Movado raises full-year profit view as margins, demand grow

Tue Aug 28, 2012 10:53am EDT

(Reuters) - Watchmaker Movado Group Inc (MOV.N) reported a higher second-quarter profit and raised its full-year earnings forecast for the second time this year, encouraged by improved gross margins and continued demand for its namesake and licensed brands.

Shares of the company, which licenses brands such as Hugo Boss, Lacoste, Tommy Hilfiger and Juicy Couture, rose 20 percent to touch a life-high of $36.12. The stock, among the top percentage gainers on the New York Stock Exchange on Tuesday morning, was up 17 percent at $35.10.

Movado, which went public in 1993, has been launching new products and ramping up marketing to attract more customers.

The watchmaker, which sells its products through upscale department store chains and jewelry shops, has also been keeping a tight leash on inventory and cutting costs to boost earnings.

The company sees fiscal 2013 earnings of $1.40 per share, up from the $1.15 per share it forecast earlier. Sales are expected to increase 10 percent to $510 million for the year.

"We view this (forecast raise) as another positive data point supporting the aspirational designer watch category, of which Fossil and Movado have a virtual monopoly," ISI Group analyst Omar Saad wrote in a client note.

Fossil Inc (FOSL.O) earlier this month forecast full-year earnings above Wall Street estimates, saying it expects strong wholesale business in the Asia-Pacific region and improved performance in Europe to continue through the year.

Analyst Oliver Chen of Citi Investment Research, which includes Movado in its Top Picks Live high conviction list, said the company's gross margin gain was "impressive" and prudent inventory management would continue to drive profit.

Gross margins rose 1.9 percentage points in the quarter on cost reductions.

Second-quarter profit rose to $8.1 million, or 32 cents per share, from $4.4 million, or 18 cents per share, a year earlier.

Sales at the Paramus, New Jersey-based company rose 4 percent to $118.0 million.

(Reporting by Ranjita Ganesan; Editing by Saumyadeb Chakrabarty)

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