Movado Warns of Slow Growth, Currency Headwinds

By Tess Stynes 

Movado Group Inc. said its earnings rose 40% in the holiday quarter due to lower taxes, and posted an upbeat profit guidance for the year.

However, the luxury watchmaker warned of slow retail growth in the watch industry amid continued currency headwinds that have already hurt earnings this year, according to Chief Operating Officer Rick Cote.

In response, Movado will be raising prices, "streamlining certain aspects of our business to provide greater operating efficiencies" and working on its supply-chain organization, according to Mr. Cote.

Chairman and Chief Executive Efraim Grinberg added that retailers have curtailed their purchasing to "more tightly manage their inventory."

For the year ending in January 2016, the company forecast per-share earnings of $2 to $2.10 and sales of $590 million to $600 million. Analysts polled by Thomson Reuters expected per-share profit of $1.89 and revenue of $603 million. The guidance assumes a 30% anticipated effective tax rate and reduced share count.

In general, 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 much anticipated smartwatch. Apple last week unveiled more details about the Apple Watch, which ships April 24.

Overall, for the period ended Jan. 31, Movado reported a profit of $10 million, or 40 cents a share, up from $7.2 million, or 28 cents a share, a year earlier. The quarter included both a structuring charge of $8.3 million and a tax benefit of $2.5 million.

Revenue increased 1.2% to $133.9 million.

The company had expected per-share earnings of 18 cents to 23 cents on sales of $132 million to $137 million.

Shares have been up about 16% this year through Monday's close.

Write to Tess Stynes at [e-mail]

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