When recessionary conditions or economic uncertainty prevail, can anybody go out shopping for a luxury product such as an expensive watch? It looks like an unnecessary thing at a time when people are trying to save the most of their hard-earned dollars to brace themselves for hard times. This point was hit home with the quarterly results of watch maker Fossil (FOSL, Financial), which was hit hard because of high dependence on the European market. But this is not an exception since there are a number of retailers who have suffered due to increased exposure to the soft European market.
However, among these stressed retailers whose share prices have plunged deeply, there is a rare performer in the form of Movado (MOV, Financial), a high end watch retailer that shone brightly in the recent quarter. Let’s take a look at it.
A stable performance
Driven by new product designs and product innovation, revenue for the quarter was flat. The company witnessed very strong demand for its products, keeping the top line in good shape. Also, the luxury retailer left behind the others as far as earnings were concerned. The earnings per share jumped to 87 cents. The key driver for this commendable jump was a lower tax rate for the company. Adding to the glory was the announcement of a cash dividend of 5 cents per share by the company.
Strategies in focus
The watch maker has undertaken a lot of initiatives recently such as increasing its spending on marketing, expanding its footprint and continuous innovation in its products. The efforts have paid off and the company is reaping huge profits out of it. Additionally, Movado is planning to expand in China in the coming years in order to improve its profitability, especially in its licensed brands such as Tommy Hilfiger, Coach (COH, Financial) and Hugo Boss. Out of the two segments, wholesale and retail, the company has shifted its focus to the wholesale business since it gives it more sales with less investment in opening outlet stores.
Conclusion
With the launch of new and frequently introduced innovative products, the watch retailer attracted more customers. Even the efforts on promotion and the more profitable wholesale segment paid off in the quarter. In addition, the company doesn’t seem to be bogged down by the current economic climate. Movado gave a bright outlook raising its full year guidance in spite of considering startup expense on the license of Ferrari brand, indicating that there are brighter spots ahead.
