Movado Group, Inc. (NYSE:MOV) Q2 2026 Earnings Call Transcript

Movado Group, Inc. (NYSE:MOV) Q2 2026 Earnings Call Transcript August 28, 2025

Movado Group, Inc. misses on earnings expectations. Reported EPS is $0.1323 EPS, expectations were $0.31.

Operator: Good day, everybody, and welcome to the Movado Group Second Quarter Fiscal 2026 Earnings Call. As a reminder, today’s call is being recorded and may not be reproduced in full or in part without permission from the company. At this time, I would like to turn the conference over to Allison Malkin of ICR. Please go ahead.

Allison C. Malkin: Thank you. Good morning, everyone. With me on the call today are Efraim Grinberg, Chairman and Chief Executive Officer; and Sallie DeMarsilis, Executive Vice President and Chief Financial Officer. Before we get started, I would like to remind you of the company’s safe harbor language, which I’m sure you’re all familiar with. The statements contained in this conference call, which are not historical facts, may be deemed to constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual future results may differ materially from those suggested in such statements due to a number of risks and uncertainties. All of which are described in the company’s filings with the SEC which includes today’s press release.

If any non-GAAP financial measure is used on this call, a presentation of the most directly comparable GAAP financial measure to this non-GAAP financial measure will be provided as supplemental financial information in our press release. Now I would like to turn the call over to Efraim Grinberg, Chairman and Chief Executive Officer of Movado Group.

Efraim Grinberg: Thank you, Allison. Good morning, and welcome to Movado Group’s second quarter conference call. With me today is our Executive Vice President and Chief Financial Officer, Sallie DeMarsilis. After I review the highlights of the quarter, and share our progress on key strategic initiatives, Sallie will take you through the financial results in more detail. We will then be happy to answer questions. We are pleased with our overall results this quarter as we return to growth in both sales and profitability. Sales grew by 3% to $161.8 million and adjusted operating profit more than doubled to $7 million from $2.6 million last year despite a $2.2 million impact from unmitigated U.S. tariff expenses. Although we’ve taken certain actions to partially offset tariffs, those actions will predominantly impact future periods.

After the quarter ended, the United States implemented a tariff rate of 39% on Swiss imports. During the second quarter, we have built a strong position in inventory of Swiss-made watches in the United States and would expect a substantial portion of the year’s needs are covered. We are hopeful that over the next several months, the United States and Switzerland will agree to lower tariff rates. Of course, we continue to monitor the situation closely and to develop mitigation plans. We continue to operate with a strong balance sheet with over $180 million in cash and no debt. Overall, we are pleased with the progress that we have made on our strategic initiatives with a focus on returning the company to growth and profitability. We would expect to see approximately $10 million of annualized savings spread evenly throughout this year as a result of the actions we took late last year to reduce operating expenses.

Although we experienced a 5.6% sales decline in our Movado brand, we continue to make progress on our Movado strategy, which I will discuss later in my remarks. In our licensed brands, we grew by 6.5% on a constant currency basis or 9.5% on a reported basis. Overall, we reported gross margins of $54.1 million versus — 54.1% versus 54.3% in Q2 of last year despite the 130 basis point impact of additional tariffs in the U.S. Most of our strategic pricing actions to partially offset the impact of tariffs became effective July 1. Our international business grew by 6.9% or 3.9% on a constant currency basis, led by a strong performance in Europe, Latin America and India, with Europe seeing particularly strong trends. As expected, this performance was offset somewhat by the Middle East, where we are in the process of rebuilding our team.

Our U.S. business declined by 1.6% as we focus on rebalancing our chain jewelry store distribution, although we had an improved performance in our domestic department store and e-commerce channels. Our outlet storage segment grew 2.4% for the quarter, and we’re excited by the recent initiatives and accelerating trends in that channel. As we look at the progress that we’re making in our brands, we’re particularly pleased by the success that we are seeing in the overall performance of trend-right products across our brand portfolio. In Movado, we’re making significant progress in returning the brand to growth in our wholesale distribution. We have seen strong performance in our own e-commerce site with 6% growth and strong trends in our digital partners.

In brick-and-mortar, Movado brand sell-through has returned to growth in the second quarter in our department store channel, where we have implemented and expanded our coverage at the point of sale and installed our new point-of-sale display. We will continue to execute behind these initiatives as the year progresses. On the product front, Movado has seen increased penetration and success in women’s watches, including our new iconic bangle watches and our new Mini Quest in BOLD, which along with our BOLD tank watch, is the best seller. On the men’s side, we’re seeing strong performance in the Movado BOLD collection, including Verso Automatic and Quest Automatic. Our Heritage collection inspired by Movado’s rich heritage, continues to do particularly well, while in a limited distribution across the country.

The Movado brand marketing campaign for the second half will include new creative featuring our Movado icons, Ludacris, Jessica Alba, Julianne Moore, Christian McCaffrey and Tyrese Haliburton. We’re very excited by the digital-first content that our team has executed with a greater focus on products associated with each of the icons. We have exciting new products debuting this fall like the new Museum Imperio with Christian McCaffrey and our Heritage 1917 with Tyrese Haliburton. On the women’s side, Jessica Alba and Julianne Moore will be featured with different shapes of our Museum Bangle collection and a women’s version of the Museum Imperio and Heritage 1917. Turning to our licensed brands. We’re seeing a return to the fashion watch and jewelry category with increased interest by Gen Z consumers across digital platforms like TikTok, Reels and YouTube.

Sales in our licensed brands grew by 9.5% for the quarter or 6.5% in constant currency. In HUGO BOSS, we have experienced strong growth in our iconic families, Time Traveler and Candor. Our new updated Grand Prix is quickly becoming a best seller. We’re also excited by our new women’s watches led by the Mae family with a petite Square shape. In Tommy Hilfiger, we’re very excited to be refocused on the women’s watch category. Our MIA family is already showing signs of strong sell-through and will be featured in our fall campaign. Complementing Mia is Moira, a new mini East West Oval that has gotten a strong reception. On the men’s front, we’re excited by our new 70s inspired Chronograph Hudson collection, which will be featured in our holiday campaign as well as by Regatta-TH a new sports watch collection in exciting colors opening at $139.

In Lacoste, we’re introducing a new black and gold version of our iconic LC33 collection and will complement our Tank Parisienne with a new oval version. Our Lacoste jewelry business continues to exceed expectations, and we’re very excited to introduce the Arthur and Crocodile families to complement our best-selling Metropole bracelet collection. In Calvin Klein, we’re launching a new mini version of our best-selling Pulse collection as well as a new 18-millimeter contemporary collection that has really peaked our retailers’ attention. Coach continues to perform extremely well, particularly in the United States and is now showing momentum in Europe as well. For the second half, we have several new introductions in our best-selling Sammy Oval collection with a strong new 20-millimeter Reese tank.

We’ll also be expanding our best-selling charter collection for him. As we enter for the second half of the year, we recognize that uncertainty remains around tariffs and the broader retail environment. At the same time, we’re excited by the new products we have introduced and encouraged by the resurgence we are seeing in the fashion watch market. As a leadership team, our focus remains on driving profitability and delivering consistent growth in both sales and operating margin, while maintaining the strength of our balance sheet and executing against our strategic plans across all of our businesses. While some of our initiatives have longer time horizons, we’re confident that we’re taking the right actions for the long term and positioning Movado Group for sustainable success.

I’m happy about the plans that we’re building for the year ahead, and I would now like to turn the call over to Sallie.

Sallie A. DeMarsilis: Thank you, Efraim, and good morning, everyone. For today’s call, I will review our financial results for the second quarter and the year-to-date period of fiscal 2026. My comments today will focus on adjusted results. Please refer to the description of the special items included in our results for the second quarter and first 6 months of fiscal 2026 in our press release issued earlier today, which also includes a reconciliation table of GAAP and non-GAAP measures. Turning to review of the quarter. Overall, we were pleased with our performance for the second quarter of fiscal 2026. Sales were $161.8 million as compared to $157 million last year, an increase of 3.1%. In constant dollars, the increase in net sales was 1.4%.

Net sales increased across licensed brands and company stores partially offset by a decrease in net sales in owned brands. By geography, U.S. net sales decreased 1.6% as compared to the second quarter of last year. International net sales increased by 6.9%. On a constant currency basis, International net sales increased 3.9%, with strong performances in certain markets such as Latin America and Europe. Gross profit as a percent of sales was 54.1% compared to 54.3% in the second quarter of last year. The decrease in gross margin rate as compared to the same period of last year was primarily driven by increased tariffs and unfavorable foreign exchange, partially offset by favorable channel and product mix. Operating expenses were $80.6 million as compared to $82.6 million for the second quarter of last year.

The $2 million decrease was driven by a strategic reduction in marketing expenses, partially offset by an increase in performance-based compensation. The combination of higher revenue and gross profit and the decline in operating expenses drove operating income to $7 million, a $4.4 million improvement from $2.6 million in the second quarter of fiscal 2025. We recorded approximately $1.1 million of other nonoperating income in the second quarter of fiscal 2026 as compared to $1.8 million in the same period of last year. Other nonoperating income is primarily comprised of interest earned on our global cash position. We recorded income tax expense of $2.7 million in the second quarter of fiscal 2026 as compared to $843,000 in the second quarter of fiscal 2025.

Net income in the second quarter was $5.3 million or $0.23 per diluted share as compared to $3.5 million or $0.15 per diluted share in the year ago period. Now turning to our year-to-date results. Sales for the 6-month period ended July 31, 2025, were $293.6 million as compared to $291.4 million last year. Total net sales increased 0.8% as compared to the 6-month period of fiscal 2025. In constant dollars, the increase in net sales for the year-to-date period was 0.3%. U.S. net sales declined by 1.6% and international sales increased by 2.6%. Gross profit was $158.9 million or 54.1% of sales as compared to $158.2 million or 54.3% of sales last year. The decrease in gross margin rate for the first 6 months was primarily due to unfavorable foreign exchange and increased tariff costs partially offset by favorable channel and product mix.

Operating expenses were $151 million as compared to $153.4 million for the same period of last year. The decrease was driven by a strategic reduction in marketing expenses, partially offset by an increase in performance-based compensation. For the 6 months ended July 31, 2025, operating income was $7.9 million compared to $4.8 million in fiscal 2025. We recorded approximately $2.7 million of other nonoperating income in the 6-month period of fiscal 2026 which is primarily comprised of interest earned on our global cash position as compared to $3.8 million in the same period of last year. Net income was $7.2 million or $0.32 per diluted share as compared to $5.5 million or $0.24 per diluted share in the year ago period. Now turning to our balance sheet.

Cash at the end of the second quarter was $180.5 million as compared to $198.3 million of the same period last year. Accounts receivable was $94.4 million up $7.7 million from the same period of last year, primarily due to timing and mix of business. Inventory at the end of the quarter was up $28.3 million or 15.5% above the same period of last year. $5.1 million of the increase was due to foreign currency and $4.6 million of reciprocal tariffs is included in inventory on hand at the end of the second quarter. As Efraim mentioned, as of July 31, we have built a strong position of inventory — a strong position in inventory of Swiss-made watches in the United States and would expect that a substantial portion of this year’s needs are covered.

We are comfortable with the we repurchased approximately 100,000 shares under our share repurchase program. As of July 31, 2025, we had $48.4 million remaining under our authorized share repurchase program. Subject to prevailing market conditions and the business environment, we plan to utilize our share repurchase program to offset dilution in fiscal 2026. As Efraim mentioned, we closely monitor the changing tariff landscape, and we will continue to develop mitigation plans. Given the current macroeconomic environment and the ongoing uncertainty of the impact of tariffs on our business, the company is not providing fiscal 2026 outlook. I would now like to open the call up for questions. Thank you.

Q&A Session

Operator: [Operator Instructions] Our first question comes from the line of Hamed Khorsand with BWS Financial.

Hamed Khorsand: So there was lots of commentary about many watches. And I just want to understand what you’re seeing from a consumer habits or purchasing that you think that the mini is the route that you’re taking?

Efraim Grinberg: So I think — and we have both what we call mini watches, and we have micro watches though, which are smaller mini watches for us are watches from like 23 to 28 millimeters. And what had happened is that for a period of time, watches had gotten bigger, both for men and for women. And over the last few years, they’ve gotten smaller again. And with that, with that aspect, it’s actually brought young women back into the category, and there’s a lot of social media around that and layering of women’s watches with jewelry. And so we believe it represents a significant opportunity across our brand portfolio. And that trend as many trends do begins in luxury and then moves into more accessible products as well.

Hamed Khorsand: Okay. And during Prime Day, I know you guys were participating. Was there anything stood out of that event that has continued sense? Or was it purely the consumer responding to price?

Efraim Grinberg: So we’re probably a bigger participant in the prime events in Europe than we are in the United States. And — but we’ve seen our overall digital business with those retailers that are completely focused on digital environment, whether it be Zalandos or the Amazons of the world, really doing very well on a global basis. And that’s really, really good to see. And that’s really across our brand portfolio. And so we believe that, that’s an increased opportunity as we continue to progress down our strategic plan.

Hamed Khorsand: Okay. And then I know you talked about you raised inventory because of the Swiss watches. But earlier this year, you had also raised inventory because of what’s going on with tariffs, how much of your increase overall year-to-date, I’m speaking of calendar, excuse me, year-to-date on the calendar, can you just digest through the channel by the holiday shopping season?

Efraim Grinberg: Sure. So I’ll start, and then I’ll turn it over to Sallie. Our inventories got very low at year-end. So we began to rebuild inventory in Q1 of this year and now into Q2. We would expect our inventories to be in line by year-end since — and what that’s allowed us to do at the same time is to offset some of the tariff impact by having inventory move to the United States prior to the implementation of certain tariffs. Obviously, we can’t offset all of it. And then we have taken other actions, whether it be pricing or negotiations with suppliers to help mitigate some of the effect as well. But I’ll turn it back to Sallie as well.

Sallie A. DeMarsilis: The only detail I will add to that, and thank you, Efraim, that was very thorough is we have, as I mentioned, about $28 million of additional inventory at this time. We do expect to work it down by the end of the year to something more reasonable. But of that $18 million, about $16 million of it is in the U.S. So we did pull it forward into the U.S. so that we can manage through these tariffs and kind of get ahead of some uncertainty with that. And as we also mentioned, just to reiterate, we do think that a substantial portion of what we need in the U.S. is probably already here. We will add in what might be new styles or something that is an advertisement or maybe something that is just selling faster than we had anticipated and bring it in, but we should be in relatively good shape.

Hamed Khorsand: Okay. Can I ask one more question?

Sallie A. DeMarsilis: Certainly.

Efraim Grinberg: Absolutely.

Oliver Chen: You’ve taken a lot of these restructuring charges in the last few quarters. When do they stop? And when us and investors see it show up in quarterly results?

Efraim Grinberg: Well, I think it’s a combination both of charges dealing with our event that occurred in the Middle East last year as well as some charges on the restructuring side. I would think on the restructuring side, they’re predominantly done and there could be some laggard still expenses on the other charges. But I would expect overall that they will be reduced significantly.

Sallie A. DeMarsilis: And just to remind you that we did mention when we were talking about the savings and the initiatives we were putting in place, those are offset by some increases this year in our cost. So you will see — they offset kind of some of the increases that we would have for regular year-over-year increases for merit, adding back performance-based compensation and, of course, currency.

Operator: Thank you. We have reached the end of the question-and-answer session. I’d like to turn the floor back to Efraim Grinberg, for closing remarks.

Efraim Grinberg: Thank you all for participating with us today, and we look forward to joining you again for our third quarter conference call. We will — hopefully we’ll be able to share with you the progress that we continue to make on our strategic initiatives. Thank you.

Operator: Thank you. And this concludes today’s conference, and you may disconnect your lines at this time. Thank you for your participation.