What happened
Movado (NYSE: MOV) investors lost ground to a rising market this week. The watch specialist is now in negative territory so far this year, down 13% compared to the wider market's 2.8% increase, according to data provided by S&P Global Market Intelligence. Shares are also trailing the S&P 500 over the past full year.
This week's decline was sparked by a lukewarm reception on Wall Street to Movado's Q4 earnings update.
So what
The company announced early Thursday that sales trends turned negative in the selling period that ended in late January. Revenue declined to $194 million from $206 million as demand softened in key markets like the U.S. and Europe. Movado also posted weaker profitability thanks to this demand pressure.
Management sees these challenges impacting the new fiscal year, too. "We believe we will continue to face a difficult retail market in our largest regions," CEO Efraim Grinberg said in a press release that also touted Movado's record sales and improving gross profit margin in the full 2023 fiscal year.
Now what
Movado had some other good news for investors, including the announcement of a special cash dividend to be paid out in April. That payout, plus management's plan to continue investing heavily in areas like marketing, reflects executives' confidence that the current downturn will ultimately end. Movado's cash holdings and lack of debt give it flexibility to prioritize these investments at a time when peers may be pulling back.
Still, sales and earnings are both likely to decline in the new fiscal year, roughly on par with the modest drop that Movado announced for the most recent quarter. Given the potential for even weaker consumer discretionary demand due to a recession on the way in the U.S. market, investors reacted to that news by pushing shares lower this week.
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Demitri Kalogeropoulos has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
