PARAMUS, N.J.--(BUSINESS WIRE)--Movado Group, Inc. (NYSE:MOV) today announced second quarter and six month results for the period ended July 31, 2017.

• Net sales increased 0.5% to $128.8 million, or 1.2% on a constant dollar basis
• Operating income of $8.3 million; Adjusted operating income of $12.9 million versus $10.1 million in the prior year period
• Diluted EPS of $0.24; Adjusted diluted EPS of $0.43 compared to $0.27 in prior year period

Efraim Grinberg, Chairman and Chief Executive Officer, stated, “We are pleased to report second quarter results, in-line with our internal expectations, reflecting progress on our strategic growth and cost savings initiatives. Despite a challenging U.S. retail environment, our global team’s strong execution of our strategy and our increasing presence around the world led to growth in net sales with particular strength in Latin America, Europe and Asia. We are pleased to have added Olivia Burton to our family of brands in the quarter, which we believe is a perfect complement to our portfolio given its fast growth and distinctive brand identity, and have seen initial success with the integration as the brand continues to resonate with its core millennial customer. Looking ahead, we are excited about the opportunities we have in front of us to grow our recently acquired Olivia Burton brand globally, expand new business initiatives including Rebecca Minkoff and Movado Connect watches, and increase our direct-to-consumer business. This, combined with our unique and compelling product offerings across the entire portfolio, supported by our traditional and digital advertising campaigns, positions us well for the upcoming holiday season.”

Mr. Grinberg continued, “The Company’s strong balance sheet with $162 million in cash affords us the opportunity to both invest in support of our growth and return value to our shareholders. We believe the Board’s approval today of a quarterly dividend and a new $50 million share repurchase program is a testament to their confidence in the Company’s business model and ability to deliver long-term sustainable growth.”

During the second quarter of fiscal 2018, the Company recorded a $4.5 million pre-tax charge, with a related tax benefit of $0.1 million, or $0.19 per diluted share, in conjunction with the acquisition of the Olivia Burton brand and a $0.1 million pre-tax charge, related to a portion of the cost savings initiatives. In the first quarter of fiscal 2018, the Company recorded a $6.3 million pre-tax charge, with a related tax benefit of $1.9 million, or $0.19 per diluted share, related to its cost savings initiatives. In the first quarter of fiscal 2017, the Company recorded a $1.8 million pre-tax charge, with a related tax benefit of $0.7 million, or $0.05 per diluted share, for the immediate vesting of stock awards and certain other compensation related to the announcement of the retirement of Rick Coté, the Company’s former Vice Chairman and Chief Operating Officer, in fiscal 2017 (“COO’s retirement”).

Second Quarter Fiscal 2018 (See attached table for GAAP and Non-GAAP measures)

• Net sales were $128.8 million compared to $128.1 million in the second quarter of fiscal 2017, an increase of 0.5%. Net sales on a constant dollar basis increased 1.2% compared to net sales in the second quarter of fiscal 2017.
• Gross profit was $66.1 million, or 51.3% of sales, compared to $70.3 million, or 54.9% of sales, in the second quarter last year. Adjusted gross profit was $66.4 million, or 51.6% of sales, which excludes $0.3 million of amortization of acquisition accounting adjustments related to the Olivia Burton brand. The decrease in gross margin percentage was primarily the result of channel and product mix as well as changes in foreign currency exchange rates, partially offset by a reduction of certain fixed costs due to the cost savings initiatives.
• Operating expenses decreased $2.4 million, or 3.9%, to $57.8 million. Adjusted operating expenses for the second quarter of fiscal 2018 were $53.5 million, which excludes $4.2 million of expenses and amortization related to the acquisition of the Olivia Burton brand and $0.1 million of expenses related to the cost savings initiatives. This decrease in adjusted operating expenses was primarily the result of decreased selling and other operating costs, as well as fluctuations in foreign currency rates.
• Operating income was $8.3 million compared to operating income of $10.1 million in the second quarter of fiscal 2017. For the second quarter of fiscal 2018, adjusted operating income was $12.9 million, which excludes $4.5 million of pre-tax expenses and amortization related to the acquisition of the Olivia Burton brand and $0.1 million of expenses related to the cost savings initiatives.
• The Company recorded a tax provision of $2.6 million which equates to an effective tax rate of 32.0% compared to a tax provision of $3.4 million, or an effective tax rate of 35.1%, in the second quarter of fiscal 2017. For the second quarter of fiscal 2018, the Company recorded an adjusted tax provision of $2.7 million or an adjusted tax rate of 21.5%.
• Net income was $5.5 million, or $0.24 per diluted share, compared to $6.3 million, or $0.27 per diluted share, in the second quarter of fiscal 2017. Adjusted net income in the second quarter of fiscal 2018 was $9.9 million, or $0.43 per diluted share, which excludes $4.4 million of expenses and amortization, net of $0.1 million of tax, related to the acquisition of the Olivia Burton brand and $0.1 million, associated with the cost savings initiatives.

First Half Fiscal 2018 (See attached table for GAAP and Non-GAAP measures)

• Net sales were $228.0 million compared to $242.1 million in the first six months of fiscal 2017, a decrease of 5.8%. Net sales on a constant dollar basis decreased 4.5% compared to net sales in the first six months of fiscal 2017.
• Gross profit was $115.3 million, or 50.5% of sales, compared to $131.6 million, or 54.3% of sales in the same period last year. Adjusted gross profit for the first six months of fiscal 2018, which excludes $0.3 million of amortization of acquisition accounting adjustments related to the Olivia Burton brand and $1.4 million in charges related to the cost savings initiatives, was $116.9 million, or 51.3% of sales. The decrease of the adjusted gross margin percentage from the first half of last year was primarily the result of channel and product mix as well as changes in foreign currency exchange rates partially offset by a reduction of certain fixed costs as a result of cost savings initiatives.
• Operating expenses were $110.6 million as compared to $116.1 million in the first six months of last fiscal year. For the first six months of fiscal 2018, adjusted operating expenses were $101.3 million, which excludes $4.2 million of expenses and amortization related to the acquisition of the Olivia Burton brand and $5.0 million of expenses related to the cost savings initiatives. For the first six months of fiscal 2017, adjusted operating expenses were $114.3 million, which excludes $1.8 million of expenses related to the COO’s retirement in fiscal 2017. The $13.0 million decrease in adjusted operating expenses was primarily the result of decreased selling and other operating costs, fluctuations in foreign currency rates and decreased marketing expenses.
• Operating income was $4.7 million compared to operating income of $15.5 million in the first six months of fiscal 2017. Adjusted operating income for the first half of fiscal 2018, which excludes $4.5 million of expenses and amortization related to the acquisition of the Olivia Burton brand and $6.4 million of expenses related to the cost savings initiatives, was $15.6 million compared to adjusted operating income of $17.3 million for the first half of fiscal 2017, which excludes $1.8 million of expenses related to the COO’s retirement in fiscal 2017.
• The Company recorded a tax provision in the first six months of fiscal 2018 of $2.9 million as compared to a tax provision of $5.2 million in the first six months of last year. Based upon adjusted pre-tax income, the adjusted tax provision was $4.9 million in the first half of fiscal 2018 compared to an adjusted tax provision of $5.9 million in the first half of fiscal 2017.
• Net income was $1.3 million, or $0.06 per diluted share, compared to $9.6 million, or $0.41 per diluted share, in the first six months of fiscal 2017. Adjusted net income for the first six months of fiscal 2018 was $10.2 million, or $0.44 per diluted share, which excludes $4.4 million in expenses and amortization, net of tax, related to the acquisition of the Olivia Burton brand and $4.5 million, net of tax, related to the cost savings initiatives. For the first half of fiscal 2017, adjusted net income was $10.7 million, or $0.46 per diluted share, which excludes $1.1 million in expenses, net of tax, related to the COO’s retirement.

Updated Fiscal 2018 Outlook

The Company is updating its outlook for fiscal 2018 to reflect the addition of seven months of the Olivia Burton brand in the Company’s operations, excluding transaction related costs and the amortization of acquisition accounting adjustments. The Olivia Burton brand continues to perform in line with the Company’s expectations communicated in the July 5, 2017 announcement. Therefore, for fiscal 2018, the Company now anticipates that net sales will be in the range of $530.0 million to $545.0 million and operating income will be approximately $53.0 million to $58.0 million. The Company anticipates net income in fiscal 2018 to be approximately $35.5 million to $38.8 million, or $1.50 to $1.65 per diluted share, reflecting a 32% anticipated effective tax rate. The Company's outlook assumes no further significant fluctuations from prevailing foreign currency exchange rates.

The above outlook excludes the $7.0 million to $10.0 million pre-tax charge related to cost savings initiatives in fiscal 2018, of which $6.4 million was recorded in the first half of fiscal 2018. The Company continues to expect to realize approximately $12.0 million of savings in fiscal 2018 and estimates approximately $15.0 million in on-going annual pre-tax savings from these initiatives, with the majority in general and administrative expenses. This outlook also excludes approximately $7.0 million in anticipated pre-tax costs in fiscal 2018, of which $4.5 million was recorded in the second quarter of fiscal 2018, related to transaction costs and the amortization of acquisition accounting adjustments for the Olivia Burton brand.

Quarterly Dividend and New Share Repurchase Program

The Company announced that on August 29, 2017, the Board of Directors approved the payment on September 25, 2017 of a cash dividend in the amount of $0.13 for each share of the Company’s outstanding common stock and class A common stock held by shareholders of record as of the close of business on September 11, 2017.

The Company also today announced that its Board of Directors has approved a new share buyback program under which the Company may purchase up to $50 million of its outstanding common shares from time to time, depending upon a variety of factors, including market and industry conditions, share price, regulatory requirements and other corporate considerations, as determined by the Company from time to time. Consistent with the Company’s prior buyback program, the primary objective of the new share repurchase program is to offset the impact of potential share dilution. The authorization expires on August 29, 2020 subject to extension or earlier termination by the Board of Directors. The Company may purchase shares of its common stock in open-market and/or privately negotiated transactions in accordance with applicable securities laws and regulations, including Rule 10b-18 of the Securities Exchange Act of 1934, and repurchases may be executed pursuant to Rule 10b5-1 under the Securities Exchange Act of 1934. The authorization may be suspended or discontinued at any time without notice.

Concurrent with this announcement, The Company’s Board of Directors cancelled the previously authorized $50 million share buyback program which would have expired on September 30, 2017. The Company repurchased approximately 229,000 shares, or $5.5 million, under that program.