Movado Group Inc.'s Q4 Earnings Call Contradicts Prior Guidance on U.S. Sales Drivers, Wholesale Growth and Tariff Impact

Date of Call: Mar 19, 2026

Financials Results

• Revenue: Q4: $191.6M, up 5.6% YOY; FY: $671.3M, up 2.7% YOY
• EPS: Q4: $0.57 per diluted share, up from $0.51 prior year; FY: $1.34 per diluted share, up from $1.12 prior year
• Gross Margin: Q4: 54.1%, compared to 54.2% prior year; FY: 54.2%, compared to 54% prior year
• Operating Margin: Q4: 7.5% (operating income of $14.4M), up from 7.6% ($13.5M) prior year; FY: 5.2% ($34.8M), up from 4.1% ($27.1M) prior year

Business Commentary:

Revenue and Operating Income Growth:

• Movado Group reported revenue of $671.3 million for fiscal 2026, up 2.7% from the previous year, with fourth-quarter sales increasing 5.6% to $191.6 million.
• Adjusted operating income grew 28.7% to $34.8 million for the full year and increased 6.2% in the fourth quarter.
• The growth was driven by strong execution across strategic priorities, including a focus on customer engagement, innovation, and profitability, as well as benefits from a strong euro, despite challenges from a strong Swiss franc.

Digital and Direct-to-Consumer Performance:

• movado.com saw an 18% increase in fourth-quarter sales.
• The growth was driven by higher consumer engagement, new product innovation, and strong performance in higher price point automatic watches, particularly for men.

U.S. Sales and Market Dynamics:

• U.S. net sales grew 11.2% in the fourth quarter.
• This increase was primarily volume-driven, fueled by the return of consumers to the fashion watch category, increased participation from younger consumers, and a strong return of women shoppers, driven by smaller case sizes and jewelry-inspired designs.

Impact of Tariffs on Gross Margin:

• The IEPA tariffs impacted the company's cost of goods sold by approximately $10 million for fiscal 2026, representing a 150 basis points drag on gross margin for the year.
• The company is planning for ongoing tariff impacts, expecting rates around 10% on top of normal duty rates for fiscal 2027.

Profitability and Margin Expansion Efforts:

• Operating income increased to $14.4 million in the fourth quarter from $13.5 million in the same period last year.
• Despite increased U.S. tariffs, the company maintained stable gross margins through favorable channel and product mix, increased leverage of lower fixed costs, and cost management initiatives.

Sentiment Analysis:

Overall Tone: Positive

• Management expressed being 'very pleased with the momentum in the business' and noted results 'exceeded our expectations and improved as the year progressed.' They highlighted 'strong execution' and are 'well-positioned for continued growth.'

Q&A:

• Question from Owen Rickert (Northland Capital Markets): movado.com grew 18% in 4Q26. What’s driving that strong performance? Is it traffic, conversion, higher ASPs, or is it a combination of all of that? Maybe how are you thinking about the D2C mix of the business longer term?
  Response: Growth driven by higher consumer engagement, new innovation, and higher price points (especially automatic watches). D2C will remain significant, but wholesale will also continue to grow.

• Question from Owen Rickert (Northland Capital Markets): U.S. net sales grew about 11.2% in the quarter. Can you break down how much of that growth was volume driven versus price driven, and how you expect that mix to evolve, you know, throughout fiscal year 2027?
  Response: Growth was mostly volume driven, fueled by consumer return to the category and strength from women, particularly in brands like Coach and Movado.

• Question from Owen Rickert (Northland Capital Markets): You called out tariffs as a partial offset to gross margins during the quarter and the year. I guess, can you just quantify the total tariff drag on gross margin in basis points for fiscal year 2026? Maybe if possible, just what’s embedded in your internal planning assumptions for fiscal year 2027.
  Response: FY 2026 tariff impact was 150 bps on gross margin ($10M COGS impact). For FY 2027, planning assumes tariffs around 10% on top of normal duty rates.

• Question from Owen Rickert (Northland Capital Markets): You repurchased, you know, roughly 208,000 shares in fiscal 2026 under that current program. Just giving you a, you know, $46 million remaining strong cash balance, what would accelerate the pace of buyback activity?
  Response: The company plans to use share repurchases to offset dilution going forward, especially given significant cash balances, while also maintaining a solid dividend.

• Question from Hamed Khorsand (BWS Financial): I know last year you had been highlighting maybe potentially saving because the revision, the Swiss tariff. Do you think that still exists now? How much of that would be of a help in this fiscal year?
  Response: No major benefit expected this year as minimal inventory was brought in during the period of high (39%) tariffs. Tariff volatility remains due to ongoing negotiations.

• Question from Hamed Khorsand (BWS Financial): Given the high growth rate out of your wholesale segment, is that because you think your wholesalers and retailers they were under-invested in inventory and they’re catching up, or was that being driven by actual demand?
  Response: Growth was driven by actual demand and sell-through. Retailers are now chasing inventory, prompting a focus on rebuilding stock for best-selling products.

• Question from Hamed Khorsand (BWS Financial): Given that this increase in number of units sold and how much you should be producing, wouldn’t there be some sort of operational you know, efficiency here?
  Response: Yes, increased volume can leverage supply chain infrastructure, helping to improve gross margin and cost of goods sold. Teams are focused on these efficiencies to improve profitability.

Contradiction Point 1

Drivers of U.S. Net Sales Growth

Contradiction on the primary driver of sales growth between quarters, shifting from strong demand to volume-driven recovery.

Owen Rickert (Northland Capital Markets) - Owen Rickert (Northland Capital Markets)

2026Q4: Growth is mostly volume driven... The recovery is fueled by the return of consumers to the fashion/watch category. - Efraim Grinberg(CEO)

Can you break down the 11.2% U.S. net sales growth in Q4 into volume vs. price driven and how do you expect this mix to evolve in FY2027? - Hamed Khorsand (BWS Financial Inc.)

2026Q3: Strong demand is a positive sign as the category recovers. - Efraim Grinberg(CEO)

Contradiction Point 2

Nature of Wholesale Growth

Contradiction on whether wholesale growth is driven by strong demand or strategic inventory management.

Hamed Khorsand (BWS Financial) - Hamed Khorsand (BWS Financial)

2026Q4: Growth was driven by strong demand and sell-through. - Efraim Grinberg(CEO)

Strong wholesale growth: inventory restocking or actual demand? - Hamed Khorsand (BWS Financial Inc.)

2026Q3: It's a good balance of supply and demand for select product families. Limited editions were planned to sell out. - Efraim Grinberg(CEO)

Contradiction Point 3

Inventory Rebuilding Timeline and Management

Contradiction on the timeline for inventory alignment and the impact of tariff mitigation strategies.

Hamed Khorsand (BWS Financial) - Hamed Khorsand (BWS Financial)

2026Q4: Retailers are currently chasing inventory, and the company is focused on rebuilding stock and accelerating deliveries, particularly for best-selling Movado products. - Efraim Grinberg(CEO)

Is the strong wholesale growth driven by retailers restocking inventory or increased consumer demand? - Hamed Khorsand (BWS Financial Inc.)

2026Q2: Inventories are expected to be in line by year-end. Pulling inventory forward into the U.S. helped offset some tariff impacts. - Efraim Grinberg(CEO)

Contradiction Point 4

Sales Growth Drivers and Outlook

Contradiction on the primary driver of sales growth and the ongoing momentum into future periods.

Owen Rickert (Northland Capital Markets) - Owen Rickert (Northland Capital Markets)

2026Q4: Growth is driven by higher consumer engagement, new product innovation, and shifts to higher price points (e.g., growth in automatic watches for men). D2C will remain significant, but wholesale will also continue to grow. Trends from Q4 have continued into Q1. - Efraim Grinberg(CEO)

What were the primary drivers (traffic, conversion, higher ASPs, or a combination) behind the 18% growth of movado.com in Q4, and how do you plan to approach the D2C mix longer term? - Hamed Khorsand (BWS Financial)

2026Q1: The uncertain retail environment...has affected consumer discretionary spending. Positives include strong consumer interest in newness, innovation... - Efraim Grinberg(CEO)

Contradiction Point 5

Tariff Impact and Mitigation

Contradiction on the quantified impact of tariffs for the current fiscal year and the assumed tariff rate for the next fiscal year.

Owen Rickert (Northland Capital Markets) - Owen Rickert (Northland Capital Markets)

2026Q4: For FY2026, IEPA tariffs impacted COGS by ~$10M, equating to a 150 bps gross margin drag... For FY2027, plans are based on current tariff information, which is approximately a 10% tariff on top of normal duty rates. - Sallie DeMarsilis(CFO)

Can you quantify the total tariff drag on gross margin in basis points for FY2026 and outline the assumptions for FY2027? - Hamed Khorsand (BWS Financial)

2026Q1: Inventory built during the quarter is expected to decrease by year-end, which should increase cash...Strong operating cash flow is anticipated in the second half of the year... - Efraim Grinberg(CEO)