Movado Group (MOV) Q1 FY27 earnings call: guidance and Q&A

How much of the Q1 gross margin expansion is structural versus one-time, and what's the right baseline for the rest of the year?

Management expects higher gross margin than last year, but not at the Q1 level. Structural improvements are driven by actions like reducing SKU counts and rationalizing suppliers, which are expected to provide long-term benefits. Sallie confirmed the expectation for an improvement, but not at the Q1 rate.

“We would expect based on the balance of the year to generate higher gross margin than last year, but not at this level that we did in Q1. So, it's probably somewhere between halfway across both of those, Sallie, would you say that's true?”

asked by Owen Rickert · answered by Efraim Grinberg

Which brands or channels are primarily driving the gross margin expansion?

Direct channels (movado.com, oliviaburton.com, company stores) performed very well. Strength was also seen across digital partners globally, excluding the Middle East. Improved Movado wholesale business also contributed to margins.

“So, our direct channels did very well, obviously, in Q1, our movado.com website, our oliviaburton.com website and our retail channel. We're also seeing strength across our digital partners across the world with the exception of the Middle East. So, I think all those things contributed to improved gross margin. Improved Movado wholesale business also drives our margins as well.”

asked by Owen Rickert · answered by Efraim Grinberg

How is the company repositioning inventory and the product roadmap to lean into the trend of smaller case sizes and distinctive shapes, and are retailers ordering ahead?

The company has been focusing on driving innovation for the past 18 months, with varying success across brands. They are particularly encouraged by the resurgence of traditional watches among younger consumers globally, which bodes well for the future of the watch category.

“what's been really rewarding, particularly has been to see younger consumers into the traditional watch space, and we think they're here to stay. And they've been out of the market for a long period of time. And so that's really exciting to see and getting them into the fashion watch market means that ultimately, they'll be moving up the up the channel and price points as well.”

asked by Owen Rickert · answered by Efraim Grinberg

Was the Q1 retailer replenishment a one-time event borrowing from Q2, or is it a timing issue for sell-through?

Q4 performance was better than expected, leading retailers to replenish more inventory than usual in Q1. This replenishment also depleted Movado's own inventory in certain areas, particularly for the Movado brand, which they hope to resolve by summer to support the second half and holiday season.

“So really, it has to do with -- and as you remember, Q4 was better than we expected and better than our retailers expected. So, they needed to replenish more inventory than usual or than certainly the last number of years. And that occurred in Q1. And what it's also done is deplete us of certain inventory, which, as I said, will be hopefully solved by summer.”

asked by Hamed Khorsand · answered by Efraim Grinberg

What are the company's thoughts on the current interest in Swatch's new release and its impact on the industry?

Management is fairly neutral but believes any interest in the watch category, especially traditional watches celebrating craftsmanship, is positive. They see it as bringing interest to the category, which is beneficial, particularly as their own innovation drives demand among young consumers.

“I think I'm fairly neutral on it, but I think any interest in the watch category is a good interest. And especially in -- although this is somewhat of a hybrid, but of traditional watches that celebrate craftsmanship and watchmaking and mechanical movements. All those things are certainly a good note for the watch business.”

asked by Hamed Khorsand · answered by Efraim Grinberg