This Stock is Ticking in the Right Direction
Himanshu is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
When recessionary conditions or economic uncertainty prevail, can anybody go out shopping for a luxury product such as an expensive watch? It looks like an unnecessary thing at a time when people are trying to save most of their hard-earned dollars to brace themselves for the next recession.
This point hit home with the quarterly results of watch maker Fossil (NASDAQ: FOSL), which was hit hard because of its high dependence on the European market. Its sales missed the Street’s expectations in its recent quarter and its shares almost halved. This was because 30% of the revenue of the retailer comes from the European market. Also, the company lowered its outlook. This is not an exception -- a number of retailers have suffered due to increased exposure to the soft European market.
However, among these stressed retailers whose share prices have plunged deeply, there is a rare star named Movado (NYSE: MOV), a high end watch retailer, that shone brightly in the quarter. Let’s take a look at it.
Performance It Is!
Driven by new product designs and product innovation, revenue for the quarter rose 15% to $104 million. The company witnessed very strong demand for its products, sending the top line toward the sky. Also, the luxury retailer left behind the others as far as earnings were concerned. The earnings per share multiplied stupendously to 26 cents from just 2 cents in the year ago quarter. The key driver for this commendable jump was a lower tax rate for the company. Adding to the glory was the announcement of a cash dividend of 5 cents per share by the company.
Line of Strategies
The watch maker has undertaken a lot of initiatives recently such as increasing its spending on marketing, expanding its footprint and making continuous innovation in its products. The efforts have paid off and the company is reaping huge profits out of it. Additionally, Movado is planning to expand in China in the coming years in order to improve its profitability, especially in its licensed brands such as Tommy Hilfiger, Coach (NYSE: COH) and Hugo Boss. Coach is also coming off a better than expected quarter in which it beat estimates. The company's geographic diversification came in handy in difficult times for Europe as sales in North America and China drove its top line north. This will be another shot in the arm for Movado as it licenses Coach. Out of the two segments, wholesale and retail, the company has shifted its focus to the wholesale business since it gives them more sales with less investment than opening outlet stores.
Bottom Line
With the launch of new and frequently introduced innovative products the watch retailer attracted more customers. Even the efforts on promotion and the more profitable wholesale segment paid off in the quarter. In addition, the company doesn’t seem to be bogged down by the current economic climate. Movado gave a bright outlook raising its full-year guidance in spite of the startup expense on the license of Ferrari brand, indicating that there are brighter spots ahead.
justhimanshu has no positions in the stocks mentioned above. The Motley Fool owns shares of Fossil and Movado Group. Motley Fool newsletter services recommend Coach and Fossil. 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. If you have questions about this post or the Fool’s blog network, click here for information.
