MOV

Movado Group Inc. 10-Q Summary: Quarter Ended July 31, 2026

Business Context and Reporting Period

This Form 10-Q covers the quarterly period ended July 31, 2026, and the six months ended on that date. Movado Group, Inc. operates in two segments: Watch and Accessory Brands (designing, manufacturing, and distributing owned and licensed brands) and Company Stores (retail outlet business). The company is an accelerated filer with principal executive offices in Paramus, New Jersey.

Key Financial Metrics

Note: Working Capital calculated as Current Assets ($527,175) minus Current Liabilities ($123,698).

Material Changes vs. Prior Period

• Revenue Growth: Net sales increased 4.9% ($7.9M) for the quarter and 6.3% ($18.6M) for the six months compared to the prior year. Growth was driven by higher wholesale volumes, favorable sales mix, and positive foreign currency impacts.
• Margin Expansion: Gross margin improved by 530 basis points (quarter) and 430 basis points (six months). Key drivers included a favorable sales mix and $3.2 million in IEEPA duty refunds recognized as a benefit to cost of sales.
• Profitability Surge: Operating income increased significantly ($10.9M for the quarter; $17.6M for six months) due to gross profit expansion and reduced professional fees related to the Dubai branch misconduct investigation.
• Cost Savings: No new severance accruals were recorded in the current period, compared to $0.9M (quarter) and $1.5M (six months) in the prior year, reflecting the completion of the fiscal 2025 cost-savings initiative.
• Cash Flow: Net cash provided by operating activities turned positive at $6.5M for the six months ended July 31, 2026, compared to a use of $11.0M in the prior year, driven by higher net income and improved working capital management.

Guidance, Outlook, and Risks

• Tariff Environment: The company received $3.2M in refunds for previously paid IEEPA tariffs (invalidated by the Supreme Court). It continues to pursue recoveries for remaining amounts and monitors new Section 301 tariffs (12.5% on certain imports) imposed in July 2026.
• Legal Proceedings: The company is cooperating with an SEC voluntary request regarding a fiscal 2025 restatement. Additionally, a pre-tax charge of $0.2M (quarter) and $0.7M (six months) was recorded related to an investigation of misconduct in the Dubai branch.
• Capital Allocation: The company paid $16.6M in dividends and repurchased $1.5M of stock during the six-month period. $44.6M remains available under the current share repurchase program.
• Liquidity: The company maintains a $75.0M revolving credit facility with no borrowings outstanding. Availability is $74.7M after letters of credit.
• Outlook: Management notes that operating results for interim periods are not necessarily indicative of full-year results. Risks include geopolitical instability, supply chain disruptions, and consumer spending trends.

Investor Verification Checklist

• Tariff Refund Status: Verify the timeline and probability of recovering the remaining ~$6.8M of IEEPA tariffs paid, as these are currently accounted for as gain contingencies.
• SEC Investigation: Monitor updates regarding the SEC's voluntary request for documents related to the fiscal 2025 restatement.
• Dubai Misconduct: Assess if the $0.7M charge related to the Dubai branch investigation represents the final cost or if further liabilities may emerge.
• Inventory Levels: Review inventory trends ($196.5M at July 31, 2026) to ensure alignment with sales growth and to monitor for potential markdown risks.
• Foreign Currency Exposure: Evaluate the impact of the strong dollar on international sales (57.6% of total sales) and the effectiveness of the company's hedging program.