Movado's Q2 2026: Contradictions Emerge on Consumer Habits, Restructuring Costs, Digital Strategy, Tariff Impact, and Sales Outlook

The above is the analysis of the conflicting points in this earnings call

Date of Call: August 28, 2025

Financials Results

• Revenue: $161.8M, up 3.1% YOY (up 1.4% in constant currency) from $157.0M
• EPS: $0.23 per diluted share, up from $0.15 prior year (~+53% YOY)
• Gross Margin: 54.1%, compared to 54.3% in the prior year; impacted by ~130 bps U.S. tariff headwind, partly offset by mix and pricing
• Operating Margin: Approximately 4.3% (operating income $7.0M on $161.8M sales), up from ~1.7% in the prior year (operating income $2.6M)

Business Commentary:

• Sales and Profitability Growth:
• Movado Group reported sales of $161.8 million for Q2 2026, up 3% from Q2 2025.
• Adjusted operating profit more than doubled to $7 million, from $2.6 million last year.

• This growth was driven by strong licensed brand sales and strategic pricing actions to offset tariff impacts.

• Licensed Brand Performance:

• Licensed brand sales grew by 9.5% for the quarter or 6.5% in constant currency.

• Growth was attributed to increased interest from Gen Z consumers and strong performance in brands like HUGO BOSS, Tommy Hilfiger, and Calvin Klein.

• Inventory and Tariff Management:

• Movado increased its inventory of Swiss-made watches in the U.S. to prepare for tariffs, covering a substantial portion of the year's needs.

• Tariff impacts were partially offset through strategic pricing and inventory management, despite a $2.2 million unmitigated tariff expense.

• International and Digital Growth:

• International business grew by 6.9% or 3.9% on a constant currency basis, driven by strong performance in Europe and Latin America.
• Digital channels, particularly with e-commerce retailers like Amazon and Zalando, showed strong growth globally.

Sentiment Analysis:

• Management highlighted a return to growth in sales and profitability and operating income improving to $7M. Gross margin was 54.1% vs 54.3% prior year despite tariff headwinds. However, they cited uncertainty around U.S. tariffs and the macro environment and explicitly did not provide fiscal 2026 outlook.

Q&A:

• Question from Hamed Khorsand (BWS Financial Inc.): What consumer behavior supports your focus on mini/micro watches?
  Response: Smaller case sizes are back, attracting younger women via social media and jewelry layering; this luxury-led trend is broadening across accessible price points, creating a multi-brand opportunity.

• Question from Hamed Khorsand (BWS Financial Inc.): Any takeaways from Prime Day—was it just price-driven?
  Response: Digital pure-play channels, especially in Europe, performed strongly across brands, with momentum extending beyond Prime events.

• Question from Hamed Khorsand (BWS Financial Inc.): You raised inventory for Swiss watches/tariffs—how much can be digested by holiday?
  Response: Inventory was rebuilt after low year-end levels and pulled forward to the U.S. to mitigate tariffs; management expects inventories to normalize by year-end with most of the U.S. needs already covered.

• Question from Oliver Chen (TD Cowen): When will restructuring charges stop and when will benefits show up?
  Response: Restructuring is largely complete with residual expenses tapering; savings are flowing through but offset by normal cost increases and currency.