Movado Group Inc.’s stock fell 12.9 percent to $9.45 on Wednesday after the watchmaker said its third-quarter earnings took a big hit from tax charges and sluggish demand from distressed U.S. jewelry retailers.
For the period ended Oct. 31, the Paramus, N.J.-based firm recorded a net loss of $20.9 million, or 85 cents a diluted share, compared with a profit of $15.7 million, or 62 cents a share, in the year-ago quarter. Excluding a noncash tax charge and a charge for sales of excess discontinued products, net income was 12 cents a diluted share, far lower than the 65 cents expected by analysts.
Revenue for the quarter slid 5.1 percent to $129 million, from $135.8 million, and also missed Wall Street’s revenue estimate of $141.2 million.
“I am very disappointed in our third-quarter and year-to-date results,” Efraim Grinberg, president and chief executive officer, said on the company call to analysts and investors. “Previously, when we had looked out at fiscal 2010 and established our expectations for the year, it is clear that we underestimated the level of destocking that would take place within our wholesale distribution channel as retailers have remained highly conservative in their inventory positions throughout the year.”
The company not only felt the impact of the liquidation of some of its former customers, such as Fortunoff and Finlay Enterprises Inc., but also the rapid slowdown in luxury spending, Grinberg said, adding the Movado brand had been the hardest hit.
For the quarter, U.S. wholesale sales declined 12.2 percent and international wholesale sales fell 13.2 percent, while retail sales slid 2 percent and outlet same-store sales increased 1.9 percent. Gross margin as a percentage of sales dropped to 46.8 percent versus 62.9 percent in the year-ago period, due partially to currency fluctuations and sales of discontinued product.
For the nine months, Movado’s losses totaled $31.1 million, or $1.27 a share, versus income of $25.1 million, or 97 cents a share, for the 2008 period. Net sales plunged 22 percent to $286.2 million from $366.9 million.
For the full year, the company anticipates a net loss of between $1.40 and $1.50 a share. Excluding onetime items, it expects a loss of 35 cents to 45 cents a share, while analysts had predicted a profit of 55 cents. Sales are expected to fall 20 percent for the year, to $92.2 million, versus prior guidance of a high-single-digit percentage decline.
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