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Bear of the Day: Time Runs Out on Movado Group, Inc.

Movado Group, Inc. (MOV) continues to struggle as watch sales decline worldwide. This Zacks Rank #5 (Strong Sell) recently cut full year guidance.

Movado Group makes watches in its Switzerland manufacturing facilities under the brands Movado, Ebel, Concord, ESQ Movado, Coach, Tommy Hilfiger, Hugo Boss, Juicy Couture, Lacoste and Ferrari. It also operates about 38 Movado retail stores globally.

Movado focuses on the upscale watch market with the Movado brand but sells its licensed watches in department stores and also to independent distributors.

Movado Fashions a Beat in Q1 But Sales Fell

On May 26, Movado reported its first quarter results and beat the Zacks Consensus by 3 cents. Earnings were 19 cents per share compared to the Consensus of 16 cents per share.

It was the Movado’s fourth earnings beat in a row.

Net sales, however, fell 5% on a constant dollar basis year over year to $114.1 million from $120.5 million in the year ago quarter.

It is the tale of various markets. While sales were up double digit in the United Kingdom, they suffered in Asia, especially in Hong Kong and China.

The lower priced fashion watch segment, which is mostly in the department stores, was also weak in the quarter. As a result, customers were reducing inventories.

Movado Cuts Full Year Guidance

There are many who believe traditional watches are dead. Movado hasn’t ignored the trend towards wearables like the Apple Inc (AAPL) Watch.

It has seen early success with its new Movado Edge collection of wearables.

There are analysts who believe that Movado’s edge in the wearables category will be in producing a fashion forward wearable watch. Most of those on the market aren’t exactly fashion forward.

But, for now, 2017 is still expected to be tough. Movado’s wearable market isn’t big enough to boost its traditional watch segment.

It cut its full year earnings guidance by 30 cents per share to a range of $1.55 to $1.70 per share.

The analysts were more optimistic just 90 days ago. The Zacks Consensus stood at $2.26 per share. It has since been cut to $1.61.

That is an earnings decline of 22% from last year.

MOV Shares at New Multi-Year Low

Given the struggles in the watch industry, it’s not a surprise to see shares hitting new lows. Check out this 5-year chart.

 

 

 

 

 

 

 

 

Does that mean they’re a deal?

Movado trades with a forward P/E of 12.5, which isn’t exactly that cheap. And you’re getting declining earnings with no timetable on when it might turn around, if ever.

For investors looking at the upscale watch and jewelry market, the pickings are slim. Tiffany & Co. (TIF) is a Zacks Rank #4 (Sell). Fossil Group Inc (FOSL), which also specializes in the lower end fashion watch category, is also a Zacks Rank #5 (Strong Sell).

Investors should look elsewhere in retail for a group that has better prospects.

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Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor of the Insider Trader and Value Investor services. You can follow her on twitter at @TraceyRyniec and she also hosts the Zacks Market Edge Podcast on iTunes.

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TIFFANY & CO (TIF): Free Stock Analysis Report

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FOSSIL GRP INC (FOSL): Free Stock Analysis Report

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Article printed from InvestorPlace Media, https://investorplace.com/2016/06/bear-of-the-day-movado-mov/.

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