0001193125-25-294766
SEC filingMovado's Q3 FY26 net sales rose 3.1% YoY, driven by licensed brands and Company Stores, while tariffs pressured gross margins.
For the three months ended October 31, 2025, Movado Group reported net sales of $186.1 million, a 3.1% increase from $180.5 million in the prior year period. Excluding a $3.4 million positive impact from foreign currency fluctuations, net sales would have increased by 1.2%. Gross profit rose to $101.1 million (54.3% of net sales) from $96.6 million (53.5% of net sales) in the prior year, an increase of $4.5 million. The gross margin improvement of approximately 80 basis points was driven by a favorable sales mix (approximately 240 bps) and leveraging of reduced costs over higher sales (approximately 110 bps), partially offset by increased U.S. tariffs (approximately 230 bps), negative foreign exchange impact (approximately 30 bps), and higher shipping costs (approximately 10 bps).
Selling, general and administrative (SG&A) expenses decreased by $1.3 million, or 1.4%, to $89.3 million, primarily due to lower marketing expenses of $4.9 million and a decrease in payroll-related expenses of $3.9 million (including $2.7 million in prior year severance costs). These were partially offset by a $5.2 million increase in performance-based compensation and $0.9 million in costs related to an internal investigation. Operating income improved to $11.7 million from $6.1 million in the prior year. Net income attributable to Movado Group, Inc. was $9.6 million, compared to $4.8 million in the prior year period.
Watch and Accessory Brands: Net sales increased 1.9% to $162.7 million. Licensed brands grew 6.4% to $116.4 million, while owned brands declined 8.5% to $46.0 million. U.S. Watch and Accessory Brands net sales rose 5.0% to $54.2 million, driven by licensed brand growth of 20.9%, partially offset by a 4.8% decline in owned brands. International Watch and Accessory Brands net sales increased 0.4% to $108.5 million, with licensed brands up 3.9% and owned brands down 17.3%. Operating income for the segment was $9.2 million, up from $4.8 million in the prior year, driven by higher gross profit and lower SG&A.
Company Stores: Net sales increased 12.2% to $23.4 million, driven by higher foot traffic, online outlet sales, and a new store opening. Operating income improved to $2.5 million from $1.3 million in the prior year, primarily due to higher gross profit from increased sales and a higher gross margin percentage.
Management expects the cost-savings initiative, which included headcount reductions, to generate approximately $10.0 million in annual savings. The Company has implemented selective price increases and is developing mitigation strategies in response to increased U.S. tariffs, which are expected to have a material impact on U.S. operations. The Company does not expect the One Big Beautiful Bill Act to have a material impact on its financial statements. No specific revenue or earnings guidance was provided for future periods.
As of October 31, 2025, Movado Group holds $183.9 million in cash and equivalents, with no outstanding debt under its $100 million revolving credit facility. The company maintains $0.4 million in marketable securities (available-for-sale and short-term investments). Inventory stands at $196.9 million, up from $156.7 million at fiscal year-end January 31, 2025. Shareholders' equity is $497.5 million, reflecting a healthy liquidity position.
Purchase commitments are not quantified in the notes; however, the company has minimum royalty and advertising commitments under license and endorsement agreements. Letters of credit outstanding total $0.3 million, with expiration dates through June 2026.
During the nine months ended October 31, 2025, Movado repurchased 100,000 shares for $1.6 million at an average price of $15.94 per share. A $50 million share repurchase program was authorized on December 5, 2024, with $48.4 million remaining. Dividends totaled $23.3 million, paid at $0.35 per share quarterly. Capital expenditures were $3.5 million, allocated $2.3 million to Watch & Accessory and $1.2 million to Company Stores. No debt was issued or repaid; the credit facility remains undrawn.
Movado operates two segments: Watch and Accessory Brands ($162.7M revenue, $9.2M operating income) and Company Stores ($23.4M revenue, $2.5M operating income) for the quarter ended October 31, 2025. Watch and Accessory Brands includes owned brands ($46.0M), licensed brands ($116.4M), and after-sales service ($0.3M). Geographically, 59.1% of total net sales are international, with Europe (38.1%), Americas ex-US (7.9%), Asia (6.9%), and Middle East (6.2%). The U.S. accounts for 40.9% of net sales.
Movado Group's operating cash flow improved significantly, turning from a $40.6 million use in the prior-year nine-month period to a $1.3 million source in the current period. This turnaround was driven by favorable working capital changes, particularly a $12.4 million smaller increase in trade receivables and a $3.6 million swing in other current assets. Net income of $14.1 million provided a solid base, with non-cash charges (depreciation, stock compensation, provisions) totaling $16.6 million. The primary drag on CFO was inventory build ($28.3 million) and a reduction in income taxes payable ($3.9 million).
Capital expenditures declined to $3.5 million (from $6.4 million), reflecting lower capex intensity. Free cash flow (CFO minus capex) was negative $2.2 million, but this was a substantial improvement from negative $47.0 million in the prior period. The company returned $24.9 million to shareholders via dividends ($23.3 million) and share repurchases ($1.6 million), which exceeded free cash flow, indicating reliance on existing cash balances. The net decrease in cash was $24.5 million, ending at $184.7 million.
Anomalies: The large swing in income taxes payable (from a $21.0 million use to a $3.9 million use) suggests a normalization of tax payments. The $5.9 million positive effect of exchange rate changes on cash provided a tailwind, contrasting with a $0.9 million headwind in the prior period.