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Movado (MOV) Stock Gains 13% on Robust Q3 Earnings & Sales

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Movado Group, Inc. (MOV - Free Report) released third-quarter fiscal 2019 results, wherein both top and bottom lines improved year over year and the latter beat the Zacks Consensus Estimate. Shares of the company gained 12.6% during yesterday’s trading session. In fact, this Zacks Rank #2 (Buy) stock has gained 38% in a year, surpassing the industry’s growth of 2.4%.

Q3 in Detail

The company’s adjusted earnings per share increased 13.5% year over year to $1.18, which also came ahead of the Zacks Consensus Estimate of $1.13.

Movado Group Inc. Price, Consensus and EPS Surprise


Movado Group Inc. Price, Consensus and EPS Surprise | Movado Group Inc. Quote

Net sales advanced 9.6% to $208.9 million, while it increased 10% on a constant-currency (cc) basis. The upside was backed by strength in both U.S. and international regions. Markedly, the company’s focus on its strategic priorities is yielding. Incidentally, Movado has been strengthening its brand portfolio, to remain well positioned for the significant holiday season.

Adjusted gross profit came in at $113.5 million, and adjusted gross margin contracted 60 basis points to 54.3%, owing to adverse channel and product mix, and foreign-currency headwinds. This was partly compensated by higher fixed cost leverage, courtesy of improved sales.

Adjusted operating income (excluding Olivia Burton’s buyout related amortization expenses, and costs associated with MVMT’s takeover and integration) came in at $35.7 million compared with $33.6 million in the year-ago quarter.

Adjusted tax rate for the quarter was 21.8%, down from 27.1% in the third quarter of fiscal 2018.

Other Financial Updates

Movado ended the quarter with cash and cash equivalents of $142.7 million, inventories of $183.5 million and shareholders’ equity of nearly $481 million.

Further, the company generated cash from operating activities of nearly $26.8 million during the nine months period ended Oct 31, 2018.

During the third quarter, Movado bought back 46,800 shares and had shares worth $44.1 million pending as of Oct 31 (under its ongoing authorization of $50 million).

Also, on Dec 4, 2018, management declared cash dividend of 20 cents per share on its Class A shares. This is payable on Dec 28, 2018 to stockholders of record as on Dec 14.

Outlook

Management is encouraged about the solid opportunities related to the MVMT brand, which was acquired on Oct 1. The company is, in fact, on track to integrate this brand into its operating business in the second quarter of fiscal 2020.

All said, Movado reaffirmed its outlook for fiscal 2019. This guidance excludes MVMT-related integration and buyout expenses, amortization adjustments related to Olivia Burton’s takeover, and tax-related adjustments. Management continues to expect fiscal 2019 net sales between $660.0 million and $675.0 million. Operating income is anticipated to be $75-$77 million.

Further, earnings per share is envisioned to be $2.45-$2.55, considering an effective tax rate of 22%.

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