Movado (NYSE:MOV) Misses Q1 Revenue Estimates

Kayode Omotosho /
2024/05/30 7:02 am EDT

Luxury watch company Movado (NYSE:MOV) missed analysts' expectations in Q1 CY2024, with revenue down 5.7% year on year to $136.7 million. On the other hand, the company's outlook for the full year was close to analysts' estimates with revenue guided to $705 million at the midpoint. It made a GAAP profit of $0.13 per share, down from its profit of $0.40 per share in the same quarter last year.

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Movado (MOV) Q1 CY2024 Highlights:

  • Revenue: $136.7 million vs analyst estimates of $145.2 million (5.9% miss)
  • The company reconfirmed its revenue guidance for the full year of $705 million at the midpoint
  • Gross Margin (GAAP): 55.3%, down from 56.6% in the same quarter last year
  • Free Cash Flow was -$19.7 million, down from $67.81 million in the previous quarter
  • Market Capitalization: $594.3 million

Efraim Grinberg, Chairman and Chief Executive Officer, stated, “We are pleased with our first quarter results, which are in line with our expectations and reflect the successful execution by our team in a retail environment that continues to be challenging. During the quarter, we drove positive momentum with powerful new product innovation led by the performance of our new Movado Bold Quest and strong double-digit growth at Movado.com, which accelerated with our spring television campaign. As planned, we will begin to ramp up our marketing investments during the second quarter to support our strategic growth opportunities, including an exciting new Movado campaign that will launch in the fall.”

With its watches displayed in 20 museums around the world, Movado (NYSE:MOV) is a watchmaking company with a portfolio of watch brands and accessories.

Apparel, Accessories and Luxury Goods

Within apparel and accessories, not only do styles change more frequently today than decades past as fads travel through social media and the internet but consumers are also shifting the way they buy their goods, favoring omnichannel and e-commerce experiences. Some apparel, accessories, and luxury goods companies have made concerted efforts to adapt while those who are slower to move may fall behind.

Sales Growth

A company's long-term performance is an indicator of its overall business quality. While any business can experience short-term success, top-performing ones demonstrate sustained growth over multiple years. Over the last five years, Movado's revenue declined at a 1.9% annual rate. This shows its demand was weak and its business shrunk, making for rough starting point in our quality assessment.

Movado Total Revenue

Long-term growth is the most important, but within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends and consumer preferences. Movado's annualized revenue declines of 6.6% over the last two years suggest its recent demand was even weaker than before.

This quarter, Movado missed Wall Street's estimates and reported a rather uninspiring 5.7% year-on-year revenue decline, generating $136.7 million of revenue. Looking ahead, Wall Street expects sales to grow 6.6% over the next 12 months, an acceleration from this quarter.

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Cash Is King

Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can't use accounting profits to pay the bills.

Movado has shown mediocre cash profitability over the last two years, putting it in a pinch as it gives the company limited opportunities to reinvest, pay down debt, or return capital to shareholders. Its free cash flow margin averaged 8.5%, subpar for a consumer discretionary business.

Movado Free Cash Flow Margin

Movado burned through $19.7 million of cash in Q1, equivalent to a negative 14.4% margin. The company's cash burn decreased by 17.1% year on year.

Key Takeaways from Movado's Q1 Results

We were impressed by Movado's optimistic full-year earnings forecast, which blew past analysts' expectations. We were also glad its EPS outperformed. On the other hand, its revenue fell short of Wall Street's estimates. Zooming out, we think this was still a decent, albeit mixed, quarter, showing that the company is staying on track. The stock is flat after reporting and currently trades at $26.50 per share.

So should you invest in Movado right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.