What happened
Shares of Movado Group (NYSE: MOV) jumped by as much as 13% in early trading on Thursday morning before settling back to a 7% increase as of 11 a.m. ET. The S&P 500 was up by 0.6% at that point of the session. The share price moved in response to the company's fiscal 2022 fourth-quarter earnings update, which included a bright outlook for the coming fiscal year.
The surge erased some of the declines that the stock has endured in recent weeks, but the maker of watches and accessories is still down overall year to date.
So what
Sales rose 17% during the holiday quarter, which ended Jan. 31, to keep revenue in record territory. Movado noted strong demand through its retailing partners and on its own e-commerce platform.
Image source: Getty Images.
The news was even better regarding earnings. Profitability improved despite rising production and input costs. Gross profit margin jumped to 59% of sales, in fact, as demand tilted toward the premium segment of its product portfolio. "We closed out the year with exceptional fourth quarter performance," CEO Efraim Grinberg said in the press release.
Now what
Wall Street was even happier to hear about management's outlook for its fiscal 2023. To be sure, sales are being disrupted in some markets due to Russia's invasion of Ukraine. And its costs will continue to rise in the short term.
However, executives project that sales for the year will rise to between $780 million and $800 million, which is higher than most analysts following the stock expected. Its gross profit margin should hold steady at about 58% of sales, too. Operating income will be as high as $130 million, compared to $118 million in the recently ended fiscal 2022.
These forecasts all assume continued strength in consumer spending, especially on premium watches and accessories. But those trends have held up through the past couple of months, and if they continue to, Movado shareholders should see improving returns that roughly track the company's earnings potential.
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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.
