PARAMUS, N.J.--(BUSINESS WIRE)--Nov. 24, 2015-- Movado Group, Inc. (NYSE:MOV) today announced third quarter results for the period ended October 31, 2015.
The Company recorded no unusual items in the third quarter of fiscal 2016. During the first quarter of fiscal 2016, the Company recorded a $2.7 million pre-tax charge, or $0.10 per diluted share, related to operating efficiency initiatives and other items. There were no unusual items recorded in the first nine months of fiscal 2015.
Net sales decreased 1.6% to $185.6 million compared to $188.6 million in the third quarter of fiscal 2015. Net sales on a constant dollar basis increased 2.1% compared to net sales in the third quarter of fiscal 2015.
Gross profit was $100.1 million, or 53.9% of sales, compared to $99.8 million, or 53.0% of sales, in the third quarter last year. The increase in gross margin percentage was primarily due to channel and product mix, selective price increases and certain sourcing improvements, partially offset by the unfavorable impact of changes in foreign currency exchange rates.
Operating expenses increased $0.1 million, or 0.2%, to $66.6 million compared to $66.5 million in the third quarter last year. This increase was primarily the result of an increase in compensation and benefit expenses mostly offset by the favorable impact of foreign currency exchange rates, as well as lower marketing and selling related expenses.
Operating income increased to $33.5 million compared to operating income of $33.3 million in the same period last year.
The Company recorded a tax provision of $11.2 million in the third quarter of fiscal 2016 as compared to a tax provision of $10.9 million in the prior year. The effective tax rate in the third quarter of fiscal 2016 was 33.9% compared to an effective tax rate of 32.7% in the third quarter of fiscal 2015.
Net income was $21.5 million, or $0.92 per diluted share, compared to net income of $22.2 million, or $0.87 per diluted share, in the third quarter of fiscal 2015.
Net sales decreased 0.3% to $451.7 million compared to $453.1 million in the same period of fiscal 2015. Net sales on a constant dollar basis increased 4.1% compared to net sales in the first nine months of fiscal 2015.
Gross profit was $241.6 million, or 53.5% of sales, compared to $242.6 million, or 53.5% of sales in the same period last year. Adjusted gross profit for the first nine months of fiscal 2016, which excludes $0.7 million in charges related to operating efficiency initiatives and other items in the first quarter of fiscal 2016, was $242.3 million, or 53.6% of sales. The increase in adjusted gross margin percentage was primarily impacted by a favorable shift in channel and product mix, selective price increases and certain sourcing improvements, mostly offset by the unfavorable impact of changes in foreign currency exchange rates.
Operating expenses were $183.0 million as compared to $181.2 million in the same period last year. For the first nine months of fiscal 2016, adjusted operating expenses were $181.0 million, which excludes $2.0 million of expenses related to operating efficiency initiatives and other items recorded in the first quarter. Adjusted operating expenses remained relatively flat due to the favorable impact of foreign currency exchange rates as well as lower marketing expenses mostly offset by an increase in compensation and benefit expenses.
Operating income was $58.6 million compared to operating income of $61.4 million in the same period last year. Adjusted operating income for the first nine months of fiscal 2016, which excludes $2.7 million of expenses related to operating efficiency initiatives and other items recorded in the first quarter, was $61.2 million or 13.6% of net sales.
The Company recorded a tax provision of $20.5 million for the nine month period of fiscal 2016 as compared to a tax provision of $19.2 million for the nine month period of fiscal 2015. The effective tax rate in the fiscal 2016 period was 35.3% compared to an effective tax rate of 31.4% in the fiscal 2015 period. The adjusted effective tax rate for first nine months of fiscal 2016 was 34.0%.
Net income was $37.2 million, or $1.55 per diluted share, compared to net income for the nine month period of fiscal 2015 of $41.7 million, or $1.63 per diluted share. Adjusted net income for the first nine months of fiscal 2016 was $39.7 million, or $1.65 per diluted share, which excludes $2.5 million in expenses, net of tax, related to operating efficiency initiatives and other items in the first quarter of fiscal 2016.
The Company continues to expect net sales to be in the range of $590 million to $600 million, operating income to increase to approximately $72.0 million to $75.0 million and earnings per share (“EPS”) of $2.00 to $2.10 per diluted share. The Company now anticipates net income for fiscal 2016 to be in the range of approximately $47.5 million to $50.0 million, reflecting a higher than previously anticipated effective tax rate. The Company’s EPS guidance reflects the higher effective tax rate offset by a lower share count resulting from its share repurchase program. The Company's guidance reflects its current outlook and does not take into account a potential worsening in the global economies or retail environment. This guidance also assumes no further significant fluctuations from prevailing foreign currency exchange rates as well as no unusual items for fiscal 2016.
The Company also announced that on November 24, 2015, the Board of Directors approved the payment on December 18, 2015 of a cash dividend in the amount of $0.11 for each share of the Company’s outstanding common stock and class A common stock held by shareholders of record as of the close of business on December 4, 2015.
During the third quarter of fiscal 2016, the Company repurchased approximately 275,000 shares under its share repurchase program. As of October 31, 2015, the Company had $17.2 million remaining under the $100.0 million share repurchase authorization.
The Company’s management will host a conference call and audio webcast to discuss its results today, November 24th at 9:00 a.m. Eastern Time. The conference call may be accessed by dialing 888-438-5525. Additionally, a live webcast of the call can be accessed at www.movadogroup.com. The webcast will be archived on the Company’s website approximately one hour after the conclusion of the call. Additionally, a telephonic re-play of the call will be available at 12:00 p.m. ET on November 24, 2015 until 11:59 p.m. ET on December 1, 2015 and can be accessed by dialing (877) 870-5176 and entering replay pin number 894113.
In this release, the Company presents certain financial measures that are not calculated according to generally accepted accounting principles in the United States (“GAAP”). Specifically, the Company is presenting adjusted gross profit and adjusted operating expenses, which are relevant measures under GAAP, adjusted to eliminate a charge for the operating efficiency initiatives and other items. The Company is also presenting adjusted operating income, which is operating income under GAAP, adjusted to eliminate a charge for the operating efficiency initiatives and other items. The Company believes these adjusted measures are useful because they give investors information about the Company’s financial performance without the effect of certain items that the Company believes are not characteristic of its usual operations. The Company is also presenting adjusted net income, adjusted earnings per share and adjusted effective tax rate, which is net income, earnings per share and effective tax rate under GAAP adjusted to eliminate the after tax impact of the charge for the operating efficiency initiatives and other items. The Company believes that adjusted net income, adjusted earnings per share and adjusted effective tax rate are useful measures of performance because they give investors information about the Company’s financial performance without the effect of certain items that the Company believes are not characteristic of its usual operations. Additionally, the Company is presenting constant currency information to provide a framework to assess how its business performed excluding the effects of foreign currency exchange rate fluctuations in the current year. Comparisons of financial results on a constant dollar basis are calculated by translating each foreign currency at the same US dollar exchange rate as in effect for the prior-year period for both periods being compared. The Company believes this information is useful to investors to facilitate comparisons of operating results. These non-GAAP financial measures are designed to complement the GAAP financial information presented in this release. The non-GAAP financial measures presented should not be considered in isolation from or as a substitute for the comparable GAAP financial measures, and the methods of their calculation may differ substantially from similarly titled measures used by other companies.