Shares of Movado Group Inc. advanced more than 25 percent Tuesday after the watchmaker reported a smaller first-quarter loss and forecast higher full-year profits than analysts had expected.
Still, with sales down one-third because of lower consumer demand and correspondingly tight inventory management by retailers, the Paramus, N.J.-based firm recorded a loss of $9 million, or 37 cents a diluted share, in the three months ended April 30, compared with net income of $1.2 million, or 5 cents, in the first quarter of 2008. Analysts polled by Yahoo Finance had expected a loss of 48 cents.
Sales in the quarter fell 33.3 percent to $67.6 million from $101.4 million in 2008.
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On a conference call with investors, president and chief executive officer Efraim Grinberg was optimistic about improving sales in the second half, noting that “retailers have basically been living off of their existing inventory to a great extent. We don’t believe that can continue through the third and fourth quarter for the holiday season.”
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While “challenged by our retail customers’ relentless focus on lowering their inventory,” he said, “we expect to see an improvement in these trends beginning in the second half of this year as our customers start to replenish inventory ahead of the holiday season.”
Based on that outlook, the company expects earnings per share of 50 cents for all of fiscal 2010 compared with 9 cents in 2009. The forecast helped propel Movado’s shares up $2.14, or 26.4 percent, to $10.24, their highest close since Jan. 6.
Movado used the first quarter to unload some of its own inventory, as it sold $4.3 million worth of discontinued product in the three months. The sales dragged on Movado’s gross margin, causing it to fall 940 basis points to 54.8 percent from 64.2 percent a year ago.
Cost cutting is expected to create $50 million to $60 million in annual savings, most of which are expected to be realized this year, said Rick Cote, executive vice president and chief operating officer.