# Movado Group Inc: Form 10-Q for the period ended Apr 30, 2023

- Company: [Movado Group Inc](/companies/mov.md) (CIK 72573)
- Form: 10-Q
- Filed: 2023-05-25
- Accepted by EDGAR: May 25, 2023, 13:44 ET
- Period: 2023-04-30
- Accession: 0000950170-23-024081
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/72573/000095017023024081/mov-20230430.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/72573/000095017023024081/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-04-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-02-01 to 2023-04-30 | $144.9m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2023-02-01 to 2023-04-30 | $62.9m | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2023-02-01 to 2023-04-30 | $82.0m | us-gaap:GrossProfit |
| Selling, general and administrative | 3 months, 2023-02-01 to 2023-04-30 | $71.1m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2023-02-01 to 2023-04-30 | $10.9m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2023-02-01 to 2023-04-30 | $113.0k | us-gaap:InterestExpense |
| Income tax | 3 months, 2023-02-01 to 2023-04-30 | $2.5m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-02-01 to 2023-04-30 | $9.1m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-02-01 to 2023-04-30 | $0.40 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-02-01 to 2023-04-30 | $0.41 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-02-01 to 2023-04-30 | 22,672,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2023-02-01 to 2023-04-30 | −$21.5m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2023-02-01 to 2023-04-30 | $2.3m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 3 months, 2023-02-01 to 2023-04-30 | $29.9m | us-gaap:PaymentsOfDividends |
| Share repurchases | 3 months, 2023-02-01 to 2023-04-30 | $381.0k | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2023-04-30 | $198.3m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-04-30 | $525.4m | us-gaap:AssetsCurrent |
| Total assets | at 2023-04-30 | $741.5m | us-gaap:Assets |
| Current liabilities | at 2023-04-30 | $116.0m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-04-30 | $246.6m | us-gaap:Liabilities |
| Shareholders' equity | at 2023-04-30 | $492.0m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 36,045 characters.

### FORWARD-LOOKING STATEMENTS

Statements in this Quarterly Report on Form 10-Q, including, without limitation, statements under Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this report, as well as statements in future filings by the Company with the Securities and Exchange Commission (the “SEC”), in the Company’s press releases and oral statements made by or with the approval of an authorized executive officer of the Company, which are not historical in nature, are intended to be, and are hereby identified as, “forward-looking statements” for purposes of the safe harbor provided by the Private Securities Litigation Reform Act of 1995. These statements are based on current expectations, estimates, forecasts and projections about the Company, its future performance, the industry in which the Company operates and management’s assumptions. Words such as “expects”, “anticipates”, “targets”, “goals”, “projects”, “intends”, “plans”, “believes”, “seeks”, “estimates”, “may”, “will”, “should” and variations of such words and similar expressions are also intended to identify such forward-looking statements. The Company cautions readers that forward-looking statements include, without limitation, those relating to the Company’s future business prospects, projected operating or financial results, revenues, working capital, liquidity, capital needs, inventory levels, plans for future operations, expectations regarding capital expenditures, operating efficiency initiatives and other items, cost savings initiatives, and operating expenses, effective tax rates, margins, interest costs, and income as well as assumptions relating to the foregoing. Forward-looking statements are subject to certain risks and uncertainties, some of which cannot be predicted or quantified. Actual results and future events could differ materially from those indicated in the forward-looking statements, due to several important factors herein identified, among others, and other risks and factors identified from time to time in the Company’s reports filed with the SEC, including, without limitation, the following: general economic and business conditions which may impact disposable income of consumers in the United States and the other significant markets (including Europe) where the Company’s products are sold; uncertainty regarding such economic and business conditions, including inflation, elevated interest rates; increased commodity prices and tightness in the labor market; trends in consumer debt levels and bad debt write-offs; general uncertainty related to possible terrorist attacks, natural disasters and pandemics, including the effect of the COVID-19 pandemic and other diseases on travel and traffic in the Company’s retail stores and the stores of its wholesale customers; supply disruptions, delivery delays and increased shipping costs; the impact of international hostilities, including the Russian invasion of Ukraine, on global markets, economies and consumer spending, on energy and shipping costs and on the Company's supply chain and suppliers; defaults on or downgrades of sovereign debt and the impact of any of those events on consumer spending; changes in consumer preferences and popularity of particular designs, new product development and introduction; decrease in mall traffic and increase in e-commerce; the ability of the Company to successfully implement its business strategies, competitive products and pricing, including price increases to offset increased costs; the impact of “smart” watches and other wearable tech products on the traditional watch market; seasonality; availability of alternative sources of supply in the case of the loss of any significant supplier or any supplier’s inability to fulfill the Company’s orders; the loss of or curtailed sales to significant customers; the Company’s dependence on key employees and officers; the ability to successfully integrate the operations of acquired businesses without disruption to other business activities; the possible impairment of acquired intangible assets; risks associated with the Company's minority investments in early-stage growth companies and venture capital funds that invest in such companies; the continuation of the Company’s major warehouse and distribution centers; the continuation of licensing arrangements with third parties; losses possible from pending or future litigation and administrative proceedings; the ability to secure and protect trademarks, patents and other intellectual property rights; the ability to lease new stores on suitable terms in desired markets and to complete construction on a timely basis; the ability of the Company to successfully manage its expenses on a continuing basis; information systems failure or breaches of network security; complex and quickly-evolving regulations regarding privacy and data protection; the continued availability to the Company of financing and credit on favorable terms; business disruptions; and general risks associated with doing business outside the United States including, without limitation, import duties, tariffs (including retaliatory tariffs), quotas, political and economic stability, changes to existing laws or regulations, and impacts of currency exchange rate fluctuations and success of hedging strategies related thereto.

These risks and uncertainties, along with the risk factors discussed under Item 1A. “Risk Factors” in the Company’s 2023 Annual Report on Form 10-K, should be considered in evaluating any forward-looking statements contained in this report or incorporated by reference herein. All forward-looking statements speak only as of the date of this report or, in the case of any document incorporated by reference, the date of that document. All subsequent written and oral forward-looking statements attributable to the Company or any person acting on its behalf are qualified by the cautionary statements in this section. The Company undertakes no obligation to update or publicly release any revisions to forward-looking statements to reflect events, circumstances or changes in expectations after the date of this report.

### Critical Accounting Policies and Estimates

The Company’s Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States and those significant policies are more fully described in Note 1 to the Company’s consolidated financial statements and contained in the Company's 2023 Annual Report on Form 10-K and are incorporated by reference herein. The preparation of these financial statements and the application of certain critical accounting policies require management to make judgments based on estimates and assumptions that affect the information reported. On an on-going basis, management evaluates its estimates and judgments, including those related to sales discounts and markdowns, product returns, bad debt, inventories, income taxes, warranty obligations, useful lives of property, plant and equipment, impairments of long-lived assets, stock-based compensation and contingencies and litigation. Management bases its estimates and judgments about the carrying values of assets and liabilities that are not readily apparent from other sources on historical experience, contractual commitments and on various other factors that are believed to be reasonable under the circumstances. Actual results could differ from these estimates.

Critical accounting policies are those that are most important to the portrayal of the Company’s financial condition and the results of operations and require management’s most difficult, subjective and complex judgments as a result of the need to make estimates about the effect of matters that are inherently uncertain. The Company's most critical accounting policies have been discussed in the Company's 2023 Annual Report on Form 10-K and are incorporated by reference herein. As of April 30, 2023, there have been no material changes to any of the Company’s critical accounting policies.

### Overview

The Company conducts its business in two operating segments: Watch and Accessory Brands and Company Stores. The Company’s Watch and Accessory Brands segment includes the designing, manufacturing and distribution of watches and, to a lesser extent, jewelry and other accessories, of owned and licensed brands, in addition to revenue generated from after-sales service activities and shipping. The Company Stores segment includes the Company’s retail outlet business in the United States and Canada. The Company also operates in two major geographic locations: United States and International, the latter of which includes the results of all non-U.S. Company operations.

The Company divides its watch and accessory business into two principal categories: the owned brands category and the licensed brands category. The owned brands category consists of the Movado®, Concord®, Ebel®, Olivia Burton® and MVMT® brands. Products in the licensed brands category include the following brands manufactured and distributed under license agreements with the respective brand owners: Coach®, Tommy Hilfiger®, Hugo Boss®, Lacoste® and Calvin Klein®.

Gross margins vary among the brands included in the Company’s portfolio and also among watch models within each brand. Watches in the Company’s owned brands category generally earn higher gross margin percentages than watches in the licensed brands category. The difference in gross margin percentages within the licensed brands category is primarily due to the impact of royalty payments made on the licensed brands. Gross margins in the Company’s e-commerce business generally earn higher gross margin percentages than those of the traditional wholesale business. Gross margins in the Company’s outlet business are affected by the mix of product sold and may exceed those of the wholesale business since the Company earns margins on its outlet store sales from manufacture to point of sale to the consumer.

### Recent Developments and Initiatives

### COVID-19

The COVID-19 pandemic and related public health measures materially impacted the Company’s operating results for the fiscal year ended January 31, 2021 and continue to affect how the Company and its customers and suppliers operate their businesses to varying degrees. Various containment and mitigation measures that have at times been imposed by governmental and other authorities around the world have adversely affected sales of our products and our supply chain.

Although the COVID-19 pandemic's adverse impact on the Company has significantly diminished in recent quarters, the pandemic may continue to affect the Company’s results of operations for the foreseeable future due to impacts on supply chains, shipping operations, consumer behavior, spending levels, shopping preferences and tourism.

### Russia's invasion of Ukraine

On February 24, 2022, Russia launched a comprehensive invasion of Ukraine. The invasion and the subsequent economic sanctions imposed by some countries have negatively impacted the Company’s revenue to the extent the conflict and the sanctions negatively impacted economic conditions and our ability to sell products to customers in the affected region. In response to the invasion, the Company decided in March 2022 to suspend all sales to Russia and Belarus. Sales and assets in Russia, Belarus and Ukraine for all periods presented are immaterial to the Company’s results of operations, financial condition and cash flows. In addition, the conflict has had broader implications on economies outside the region, such as the global inflationary impact of boycotts of Russian oil and gas by other countries and the blockade of Ukrainian grain exports.

### Results of Operations Overview

The following is a discussion of the results of operations for the three months ended April 30, 2023 compared to the three months ended April 30, 2022, along with a discussion of the changes in financial condition during the first three months of fiscal 2024. The Company’s results of operations for the first three months of fiscal 2024 should not be deemed indicative of the results that the Company will experience for the full year of fiscal 2024. See “Recent Developments and Initiatives” above. See also “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended January 31, 2023 filed with the Securities and Exchange Commission on March 23, 2023.

*Net Sales:* Comparative net sales by business segment were as follows (in thousands):

| Watch and Accessory Brands: | Three Months Ended April 30, 2023 | 2022 |
| --- | ---: | ---: |
| United States | $40,744 | $51,062 |
| International | 84,815 | 92,306 |
| Total Watch and Accessory Brands | 125,559 | 143,368 |
| Company Stores: |  |  |
| United States | 18,465 | 19,161 |
| International | 881 | 895 |
| Total Company Stores | 19,346 | 20,056 |
| Net Sales | $144,905 | $163,424 |

Comparative net sales by categories were as follows (in thousands):

| Watch and Accessory Brands: | Three Months Ended April 30, 2023 | 2022 |
| --- | ---: | ---: |
| Owned brands category | $45,132 | $53,170 |
| Licensed brands category | 80,207 | 88,840 |
| After-sales service and all other | 220 | 1,358 |
| Total Watch and Accessory Brands | 125,559 | 143,368 |
| Company Stores | 19,346 | 20,056 |
| Net Sales | $144,905 | $163,424 |

#### Net Sales

Net sales for the three months ended April 30, 2023 were $144.9 million, representing an $18.5 million or 11.3% decrease from the prior year period. This decrease is attributable to the Watch and Accessory Brands segment and, to a lesser extent, the Company Stores segment. For the three months ended April 30, 2023, fluctuations in foreign currency exchange rates negatively impacted net sales by $1.9 million when compared to the prior year period. On a constant dollar basis net sales decreased by 10.1% as compared to the prior year period.

#### Watch and Accessory Brands Net Sales

Net sales for the three months ended April 30, 2023 in the Watch and Accessory Brands segment were $125.6 million, below the prior year period by $17.8 million, or 12.4%. The decrease in net sales was primarily due to decreased volumes resulting from lower demand in the Company's wholesale customers in both the United States and International locations, a decrease in online retail and the negative impact of fluctuations in foreign exchange rates, partially offset by the impact of pricing increases.

#### United States Watch and Accessory Brands Net Sales

Net sales for the three months ended April 30, 2023 in the United States locations of the Watch and Accessory Brands segment were $40.8 million, below the prior year period by $10.3 million, or 20.2%, resulting primarily from decreased volumes due to lower demand in the Company's wholesale customers in both the owned and licensed brand categories and a decrease in online retail, partially offset by the impact of pricing increases. The net sales recorded in the owned brands category decreased $7.3 million, or 18.5%, and net sales recorded in the licensed brand category decreased $2.7 million, or 24.5%.

#### International Watch and Accessory Brands Net Sales

Net sales for the three months ended April 30, 2023 in the International locations of the Watch and Accessory Brands segment were $84.8 million, below the prior year by $7.5 million, or 8.1%, which included fluctuations in foreign currency exchange rates that negatively impacted net sales by $1.9 million when compared to the prior year period. The decrease in net sales was across most brands in both the owned and licensed brand categories primarily due to decreased volumes resulting from lower demand in the Company's wholesale customers, a decrease in online retail and fluctuations in foreign currency exchange rates, partially offset by the impact of pricing increases. The net sales decrease recorded in the owned brands category was $0.8 million, or 5.6%, primarily due to net sales decreases in Europe and the Middle East. The net sales decrease in the licensed brands category was $5.9 million, or 7.6%, primarily due to a net sales decrease in Europe, partially offset by net sales increases across the Middle East and the Americas (excluding the United States).

#### Company Stores Net Sales

Net sales for the three months ended April 30, 2023 in the Company Stores segment were $19.3 million, $0.7 million or 3.5% below the prior year period. The net sales decrease was primarily due to sales mix in the Company stores, partially offset by new store openings and the growth of the Company's online outlet store at www.movadocompanystore.com. As of April 30, 2023 and 2022, the Company operated 55 and 51 retail outlet locations, respectively.

#### Gross Profit

Gross profit for the three months ended April 30, 2023 was $82.0 million or 56.6% of net sales as compared to $96.7 million or 59.2% of net sales in the prior year period. The decrease in gross profit of $14.7 million was primarily due to lower net sales combined with a lower gross margin percentage. The decrease in the gross margin percentage of approximately 260 basis points for the three months ended April 30, 2023 reflected an unfavorable impact of sales mix of approximately 260 basis points, a negative impact of fluctuations in foreign exchange rates of approximately 60 basis points and the decreased leveraging of certain fixed costs as a result of lower sales of approximately 10 basis points, partially offset by decreased shipping costs of approximately 70 basis points.

#### Selling, General and Administrative (“SG&A”)

SG&A expenses for the three months ended April 30, 2023 were $71.1 million, representing a decrease from the prior year period of $0.3 million, or 0.4%. The decrease in SG&A expenses was primarily due to the following factors: lower marketing expenses of $1.6 million and a decrease in performance-based compensation of $0.9 million. These decreases in SG&A expenses were partially offset by an increase in payroll related expenses of $2.3 million. For the three months ended April 30, 2023, fluctuations in foreign currency rates related to the foreign subsidiaries favorably impacted SG&A expenses by $0.7 million when compared to the prior year period.

#### Watch and Accessory Brands Operating Income

For the three months ended April 30, 2023, the Company recorded operating income of $8.8 million in the Watch and Accessory Brands segment which includes $11.4 million of unallocated corporate expenses as well as $17.3 million of certain intercompany profits related to the Company’s supply chain operations. For the three months ended April 30, 2022, the Company recorded operating income of $21.5 million in the Watch and Accessory Brands segment which included $13.5 million of unallocated corporate expenses as well as $19.1 million of certain intercompany profits related to the Company’s supply chain operations. The decrease in operating income was the result of a decrease in gross profit of $13.1 million, partially offset by a decrease in SG&A expenses of $0.4 million when compared to the prior year period. The decrease in gross profit was primarily the result of lower net sales combined with a lower gross margin percentage primarily due to an unfavorable impact of sales mix and a negative impact of fluctuations in foreign exchange rates, partially offset by lower shipping costs. The decrease in SG&A expenses of $0.4 million was primarily due to the following factors: lower marketing expenses of $1.7 million and a decrease in performance-based compensation of $0.8 million. These decreases in SG&A expenses were partially offset by an increase in payroll related expenses of $2.0 million.

#### U.S. Watch and Accessory Brands Loss

In the United States locations of the Watch and Accessory Brands segment, for the three months ended April 30, 2023, the Company recorded an operating loss of $9.0 million which includes unallocated corporate expenses of $11.4 million. For the three months ended April 30, 2022 the Company recorded an operating loss of $3.0 million in the United States locations of the Watch and Accessory Brands segment which included unallocated corporate expenses of $13.5 million. The increase in operating loss was the result of lower gross profit of $7.6 million, partially offset by a decrease in SG&A expenses of $1.6 million when compared to the prior year period. The decrease in gross profit of $7.6 million was primarily the result of lower net sales, combined with a lower gross margin percentage primarily due to an unfavorable impact of sales mix, partially offset by lower shipping costs. The decrease in SG&A expenses of $1.6 million was primarily due to the following factors: lower marketing expenses of $2.2 million and a decrease in performance-based compensation of $0.4 million. These decreases in SG&A expenses were partially offset by an increase in payroll related expenses of $1.6 million.

#### International Watch and Accessory Brands Operating Income

In the International locations of the Watch and Accessory Brands segment, for the three months ended April 30, 2023, the Company recorded operating income of $17.8 million which includes $17.3 million of certain intercompany profits related to the Company’s International supply chain operations. For the three months ended April 30, 2022 the Company recorded operating income of $24.5 million in the International locations of the Watch and Accessory Brands segment which included $19.1 million of certain intercompany profits related to the Company’s supply chain operations. The decrease in operating income was the result of lower gross profit of $5.4 million combined with higher SG&A expenses of $1.3 million. The decrease in gross profit of $5.4 million was primarily the result of lower net sales, combined with a lower gross margin percentage primarily due to an unfavorable impact of sales mix and a negative impact of fluctuations in foreign exchange rates, partially offset by lower shipping costs. The increase in SG&A expenses of $1.3 million was primarily due to the following factors: higher marketing expenses of $0.5 million and an increase in payroll related expenses of $0.4 million. These increases in SG&A expenses were partially offset by a decrease in performance-based compensation of $0.3 million.

#### Company Stores Operating Income

The Company recorded operating income of $2.1 million and $3.7 million in the Company Stores segment for the three months ended April 30, 2023 and 2022, respectively. The decrease in operating income of $1.6 million was primarily related to a decrease in gross profit of $1.6 million, mainly due to a lower gross margin percentage combined with lower net sales, while SG&A expenses remained relatively flat, reflecting a $0.3 million increase in payroll related expenses, offset by a decrease of $0.3 million in professional service fees. As of April 30, 2023, and 2022, the Company Stores segment operated 55 and 51 retail outlet locations, respectively.

#### Other Non-Operating Income, net

For the three months ended April 30, 2023, the Company recorded other income, net of $1.0 million primarily due to interest income and the non-service components of the Company's Swiss pension plan, partially offset by a $0.5 million impairment related to an equity investment that sold its business and assets in which the Company expects to receive little or no return on its investment.

The Company recorded other income of $0.1 million primarily due to the non-service components of the Company’s Swiss pension plan for the three months ended April 30, 2022.

#### Interest Expense

Interest expense was $0.1 million primarily due to the payment of unused commitment fees for both the three months ended April 30, 2023 and 2022, respectively. There were no borrowings under the Company's revolving credit facility during the three months ended April 30, 2023 and 2022.

#### Income Taxes

The Company recorded an income tax provision of $2.5 million and $6.0 million for the three months ended April 30, 2023 and 2022, respectively.

The effective tax rate was 21.5% and 23.8% for the three months ended April 30, 2023 and 2022, respectively. The significant components of the effective tax rate changed primarily due to return to provision adjustments and changes in jurisdictional earnings, partially offset by the release of certain foreign valuation allowances in the prior year.

#### Net Income Attributable to Movado Group, Inc.

The Company recorded net income attributable to Movado Group, Inc. of $9.1 million and $18.5 million for the three months ended April 30, 2023 and 2022, respectively.

### LIQUIDITY AND CAPITAL RESOURCES

At April 30, 2023 and April 30, 2022, the Company had $198.3 million and $225.3 million, respectively, of cash and cash equivalents. Of this total, $117.9 million and $188.8 million, respectively, consisted of cash and cash equivalents at the Company's foreign subsidiaries.

At April 30, 2023 the Company had working capital of $409.4 million as compared to $386.6 million at April 30, 2022. The increase in working capital was primarily the result of a decrease in accounts payable and an increase in inventories and income taxes receivable, partially offset by a decrease in cash. The Company defines working capital as the difference between current assets and current liabilities.

The Company had $21.5 million of cash used in operating activities for the three months ended April 30, 2023 as compared to $20.8 million of cash used in operating activities for the three months ended April 30, 2022. Cash used in operating activities for the three months ended April 30, 2023 included net income of $9.3 million, positively adjusted by $4.5 million related to non-cash items. Cash used in operating activities for the three months ended April 30, 2023 included an $11.1 million decrease in income taxes payable, a decrease in accrued payroll of $9.8 million primarily as a result of payments of performance-based compensation, an $8.1 million increase in investment in inventories primarily due to timing of receipts and a $7.9 million decrease in accounts payable primarily as a result of timing of payments. Cash used in operating activities for the three months ended April 30, 2022 was primarily due to a $24.3 million increase in investment in inventories and a decrease in accrued payroll of $17.1 million as a result of payments of performance-based compensation, partially offset by net income of $19.3 million.

Cash used in investing activities was $2.9 million for the three months ended April 30, 2023 as compared to cash used in investing activities of $3.3 million for the three months ended April 30, 2022. The cash used in the three months ended April 30, 2023 was primarily related to capital expenditures of $2.3 million primarily due to new computer software and leasehold improvements and $0.6 million of long-term investments. Cash used in investing activities for the three months ended April 30, 2022 was primarily due to $1.8 million of long-term investments and $1.4 million of capital expenditures.

Cash used in financing activities was $30.3 million for the three months ended April 30, 2023 as compared to cash used in financing activities of $22.9 million for the three months ended April 30, 2022. The cash used in the three months ended April 30, 2023 included $29.9 million in dividends paid, which included a special cash dividend of $1.00 per share, and $0.4 million in stock repurchased in the open market. Cash used in financing activities for the three months ended April 30, 2022 included $14.4 million in stock repurchased in the open market and $7.9 million in dividends paid.

On October 12, 2018, the Company, together with Movado Group Delaware Holdings Corporation, Movado Retail Group, Inc. and Movado LLC (together with the Company, the “U.S. Borrowers”), each a wholly owned domestic subsidiary of the Company, and Movado Watch Company S.A. and MGI Luxury Group S.A., each a wholly owned Swiss subsidiary of the Company, entered into an Amended and Restated Credit Agreement (as subsequently amended, the “Credit Agreement”) with the lenders party thereto and Bank of America, N.A. as administrative agent (in such capacity, the “Agent”). As a result of the merger of Movado Watch Company S.A. into MGI Luxury Group S.A. in July 2022, MGI Luxury Group S.A. (subsequently renamed MGI Luxury Group GmbH as a result of the conversion of its corporate form) became the sole Swiss subsidiary of the Company party to the Credit Agreement (in such capacity, the "Swiss Borrower" and, together with the U.S. Borrowers, the "Borrowers"). The Credit Agreement provides for a $100.0 million senior secured revolving credit facility (the “Facility”) and has a maturity date of October 28, 2026. The Facility includes a $15.0 million letter of credit subfacility, a $25.0 million swingline subfacility and a $75.0 million sublimit for borrowings by the Swiss Borrower, with provisions for uncommitted increases to the Facility of up to $50.0 million in the aggregate subject to customary terms and conditions. The Credit Agreement contains affirmative and negative covenants binding on the Company and its subsidiaries that are customary for credit facilities of this type, including, but not limited to, restrictions and limitations on the incurrence of debt and liens, dispositions of assets, capital expenditures, dividends and other payments in respect of equity interests, the making of loans and equity investments, mergers, consolidations, liquidations and dissolutions, and transactions with affiliates (in each case, subject to various exceptions).

The borrowings under the Facility are joint and several obligations of the Borrowers and are also cross-guaranteed by each Borrower, except that the Swiss Borrower is not liable for, nor does it guarantee, the obligations of the U.S. Borrowers. In addition, the Borrowers’ obligations under the Facility are secured by first priority liens, subject to permitted liens, on substantially all of the U.S. Borrowers’ assets other than certain excluded assets. The Swiss Borrower does not provide collateral to secure the obligations under the Facility.

As of April 30, 2023, and April 30, 2022, there were no amounts in loans outstanding under the Facility for either period. Availability under the Facility was reduced by the aggregate number of letters of credit outstanding, issued in connection with retail and operating facility leases to various landlords and for Canadian payroll to the Royal Bank of Canada, totaling approximately $0.3 million at both April 30, 2023 and April 30, 2022. At April 30, 2023, the letters of credit have expiration dates through April 26, 2024. As of April 30, 2023, and April 30, 2022, availability under the Facility was $99.7 million for both periods. For additional information regarding the Facility, see Note 5 – Debt and Lines of Credit to the Consolidated Financial Statements.

The Company had weighted average borrowings under the Facility of zero during both the three months ended April 30, 2023 and 2022, respectively.

A Swiss subsidiary of the Company maintains unsecured lines of credit with a Swiss bank that are subject to repayment upon demand. As of April 30, 2023, and 2022, these lines of credit totaled 6.5 million Swiss Francs for both periods, with a dollar equivalent of $7.3 million and $6.7 million, respectively. As of April 30, 2023, and 2022, there were no borrowings against these lines. As of April 30, 2023 and 2022, two European banks had guaranteed obligations to third parties on behalf of two of the Company’s foreign subsidiaries in the dollar equivalent of $1.3 million and $1.2 million, respectively, in various foreign currencies, of which $0.6 million for both periods was a restricted deposit as it relates to lease agreements.

Cash paid for interest, including unused commitments fees, was $0.1 million for both the three-month periods ended April 30, 2023 and April 30, 2022, respectively.

From time to time the Company may make minority investments in growth companies in the consumer products sector and other sectors relevant to its business, including certain of the Company's suppliers and customers, as well as in venture capital funds that invest in companies in media, entertainment, information technology and technology-related fields and in digital assets. During fiscal 2022, the Company committed to invest up to $21.5 million in such investments. The Company funded approximately $5.3 million of these commitments through fiscal 2023 and an additional $0.6 million during the first quarter of fiscal 2024 and may be called upon to satisfy capital calls in respect of the remaining $15.6 million in such commitments at any time during a period generally ending ten years after the first capital call in respect of a given commitment. One consumer products company in which the Company made an equity investment in fiscal year 2022 sold its business and assets in the first quarter of fiscal 2024 in a transaction that is expected to yield little or no return for equity holders. As a result, the Company fully impaired its $0.5 million investment in this entity in the first quarter of fiscal 2024.

On March 23, 2023, the Company declared a special cash dividend of $1.00 per share, as well as a quarterly cash dividend of $0.35 per share, both paid on April 19, 2023, to shareholders of record on April 5, 2023. The total dividends of $29.9 million were paid on April 19, 2023. The Company paid cash dividends of $0.35 per share, or $7.9 million, during the three months ended April 30, 2022. Although the Company currently expects to continue to declare cash dividends in the future, the decision of whether to declare any future cash dividend, including the amount of any such dividend and the establishment of record and payment dates, will be determined, in each quarter, by the Board of Directors, in its sole discretion.

On March 25, 2021, the Board approved a share repurchase program under which the Company was authorized to purchase up to $25.0 million of its outstanding common stock through September 30, 2022, depending on market conditions, share price and other factors. On November 23, 2021, the Board approved a share repurchase program under which the Company is authorized to purchase up to an additional $50.0 million of its outstanding common stock through November 23, 2024, depending on market conditions, share price and other factors. Under both share repurchase programs, the Company is permitted to purchase shares of its common stock from time to time through open market purchases, repurchase plans, block trades or otherwise. During the three months ended April 30, 2023, the Company repurchased a total of 14,000 shares of its common stock under the November 23, 2021 share repurchase program at a total cost of $0.4 million, or an average of $27.24 per share. At April 30, 2023, zero remains available for purchase under the Company’s March 25, 2021 repurchase program and $20.6 million remains available for purchase under the Company's November 23, 2021 repurchase program. During the three months ended April 30, 2022, the Company repurchased a total of 378,380 shares of its common stock under the March 25, 2021 share repurchase program and November 23, 2021 share repurchase program at a total cost of $14.4 million, or an average of $38.16 per share.

### Off-Balance Sheet Arrangements

The Company does not have off-balance sheet financing or unconsolidated special-purpose entities.

### Accounting Changes and Recent Accounting Pronouncements

See Note 2- Recent Accounting Pronouncements to the accompanying unaudited Consolidated Financial Statements for a description of recent accounting pronouncements which may impact the Company’s Consolidated Financial Statements in future reporting periods.

## Market risk

As filed, 4,725 characters.

### Foreign Currency Exchange Rate Risk

The Company’s primary market risk exposure relates to foreign currency exchange risk (see Note 6 – Derivative Financial Instruments to the Consolidated Financial Statements). A significant portion of the Company’s purchases are denominated in Swiss Francs and, to a lesser extent, the Japanese Yen. The Company also sells to third-party customers in a variety of foreign currencies, most notably the Euro, Swiss Franc and the British Pound. The Company reduces its exposure to the Swiss Franc, Euro, British Pound, Chinese Yuan and Japanese Yen exchange rate risk through a hedging program. Under the hedging program, the Company manages most of its foreign currency exposures on a consolidated basis, which allows it to net certain exposures and take advantage of natural offsets. In the event these exposures do not offset, from time to time the Company uses various derivative financial instruments to further reduce the net exposures to currency fluctuations, predominately forward and option contracts. Certain of these contracts meet the requirements of qualified hedges. In these circumstances, the Company designates and documents these derivative instruments as a cash flow hedge of a specific underlying exposure, as well as the risk management objectives and strategies for undertaking the hedge transactions. Changes in the fair value of hedges designated and documented as a cash flow hedge and which are highly effective, are recorded in other comprehensive income until the underlying transaction affects earnings, and then are later reclassified into earnings in the same account as the hedged transaction. The earnings impact is mostly offset by the effects of currency movements on the underlying hedged transactions. To the extent that the Company does not engage in a hedging program, any change in the Swiss Franc, Euro, British Pound, Chinese Yuan and Japanese Yen exchange rates to local currency would have an equal effect on the Company’s earnings.

From time to time the Company uses forward exchange contracts, which do not meet the requirements of qualified hedges, to offset its exposure to certain foreign currency receivables and liabilities. These forward contracts are not designated as qualified hedges and, therefore, changes in the fair value of these derivatives are recognized in earnings in the period they arise, thereby offsetting the current earnings effect resulting from the revaluation of the related foreign currency receivables and liabilities.

As of April 30, 2023, the Company’s entire net forward contracts hedging portfolio consisted of 24.7 million Chinese Yuan equivalent, 24.0 million Swiss Francs equivalent, 17.1 million U.S. dollars equivalent, 38.4 million Euros equivalent (including 21.0 million Euros designated as cash flow hedges) and 2.8 million British Pounds equivalent with various expiry dates ranging through September 14, 2023, compared to a portfolio of 9.4 million Chinese Yuan equivalent, 36.0 million Swiss Francs equivalent, 21.9 million U.S. dollars equivalent, 53.2 million Euros equivalent (including 38.0 million Euros designated as cash flow hedges) and 1.0 million British Pounds equivalent with various expiry dates ranging through October 20, 2022, as of April 30, 2022. If the Company were to settle its Swiss Franc forward contracts at April 30, 2023, the result would be a $0.6 million gain. If the Company were to settle its Euro forward contracts at April 30, 2023, the result would be a $0.4 million loss. As of April 30, 2023, the Company’s British Pound, Chinese Yuan and US Dollar forward contracts had no gain or loss.

### Commodity Risk

The Company considers its exposure to fluctuations in commodity prices to be primarily related to gold used in the manufacturing of the Company’s watches. Under its hedging program, the Company can purchase various commodity derivative instruments, primarily futures contracts. When held, these derivatives are documented as qualified cash flow hedges, and the resulting gains and losses on these derivative instruments are first reflected in other comprehensive income, and later reclassified into earnings, partially offset by the effects of gold market price changes on the underlying actual gold purchases. The Company did not hold any future contracts in its gold hedge portfolio as of April 30, 2023 and 2022; thus, any changes in the gold purchase price will have an equal effect on the Company’s cost of sales.

### Debt and Interest Rate Risk

Floating rate debt at April 30, 2023 and 2022 was zero for both periods. During the three months ended April 30, 2023, the Company had no borrowings. The Company does not hedge these interest rate risks.

## Controls and procedures

As filed, 1,390 characters.

### Evaluation of Disclosure Controls and Procedures

The Company’s disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives. However, it should be noted that a control system, no matter how well conceived or operated, can only provide reasonable, not absolute, assurance that its objectives will be met and may not prevent all errors or instances of fraud.

The Company, under the supervision and with the participation of its management, including the Chief Executive Officer and the Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures, as such terms are defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective at a reasonable assurance level as of the end of the period covered by this report.

### Changes in Internal Control Over Financial Reporting

There have been no changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the three months ended April 30, 2023, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

## Risk factors

As filed, 154 characters.

As of April 30, 2023, there have been no material changes to any of the risk factors previously reported in the Company’s 2023 Annual Report on Form 10-K.

Filed May 25, 2023.
Source: SEC EDGAR, the filing index for accession 0000950170-23-024081. Last ingested by Listed: Oct 24, 2026, 14:53 ET. No prices; not investment advice.