Movado (MOV) Q1 2027 Earnings Call Transcript

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DATE

Wednesday, May 27, 2026 at 9:00 a.m. ET

CALL PARTICIPANTS

• Chairman and Chief Executive Officer — Efraim Grinberg
• Executive Vice President and Chief Financial Officer — Sallie A. DeMarsilis

TAKEAWAYS

• Revenue -- $142.4 million, up 8.1% as reported, or 4.5% in constant currency, reflecting broad-based brand and channel growth.
• Adjusted Operating Profit -- $7.5 million, rising from $900 thousand, marking a substantial improvement in profitability versus the prior year.
• Adjusted Earnings Per Share -- $0.32, up from $0.08, with management attributing the increase to execution of strategic priorities.
• U.S. Net Sales -- Increased 8.7%, with international net sales up 7.6%, and constant currency international growth at 1.6%.
• Gross Margin -- 57.3%, up from 54.1%, due to favorable channel and product mix and increased leverage, partially offset by negative foreign exchange effects and temporary benefit from the elimination of the IEPA tariff.
• Direct-to-Consumer Growth -- Movado.com sales climbed 12.8%, and company store sales grew 10.2%, with enhanced digital capabilities cited as key contributors.
• Licensed Brand Net Sales -- Rose 6.5%, and, excluding the Middle East, constant currency sales increased 9.2%, signaling resilience in multiple markets and product categories.
• Operating Expenses -- $74.1 million, up from $70.5 million, driven by higher marketing spend and increased performance-based compensation.
• Net Income -- $7.3 million, or $0.32 per diluted share, versus $1.9 million, or $0.08 per diluted share, a marked year-over-year improvement.
• Cash Position -- Quarter-end cash totaled $225.3 million, up from $203.1 million, with no debt on the balance sheet.
• Dividend Increase -- Quarterly cash dividend raised by 5%, or $0.05 per share, to $0.40 per share, reflecting confidence in financial health.
• Share Repurchases -- Approximately 61 thousand shares were repurchased, with $44.6 million remaining authorized under the current program as of April 30, 2026.
• Inventory -- Inventory declined by $7.3 million year over year, attributed to timing of receipts and notable brand-specific shortages.
• Outlook Policy -- No formal fiscal 2027 outlook provided due to economic and geopolitical uncertainty, particularly regarding the Middle East.

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RISKS

• Management stated, "The Middle East region was extremely challenging due to the ongoing conflict," with growth being significantly higher if this region's impact were excluded.
• No outlook provided for fiscal 2027, citing "the unpredictable impact of the current Middle East conflict" and wider economic uncertainties.
• Gross margin benefited from a temporary IEPA tariff elimination, and management clarified margins "We would expect based on the balance of the year, to generate higher gross margin than last year, but not at this level." for the remainder of the year.

SUMMARY

Movado Group (NYSE:MOV) posted its fourth consecutive quarter of sequential improvement, as direct-to-consumer and licensed brand channels led sales growth. The company reported a substantial increase in operating profit, alongside evidence of improved digital execution and elevated consumer engagement, particularly among younger demographics and in its fashion watch category. Brand innovation and targeted product launches contributed to both owned and licensed label outperformance. The company maintained a debt-free balance sheet with rising net cash and positive operating cash flow.

• Grinberg said, "we have shortages today of inventory, particularly in our Movado brand," highlighting current supply-demand imbalances for key SKUs.
• DeMarsilis disclosed management chose not to recognize a gain for a potential $10 million recovery of previously paid IEEPA tariffs, pending receipt of cash.
• Management noted replenishment activity was concentrated in Q1, which is expected to temper sales growth in the following quarter.
• The board's decision to increase the dividend signals ongoing confidence in long-term business prospects, despite mixed global headwinds.

INDUSTRY GLOSSARY

• IEEPA Tariff: Reference to the International Emergency Economic Powers Act tariff, affecting product costs and gross margin calculations.
• SKU: Stock Keeping Unit; an individual product identifier used to track inventory and streamline supply chain decisions.

Full Conference Call Transcript

Efraim Grinberg: Thank you, Alison. Good morning, everyone. Thank you for joining us. With me today is Sallie A. DeMarsilis, our Executive Vice President and Chief Financial Officer. After these prepared remarks, we will be happy to answer your questions. We are very pleased with our start to the year. Our first quarter performance demonstrates meaningful momentum across our business and continued consumer strength despite a dynamic external environment. Sales increased 8.1% as reported or 4.5% on a constant currency basis reaching $142.4 million Adjusted operating profit increased to $7.5 million from $900 thousand in Q1 of last year. Adjusted earnings per share increased to $0.32 from $0.08 driven by strong execution against our strategic priorities. Continued strong U. S.

Momentum and improving trends in Europe led the way. This was supported by increased retailer replenishment activity, currency tailwinds, and robust direct to consumer growth across both movado.com and our company stores. The Middle East region was extremely challenging due to the ongoing conflict. Excluding this region, our growth would have been even more significant underscoring the strength of our core markets. On the profitability front, gross margin improved 23 basis points due to a favorable mix of business despite a stronger Swiss franc. Our teams executed well against the strategic priorities we have outlined.

We ended the quarter with $225 million in cash and no debt, providing us with significant financial flexibility In recognition of our solid financial position, and believe in the long term health of our business, I am also pleased to share that our board approved a 5%, a $0.05 per share increase in our quarterly cash dividend to $0.40 per share. I would now like to discuss our performance in the context of our key strategic priorities. Our first priority is to put our customers at the center of everything we do. In that regard, we continue to strengthen consumer engagement across digital platforms while delivering trend right product that honors each brand's unique identity.

We are particularly encouraged by the resurgence of the fashion watch category. Especially among younger consumers globally who are increasingly attracted to traditional watches. Let me share some brand highlights. Movado delivered strong performance with renewed interest in both innovative new designs and iconic classics. Several best selling styles sold out during the quarter, and we expect to replenish these key items by summer. Movado.com sales increased 12.8%, reflecting strong direct consumer demand and our improved digital capabilities. Our company stores achieved a 10.2% sales increase, while our enhanced analytics and customer engagement tools are helping us better understand consumer preferences and optimize assortments across all our channels. Our second strategic priority is to deliver consumer and brand focused innovation.

In that regard, the Movado brand sales growth was driven by retailer replenishment, and continued consumer response to our Bangle collection, Museum Valeura, and the new Mini Bold Evolution tank. The Heritage 1.92 thousand collection for both men and women continues to exceed expectations and our new core curved jewelry collection is resonating strongly on movado.com. Validating our strategy to expand jewelry within the Movado portfolio. Looking ahead to Father's Day and the second quarter, we are excited about 2 launches. The new sporty bold Verso S collection and the vintage inspired Kingmatic collection, both experiencing strong early demand. Additionally, our limited drop of the new 23-millimeter baby face watch in spring colors sold out quickly.

Validating consumer appetite for smaller distinctive sizes. Across our licensed brands, we are seeing strong momentum Net sales were up 6.5% for the first quarter, over last year. Excluding The Middle East, licensed brand sales increased 9.2% on a constant currency basis. With new shapes and sizes driving results across multiple markets and categories. Coach is seeing strong Gen Z engagement particularly with the iconic signature c dial on our Sami oval family. The new 22-millimeter Mae family is off to a strong start further validating demand for innovation in smaller women's watches. Lacoste is building strong momentum with new LC33 executions including a square version in signature khaki green.

The Renee collection named after René Lacoste himself, is resonating well. Our Metropole bracelet continues to drive jewelry sales globally. Hugo Boss performance is led by the Grand Prix Chronograph family. And the new Grand Prix Vitas with expanding men's classic assortments. The North Pendant, our latest men's jewelry innovation, has quickly become a best seller. Tommy Hilfiger's Bruce family continues to drive global performance. We are increasingly penetrating the women's market with strong demand for new shapes and sizes particularly the Mia and the newly introduced Mackenzie collections. In Calvin Klein, the Pulse Mini family, continues its strong performance while the new sophisticated square is quickly becoming a best seller. Men's is gaining traction.

With the new 39-millimeter motion family. And finally, Olivia Burton's retail cell through in the US and the UK remains strong. Both in store and online. Driven by the Mini Grove and the Mini Grosvenor collections. Our third strategic priority is to deliver compelling consumer storytelling. We recently launched digital content celebrating the 145th anniversary of Movado. Inviting consumers to experience not only our rich heritage, but also the quality, and craftsmanship behind every Movado watch. Engagement has been exceptionally strong across digital platforms. Our brand ambassadors, Ludacris, Christian McCaffrey, Julianne Moore, Jessica Alba, and Tyrese Haliburton, continue to authentically represent our collections.

Across the portfolio, we are deepening consumer connections through strategic storytelling, including our association with Sergio Pérez and the Cadillac Formula 1 team for Tommy Hilfiger. We will continue amplifying these initiatives across our brand portfolio throughout the year. Our fourth strategic priority is to expand margins and increase profitability. In that regard, we improve gross margin by 23 basis points in Q1. Primarily due to a favorable sales mix and continuing to elevate our full price selling. Our focus remains on 3 key drivers. Introducing higher margin products, driving full price selling through stronger brand positioning while reducing promotional activity and improving efficiency across our value chain and operations.

While progress may vary quarter to quarter, we believe these initiatives position us to deliver meaningful long term margin improvement. As we look ahead, remain encouraged by the improving trends across the business and by demonstrated consumer resilience. While the external environment remains dynamic, we believe our strong portfolio of brands disciplined execution healthy balance sheet and commitment to innovation position us well for the remainder of the year. We are particularly optimistic about the renewed momentum in the fashion watch category.

The strength in our direct to consumer business, and the positive reception to our new product introductions across both owned and licensed brands While we are not providing guidance due to the current economic and geopolitical uncertainty, including the unpredictable impact of the current Middle East conflict we expect sales growth to moderate in the second quarter particularly on a constant currency basis. Following the strong replenishment activity, we experienced in Q1. Our focus remains on controlling what we can control. Investing behind our brands, You are having technical difficulty.

Operator: Thank you for your patience. The conference will be resuming momentarily. Once again, we are having technical difficulties.

Efraim Grinberg: I understand we dropped off for a second, so I will finish my comments and then turn it over to Sallie. Our focus remains on controlling what we can control. Investing behind our brands, deepening consumer engagement, improving operational efficiencies, and driving long term profitability. I wanna recognize our global teams for their commitments to our strategy, and execution within a complex environment. Now I will turn the call over to Sallie to review our financial results in greater detail.

Sallie A. DeMarsilis: Thank you, Efraim, and good morning, everyone. For today's call, I will review our financial results for the first quarter of fiscal 27. My comments today will focus on adjusted results. Please refer to the description of the special item included in our results for the first quarter of fiscal 27 in our press release issued earlier today which also includes a reconciliation table of GAAP and non GAAP measures. Overall, we were very pleased with our first quarter fiscal 27 performance. Our results included top line growth of 8.1% versus the first quarter of fiscal 26 and marked our fourth quarter of sequential improvements.

We continued to make good progress on our strategic initiatives and maintained an extremely strong balance sheet. Turning to a review of the quarter. Sales were $142.4 million as compared to $131.8 million last year. Reflecting growth in our owned brands, licensed brands and in our company stores. In constant dollars, the increase in net sales was 4.5%. Strong overall sales more than compensated for a weak performance in The Middle East, due to the ongoing conflict. By geography, U.S. net sales increased 8.7% as compared to the first quarter of last year. International net sales increased 7.6%. On a constant currency basis, international net sales increased 1.6%.

Gross as a percent of sales was 57.3% compared to 54.1% in the first quarter of last year. The year over year increase in gross margin rate was primarily driven by favorable channel and product mix and increased leverage of certain costs over higher sales, partially offset by a negative impact of the fluctuation in foreign currency foreign exchange rates. We experienced temporary favorability in gross margin during the first quarter of fiscal 27 due to the elimination of the IEPA tariff to the extent that we had residual inventory in our U. S. Warehouse.

As for the potential recovery of the $10 million of IEEPA tariffs had previously paid, we have elected to not recognize the gain until the cash refund is received. Operating expenses were $74.1 million as compared to $70.5 million for the same period of last year. The increase was driven by higher marketing expenses and performance based compensation. Higher sales and gross margin dollars more than offset the increase in operating expenses resulting in an operating income increasing $6.6 million to $7.5 million as compared to $900 thousand in the first quarter of fiscal 26. We recorded approximately $2 million of other nonoperating income in the first quarter of fiscal 27.

Which was primarily comprised of interest earned on our global cash position and distributions received from a venture capital fund which we hold a limited partnership interest. This compared to $1.8 million recorded during the same period of last year which was primarily interest earned on our global cash. We recorded income tax expense of $2.1 million in the first quarter of fiscal 27 as compared to $800 thousand in the first quarter of fiscal 26. Net income in the first quarter was $7.3 million or $0.32 per diluted share, as compared to $1.9 million or $08 diluted share in the year ago period. Now turning to our balance sheet.

Cash at the end of the first quarter $225.3 million as compared to $203.1 million at the same period of last year. And we reported positive cash flow from operations in the first quarter of fiscal 27 of $7 million In recognition of our strong cash flow generation and solid financial position, this morning, we are pleased to have announced a $0.05 increase in our quarterly dividend to $0.40 per share. Accounts receivable was $80 million as compared to $87.3 million for the same period of last year. The reduction was due to timing and mix of business.

Inventory at the end of the quarter decreased $7.3 million from the same period of last year due to the timing of receipt. In the first 3 months of fiscal 27, capital expenditures were $1.2 million As it relates to share repurchases, we repurchased approximately 61 thousand shares in the first quarter of fiscal 27. As of April 30, 2026, we had $44.6 million of availability remaining under our December 5, 2024, share repurchase program. Given the current economic and geopolitical uncertainty, including the unpredictable impact of the current Middle East conflict, the company has elected to not provide fiscal 27 outlook at this time. I would now like to open the call up for questions.

Operator: Thank you. If you would like to ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate You may press 2 if you would like to remove your question from the queue. And for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question is from Owen Rickert with Northland Securities. Please proceed.

Owen Rickert: Hey, guys. Congrats on a great quarter, and thanks for taking my questions here. First for me, how much of the strong gross margin expansion is structural versus onetime? And what is the right baseline to think about for the rest of the year?

Efraim Grinberg: We would expect based on the balance of the year, to generate higher gross margin than last year, but not at this level. That we did in Q2. So it is probably somewhere between halfway across both of those. Sallie, would you say that is true?

Sallie A. DeMarsilis: that is fair. Yep. And we are looking for an improvement in gross profit, and we think that the actions that we are taking will have long term benefits in our gross margin improvement, especially as we reduce SKU counts across our brands and rationalize our suppliers.

Owen Rickert: Got it. Super helpful. And building off of that, you cited channel and product mix as key drivers of that expansion for the quarter. Which brands or channels are really moving the needle here?

Efraim Grinberg: So our direct channels did very well, in Q1. Our movado.com website, our OliviaBurton.com website, and our retail channel. We are also seeing strength across our digital partners. Across the world. With the exception of The Middle East. So think all those things contributed to improved gross margin. Improve Movado wholesale business, also drives our margins as well. Got it.

Owen Rickert: And that is for me. You know, we keep hearing smaller case sizes and distinctive shapes, so that seems to be a key theme here. How are you repositioning inventory in the product road map to lean into that? And are retailers ordering ahead on it?

Efraim Grinberg: So we have been 1 of our focuses really for the last 18 months has been driving innovation. Obviously, there is a lead time to do that. And there are places where we have advanced brands where we have advanced the needle better than in other brands, so we still have a lot of opportunity in that area. But what is been really rewarding particularly has been to see younger consumers into the traditional watch space, and we think they are here to stay. And they have been out of the market for long period of time. And so that is really exciting, to see.

And getting them into the fashion watch market means that, you know, ultimately, they will be moving up the up the channel and price points as well. And that is that phenomena has really been on a global basis. So I think it is it portends well for the future of the watch category. Great. Thanks, guys. Appreciate you taking my questions. Thank you, Owen. Thanks, Owen.

Operator: Our next question is from Hamed Khorsand with BWS Financial. Please proceed.

Hamed Khorsand: Hi. So the commentary about the retailer replenishment was that a onetime event in the quarter? And you think it was just borrowed from Q2? Or is that really just a matter of timing as far as that replenishment selling through. I am just a little confused with why talking about Q2.

Efraim Grinberg: Sure. So, really, it has to do with and as you remember, Q4 was better than we expected. And better than our retailers expected. So they needed to replenish more inventory than usual or than certainly the last number of years. And that occurred in q in Q1. And what it is also done is deplete us of certain inventory which will, as I said, will be hopefully solved by summer. Which will enable us to, I think, get on a more balanced schedule through the second half of the year and the important holiday selling season. I think we are in good we are we are we have shortages today of inventory, particularly in our Movado brand.

And they were unanticipated prior to Q1 of this year. Okay.

Hamed Khorsand: And then what are your thoughts about the current ongoing interest in the Swatch's new release, and is that a good thing for you, a bad thing for the industry? What are your thoughts?

Efraim Grinberg: I think, look, I am fairly neutral it. But I think any interest in the watch category is a good interest. And especially in although this is somewhat of a hybrid, but traditional watches that celebrate craftsmanship and watchmaking and mechanical movements all those things are certainly a good note for the for the watch business. And I think, we make a lot of really beautiful fashion watches, and you have seen that our innovation is driving demand among young consumers. We know that our penetration of Gen Z consumers, for example, in our Coach brand is extremely high. And so we think that bringing interest to the category is a great thing.

And I think so that is probably my point of view on that situation. Okay. Great. Thank you.

Operator: With no further questions, I would like to turn the floor back over to Efraim for closing remarks.

Efraim Grinberg: Okay. Thank you. Thank you very much of you, for participating and great questions today. As you can tell, we have a big belief in our business and the long term prospects of both the category and our company. and I think that there are a lot of opportunities ahead. And we look forward to talking to you at the end of our second quarter. Thank you. Thank you.

Operator: This will conclude today's conference. You may disconnect at this time, and thank you for your participation.

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