Movado Group posted positive third quarter results with sales up 18.4% led by strong performances from its Movado, Coach and Scuderia Ferrari watch brands.
Net sales at the group hit US$189.7 million (£116.8m) in the 13 weeks to October 31, led by growth in its accessible luxury and licensed brand categories. Operating income for the period was US$34.1 million (£21 million), up 22% on US$28 million (£17.2m) achieved in the comparable period in 2012.
Gross profits hit US$101.3 million (£62.3m), delivering a profit margin of 53.4%, which was an increase on US$90.4 million (£55.6m) in the third quarter of 2013, although last year’s profit margin had been 56.4%. Movado Group said that decline in profit margin was "primarily the result of a shift in channel and product mix and the unfavourable impact of fluctuations in foreign currency exchange rates partially offset by the leverage gained on certain fixed costs".
Operating expenses for the quarter increased 2.7% year on year to US$174.9 million (£107.6m), driven by a higher level of investment in marketing.
Movado Group chairman and chief executive Efraim Grinberg said: “The strength of our brands, the success of our growth strategies and the discipline with which our team operates led to another strong quarter for Movado Group. We recorded an 18% increase in sales and a 22% increase in adjusted operating income as we remained focused on leveraging our infrastructure as we grow.
"Sales continue to be driven by our Movado and licensed brands, which include a positive customer response to our repositioned Coach watch brand and introduction of our Scuderia Ferrari watch brand. We believe we are well positioned for the holiday season, supported by powerful innovation and high impact advertising campaigns, which is reflected in our annual guidance.”
In light of the strength of its third quarter performance Movado Group is increasing its operating income guidance for the 2014 fiscal year. Its projections for net sales have increased to US$580 million (£356.5m), operating income has been positively adjusted to US$72 million (£44.2m) and EBITDA forecasts have been raised to US$84 million (£51.6m).
Since the end of the third quarter Movado Group revealed it has received a US$2.5 million (£1.5m) net pre-tax refund from US Customs and Border Protection to recover payments made in calendar years 2008 through 2011 for watches subsequently exported from the US. The refund is non-recurring and the Company anticipates making a donation to the Movado Group Foundation in the fourth quarter with the proceeds of the refund and a portion of other non-recurring items.