With the growing interest in smartwatches and the ubiquity of smartphones with time-telling capabilities, business hasn't been easy for traditional watchmakers like Fossil Group (FOSL 8.84) and Movado Group (MOV 23.85). Making things even harder has been the drop in foot traffic to retail stores.
To be sure, Fossil and Movado have the stock prices to show for it. The former is down about 93% from its all-time high registered in 2012 while the latter is down about 50% from the all-time high it registered in 2013.
Fossil posted some very disappointing second quarter results earlier this month and its stock paid a heavy price for it. Movado, however, posted second quarter results this morning that were much better than analysts' depressed expectations.
Specifically, Movado reported a 0.5% increase in net sales of $128.8 million and adjusted diluted earnings per share of $0.43 versus $0.27 in the same period a year ago.
The increase in net sales occurred despite what was referred to by Movado as a "challenging U.S. retail environment." Strength in Latin America, Europe, and Asia, however, offset the sales challenges in the U.S.
Movado managed to cut its selling and other operating costs in the period, which helped boost its operating margin on an adjusted basis, yet its adjusted gross margin was negatively impacted still by channel and product mix, as well as changes in foreign currency exchange rates.
Movado exited the quarter with inventories down 4.9% from a year ago. That is an encouraging sign given the sales challenges the company faced and continues to face.
The latter point aside, Movado said it is excited about the opportunities in front of it, citing the addition of the Olivia Burton brand in the quarter through its July acquisition of JLB Brands and the expansion of new business initiatives that include Rebecca Minkoff and Movado Connect watches, as well as an increase in its direct-to-consumer business.
Taking into account the addition of the Olivia Burton brand, Movado raised its fiscal 2018 net sales outlook to a range of $530 million to $545 million from $515 million to $530 million. In turn, it bumped up its fiscal 2018 diluted EPS expectation to a range of $1.50 to $1.65 from $1.40 to $1.55.
The second quarter performance and increased outlook has created a good time for its stock, which is up 8.8% in pre-market action. At Monday's close, shares of MOV were down 17% in 2017.