Does Movado Represent the Death of the Wristwatch?

Chris Lange

Movado Group Inc. (NYSE: MOV) saw its stock plummet in Friday’s trading session on missed earnings, but this could be the signal for a larger movement. It reported $0.86 in earnings per share and $188.6 million in revenue, against Thomson Reuters consensus estimates of $1.13 in earnings per share and $218.32 million in revenue.

The company is known for producing luxury watches with brands in addition it its own, including Coach, Hugo Boss, Lacoste, Juicy Couture and Tommy Hilfiger.

With the advent of cellphones, watches have steadily been on the decline. Most people, especially the younger generations (i.e., millennials), do not wear watches and instead choose to check the time on their cell phones. It also begs the question of how the movement to smart watches will be treated ahead.

Chairman and CEO of Movado, Efraim Grinberg, even commented on the slowdown in the watch category:

I am disappointed in our third quarter performance and our expectations for this trend to continue into the fourth quarter, which combined has caused us to reduce guidance for the full year.

The overall watch category is experiencing slower growth and retailers are focusing on driving improved productivity. Moreover, certain of our brands did not perform as well as planned, including Movado in international markets.

The guidance for the 2015 fiscal year expects net sales to increase only 1% to 2% and operating profit to be down 7% to 10%. As it is planning for the next year, Movado is hoping to return to sustainable profit growth, and that it can stave off this slowing trend.

Conventional watches are also facing pressure on the technological front. The Apple Watch looks to change the game entirely for watches, adding new technological features that will make traditional watches obsolete, other than fashion statements. The Apple Watch will have some of the capabilities of the iPhone, such as messaging and email, but it will further complement these with a heart rate sensor and walkie-talkie feature. The Apple Watch is expected to be released in early 2015.

Movado’s stock was down 30% at $26.90 late on Friday, after hitting a 52-week low of $25.12 earlier in the day. The stock has a consensus analyst price target of $48.60 and a 52-week trading range of $25.12 to $48.27.

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