Movado Group Inc. said Thursday shrinking fourth-quarter sales pulled it into the red. The company noted it is in violation of a financial covenant and in the process of negotiating a three-year asset-based loan.
In the quarter ended Jan. 31, the Paramus, N.J.-based timepiece vendor lost $22.8 million, or 92 cents a diluted share, compared with profits of $19.6 million, or 72 cents a share, in the comparable period last year. Sales in the three months fell 32.2 percent to $94 million from $138.6 million.
Excluding one-time charges and provisions, the company’s losses in the quarter totaled $10.5 million, or 42 cents a share. Two analysts polled by Yahoo Finance expected a loss of 2 cents a share on revenues of $105.4 million. Analysts generally don’t account for nonrecurring items in their estimates.
“Fiscal 2009 was extremely difficult, and we experienced a loss in the fourth quarter, reflecting the dual impact on our business from weak consumer spending and the amplified effect of customers significantly curtailing replenishment orders as they focus instead on inventory reductions and cash flow,” president and chief executive officer Efraim Grinberg said on a conference call with investors.
Movado shares closed down 48 cents, or 5.8 percent, at $7.83.
Citing the losses, Movado said it is not in compliance with a financial covenant in its credit agreements. However, the company said it is negotiating with lenders on a $110 million asset-based loan. It has already secured a three-year, $50 million credit facility from Bank of America. Movado said it has enough cash on hand and cash from working capital to finance its business.
To conserve cash, the company suspended its quarterly cash dividends until the economy stabilizes and it returns to profitability.
For the full year, Movado’s profits fell 96.2 percent to $2.3 million, or 9 cents a share, from $60.8 million, or $2.23 a share, in 2008. Sales in the 12 months fell 17.7 percent to $460.9 million from $559.6 million.