Movado to Take More ‘Conservative’ Outlook This Year

With slow sales amid a challenging environment and retailers scaling back on inventory, the company is eliminating positions as it implements cost-saving initiatives.

Brecken Branstrator brecken.branstrator@nationaljeweler.com

Though sales were down in fiscal 2017, the company noted a number of successful launches that helped buoy the business, like that of the Esperanza collection. Pictured here is the Women’s Esperanza watch in a yellow gold PVD-finished stainless steel case ($1,295).

Paramus, N.J.--Movado Group said that sales were down in the fourth quarter and full year amid a challenging retail environment, noting that it is eliminating positions in the company as part of a cost-saving initiative.

Anticipating a continued difficult retail environment, shift to e-commerce and a sluggish fashion watch market in in the U.S., the company said it is taking a “more conservative view” for fiscal 2018.

In its earnings results released Monday, the company said sales decreased 12 percent in the U.S. in the fourth quarter ended Jan. 31, and by 9 percent in the region in the full fiscal year.

The “bright spot” for the watch company during the holiday season was its U.S. outlet business, it said, reporting a 7 percent increase there in the fourth quarter.

Globally, net sales were down 9 percent to $130.8 million in the fourth quarter, while operating income was down from $11.5 million in the year-earlier period to $7.4 million this year. Net income was $5.2 million in the three-month period, compared with $7.9 million last year.

In the full-year, net sales decreased 7 percent on a worldwide basis to $552.8 million, compared with $594.9 million in fiscal 2016.

Operating income for fiscal 2017 was $54 million, compared with operating income of $70.1 million in fiscal 2016, and net income was down from $45.1 million in the prior-year period to $35.1 million.

While the company noted a number of successful launches during the past year--such as its Ultra Slim designs across licensed brand portfolios and Movado collection as well as the launch of the Movado Esperanza collection--CEO Efraim Grinberg said in the earnings conference call that the watch category continues to be impacted by decreased traffic to retail partners combined with the introduction of wearables.

“We believe that the digital shift--consumers moving to purchasing on their smartphones and the consumption of digital media--has accelerated greatly over the last 18 months,” he said.

Given these shifts, the company is putting its digital initiative at the top of its priority list, reallocating a much larger portion of marketing dollars into the digital space and accelerating e-commerce growth.

The company also noted in its results that it was struggling from a difficult holiday season from its retail partners and their increased focus on inventory management amid slower store traffic.

As such, it is going to implement a number of “cost-savings initiatives” to

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reduce costs and improve profitability, including a decrease in the company’s workforce, primarily impacting its North American and Swiss operations.

Movado said it eliminated 70 positions in the U.S. last week and is in the process of executing a similar program in Switzerland.

Movado said it expects to realize about $12 million of savings in fiscal 2018 from these cost-saving initiatives.

The company also has a few new projects on the docket, including a long-term global partnership with fashion brand Rebecca Minkoff, which will lead to a collaboration on the design, development, distribution and marketing of a line of watches. The collection will launch in North America this summer.

Movado also recently announced a partnership with Google to launch Movado Connect, a smartwatch which will be powered by Android Wear 2.0. The watch is one of the first designed specifically for the platform, the company said, and will launch this fall, introducing five men’s styles starting at $495.

For fiscal 2018, the company anticipates net sales to be in the range of $515 million and $530 million and operating income to be between $50 million and $55 million. Net income, meanwhile, is expected to be approximately $33 million to $36.3 million.

Editor’s Note: This story was updated on March 21 to include the number of positions reduced in the U.S. supplied by Movado Group after the story already was published.

Brecken Branstratoris the senior editor, gemstones at National Jeweler, covering sourcing, pricing and other developments in the colored stone sector.