December 9, 2009 / 1:30 PM / 10 years ago

UPDATE 3-Movado Q3 adj profit trails Street, shares drop

* Sees FY 10 single-digit sales drop in license brand category

* Sees growth in license brand category in 2011

* Sees FY loss $1.40-$1.50/shr

* Shares fall as much as 20 pct (Adds details, analyst comment, updates stock activity)

By Vidya Lakshmi

BANGALORE, Dec 9 (Reuters) - Watchmaker Movado Group Inc (MOV.N) posted a lower-than-expected adjusted quarterly profit, hurt by high levels of destocking as retailers focused on tight inventory control, and its shares fell as much as 20 percent.

The company, which distributes watch brands such as Concord, Tommy Hilfiger and Hugo Boss, expects a single-digit sales decline this year in the license brand category but expects to return to growth next year, a company executive said on a conference call with analysts.

Movado posted a net loss attributable to the company of $20.9 million, or 85 cents a share, for the third quarter ended Oct. 31, compared with a profit of $15.7 million, or 62 cents a share, a year earlier.

The loss included a non-cash tax charge of 92 cents a share and a charge for sales of excess discontinued product of 6 cents a share, the company said.

Excluding these items, Movado, which has been aggressively cutting costs, earned 12 cents a share.

Revenue fell 5 percent to $129.0 million.

Analysts on average were looking for a profit of 65 cents a share, before items, on revenue of $141.2 million, according to Thomson Reuters I/B/E/S.

The unprecedented level of U.S. jewelry retailers closing their operations and liquidating inventory has had a significant impact on the company’s business, Chief Executive Efraim Grinberg said in a statement.

Wall Street Strategies analyst Brian Sozzi said the earnings report went against his investment thesis that inventory restocking at wholesale customers, coupled with tight expense management, would generate above-consensus holiday-quarter and 2010 earnings.

“The company’s report suggests it is losing share in a still competitive accessible luxury marketplace, while having to battle with an increased percentage of licensed watch sales,” Wall Street Strategies analyst Brian Sozzi said in an e-mail to Reuters.

“I think the destocking thing is something that is going to be in play until the middle of next year,” Sozzi added by phone.

The company forecast a full-year loss of $1.40 to $1.50 a share, including a 94-cent non-cash tax charge, an 8-cent charge for the sale of excess discontinued product and a 3-cent charge for debt financing.


Sozzi said Movado’s international sales, including in the Middle East and Britain, were disappointing in view of strong results posted by companies such as Tiffany & Co (TIF.N). [ID:nN25324014]

“Movado seems to be losing share at this point on a global scale,” he said.

Last month rival Fossil Inc (FOSL.O) posted a quarterly profit that outpaced Wall Street expectations, buoyed by strong sales at company-owned stores, and said its international accessories business would continue to gain momentum. [ID:nBNG493474]

Shares of Paramus, New Jersey-based Movado were down 16 percent at $9.08 in early afternoon trading on the New York Stock Exchange, after dropping as low as $8.67. (Reporting by Vidya Lakshmi in Bangalore; Editing by Anne Pallivathuckal, Jarshad Kakkrakandy)

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