Movado Story From National Jewelers

Movado to shift gears, close retail boutiques
May 27, 2010

Paramus, N.J.--In an effort to streamline its business, Movado Retail Group will close its retail boutique division and focus on its wholesale model, the company announced along with its first-quarter fiscal 2011 results on Thursday.

The move is one that Movado is taking to improve its overall profitability, redirecting investment toward what it believes are higher-return businesses. The company said it expects to increase its market share by expanding relationships with existing wholesaler customers and by enhancing its relationships with independent retailers.

Though shifting its focus to a wholesale model, Movado Retail Group will continue to sell all of the company's watch brands directly to consumers through its 31 outlet stores. It will also keep the Movado boutique located in New York City's Rockefeller Center open as a flagship store.

Movado Group President and Chief Operating Officer Rick Cote said the decision to close the retail boutique division came after several years of unprofitability and a strategic review of the business.

"We believe that this action will assist Movado Group to return U.S. operations to profitability," Cote said. "We will continue to make strategic investments in our brands to capitalize on growth prospects, build market share and elevate our connection with consumers. We believe in the strength of the Movado brand and the rest of our portfolio of iconic brands, and we expect these actions will solidify our position as a leader in the watch industry."

The company said it anticipates that closing the retail boutique division will lower annual revenues by approximately $30 million, but will immediately improve profitability for the 2011 fiscal year on an adjusted basis. In addition, Movado said it believes the move will have a favorable impact on the multi-year profitability and cash flow plan that it expects to present later this year.

As for Movado Group's first quarter results, the company revealed on Thursday that adjusted net loss for the period ended April 30, 2010, was $4.8 million, or $0.19 per diluted share.

Top-line growth for the quarter was reported at 25 percent, excluding sales of excess discontinued product for the previous year. Net sales for the quarter increased 16.7 percent to $78.9 million, primarily driven by an increase in consumer demand and a return to normalized buying and inventory replenishment patterns among retailers, the company said.

Movado reported gross profits of $44.2 million, or 56 percent of sales for the quarter, while operating expenses increased $5.5 million, or 11.4 percent.