Movado's sales rose 4.9%, the exact figure by which Fossil's fell
The quarter to 31 July put Movado's net sales at $169.8 million and net income at $12.3 million against $3.0 million a year earlier, helped by $3.2 million of tariff duty refunds.
By The Watches Desk
What changed
Movado Group filed its quarterly report on 26 August for the three months to 31 July, and net sales rose $7.9 million or 4.9% on the prior-year period. This paper reported on 26 August that Fossil Group's net sales fell 4.9% in its own most recent quarter.
What it means
- The useful comparison is not Movado against Fossil, it is licensed against owned. Movado's licensed brands grew 9.0% and its own name grew 0.7%, and the Fossil quarter this paper read last week showed the same shape from the other side, with the fall concentrated in leathers and jewellery rather than watches.
- Two filings a month apart now say the watch line is holding and the trouble is elsewhere in these companies. The 530 basis points of margin will be the number to watch next quarter, because roughly 150 of them do not look repeatable.
Key figures
| net sales, against $161.9M | $169.8M |
|---|---|
| net income, against $3.0M | $12.3M |
| of which ~380bp is sales mix | +530bp |
| IEEPA duty refunds in gross profit | $3.2M |
Source: Movado Group, quarter to 31 July
The same number, two companies, opposite signs
The symmetry is exact and the periods are not: Fossil's quarter ended 4 July and Movado's ended 31 July, twenty-seven days apart, so these are neighbouring quarters rather than the same one. With that stated, two US-listed watch groups reporting within a fortnight of each other moved the same distance in opposite directions.
Movado, quarter to 31 July - growth by line, %
Source: Movado Group, quarter to 31 July
Licensed brands grew thirteen times faster than the company's own name
The composition. Watch and Accessory Brands, the larger segment, made $142.9 million, up $7.2 million or 5.3%, and Company Stores made $26.9 million, up $0.7 million or 2.8%. The two sum to $169.8 million, which puts the watch and accessory segment at 84.2% of the company on this desk's arithmetic.
Inside the larger segment the growth is not evenly spread: licensed brands added $8.3 million or 9.0% while owned brands added $0.3 million or 0.7%. Geographically, United States locations made $47.5 million, up 5.9%, and international $95.4 million, up 5.0%, of which $0.7 million was favourable currency.
Excluding that currency effect the company says net sales would have risen 4.4% rather than 4.9%.
| Figure | |
|---|---|
| Licensed Brands | +9.0% |
| United States | +5.9% |
| Watch & Accessory Segment | +5.3% |
| International | +5.0% |
| Company Stores | +2.8% |
| Owned Brands | +0.7% |
Everything grew; the company's own brands grew least Bars scaled at ten times the percentage. The spread between licensed and owned is the quarter's real story. Carat Capital graphics desk, on Movado's Form 10-Q.
A quarter of the profit is a tariff refund
The profit line moved much further than the sales line. Net income attributable to Movado Group was $12.3 million against $3.0 million a year earlier, which is 4.10 times, and across six months $19.2 million against $4.4 million, or 4.36 times.
Gross profit rose $13.3 million on sales that rose $7.9 million, and gross margin expanded by approximately 530 basis points. The company attributes roughly 380 of those basis points to favourable sales mix. It also records $3.2 million of duty refunds received under the IEEPA tariff regime inside gross profit for the quarter.
That refund line is worth separating from the operating result. Against net income of $12.3 million, $3.2 million of duty refunds is a little over a quarter of the quarter's profit, and it is a recovery of duties previously paid rather than a trading gain.
This paper covered a watch retailer taking the same tariff regime to court on 28 July. A reader comparing this quarter with the next should expect the refund not to repeat, and should note the company operated 57 retail outlet locations at both period ends, so the store estate did not contribute growth by expansion.
The story so far
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Method
Everything grew; the company's own brands grew least