Movado (MOV)

Luxury watch company Movado (NYSE:MOV) missed Wall Street’s revenue expectations in Q1 CY2025, with sales falling 1.9% year on year to $131.8 million. Its GAAP profit of $0.06 per share was 84.5% below analysts’ consensus estimates.

Company Overview

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.

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

Movado’s primary competitors include Omega (owned by Swatch SWX:UHR), Fossil Group (NASDAQ:FOSL), Citizen Watch (TYO:7762), TAG Heuer (owned by LVMH Moët Hennessy Louis Vuitton Euronext:MC), and private company Rolex.

A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Unfortunately, Movado struggled to consistently increase demand as its $648.5 million of sales for the trailing 12 months was close to its revenue five years ago. This was below our standards and suggests it’s a low quality business.

We at StockStory place the most emphasis on long-term growth, but within consumer discretionary, a stretched historical view may miss a company riding a successful new product or trend. Movado’s recent performance shows its demand remained suppressed as its revenue has declined by 6% annually over the last two years.

This quarter, Movado missed Wall Street’s estimates and reported a rather uninspiring 1.9% year-on-year revenue decline, generating $131.8 million of revenue.

We also like to judge companies based on their projected revenue growth, but not enough Wall Street analysts cover the company for it to have reliable consensus estimates.

Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

Movado’s operating margin has been trending down over the last 12 months and averaged 4.4% over the last two years. The company’s profitability was mediocre for a consumer discretionary business and shows it couldn’t pass its higher operating expenses onto its customers.

In Q1, Movado’s breakeven margin was in line with the same quarter last year. This indicates the company’s overall cost structure has been relatively stable.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Movado’s full-year EPS flipped from negative to positive over the last five years. This is encouraging and shows it’s at a critical moment in its life.

In Q1, Movado reported EPS at $0.06, down from $0.13 in the same quarter last year. This print missed analysts’ estimates, but we care more about long-term EPS growth than short-term movements. We also like to analyze expected EPS growth based on Wall Street analysts’ consensus projections, but there is insufficient data.

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 weak cash profitability over the last two years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 5.7%, subpar for a consumer discretionary business.

Movado burned through $8.75 million of cash in Q1, equivalent to a negative 6.6% margin. The company’s cash burn was similar to its $19.7 million of lost cash in the same quarter last year. These numbers deviate from its longer-term margin, indicating it is a seasonal business that must build up inventory during certain quarters.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Although Movado hasn’t been the highest-quality company lately because of its poor top-line performance, it historically found a few growth initiatives that worked out well. Its five-year average ROIC was 20.5%, impressive for a consumer discretionary business.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, Movado’s ROIC has unfortunately decreased significantly. We like what management has done in the past, but its declining returns are perhaps a symptom of fewer profitable growth opportunities.

Companies with more cash than debt have lower bankruptcy risk.

Movado is a profitable, well-capitalized company with $203.5 million of cash and $92.28 million of debt on its balance sheet. This $111.2 million net cash position is 31.3% of its market cap and gives it the freedom to borrow money, return capital to shareholders, or invest in growth initiatives. Leverage is not an issue here.

We struggled to find many positives in these results. Its revenue missed and its EPS fell short of Wall Street’s estimates. Overall, this quarter could have been better. The stock remained flat at $16 immediately following the results.

Updated: June 16, 2025 at 10:57 PM EDT

Are you wondering whether to buy Movado or pass? We urge investors to not only consider the latest earnings results but also longer-term business quality and valuation as well.

Movado falls short of our quality standards. First off, its revenue growth was weak over the last five years. And while its projected EPS for the next year implies the company’s fundamentals will improve, the downside is its operating margins reveal poor profitability compared to other consumer discretionary companies. On top of that, its low free cash flow margins give it little breathing room.

Movado’s price-to-sales ratio based on the trailing 12 months is 0.5x. The market typically values companies like Movado based on their anticipated profits for the next 12 months, but there aren’t enough published estimates to arrive at a reliable number. You should avoid this stock for now - better opportunities lie elsewhere.

Wall Street analysts have a consensus one-year price target of $31.50 on the company (compared to the current share price of $15.38).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.