MOV

Movado Group Inc. 10-Q Summary: Quarter Ended October 31, 2025

Business Context and Reporting Period

This is a Quarterly Report on Form 10-Q for Movado Group, Inc. (NYSE: MOV) for the period ended October 31, 2025. The Company designs, manufactures, and distributes watches and accessories under owned brands (Movado, Concord, EBEL, Olivia Burton, MVMT) and licensed brands (Coach, Tommy Hilfiger, Hugo Boss, Lacoste, Calvin Klein). The Company operates two segments: Watch and Accessory Brands and Company Stores. The financial statements for the prior year periods have been restated due to an investigation into sales misconduct at the Dubai branch of its Swiss subsidiary.

Key Financial Metrics

Note: All figures in millions unless otherwise noted. Prior year comparative figures are restated.

Material Changes vs. Prior Period

• Revenue Growth: Net sales increased 3.1% ($5.6 million) for the quarter and 1.7% ($7.8 million) for the nine months compared to the restated prior year periods. Growth was driven by higher volumes in the licensed brands category, partially offset by declines in owned brands.
• Profitability: Operating income increased 94% for the quarter ($11.7 million vs. $6.0 million) and 48% for the nine months ($16.0 million vs. $10.8 million). This improvement was driven by higher gross margins and reduced SG&A expenses, despite increased tariff costs.
• Restatement Impact: The Company restated prior period financials due to sales overstatement and premature recognition in the Middle East, India, and Asia Pacific region. The restatement reduced prior year net sales and operating income but did not impact cash flows.
• Cost-Savings: The Company recorded $1.5 million in severance and employee-related charges in the first nine months of fiscal 2026 as part of an ongoing cost-savings initiative targeting $10.0 million in annual savings.
• Tariffs: Increased U.S. tariffs on Swiss, Chinese, and Japanese goods negatively impacted gross margins by approximately 230 basis points in the quarter and 130 basis points for the nine months.

Guidance, Outlook, and Risks

• Outlook: Management expects tariffs to have a material impact on U.S. operations even after mitigation efforts, unless rates are significantly reduced. A framework agreement with Switzerland announced in November 2025 may reduce the special tariff on Swiss goods from 39% to 15% minus the standard duty rate.
• Internal Controls: The Company disclosed a material weakness in internal controls related to the lack of functional segregation of duties in the Dubai branch. Remediation is underway, including personnel changes and enhanced risk assessment processes.
• Legal Proceedings: The Company is cooperating with an SEC inquiry regarding the restatement. Additionally, a U.S. Customs and Border Protection audit from 2016 regarding tariff allocation methodologies remains a potential contingency, though the statute of limitations has lapsed for the specific entries audited.
• Capital Allocation: The Company paid $23.3 million in dividends and repurchased $1.6 million of stock during the nine months ended October 31, 2025. $48.4 million remains available under the current share repurchase program.

Investor Verification Checklist

• Restatement Details: Verify the full extent of the restatement adjustments on the prior year's financials and the status of the SEC inquiry.
• Tariff Mitigation: Assess the effectiveness of price increases and sourcing changes in offsetting the impact of new U.S. tariffs on Swiss and Chinese goods.
• Owned Brands Performance: Investigate the reasons behind the continued decline in sales for owned brands (Movado, etc.) versus the growth in licensed brands.
• Internal Control Remediation: Monitor the timeline and testing results for the remediation of the material weakness in the Dubai branch.
• Inventory Levels: Review inventory turnover and potential markdown risks given the increase in inventory levels to $196.9 million.