This Watch Maker Looks Good To Go
Himanshu is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Good times are here and there are no two ways about it. Consumers seem to move up the hierarchy of needs as they start spending. After spending freely on necessities, consumers are splurging on luxury items and stylish products which mark the beginning of a healthy economic recovery. The success of premium products retailers such as Michael Kors (NYSE: KORS) has paved the way for other luxury products retailers.
Michael Kors had recently posted a stellar quarter due to higher consumer demand for its products and stronger same store sales growth. This highlights that shoppers are becoming comfortable spending on expensive products.
This point was affirmed by the luxury watch retailer Movado’s (NYSE: MOV) second quarter results, which lit up the Street, sending the stock north. Let us dig in deeper.
A Look at the Numbers…
Movado makes premium watches that have an aura about them that influences people to own a piece of art. Moreover, its continuous innovation into new product designs attracted consumers driving its revenue to $118 million, a jump of 7.6% in constant currency terms. Its smart cost cutting measures helped earnings grow a magnificent 67% to 30 cents a share.
The results were driven by strategic initiatives undertaken by Movado. Its increased marketing efforts, enhanced focus on innovation, product design, and expansion efforts led to a fabulous quarter. However, this is not the first time that Movado has registered amazing results which beat analysts’ expectations. It has been outperforming, especially on its bottom line, for quite some time now and has managed to become investors’ favorite.
At a time when retailers are finding it difficult to maintain their margins, Movado is amongst those rare performers which experienced margin increases to 55.7% from 53.8% a year ago. This compares favorably to its arch rival Fossil’s (NASDAQ: FOSL) recent quarter that experienced no change in its gross margin of 56%. Rising input prices has become a serious concern for all retailers and overcoming this problem is a remarkable and this star has done it in the most difficult time. This gives enough confidence for better margins going forward since input costs have been stabilizing.
Coach"ed” by the best
Another strong weapon in Movado’s arsenal is its licensing of strong brands which are customer favorites. Among its list of licensed brands is Coach (NYSE: COH), which has been doing well in driving the watch retailer’s licensing revenue. Coach has been growing through expansion and marketing efforts. Its recent quarter was also quite impressive with a 12% increase in revenue and 24% surge in earnings because of the growing demand for its products, especially men’s accessories. Growing demand for Coach’s products will continue to benefit Movado going forward.
Optimism Shining Brightly
Movado has a number of strong cards in its hand which can work in its favor. It has been planning to expand its Chinese footprint since it is finding healthy demand in the region. This will benefit the retailer, coupled with the re-launch of its ESQ and Ebel brands. The re-launch in the coming month will be a boost to its top line.
Moreover, the Paramus-based company has recently announced Lily Collins as its brand ambassador. Lily Collins’ popularity will help drive demand. This looks like a good marketing move since it will attract youngsters to the brand through the actor’s promotional presence.
Movado has also revised its outlook upward which excited the investors even more. The joy was doubled by the company’s announcement of dividend payment for the second time in the fiscal year. Key to winning investors’ attention is to provide value to them and Movado does it all giving them more reasons to hold on to it.
The company has been performing well continuously. All thanks to its commitment to keep its niche customers happy through its innovative designs and quality products. Its cost cutting measures have also played a key role driving its margins. In comparison to its peers, Movado has been outperforming since its growth is organic in nature unlike Fossil, which acquired Skagen in order to drive its top line.
Moreover, Fossil plans to expand its presence in China where Movado already enjoys a substantial presence which will be is expected to strengthen further with its expansion plans. The retailer looks well positioned for the next fall with better promotional efforts and its brands’ launches. With customers becoming lenient with their shopping habits Movado seems to have a bright future. Investors should not ignore the ticking of this watch.
justhimanshu has no positions in the stocks mentioned above. The Motley Fool owns shares of Coach, 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.