NEW YORK — Cost cuts allowed Movado Group Inc. to post gains in second-quarter profits despite an appreciable sales decline.
For the three months ended July 31, the Paramus, N.J.-based watchmaker reported net income grew 4.8 percent to $5.4 million, or 44 cents a diluted share. That compares with net income of $5.1 million, or 42 cents, in the prior-year quarter. Earnings per share beat the Wall Street consensus estimate by a penny.
Net sales for the period fell 7.8 percent to $72.2 million from $78.4 percent last year, while same-store sales rose 1.5 percent at Movado’s retail boutiques.
“Our successful cost-savings initiatives and productivity improvements continue to drive strong results as we improved our operating profit margin and grew the bottom line during the quarter,” said chief executive officer Efraim Grinberg in a statement. “The single-digit net sales decline compares to a record sales performance in the year-ago period and is primarily attributable to economic weakness overseas combined with U.S. retailers’ continued focus on inventory management.”
Cost cuts accruing to the bottom line included an 8.2 percent decline in cost of sales to $27.9 million from $30.4 million last year, as well as an 8.6 percent drop in selling, general and administrative expenses to $35.8 million from $39.2 million a year ago. Those cuts helped gross margin remain at 61.4 percent.
Overall, for the first half of the fiscal year, Movado reported net earnings increased 14.1 percent to $5.7 million, or 47 cents a diluted share. That compares with last year’s profits of $5 million, or 41 cents. Movado said last year’s earnings have been adjusted downward $109,000, or 1 cent, to reflect the adoption of a new accounting standard regarding derivative instruments and hedging activities.
Sales for the first six months slipped 4 percent to $129.5 million from $134.9 million a year ago, while same-store sales in the company’s boutiques gained 4.8 percent.
In a separate development, the firm reported Wednesday it has signed two lease agreements for Movado boutiques to be located in the Dadeland Mall and the Aventura Mall, both located in Miami. The boutiques are expected to open in late 2002.