Watch and Jewelry designer Movado Group, Inc. (MOV), reported Thursday a fourth-quarter loss, hit by a weak consumer spending and increasingly aggressive curtailment of retailers replenishment orders. However, the company expects to report a marginal adjusted profit in fiscal 2010. Movado also said that it has decided not to declare quarterly cash dividend.
For the fourth quarter of fiscal 2009, net loss was $22.8 million, or $0.92 per share, compared to net income of $19.6 million or $0.72 per share in the previous year. The latest quarterly results included a pre-tax charge of $5.5 million, related to a previously announced expense reduction plans, an impairment charge of $4.5 million, pertaining to the 5 Movado Boutiques, and a $7.4 million tax provision, resulting mainly from future repatriation of $30 million in funds from Movado's international operations.
Results of the year-ago period included pre-tax charge to sales returns reserve of $15 million and the actual taxes included a favorable settlement of an Internal Revenue Services audit of $12.5 million.
Adjusted net loss for the quarter was $10.5 million, or $0.42 per share, compared to adjusted net income of $10.8 million, or $0.40 per share in the past year.
The company, which also operates retail stores and distributes other branded watches, reported that net sales were down 32.2% to $93.97 million from $138.57 million in the year-ago period.
For the full year, net income fell to $2.3 million, or $0.09 per share, from $60.8 million, or $2.23 per share, in fiscal 2008. The results of fiscal 2009 included a pre-tax charge of $11.1 million due to expense reduction plans, a pre-tax impairment charge of $4.5 million, and the tax impact of a non-cash tax provision of $30 million. The yearly results were largely offset by the tax benefit on utilization of a Swiss net operating loss carryforward acquired with the Ebel brand in fiscal 2005, recorded in fiscal 2009 third quarter. For the prior year, return reserve provision was $11 million.
Adjusted net income for 2009 declined to $14.2 million, or $0.55 per share, from $46.6 million, or $1.71 per share last year.
Full-year net sales decreased 17.6% to $460.86 million from $559.55 million in 2008.
Rick Cote, chief operating officer, said, "Through the various expense reduction programs we are implementing across our global operations, we expect to realize a combined $50 million to $60 million in annualized cost savings, the majority of which should be realized in fiscal 2010."
Movado also revealed that it is negotiating with its banking partners to obtain a fresh three-year asset based loan of $110 million, as it is not in compliance with a financial covenant in its present credit agreements The company also said that it executed a commitment for a $50 million three year asset-based credit facility from Bank of America, to replace its current domestic outstanding debt.
Regarding the dividend policy, Movado announced that it would discontinue the quarterly cash dividend payment because it wanted to retain capital during the economic downturn.
Looking ahead, Movado Group expects fiscal 2010 to be slightly profitable, excluding special items. The company foresees a loss of about $1.00 per share in the first half of the year, reflecting the prevalent weakness in consumer spending and retailers' lack of replenishment. Further, Movado anticipates this loss to be offset by gains during the second half of fiscal 2010, as a major part of its savings initiatives could be realized as retailers purchase inventory in advance of the holiday season.
MOV is currently trading at $7.54, down $0.77 or 9.27%, on the NYSE.
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