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Movado After Q4: Company In Good Shape, Stock Fairly Priced

Apr. 03, 2018 4:50 PM ETMovado Group, Inc. (MOV)1 Comment
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Kenra Investors


  • Movado reported a solid Q4 with an excellent top-line growth and a solid margin expansion.
  • The solid performance was mainly driven by licensed brands, while the Movado brand posted a decline compared to Q4 2017.
  • The company is solid and the performance was good, but I remain moderately cautious on the prospects of future growth and margin expansion.

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The Context

The watch industry has lived a few difficult years for sure. A combination of industry headwinds, competitive pressures, and macroeconomic deceleration triggered weakness on many fronts and Movado (NYSE:MOV) was not immune to those forces, although its business resisted well in comparison to peers such as Fossil (FOSL).

Movado's revenue growth declined significantly in 2015 but went into negative territory only in fiscal 2017 (ending January 2017) when sales declined 7.1%. The company recovered in fiscal 2018 and posted a 2.8% increase in revenue with a recovery in EBIT margins, at least if measured in adjusted terms. Before analyzing Movado's recent results, let's do a recap of what happened in the past few years, with a particular focus on the issues that the company and its peers had to face.

Declining tourist spending. Between 2015 and 2016, watchmakers and many other industries exposed to fluctuations in tourist spending were negatively affected by a negative macroeconomic environment triggered by a combination of a strong dollar, recessions in emerging countries such as Russia and Brazil, and the economic slowdown in China, in addition to the concerns related to terrorism in Europe. The combination of these factors determined a decrease in tourism and spending by tourists, which is extremely important for basically all the companies in the space.

Smartwatches. The launch and the increasing popularity of smartwatches produced by well-known tech brands such as Apple (AAPL) and Samsung generated further competitive pressures for Movado and the likes, as a significant number of customers started to shift to those devices at the expense of traditional watches. The competitive pressures from smartwatches were particularly evident in the mid-price segment, where Movado and Fossil operate, while it was definitely negligible in the high-end and low-end segments.

The environment started to improve in more recent

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Kenra investors is a 5-star financial expert according to Tipranks and is constantly in the top 5%-10% of world financial experts.Thanks to the experience gained in almost 10 years of activity and study in the stock market and 5 years in professional equity research, I have developed a very sound understanding of many aspects of business, finance and investing. My approach is based on combining fundamental, technicals and macro to deliver meaningful outperformance. I am always open to considering professional collaborations or formal employment opportunities in equity research and/or portfolio management globally. For any purpose, you can message me here on Seeking Alpha or send an email to kenrainv@gmail.com

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