MOVADO GROUP, INC. — FY2024 Form 10-K
Reporting period: Fiscal year ended January 31, 2024 (compared primarily with fiscal 2023). This is an annual report, not a standalone fourth-quarter filing.
Business context
Movado designs, sources, markets and distributes watches, jewelry and accessories through owned brands, including Movado, Concord, EBEL, Olivia Burton and MVMT, and licensed brands including Coach, Tommy Hilfiger, Hugo Boss, Lacoste and Calvin Klein. It operates Watch and Accessory Brands and Company Stores segments. Approximately 56.8% of FY2024 sales came from international markets; licensed brands represented 53.9% of net sales.
Financial performance and liquidity
| Metric | FY2024 | FY2023 |
|---|---|---|
| Net sales | $672.6 million | $751.9 million |
| Gross profit / margin | $370.4 million / 55.1% | $433.9 million / 57.7% |
| SG&A | $315.7 million | $313.5 million |
| Operating income / margin | $54.7 million / 8.1% | $120.4 million / 16.0% |
| Net income attributable to Movado Group | $46.7 million | $94.5 million |
| Diluted EPS | $2.06 | $4.12 |
| Cash from operating activities | $76.8 million | $54.3 million |
Cash and cash equivalents were $262.1 million at year-end, including $176.1 million at foreign subsidiaries. Working capital was $430.8 million. The company had no borrowings under its $100 million revolving credit facility, with $99.7 million available; the facility matures October 2026. Total liabilities were $250.1 million, including $92.1 million of operating lease obligations.
Investing cash outflow was $11.5 million, including $8.2 million of capital expenditures and $3.1 million of long-term investments. Financing cash outflow was $57.6 million, including $53.1 million of dividends (including a $1.00-per-share special dividend) and $3.1 million of open-market repurchases. FY2024 dividends totaled $2.40 per share.
Material changes versus FY2023
- Sales decreased $79.3 million, or 10.5%; excluding a favorable $8.6 million currency effect, the decline was 11.7%. Lower wholesale demand and online sales affected both U.S. and international Watch and Accessory Brands results.
- Watch and Accessory Brands sales fell 11.2% to $568.7 million; Company Stores sales fell 6.8% to $103.9 million.
- Gross margin contracted 260 basis points, mainly from unfavorable sales mix and lower fixed-cost absorption, partly offset by reduced shipping costs. SG&A increased 0.7% despite lower performance-based compensation.
- Operating income declined to $54.7 million from $120.4 million; attributable net income and diluted EPS each fell by about half.
- Operating cash flow rose to $76.8 million, supported in part by a $37.7 million inventory reduction. Inventory ended at $148.0 million, down from $186.2 million; trade receivables increased to $104.5 million from $94.3 million.
Outlook, commentary and risks
- Management says cash on hand, operating cash flows and credit lines are adequate for operating, capital and debt-service needs for the next 12 months and expects covenant compliance. No revenue or earnings guidance is provided in the supplied filing text.
- FY2025 capital expenditures are expected to be approximately $11 million, versus $8.2 million in FY2024.
- Management released reserves in FY2024 related to a U.S. Customs duty audit after the statute of limitations expired for the covered entries. The filing does not provide a clear value for the reserves released or the resulting earnings benefit.
- Key exposures include discretionary consumer demand and holiday-season concentration, international operations and currency movements, tariffs and supply-chain reliance (including a single source for mechanical watch movements), competition from smartwatches, inventory valuation, retail and e-commerce execution, and reliance on licensed brands. Several brand licenses have future expiration or renewal conditions; Tommy Hilfiger’s agreement expires December 31, 2024, with an extension subject to conditions.
- Outstanding commitments include $222.3 million of minimum license, endorsement and service commitments over the next eight years; $84.5 million of supplier purchase obligations; and $13.1 million of remaining investment commitments. The company reported no material cybersecurity incidents in the last three fiscal years. PwC issued unqualified opinions on the financial statements and internal control over financial reporting.
Investor verification priorities
- Review the causes and durability of the sharp decline in sales, gross margin and operating income, including demand by brand, channel and geography.
- Assess whether inventory reductions, receivable growth and operating cash flow are sustainable, and examine the auditor’s critical audit matter regarding valuation of $26.4 million of component-parts inventory.
- Verify the economics and renewal terms of major licenses, particularly Tommy Hilfiger, and the potential effects of the $222.3 million minimum commitments.
- Track FY2025 capital spending, dividends and repurchases against cash generation and the company’s stated liquidity outlook.
- Review the full notes for lease, tax, legal, investment and supplier commitments, including the released Customs reserves and the remaining $13.1 million investment commitments.