Release Date: September 05, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Movado Group Inc (MOV, Financial) reported virtually flat net sales on a constant dollar basis compared to last year, showing resilience in a challenging consumer spending environment.
- The company maintained a healthy gross margin, despite a slight decline compared to the previous year.
- Movado Group Inc (MOV) has a strong balance sheet with $198 million in cash and no debt.
- Increased marketing investments have led to a 10% increase in unit volume for licensed brands.
- The new advertising campaign featuring high-profile ambassadors like Ludacris and Jessica Alba has received positive press coverage, reaching over 245 million readers.
Negative Points
- Operating profit declined to $3 million, driven by increased marketing investments.
- Net sales decreased by 0.7% compared to the second quarter of fiscal 2024.
- Gross profit as a percentage of sales decreased to 54.2% from 55.7% in the same period last year.
- Operating expenses increased to $83.3 million from $79.6 million in the previous year, driven by higher marketing investments.
- Net income for the second quarter was $3.7 million, or $0.16 per diluted share, down from $8 million, or $0.36 per diluted share, in the year-ago period.
Q & A Highlights
Q: You mentioned coming out of this period with increased market share. Can you talk about what you're seeing from the competition today from a pricing perspective, from a viability perspective, and anything from a geographic perspective also?
A: The watch category overall, from luxury down to accessible, has become challenging. We have executed well in the fashion watch category and seen gains there, while competitors are challenged. European markets are particularly tough, and the US economy is showing stress. However, we've seen good growth in markets like Latin America, Mexico, and India. Our strategies are working, though not to the extent we would like. We're excited about the new Movado campaign, which has received strong reviews.
Q: Can you talk about the media campaign in India and the overall opportunity there?
A: The Movado campaign is predominantly in North America but will also run in India and some parts of China. Movado is about 90% domestic for us, but we believe this campaign will present international opportunities in the future. The campaign will launch this month on digital platforms and outdoor media, with TV and other media added during the holiday season.
Q: How is the jewelry segment performing?
A: Jewelry is actually outperforming watches in our fashion brands and is doing very well. Our innovation has been good, and we see a big opportunity for growth, especially in markets like Europe and Mexico. We will also reset our Movado jewelry assortment next year, which we are excited about.
Q: Does your guidance factor in any interest rate cuts?
A: Our guidance does not factor in interest rate cuts. We believe that any declines in interest rates will happen gradually, similar to how increases occurred. While there will be a benefit as rates come down, it won't have an immediate impact on consumers.
Q: What would it take for you to be more aggressive in the share buyback?
A: It's not about a specific stock level but rather confidence in the environment and our execution. We will manage our investments better as we look into next year. While we will curtail some spending this fall, we are not touching our Movado campaign. We believe in the value of our shares and will consider buybacks as the market evolves.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
