Movado: Zacks’ Bear of the Day Play

Are watch sales really that bad? In a surprise move, Movado Group Inc. (MOVSnapshot Report) recently guided lower for the full year as it blamed softening in the watch category. It has fallen to a Zacks Rank #5 (Strong Sell) as analysts moved to cut estimates.

Movado Group makes watches in its Switzerland manufacturing facilities under the brands Movado, Ebel, Concord, ESQ Movado, Coach, Tommy Hilfiger, Hugo Boss, Juicy Couture, Lacoste and Scuderia Ferrari. It also operates Movado company stores in the United States.

Movado focuses on the upscale watch market, which has been holding up well in the face of economic weakness in Europe and now in Asia.

Disappointing Sales and Lowered Guidance

However, on Nov 14, Movado shocked the Street by announcing preliminary third quarter sales which were below analyst forecasts.

Net sales for the third quarter are expected to fall to $188.6 million from $189.7 million a year ago. For the full fiscal year, net sales are only now expected to increase by 1% to 2%.

The company blamed it on slower growth in the overall watch category and that retailers are “focusing on driving improved productivity.”

Additionally, some of its brands didn’t perform as well as planned, including the flagship brand, Movado, in the international markets.

Earnings per share for the fiscal fourth quarter are expected in the range of $0.86 and $0.87. That is well below the Zacks Consensus of $1.14.

Fiscal full year guidance has been reduced to a range of $1.80 to $1.85.

That is well under the Zacks Consensus Estimate of $2.41.

Analysts moved to immediately cut estimates. The full year Zacks Consensus was cut to $1.81 which is at the low end of the company’s new range. That’s also an earnings decline of 12% from fiscal 2014.

Shares Fall to New 52-Week Low

Not surprisingly, the shares got crushed on the lowered guidance. They’re now trading at new 52-week lows.

Movado is now trading with a forward P/E of just 13.9.

But that doesn’t mean it’s a deal. Slashing your outlook as you head into the critical holiday shopping season is never a confidence booster.

If you are really interested in the watch space, you might want to consider Fossil Group Inc. (FOSLAnalyst Report) instead. While it makes watches on the lower end of the spectrum, it didn’t mention any problems with watch demand slowing in its last earnings report. Fossil is also expected to see 13% earnings growth this year.

Want More of Our Best Recommendations?

Zacks’ Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Then each week he hand-selects the most compelling trades and serves them up to you in a new program called Zacks Confidential.

Learn More>>

Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor of the Insider Trader and Value Investor services. You can follow her on twitter at @TraceyRyniec.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s