Paramus, NJ—Movado Group, Inc. today reported that improved operating margins and a 17% increase in sales helped it achieve a 55% increase in its second quarter profit.
After beating analysts’ estimates, the watch company raised its fiscal full year earnings and sales forecasts.
For the quarter ended July 31, Movado posted net income of $12.45 million, or 48 cents a share, compared with net income of $8.06 million, or 32 cents a share, in the year-ago quarter. Excluding a $1 million, or 4 cents a share tax benefit, adjusted net income was $11.5 million, or 44 a share. Analysts’ average estimate, which typically excludes one-time items, was for 32 cents a share.
Net sales grew 17.2% to $138.30 million.
The company noted that operating margin improved 320 basis points to 12.3% from 9.1% last year, while gross margin contracted 160 basis points on increased operating expenses.
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“We continued our positive momentum from the beginning of the year reporting a 17% increase in sales and a 59% rise in operating income in the second quarter. Our topline strength was fueled by strong innovation across our Movado and licensed brands and included the continued successful introduction of our Scuderia Ferrari watch brand and our newly repositioned Coach watch brand into the fashion watch category,” said Efraim Grinberg, chairman/ceo, said.
The company also benefited from the later schedule of BaselWorld. “This, combined with the disciplined execution of our growth strategies, enabled us to leverage our infrastructure and produced operating income growth more than triple the rate of our sales increase,” Grinberg added.
Operating expenses increased 5% to $57.8 million compared to $55 million in the second quarter last year. “This increase was primarily the result of higher marketing expense and other operating expenses, partially offset by lower compensation expense primarily related to the accrual for performance-based compensation,” the company said.
Looking ahead, Movado raised its fiscal full year earnings forecast to $1.90 a share, up from its previous estimate for $1.80 a share. Total revenue is expected to reach between $575 million to $580 million, up from the previous forecast for $570 million to $575 million.
Analysts’ consensus expects 2014 earnings of $1.82 a share on sales of $570.55 million.
In addition, the company’s board has approved a 60% increase in its quarterly cash dividend, payable on September 20 to all shareholders of record as of the close of business on September 6.
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