Movado Group's Profit Drops Amid Slowing Growth in Watch Industry

By Lisa Beilfuss 

Movado Group Inc. said its profit halved in the first quarter, as the luxury watchmaker was hurt by slowing growth in the watch industry and the stronger dollar.

Watchmakers have been pressured by a lackluster economy in Europe and slowing sales in Asia, which had been a source of strength. The industry also is facing increased competition from the entry of Apple Inc.'s smartwatch, which started shipping in April.

In March, Movado said it would raise prices and undertake "operating efficiency initiatives" in response to slow retail growth in the watch industry amid continued currency headwinds that already have hurt earnings this year. The initiatives resulted in a $2.7 million charge during the quarter.

The remainder of the expected $3 million to $4 million charge will be booked by the end of the year, Movado said.

For the year ending in January, the company affirmed its guidance of $2 to $2.10 in per-share earnings and $590 million to $600 million in sales. Analysts polled by Thomson Reuters have expected $2.04 in per-share profit and $593 million in sales.

Movado reported a first-quarter profit of $3.6 million, or 15 cents a share, down from $7.4 million, or 29 cents a share, a year earlier.

Excluding charges related to the operating efficiency initiatives and other one-time items, earnings were 25 cents a share.

Sales were down slightly to $120.5 million. Excluding foreign exchange effects, sales rose 5%.

Analysts anticipated 26 cents in per-share earnings and $119.6 million in sales.

Gross margin contracted to 51.8% from 53.9%. The decline was largely thanks to adverse currency rates, the company said, noting the foreign-exchange rate changes in the euro and Swiss franc.

Shares of the company, down about 28% over the past year, were inactive during premarket trading.

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