Thursday, December 06, 2007

Movado Nails It. But?

Movado (MOV) released earnings and delighted the street. The main factor seems to be an increase in margins resulting from favorable shifts in product mix. Shareholders have rewarded themselves by increasing the share valuation by approximately 14%. The rich get richer. Merry Christmas to all.

The company also announced a share buy back plan. Given the amount of cash on hand and reducing debt levels they can probably get away with it. No plans to increase the dividend were mentioned. Given the anemic 1% yield this is disappointing. The dividend was increased last March by 33% in a time when guidance estimates where being reduced and caution flags were flying.

Moving forward to Sep 6,2007 they issued annual guidance that was below market expectations. Then three months later they come out with a really great quarter. In listening to the conference call the analysts primarily focused on margin and product mix questions. You can just see the pencils and erasers working as they were adjusting models. I never got the sense that collectively they had it figured out.

Movado executives also pointed to uncertainty in the US economy as a potential contributing factor to potentially bad news. Yet at the same time they are pointing out growing international sales. While expansion is normally a good idea it would seem that Movado does not have a handle on it; as they would not offer any focused comments on markets or product lines.

Movado's policy of not making quarterly guidance announcements and sticking to annuals develops a little bit of stand offishness. The risk factor of getting it wrong is somewhat enhanced in this context. Today the market went up because of good news. Tomorrow is another story.