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 Ferrari. It also operates about 38 Movado retail stores globally.
Big Third Quarter Beat
On Nov 22, 2016, Movado reported its fiscal third quarter results and surprised by 20 cents on the Zacks Consensus Estimate. Earnings were $0.91 versus the consensus of $0.71.
Net sales still fell, but only by 3.1% to $179.8 million from $185.6 million in the year ago period. Net sales on a constant dollar basis only fell 1.4%.
Gross profit, however, rose by 90 basis points to 54.8% of sales compared to 53.9% in the third quarter of fiscal 2016. The increase was primarily due to the result of the favorable impact of channel and product mix and some sourcing improvements.
Is the Worst Over?
Movado has been in the unfortunate position of not just being a watchmaker as watches are becoming less popular, but also a luxury watchmaker.
But in November, it maintained its outlook for fiscal 2017 with earnings expected to be between $1.40 and $1.55 per share.
The Zacks Consensus Estimate has actually risen in the last 30 days to $1.55 from $1.51, which is the high end of the company’s range. That indicates the analyst is more bullish on the holiday quarter.
While that is a still a 25% earnings decline from fiscal 2016, the analyst is more bullish about fiscal 2018. Earnings are expected to be $1.69 which is a 9% increase over fiscal 2017.
Dividend and Share Buy Back
Movado pays a dividend, which is currently yielding a healthy 1.9%.
It also has been repurchasing shares. It repurchased about 18,000 shares during the fiscal third quarter. As of Oct 31, 2016, it still had $46.7 million of the $50 million share repurchase authorization in place.
Shares Get Election Bounce
Shares of Movado took off at the end of 2016 but have since pulled back off their highs.
They aren’t overly expensive. They are trading with a forward P/E of 17.1.
But is it too risky to buy a watchmaker in 2017?
I last wrote about Movado as a Bull of the Day in April 2014. In the interim, it was Bear of the Day twice in 2016.
But the rise in the earnings estimates for fiscal 2018 look promising. Despite all the talk that watches will only be found in museums going forward, there is still a contingent of consumers who wants an old-fashioned watch.
If you’re looking for an accessory retailer, then Movado is one to keep on your short list.
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