Source: Movado Group.
On Tuesday, Movado Group will announce its financial results for its fiscal second quarter, and investors expect continued solid earnings growth from the luxury watch maker. Yet, Movado has suffered from the same trends that have held back most luxury retailers this year after an incredibly strong 2013, and shareholders want to see whether the company can sustain its growth rates, even as some expect the fundamentals of the industry to start topping out.
Movado poses a double threat to its competitors in the watchmaking industry. Its own name brand sports impressive market share in the U.S. luxury watch segment, topping its rivals in the $500 to $1,500 price point range. Yet, Movado also has lucrative licensing deals with other major brands, including Tommy Hilfiger, Coach, and Hugo Boss. Nevertheless, potential competition not only from existing luxury watchmakers, but also from potential smartwatch offerings from tech titans, could hurt Movado down the road. Let's take an early look at what's been happening with Movado during the past quarter and what we're likely to see in its report.
Stats on Movado Group
Source: Yahoo! Finance.
How Movado set the stage for growth
During the past few months, investors have gotten more upbeat about Movado's earnings prospects, lifting long-term estimates. The stock has also rebounded impressively, gaining almost 20% since late May, and regaining most of its lost ground from earlier in the year.
Source: Movado Group.
As Fool analyst Seth Jayson discussed in detail back in May, Movado's fiscal first-quarter report was somewhat disappointing for investors, but was nevertheless consistent with its long-term track record. Even though Movado didn't bring in as much revenue as investors had hoped to see, growth of nearly 10% from the year-ago quarter still showed the company's overall upward trajectory. Gains in licensed-brand sales led the way with gains of 19%, and given some of the declines that other retailers saw due to bad winter weather, Movado held up pretty well by comparison. Yet, year-over-year earnings-per-share declines worried many shareholders, with margins eroding somewhat from past levels.
Overall, though, Movado still projects that it will meet its initial guidance for the full fiscal year. In order to achieve that goal, Movado has made shifts to its product mix at many of its distribution channels. Movado believes that by doing so, it can match up its offerings with local customer demand, and thereby boost margins back up to previous levels.
What has many investors concerned, though, are expectations that smartwatches could lead to a shift away from luxury watches. As hype about a potential iWatch from Apple continues to swirl, some luxury shoppers will jump at the chance to have a functional and innovative watch on their wrists. Yet, with analysts expecting an iWatch to cost somewhere in the neighborhood of $300, Movado's key price demographic would likely be unaffected, and renewed attention to wrist-borne accessories could actually drive further sales of luxury watches after an iWatch launch.
In the Movado earnings report, be sure to look at how the company's own name-brand products perform compared to its licensed lines of watches. More broadly, with shares of luxury retailers across the industry having taken a pause, any strength in Movado's report could prove to be a catalyst not just for its stock, but for the industry as a whole.
Leaked: Apple's next smart device (warning, it may shock you)
Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are claiming its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here !
Click hereto add Movado Group to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.
The article Can Movado Group Restart the Luxury Retail Growth Engine? originally appeared on Fool.com.
Dan Caplinger owns shares of Apple. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .
Copyright © 1995 - 2014 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy .
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
