MOVADO GROUP INC [MOV] Filings

10-Q 1 mov-20240731.htm 10-Q 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended July 31, 2024


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 1-16497

MOVADO GROUP, INC.

(Exact Name of Registrant as Specified in its Charter)


New York		13-2595932
(State or Other Jurisdiction of Incorporation or Organization)		(IRS Employer Identification No.)

650 From Road, Ste. 375 Paramus, New Jersey		07652-3556
(Address of Principal Executive Offices)		(Zip Code)

(201) 267-8000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

    Title of each class

    Trading
Symbol(s)

    Name of each exchange on which registered

    Common Stock, par value $0.01 per share

    MOV

    New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for that past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,’’ “accelerated filer,’’ “smaller reporting company,’’ and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☒	Non-accelerated filer	☐
Smaller reporting company	☐	Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares outstanding of the registrant’s Common Stock and Class A Common Stock as of August 30, 2024 were 15,763,218 and 6,458,376 respectively.

MOVADO GROUP, INC.

Index to Quarterly Report on Form 10-Q

July 31, 2024


			Page
Part I	Financial Information (Unaudited)
	Item 1.	Consolidated Balance Sheets at July 31, 2024, January 31, 2024 and July 31, 2023	3
		Consolidated Statements of Operations for the three and six months ended July 31, 2024 and July 31, 2023	4
		Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended July 31, 2024 and July 31, 2023	5
		Consolidated Statements of Cash Flows for the six months ended July 31, 2024 and July 31, 2023	6
		Notes to Consolidated Financial Statements	7
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29
	Item 4.	Controls and Procedures	30
Part II	Other Information
	Item 1.	Legal Proceedings	31
	Item 1A.	Risk Factors	31
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31
	Item 5.	Other Information	32
	Item 6.	Exhibits	33
Signature			34

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

MOVADO GROUP, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

(Unaudited)


	July 31,			January 31,			July 31,
	2024			2024			2023
ASSETS
Current assets:
Cash and cash equivalents	$	198,251		$	262,059		$	218,909
Trade receivables, net		109,784			104,472			95,821
Inventories		176,396			148,031			181,448
Other current assets		26,421			17,962			25,206
Income taxes receivable		13,088			11,354			12,988
Total current assets		523,940			543,878			534,372
Property, plant and equipment, net		20,315			19,436			19,740
Operating lease right-of-use assets		85,350			82,661			71,358
Deferred and non-current income taxes		42,685			43,016			45,004
Other intangibles, net		6,645			7,493			8,432
Other non-current assets		80,253			72,598			70,791
Total assets	$	759,188		$	769,082		$	749,697
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	36,769		$	32,775		$	28,435
Accrued liabilities		45,074			38,695			47,135
Accrued payroll and benefits		9,778			7,591			10,976
Current operating lease liabilities		18,352			15,696			17,069
Income taxes payable		8,962			18,318			18,078
Total current liabilities		118,935			113,075			121,693
Deferred and non-current income taxes payable		1,028			8,234			8,321
Non-current operating lease liabilities		76,314			76,396			63,565
Other non-current liabilities		56,336			52,420			52,220
Total liabilities		252,613			250,125			245,799
Commitments and contingencies (Note 8)
Equity:
Preferred Stock, $0.01 par value, 5,000,000 shares authorized; no shares issued		—			—			—
Common Stock, $0.01 par value, 100,000,000 shares authorized; 29,169,952, 29,004,001 and 28,876,211 shares issued and outstanding, respectively		292			290			289
Class A Common Stock, $0.01 par value, 30,000,000 shares authorized; 6,458,376, 6,483,116 and 6,483,116 shares issued and outstanding		64			64			64
Capital in excess of par value		242,039			239,062			234,443
Retained earnings		461,382			470,317			456,279
Accumulated other comprehensive income		87,838			92,335			91,810
Treasury Stock, 13,408,334, 13,328,095 and 13,213,877 shares, respectively, at cost		(287,499	)		(285,270	)		(282,101	)
Total Movado Group, Inc. shareholders' equity		504,116			516,798			500,784
Noncontrolling interest		2,459			2,159			3,114
Total equity		506,575			518,957			503,898
Total liabilities and equity	$	759,188		$	769,082		$	749,697

See Notes to Consolidated Financial Statements

MOVADO GROUP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)


	Three Months Ended July 31,						Six Months Ended July 31,
	2024			2023			2024			2023
Net sales	$	159,313		$	160,390		$	295,982		$	305,295
Cost of sales		72,948			71,104			134,104			134,006
Gross profit		86,365			89,286			161,878			171,289
Selling, general and administrative		83,335			79,638			155,537			150,742
Operating income		3,030			9,648			6,341			20,547
Non-operating income/(expense):
Other income, net		1,877			1,537			4,049			2,562
Interest expense		(110	)		(113	)		(228	)		(226	)
Income before income taxes		4,797			11,072			10,162			22,883
Provision for income taxes (Note 9)		936			2,885			3,238			5,419
Net income		3,861			8,187			6,924			17,464
Less: Net income attributable to noncontrolling interests		140			138			312			287
Net income attributable to Movado Group, Inc.	$	3,721		$	8,049		$	6,612		$	17,177

Basic income per share:
Weighted basic average shares outstanding		22,303			22,231			22,278			22,229
Net income per share attributable to Movado Group, Inc.	$	0.17		$	0.36		$	0.30		$	0.77

Diluted income per share:
Weighted diluted average shares outstanding		22,658			22,616			22,665			22,642
Net income per share attributable to Movado Group, Inc.	$	0.16		$	0.36		$	0.29		$	0.76

See Notes to Consolidated Financial Statements

MOVADO GROUP, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

(Unaudited)


	Three Months Ended July 31,						Six Months Ended July 31,
	2024			2023			2024			2023
Net income	$	3,861		$	8,187		$	6,924		$	17,464
Other comprehensive income/(loss):
Net unrealized gain/(loss) on investments, net of tax provision/(benefit) of $6, $1, $7 and ($10), respectively		16			3			20			(29	)
Amortization of prior service cost, net of tax provision of $4, $4, $7 and $8, respectively		12			15			24			30
Foreign currency translation adjustments		5,826			6,320			(4,513	)		10,322
Cash flow hedges:
Accumulated other comprehensive income/(loss) before reclassification, net of tax provision/(benefit) of $16, $59, $38 and ($5), respectively		79			299			190			(24	)
Amounts reclassified from accumulated other comprehensive (loss)/income, net of tax (benefit)/provision of ($33), ($1), ($43) and $43, respectively		(168	)		(4	)		(218	)		216
Total other comprehensive income/(loss), net of taxes		5,765			6,633			(4,497	)		10,515
Less:
Comprehensive income/(loss) attributable to noncontrolling interests:
Net income		140			138			312			287
Foreign currency translation adjustments		11			34			(12	)		(111	)
Total comprehensive income attributable to noncontrolling interests	$	151		$	172		$	300		$	176
Total comprehensive income attributable to Movado Group, Inc.	$	9,475		$	14,648		$	2,127		$	27,803

See Notes to Consolidated Financial Statements

MOVADO GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Six Months Ended July 31,
	2024			2023
Cash flows from operating activities:
Net income	$	6,924		$	17,464
Adjustments to reconcile net income to net cash (used in)/provided by operating activities:
Depreciation and amortization		4,582			5,039
Transactional (gains)/losses		(75	)		849
Provision for inventories and accounts receivable		2,292			1,916
Deferred income taxes		(553	)		(1,564	)
Stock-based compensation		2,855			3,579
Other		171			647
Changes in assets and liabilities:
Trade receivables		(6,864	)		(827	)
Inventories		(31,401	)		6,935
Other current assets		(8,375	)		(700	)
Accounts payable		3,493			(2,995	)
Accrued liabilities		6,608			2,206
Accrued payroll and benefits		2,243			(6,529	)
Income taxes receivable		4,126			(5,981	)
Income taxes payable		(22,218	)		(12,108	)
Other non-current assets		276			1,003
Other non-current liabilities		6			292
Net cash (used in)/provided by operating activities		(35,910	)		9,226
Cash flows from investing activities:
Capital expenditures		(3,913	)		(4,620	)
Long-term investments		(4,310	)		(1,407	)
Trademarks and other intangibles		(82	)		(54	)
Net cash used in investing activities		(8,305	)		(6,081	)
Cash flows from financing activities:
Dividends paid		(15,547	)		(37,650	)
Stock repurchases		(1,086	)		(433	)
Stock awards and options exercised and other changes		(1,075	)		(92	)
Net cash used in financing activities		(17,708	)		(38,175	)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash		(1,900	)		3,131
Net decrease in cash, cash equivalents and restricted cash		(63,823	)		(31,899	)
Cash, cash equivalents, and restricted cash at beginning of year		262,814			252,179
Cash, cash equivalents, and restricted cash at end of period	$	198,991		$	220,280

Reconciliation of cash, cash equivalents, and restricted cash:
Cash and cash equivalents	$	198,251		$	218,909
Restricted cash included in other non-current assets		740			1,371
Cash, cash equivalents, and restricted cash	$	198,991		$	220,280

See Notes to Consolidated Financial Statements

MOVADO GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 – BASIS OF PRESENTATION

The accompanying interim unaudited Consolidated Financial Statements have been prepared by Movado Group, Inc. (the “Company”), in a manner consistent with that used in the preparation of the annual audited Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2024 (the “2024 Annual Report on Form 10-K”). The unaudited Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America, which require the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the unaudited Consolidated Financial Statements and the reported amounts of revenues and expenses during the periods reported. Actual results could differ from those estimates. In the opinion of management, the accompanying unaudited Consolidated Financial Statements reflect all adjustments, consisting of only normal and recurring adjustments, necessary for a fair statement of the financial position and results of operations for the periods presented. The Consolidated Balance Sheet data at January 31, 2024 is derived from the audited annual financial statements, which are included in the Company’s 2024 Annual Report on Form 10-K and should be read in connection with these interim unaudited financial statements. Operating results for the interim periods presented are not necessarily indicative of the results that may be expected for the full year.

NOTE 2 – RECENT ACCOUNTING PRONOUNCEMENTS

In November 2023, the Financial Accounting Standards Board ("FASB") issued ASU 2023-07 "Improvements to Reportable Segment Disclosures" which requires expanded disclosures about an entity's reportable segments, including more enhanced information about a reportable segment's expenses, interim segment profit or loss, and how an entity's chief operating decision maker uses reported segment profit or loss information in assessing segment performance and allocating resources. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within the fiscal years beginning after December 15, 2024. ASU 2023-07 should be adopted on a retrospective basis. Early adoption is permitted. The Company is currently evaluating this ASU to determine the impact of adoption on its Consolidated Financial Statements and related disclosures.

In December 2023, the FASB issued ASU 2023-09 "Improvements to Income Tax Disclosures" which requires expanded income tax disclosures primarily related to an entity's effective tax rate reconciliation and income taxes paid. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, and should be adopted on a prospective basis. Early adoption is permitted. The Company is currently evaluating this ASU to determine the impact of adoption on its Consolidated Financial Statements and related disclosures.

NOTE 3 – EARNINGS PER SHARE AND CASH DIVIDENDS

The Company presents net income attributable to Movado Group, Inc. after adjusting for noncontrolling interests, as applicable, per share on a basic and diluted basis. Basic earnings per share is computed using weighted-average shares outstanding during the period. Diluted earnings per share is computed using the weighted-average number of shares outstanding adjusted for dilutive common stock equivalents.

The number of shares used in calculating basic and diluted earnings per share is as follows (in thousands):


	Three Months Ended July 31,				Six Months Ended July 31,
	2024		2023		2024		2023
Weighted average common shares outstanding:
Basic		22,303		22,231		22,278		22,229
Effect of dilutive securities:
Stock awards and options to purchase shares of common stock		355		385		387		413
Diluted		22,658		22,616		22,665		22,642

For the three months ended July 31, 2024 and 2023, approximately 715,000 and 505,000, respectively, of potentially dilutive common stock equivalents were excluded from the computation of diluted earnings per share because their effect would have been antidilutive. For both the six months ended July 31, 2024 and 2023, approximately 668,000 of potentially dilutive common stock equivalents were excluded from the computation of diluted earnings per share because their effect would have been antidilutive.

On May 30, 2024, the Company declared a quarterly cash dividend of $0.35 per share payable on June 26, 2024, to shareholders of record on June 12, 2024. The total dividend of $7.8 million was paid on June 26, 2024. On March 26, 2024, the Company declared a quarterly cash dividend of $0.35 per share payable on April 23, 2024, to shareholders of record on April 9, 2024. The total dividend of $7.8 million was paid on April 23, 2024. During the three months ended April 30, 2023, the Company paid a special cash dividend of $1.00 per share, as well as a quarterly cash dividend of $0.35 per share, for a total of $29.9 million. During the three months ended July 31, 2023, the Company paid a quarterly cash dividend of $0.35 per share, or $7.7 million.

NOTE 4 – INVENTORIES

Inventories consisted of the following (in thousands):


	July 31, 2024		January 31, 2024		July 31, 2023
Finished goods	$	145,418	$	117,909	$	147,003
Component parts		27,573		26,386		30,653
Work-in-process		3,405		3,736		3,792
	$	176,396	$	148,031	$	181,448

NOTE 5 – DEBT AND LINES OF CREDIT

The Company and its U.S. and Swiss subsidiaries (collectively, the "Borrowers") are parties to an Amended and Restated Credit Agreement originally dated October 12, 2018 (as subsequently amended, the “Credit Agreement”) with the lenders party thereto and Bank of America, N.A. as administrative agent (in such capacity, the “Agent”). The Credit Agreement provides for a $100.0 million senior secured revolving credit facility (the “Facility”) and has a maturity date of October 28, 2026. The Facility includes a $15.0 million letter of credit subfacility, a $25.0 million swingline subfacility and a $75.0 million sublimit for borrowings by the Swiss Borrower, with provisions for uncommitted increases to the Facility of up to $50.0 million in the aggregate subject to customary terms and conditions. The Credit Agreement contains affirmative and negative covenants binding on the Company and its subsidiaries that are customary for credit facilities of this type, including, but not limited to, restrictions and limitations on the incurrence of debt and liens, dispositions of assets, capital expenditures, dividends and other payments in respect of equity interests, the making of loans and equity investments, mergers, consolidations, liquidations and dissolutions, and transactions with affiliates (in each case, subject to various exceptions).

The borrowings under the Facility are joint and several obligations of the Borrowers and are also cross-guaranteed by each Borrower, except that the Swiss Borrower is not liable for, nor does it guarantee, the obligations of the U.S. Borrowers. In addition, the Borrowers' obligations under the Facility are secured by first priority liens, subject to permitted liens, on substantially all of the U.S. Borrowers' assets other than certain excluded assets. The Swiss Borrower does not provide collateral to secure the obligations under the Facility.

As of both July 31, 2024, and July 31, 2023, there were no amounts of loans outstanding under the Facility. Availability under the Facility was reduced by the aggregate number of letters of credit outstanding, issued in connection with retail and operating facility leases to various landlords and for Canadian payroll to the Royal Bank of Canada, totaling approximately $0.3 million at both July 31, 2024 and July 31, 2023. At July 31, 2024, the letters of credit have expiration dates through June 2, 2025. As of both July 31, 2024, and July 31, 2023, availability under the Facility was $99.7 million.

The Company had weighted average borrowings under the Facility of zero during both the three and six months ended July 31, 2024 and 2023, respectively.

The Company's Swiss subsidiary maintains unsecured lines of credit with a Swiss bank that are subject to repayment upon demand. As of July 31, 2024, and 2023, these lines of credit totaled 6.5 million Swiss Francs for both periods, with a dollar equivalent of $7.4 million and $7.5 million, respectively. As of July 31, 2024, and 2023, there were no borrowings against these lines. As of July 31, 2024 and 2023, two European banks had guaranteed obligations to third parties on behalf of two of the Company’s foreign subsidiaries in the dollar equivalent of $1.4 million and $2.0 million, respectively, in various foreign currencies, of which $0.7 million and $1.4 million ($0.5 million was refunded in August 2023), respectively, was a restricted deposit as it relates to lease agreements.

Cash paid for interest, including unused commitments fees, was $0.1 million for both the six month periods ended July 31, 2024 and July 31, 2023 and amortization of debt fees was $0.1 million for both the six month periods ended July 31, 2024 and July 31, 2023.

NOTE 6 – DERIVATIVE FINANCIAL INSTRUMENTS

The Company addresses certain financial exposures that include the use of derivative financial instruments. The Company enters into foreign currency forward contracts to reduce the effects of fluctuating foreign currency exchange rates. As of July 31, 2024, the Company's net forward contracts hedging portfolio designated as qualified cash flow hedging instruments consisted of 17.0 million Euros equivalent with various expiry dates ranging through October 22, 2024. The net gain or loss on the derivatives is reported as a component of accumulated other comprehensive income/(loss) and reclassified into earnings in the same period during which the hedged transaction affects earnings using the same revenue or expense category that the hedged item impacted. The Company also enters into foreign currency forward contracts not designated as qualified hedges in accordance with ASC 815, Derivatives and Hedging. As of July 31, 2024, the Company’s net forward contracts hedging portfolio not designated as qualified hedges consisted of 25.0 million Chinese Yuan equivalent, 22.0 million Swiss Francs equivalent, 30.0 million U.S. dollars equivalent, 18.9 million Euros equivalent and 2.7 million British Pounds equivalent with various expiry dates ranging through January 9, 2025. Changes in the fair value of these derivatives are recognized in earnings in the period they arise. Net gains or losses related to these forward contracts are included in cost of sales, selling and general and administrative expenses in the Consolidated Statements of Operations. The cash flows related to these foreign currency contracts are classified in operating activities.

The following table presents the fair values of the Company's derivative financial instruments included in the Consolidated Balance Sheets as of July 31, 2024, January 31, 2024 and July 31, 2023 (in thousands):


	Asset Derivatives							Liability Derivatives
	Balance Sheet Location	July 31, 2024 Fair Value		January 31, 2024 Fair Value		July 31, 2023 Fair Value		Balance Sheet Location	July 31, 2024 Fair Value		January 31, 2024 Fair Value		July 31, 2023 Fair Value
Derivatives designated as hedging instruments:
Foreign Exchange Contracts	Other Current Assets	$	25	$	26	$	50	Accrued Liabilities	$	24	$	11	$	101
Total Derivative Instruments		$	25	$	26	$	50		$	24	$	11	$	101


	Asset Derivatives							Liability Derivatives
	Balance Sheet Location	July 31, 2024 Fair Value		January 31, 2024 Fair Value		July 31, 2023 Fair Value		Balance Sheet Location	July 31, 2024 Fair Value		January 31, 2024 Fair Value		July 31, 2023 Fair Value
Derivatives not designated as hedging instruments:
Foreign Exchange Contracts	Other Current Assets	$	384	$	528	$	360	Accrued Liabilities	$	—	$	—	$	44
Total Derivative Instruments		$	384	$	528	$	360		$	—	$	—	$	44

As of July 31, 2024, January 31, 2024 and July 31, 2023, the balance of net deferred gains on derivative financial instruments designated as cash flow hedges included in accumulated other comprehensive income were $15,000, $43,000 and $21,000, respectively. For the three months ended July 31, 2024, and July 31, 2023, the Company reclassified $0.2 million and $4,000, respectively, from accumulated other comprehensive income to Net sales in the Consolidated Statements of Operations. For the six months ended July 31, 2024, and July 31, 2023, the Company reclassified $0.2 million and ($0.2) million, respectively, from accumulated other comprehensive income/(loss) to Net sales in the Consolidated Statements of Operations. No ineffectiveness has been recorded for the three and six months ended July 31, 2024.

See Note 7 - Fair Value Measurements for fair value and presentation in the Consolidated Balance Sheets for derivatives.

NOTE 7 – FAIR VALUE MEASUREMENTS

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Accounting guidance establishes a fair value hierarchy which prioritizes the inputs used in measuring fair value into three broad levels as follows:

•

Level 1 – Quoted prices in active markets for identical assets or liabilities.

•

Level 2 – Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly.

•

Level 3 – Unobservable inputs based on the Company’s assumptions.

The guidance requires the use of observable market data if such data is available without undue cost and effort.

The following tables present the fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of July 31, 2024 and 2023 and January 31, 2024 (in thousands):


		Fair Value at July 31, 2024
	Balance Sheet Location	Level 1		Level 2		Level 3		Total
Assets:
Available-for-sale securities	Other current assets	$	272	$	—	$	—	$	272
Short-term investment	Other current assets		151		—		—		151
SERP assets - employer	Other non-current assets		659		—		—		659
SERP assets - employee	Other non-current assets		52,511		—		—		52,511
Defined benefit plan assets	Other non-current liabilities		—		—		34,109		34,109
Hedge derivatives	Other current assets		—		409		—		409
Total		$	53,593	$	409	$	34,109	$	88,111
Liabilities:
SERP liabilities - employee	Other non-current liabilities	$	52,511	$	—	$	—	$	52,511
Hedge derivatives	Accrued liabilities		—		24		—		24
Total		$	52,511	$	24	$	—	$	52,535


		Fair Value at January 31, 2024
	Balance Sheet Location	Level 1		Level 2		Level 3		Total
Assets:
Available-for-sale securities	Other current assets	$	246	$	—	$	—	$	246
Short-term investment	Other current assets		155		—		—		155
SERP assets - employer	Other non-current assets		510		—		—		510
SERP assets - employee	Other non-current assets		48,800		—		—		48,800
Defined benefit plan assets	Other non-current liabilities		—		—		33,731		33,731
Hedge derivatives	Other current assets		—		554		—		554
Total		$	49,711	$	554	$	33,731	$	83,996
Liabilities:
SERP liabilities - employee	Other non-current liabilities	$	48,800	$	—	$	—	$	48,800
Hedge derivatives	Accrued liabilities		—		11		—		11
Total		$	48,800	$	11	$	—	$	48,811


		Fair Value at July 31, 2023
	Balance Sheet Location	Level 1		Level 2		Level 3		Total
Assets:
Available-for-sale securities	Other current assets	$	225	$	—	$	—	$	225
Short-term investment	Other current assets		158		—		—		158
SERP assets - employer	Other non-current assets		554		—		—		554
SERP assets - employee	Other non-current assets		48,046		—		—		48,046
Defined benefit plan assets	Other non-current liabilities		—		—		31,192		31,192
Hedge derivatives	Other current assets		—		410		—		410
Total		$	48,983	$	410	$	31,192	$	80,585
Liabilities:
SERP liabilities - employee	Other non-current liabilities	$	48,046	$	—	$	—	$	48,046
Hedge derivatives	Accrued liabilities		—		145		—		145
Total		$	48,046	$	145	$	—	$	48,191

The fair values of the Company’s available-for-sale securities are based on quoted market prices. The fair value of the short-term investment, which is a guaranteed investment certificate, is based on its purchase price plus one half of one percent calculated annually. The assets related to the Company’s defined contribution supplemental executive retirement plan (“SERP”) consist of both employer (employee unvested) and employee assets which are invested in investment funds with fair values calculated based on quoted market prices. The SERP liability represents the Company’s liability to the employees in the plan for their vested balances. The hedge derivatives consist of cash flow hedging instruments and forward contracts (see Note 6 for further discussion) and are entered into by the Company principally to reduce its exposure to Swiss Franc and Euro exchange rate risks. Fair values of the Company’s hedge derivatives are calculated based on quoted foreign exchange rates and quoted interest rates.

The Company sponsors a defined benefit pension plan in Switzerland. The plan covers certain international employees and is based on years of service and compensation on a career-average pay basis. The assets within the plan are classified as a Level 3 asset within the fair value hierarchy and consist of an investment in pooled assets and include separate employee accounts that are invested in equity securities, debt securities and real estate. The values of the separate accounts invested are based on values provided by the administrator of the funds that cannot be readily derived from or corroborated by observable market data. The value of the assets is part of the defined benefit plan and included in other non-current liabilities in the Consolidated Balance Sheets at July 31, 2024, January 31, 2024, and July 31, 2023.

There were no transfers between any levels of the fair value hierarchy for any of the Company’s fair value measurements.

Investments Without Readily Determinable Fair Values

From time to time the Company may make minority investments in growth companies in the consumer products sector and other sectors relevant to its business, including certain of the Company's suppliers and customers, as well as in venture capital funds that invest in companies in media, entertainment, information technology and technology-related fields and in digital assets. Through fiscal 2024, the Company invested approximately $8.4 million and during the first six months of fiscal 2025, the Company invested an additional $4.3 million in venture capital funds. The Company has evaluated and will regularly evaluate the carrying value of its investments. One consumer products company in which the Company made an equity investment in fiscal year 2022 sold its business and assets in the first quarter of fiscal 2024 in a transaction that yielded little return for equity holders. As a result, the Company fully impaired its $0.5 million investment in this entity in the first quarter of fiscal 2024, and the impairment is recorded in Other income, net in the Consolidated Statements of Operations. The carrying value of the investments are recorded in Other non-current assets in the Consolidated Balance Sheets at July 31, 2024, January 31, 2024 and July 31, 2023.

NOTE 8 – COMMITMENTS AND CONTINGENCIES

The Company has minimum commitments related to the Company’s license agreements and endorsement agreements with brand ambassadors, and also includes service agreements. The Company sources, distributes, advertises and sells watches and jewelry pursuant to its exclusive license agreements with unaffiliated licensors. Royalty amounts under the license agreements are generally based on a stipulated percentage of revenues, although most of these agreements contain provisions for the payment of minimum annual royalty amounts. The license agreements have various terms, and some have renewal options, provided that minimum sales levels are achieved. Additionally, the license agreements require the Company to pay minimum annual advertising amounts.

The Company believes that income tax reserves are adequate; however, amounts asserted by taxing authorities could be greater or less than amounts accrued and reflected in the Consolidated Balance Sheet. Accordingly, the Company could record adjustments to the amounts for federal, state, and foreign liabilities in the future as the Company revises estimates or settles or otherwise resolves the underlying matters. In the ordinary course of business, the Company may take new positions that could increase or decrease unrecognized tax benefits in future periods.

In December 2016, U.S. Customs and Border Protection (“U.S. Customs”) issued an audit report concerning the methodology used by the Company to allocate the cost of certain watch styles imported into the U.S. among the component parts of those watches for tariff purposes. The report disputed the reasonableness of the Company’s historical allocation formulas and proposed an alternative methodology that would imply $5.1 million in underpaid duties for all imports that entered the United States during the audit period which extended from August 1, 2011 through July 15, 2016, plus possible penalties and interest. Although the Company believes that U.S. Customs’ alternative duty methodology and estimate were not consistent with the Company’s facts and circumstances and consistently disputed U.S. Customs’ position, the Company previously established reserves for a portion of the alleged underpayment indicated in the audit report. Between February 2017 and January 2021, the Company made numerous submissions to U.S. Customs containing supplemental analyses and information in response to U.S. Customs’ information requests. On May 1, 2023, the statute of limitations lapsed with respect to all entries encompassed by the audit period. As a result, during the second quarter of fiscal 2024, the Company released the reserves that it had established in respect of those entries.

The Company is involved in legal proceedings and claims from time to time, in the ordinary course of its business. Legal reserves are recorded in accordance with the accounting guidance for contingencies. Contingencies are inherently unpredictable and it is possible that results of operations, balance sheets or cash flows could be materially and adversely affected in any particular period by unfavorable developments in, or resolution or disposition of, such matters. For those legal proceedings and claims for which the Company believes that it is probable that a reasonably estimable loss may result, the Company records a reserve for the potential loss. For proceedings and claims where the Company believes it is reasonably possible that a loss may result that is materially in excess of amounts accrued for the matter, the Company either discloses an estimate of such possible loss or range of loss or includes a statement that such an estimate cannot be made. As of July 31, 2024, the Company is party to legal proceedings and contingencies, the resolution of which is not expected to materially affect its financial condition, future results of operations beyond the amounts accrued, or cash flows.

NOTE 9 – INCOME TAXES

The Company recorded an income tax provision of $0.9 million and $2.9 million for the three months ended July 31, 2024 and 2023, respectively.

The effective tax rate was 19.5% and 26.1% for the three months ended July 31, 2024 and 2023, respectively. The significant components of the effective tax rate changed primarily due to a limitation on a portion of the foreign tax credits and deductions related to the tax on Global Intangible Low-Taxed Income ("GILTI") and a reduction in valuation allowances against certain foreign losses.

The Company recorded an income tax provision of $3.2 million and $5.4 million for the six months ended July 31, 2024 and 2023, respectively.

The effective tax rate was 31.9% and 23.7% for the six months ended July 31, 2024 and 2023, respectively. The significant components of the effective tax rate changed primarily due to a limitation on a portion of the foreign tax credits and deductions related to the tax on GILTI and an increase in valuation allowances against certain foreign losses.

At July 31, 2024, the Company had no deferred tax liability for substantially all of the undistributed foreign earnings of approximately $309.6 million because the Company intends to permanently reinvest such earnings in its foreign operations. It is not practicable to estimate the tax liability related to a future distribution of these permanently reinvested foreign earnings.

NOTE 10 – EQUITY

The components of equity for the three and six months ended July 31, 2024 and 2023 are as follows (in thousands):


					Movado Group, Inc. Shareholders' Equity for the three months ended July 31, 2024 and 2023
	Preferred Stock		Common Stock Shares (1)		Common Stock Amount		Class A Common Stock Shares (2)			Class A Common Stock Amount			Capital in Excess of Par Value		Retained Earnings			Accumulated Other Comprehensive Income			Treasury Stock			Noncontrolling Interest		Total Movado Group, Inc. Shareholders' Equity
Balance, April 30, 2024	$	—		29,132	$	291		6,483		$	64		$	240,923	$	465,435		$	82,073		$	(287,414	)	$	2,308	$	503,680
Net income attributable to Movado Group, Inc.																3,721									140		3,861
Dividends ($0.35 per share)																(7,774	)										(7,774	)
Stock awards and options exercised				13		1								67								(85	)				(17	)
Stock repurchases																											-
Conversion of Class A Common Stock to Common Stock				25				(25	)																		-
Supplemental executive retirement plan														32													32
Stock-based compensation expense														1,017													1,017
Net unrealized gain on investments, net of tax provision of $6																			16								16
Net change in effective portion of hedging contracts, net of tax benefit of ($17)																			(89	)							(89	)
Amortization of prior service cost, net of tax provision of $4																			12								12
Foreign currency translation adjustment (3)																			5,826						11		5,837
Balance, July 31, 2024	$	—		29,170	$	292		6,458		$	64		$	242,039	$	461,382		$	87,838		$	(287,499	)	$	2,459	$	506,575

	Preferred Stock		Common Stock Shares (1)		Common Stock Amount		Class A Common Stock Shares (2)			Class A Common Stock Amount			Capital in Excess of Par Value		Retained Earnings			Accumulated Other Comprehensive Income			Treasury Stock			Noncontrolling Interest		Total Movado Group, Inc. Shareholders' Equity
Balance, April 30, 2023	$	—		28,824	$	288		6,525		$	65		$	232,419	$	455,979		$	85,177		$	(281,957	)	$	2,942	$	494,913
Net income attributable to Movado Group, Inc.																8,049									138		8,187
Dividends ($0.35 per share)																(7,749	)										(7,749	)
Stock awards and options exercised				10																		(92	)				(92	)
Stock repurchases																						(52	)				(52	)
Conversion of Class A Common Stock to Common Stock				42		1		(42	)		(1	)															-
Supplemental executive retirement plan														42													42
Stock-based compensation expense														1,982													1,982
Net unrealized gain on investments, net of tax provision of $1																			3								3
Net change in effective portion of hedging contracts, net of tax provision of $58																			295								295
Amortization of prior service cost, net of tax provision of $4																			15								15
Foreign currency translation adjustment (3)																			6,320						34		6,354
Balance, July 31, 2023	$	—		28,876	$	289		6,483		$	64		$	234,443	$	456,279		$	91,810		$	(282,101	)	$	3,114	$	503,898


					Movado Group, Inc. Shareholders' Equity for the six months ended July 31, 2024 and 2023
	Preferred Stock		Common Stock Shares (1)		Common Stock Amount		Class A Common Stock Shares (2)			Class A Common Stock Amount			Capital in Excess of Par Value		Retained Earnings			Accumulated Other Comprehensive Income			Treasury Stock			Noncontrolling Interest			Total Movado Group, Inc. Shareholders' Equity
Balance, January 31, 2024	$	—		29,004	$	290		6,483		$	64		$	239,062	$	470,317		$	92,335		$	(285,270	)	$	2,159		$	518,957
Net income attributable to Movado Group, Inc.																6,612									312			6,924
Dividends ($0.70 per share)																(15,547	)											(15,547	)
Stock awards and options exercised				140		2								66								(1,143	)					(1,075	)
Stock repurchases																						(1,086	)					(1,086	)
Conversion of Class A Common Stock to Common Stock				25				(25	)																			-
Supplemental executive retirement plan				1										56														56
Stock-based compensation expense														2,855														2,855
Net unrealized gain on investments, net of tax provision of $7																			20									20
Net change in effective portion of hedging contracts, net of tax benefit of ($5)																			(28	)								(28	)
Amortization of prior service cost, net of tax provision of $7																			24									24
Foreign currency translation adjustment (3)																			(4,513	)					(12	)		(4,525	)
Balance, July 31, 2024	$	—		29,170	$	292		6,458		$	64		$	242,039	$	461,382		$	87,838		$	(287,499	)	$	2,459		$	506,575

	Preferred Stock		Common Stock Shares (1)		Common Stock Amount		Class A Common Stock Shares (2)			Class A Common Stock Amount			Capital in Excess of Par Value		Retained Earnings			Accumulated Other Comprehensive Income			Treasury Stock			Noncontrolling Interest			Total Movado Group, Inc. Shareholders' Equity
Balance, January 31, 2023	$	—		28,807	$	288		6,525		$	65		$	230,782	$	476,752		$	81,295		$	(281,576	)	$	2,938		$	510,544
Net income attributable to Movado Group, Inc.																17,177									287			17,464
Dividends ($1.70 per share)																(37,650	)											(37,650	)
Stock awards and options exercised				27																		(92	)					(92	)
Stock repurchases																						(433	)					(433	)
Conversion of Class A Common Stock to Common Stock				42		1		(42	)		(1	)																-
Supplemental executive retirement plan														82														82
Stock-based compensation expense														3,579														3,579
Net unrealized loss on investments, net of tax benefit of ($10)																			(29	)								(29	)
Net change in effective portion of hedging contracts, net of tax provision of $38																			192									192
Amortization of prior service cost, net of tax provision of $8																			30									30
Foreign currency translation adjustment (3)																			10,322						(111	)		10,211
Balance, July 31, 2023	$	—		28,876	$	289		6,483		$	64		$	234,443	$	456,279		$	91,810		$	(282,101	)	$	3,114		$	503,898

(1)

Each share of common stock is entitled to one vote per share on all matters submitted to a vote of the shareholders.

(2)

Each share of class A common stock is entitled to 10 votes per share on all matters submitted to a vote of the shareholders. Each holder of class A common stock is entitled to convert, at any time, any and all of such shares into the same number of shares of common stock. Each share of class A common stock is converted automatically into common stock in the event that the beneficial or record ownership of such shares of class A common stock is transferred to any person, except to certain family members or affiliated persons deemed “permitted transferees” pursuant to the Company’s Restated Certificate of Incorporation, as amended. The class A common stock is not publicly traded, and consequently, there is currently no established public trading market for these shares.

(3)

The currency translation adjustment is not adjusted for income taxes to the extent that it relates to permanent investments of earnings in international subsidiaries.

NOTE 11 – TREASURY STOCK

During the six months ended July 31, 2024, the Company repurchased a total of 39,000 shares of its common stock at a total cost of $1.1 million, or an average of $27.85 per share. During the six months ended July 31, 2023, the Company repurchased a total of 16,000 shares of its common stock at a total cost of $0.4 million, or an average of $27.04 per share.

At July 31, 2024, $16.8 million remains available for purchase under the Company's November 23, 2021 repurchase program.

There were 41,239 and 3,538 shares of common stock repurchased during the six months ended July 31, 2024 and 2023, respectively, as a result of the surrender of shares in connection with the vesting of restricted stock awards or stock options. At the election of an employee, shares having an aggregate value on the vesting date equal to the employee’s withholding tax obligation may be surrendered to the Company.

NOTE 12 – ACCUMULATED OTHER COMPREHENSIVE INCOME

The accumulated balances at July 31, 2024 and 2023, and January 31, 2024, related to each component of accumulated other comprehensive income are as follows (in thousands):


	July 31, 2024			January 31, 2024			July 31, 2023
Foreign currency translation adjustments	$	89,327		$	93,840		$	93,327
Available-for-sale securities		189			169			153
Cash flow hedges		15			43			21
Unrecognized prior service cost related to defined benefit pension plan		(147	)		(171	)		(201	)
Net actuarial loss related to defined benefit pension plan		(1,546	)		(1,546	)		(1,490	)
Total accumulated other comprehensive income	$	87,838		$	92,335		$	91,810

Amounts reclassified from accumulated other comprehensive income/(loss) to operating income in the Consolidated Statements of Operations during the six months ended July 31, 2024 and July 31, 2023 were $0.2 million and ($0.2) million, respectively.

NOTE 13 – REVENUE

Disaggregation of Revenue

The following table presents the Company’s net sales disaggregated by customer type. Sales and usage-based taxes are excluded from net sales (in thousands):


	For the Three Months Ended July 31,				For the Six Months Ended July 31,
Customer Type	2024		2023		2024		2023
Wholesale	$	116,219	$	117,589	$	223,979	$	232,437
Direct to consumer		42,206		41,847		70,353		71,016
After-sales service		888		954		1,650		1,842
Net Sales	$	159,313	$	160,390	$	295,982	$	305,295

The Company’s revenue from contracts with customers is recognized at a point in time. The Company’s net sales disaggregated by geography are based on the location of the Company’s customer (see Note 15 – Segment and Geographic Information).

Wholesale Revenue

The Company’s wholesale revenue consists primarily of revenues from independent distributors, department stores, chain stores, independent jewelry stores and third-party e-commerce retailers. The Company recognizes and records its revenue when obligations under the terms of a contract with the customer are satisfied, and control is transferred to the customer. Transfer of control passes to wholesale customers upon shipment or upon receipt depending on the agreement with the customer and shipping terms. Wholesale revenue is measured as the amount of consideration the Company ultimately expects to receive in exchange for transferring goods. Wholesale revenue is included entirely within the Watch and Accessory Brands segment (see Note 15 – Segment and Geographic Information), consistent with how management makes decisions regarding the allocation of resources and performance measurement.

Direct to Consumer Revenue

The Company’s direct to consumer revenue primarily consists of revenues from the Company’s outlet stores, the Company’s owned e-commerce websites and concession stores, and consumer repairs. The Company recognizes and records its revenue when obligations under the terms of a contract with the customer are satisfied, and control is transferred to the customer. Control passes to outlet store customers at the time of sale and to substantially all e-commerce customers upon shipment. Direct to Consumer revenue is included in either the Watch and Accessory Brands segment or Company Stores Segment based on how the Company makes decisions about the allocation of resources and performance measurement. Revenue derived from outlet stores and related e-commerce is included within the Company Stores Segment. Other Direct to Consumer revenue (i.e., revenue derived from other Company-owned e-commerce websites, concession stores and consumer repairs) is included within the Watch and Accessory Brands segment. (See Note 15 – Segment and Geographic Information).

After-Sales Service

All watches sold by the Company come with limited warranties covering the movement against defects in materials and workmanship.

The Company’s after-sales service revenues consists of out of warranty service provided to customers and authorized third party repair centers, and sale of watch parts. The Company recognizes and records its revenue when obligations under the terms of a contract with the customer are satisfied and control is transferred to the customer. After-sales service revenue is measured as the amount of consideration the Company ultimately expects to receive in exchange for transferring goods. Revenue from after sales service, including consumer repairs, is included entirely within the Watch and Accessory Brands segment, consistent with how management makes decisions about the allocation of resources and performance measurement.

NOTE 14 – STOCK-BASED COMPENSATION

Under the Company’s Stock Incentive Plan, as amended and restated as of June 22, 2023 (the “Plan”), the Compensation and Human Capital Committee of the Board of Directors, which consists of three of the Company’s non-employee directors, has the authority to grant participants incentive stock options, nonqualified stock options, restricted stock, stock appreciation rights and stock awards, for up to 12,000,000 shares of common stock.

Stock Options:

Stock options granted to participants under the Plan generally become exercisable after three years and remain exercisable until the tenth anniversary of the date of grant. All stock options granted under the Plan have an exercise price equal to or greater than the fair market value of the Company’s common stock on the grant date. There were no stock options granted during the six months ended July 31, 2024 and July 31, 2023.

The fair value of the stock options, less expected forfeitures, is amortized on a straight-line basis over the vesting term. Total compensation expense for stock option grants recognized during the three months ended July 31, 2024 and 2023 was $0.2 million and $0.6 million, respectively. Total compensation expense for stock option grants recognized during the six months ended July 31, 2024 and 2023 was $0.5 million and $1.2 million, respectively. As of July 31, 2024, there was $0.5 million of unrecognized compensation cost related to unvested stock options. These costs are expected to be recognized over a weighted-average period of 0.7 years. Total cash consideration received for stock option exercises during the six months ended July 31, 2024 and 2023 was $0.1 million and zero, respectively.

The following table summarizes the Company’s stock options activity during the first six months of fiscal 2025:


	Outstanding Options			Weighted Average Exercise Price per Option		Option Price Per Share		Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value $(000)
Options outstanding at January 31, 2024 (662,375 options exercisable)		1,014,189		$	24.20	$12.42-$42.12			6.2	$	6,049
Granted		—			—		—
Exercised		(4,000	)	$	16.87	$	16.87
Forfeited		(58,700	)	$	42.12	$	42.12
Options outstanding at July 31, 2024		951,489		$	23.13	$12.42-$38.04			6.0	$	5,136
Exercisable at July 31, 2024		802,850		$	20.37				5.6	$	5,136
Expected to vest at July 31, 2024		147,342		$	38.04				7.7	$	-

Stock Awards:

Under the Plan, the Company can also grant stock awards to employees and directors. For the three months ended July 31, 2024 and 2023, compensation expense for stock awards was $0.8 million and $1.4 million, respectively. For the six months ended July 31, 2024 and 2023, compensation expense for stock awards was $2.3 million and $2.4 million, respectively. As of July 31, 2024, there was approximately $9.4 million of unrecognized compensation cost related to unvested stock awards. These costs are expected to be recognized over a weighted-average period of 2.1 years.

The following table summarizes the Company’s stock awards activity during the first six months of fiscal 2025:


	Number of Stock Award Units			Weighted- Average Grant Date Fair Value		Weighted- Average Remaining Contractual Term (years)	Aggregate Intrinsic Value $(000's)
Units outstanding at January 31, 2024		485,956		$	30.15
Units granted		311,786		$	27.78
Units vested		(135,743	)	$	28.10
Units forfeited		—			—
Units outstanding at July 31, 2024		661,999		$	29.45	1.9	$	17,146

Stock awards granted by the Company can be classified as either time-based stock awards or performance-based stock awards. Time-based stock awards vest over time in the number of shares established at grant date, subject to continued employment. Performance-based stock awards vest over time subject both to continued employment and to the achievement of corporate financial performance goals. Upon the vesting of a stock award, shares are issued from the pool of authorized shares. The number of shares to be issued related to the outstanding performance-based stock awards can vary from 0% to 200% of the target number of underlying stock award units, established at grant date, depending on the particular stock awards and the extent of the achievement of the predetermined financial goals. There were 41,239 and 3,538 shares of common stock of the Company tendered by the employee for the payment of the employee's withholding tax obligation totaling $1.1 million and $0.1 million for the six months ended July 31, 2024 and 2023, respectively. The total fair value of stock award units that vested during the first six months of fiscal 2025 was $3.8 million.

NOTE 15 – SEGMENT AND GEOGRAPHIC INFORMATION

The Company conducts its business in two operating segments: Watch and Accessory Brands and Company Stores. The Company’s Watch and Accessory Brands segment includes the designing, manufacturing and distribution of watches and, to a lesser extent, jewelry and other accessories, of owned and licensed brands, in addition to revenue generated from after-sales service activities and shipping. The Company Stores segment includes the Company’s retail outlet business. The Chief Executive Officer of the Company is the chief operating decision maker (“CODM”) and regularly reviews operating results for each of the two operating segments to assess performance and makes operating decisions about the allocation of the Company’s resources.

The Company divides its business into two major geographic locations: United States operations and International, which includes the results of all non-U.S. Company operations. The allocation of geographic revenue is based upon the location of the customer. The Company’s International operations in Europe, Asia, the Americas (excluding the United States) and the Middle East accounted for 29.4%, 9.5%, 9.0% and 7.8%, respectively, of the Company’s total net sales for the three months ended July 31, 2024. For the three months ended July 31, 2023, the Company’s International operations in Europe, Asia, the Middle East and the Americas (excluding the United States) accounted for 29.1%, 9.1%, 9.0% and 8.6%, respectively, of the Company’s total net sales. The Company’s International operations in Europe, the Americas (excluding the United States), the Middle East and Asia accounted for 30.7%, 9.4%, 8.7% and 8.6%, respectively, of the Company’s total net sales for the six months ended July 31, 2024. For the six months ended July 31, 2023, the Company’s International operations in Europe, the Americas (excluding the United States), the Middle East and Asia accounted for 29.8%, 10.2%, 9.2% and 8.2%, respectively, of the Company’s total net sales.

Certain prior year reclassifications have been made to the allocation of geographic revenue between the Middle East and Asia.

Operating Segment Data for the Three Months Ended July 31, 2024 and 2023 (in thousands):


	Net Sales
	2024		2023
Watch and Accessory Brands:
Owned brands category	$	45,466	$	48,888
Licensed brands category		86,600		84,450
After-sales service and all other		1,858		782
Total Watch and Accessory Brands		133,924		134,120
Company Stores		25,389		26,270
Consolidated total	$	159,313	$	160,390


	Operating (Loss)/Income
	2024			2023
Watch and Accessory Brands	$	(650	)	$	4,589
Company Stores		3,680			5,059
Consolidated total	$	3,030		$	9,648

Operating Segment Data as of and for the Six Months Ended July 31, 2024 and 2023 (in thousands):


	Net Sales
	2024		2023
Watch and Accessory Brands:
Owned brands category	$	85,413	$	94,020
Licensed brands category		162,957		164,657
After-sales service and all other		4,956		1,002
Total Watch and Accessory Brands		253,326		259,679
Company Stores		42,656		45,616
Consolidated total	$	295,982	$	305,295


	Operating Income
	2024		2023
Watch and Accessory Brands	$	2,203	$	13,418
Company Stores		4,138		7,129
Consolidated total	$	6,341	$	20,547


	Total Assets
	July 31, 2024		January 31, 2024		July 31, 2023
Watch and Accessory Brands	$	699,729	$	710,067	$	687,745
Company Stores		59,459		59,015		61,952
Consolidated total	$	759,188	$	769,082	$	749,697

Geographic Location Data for the Three Months Ended July 31, 2024 and 2023 (in thousands):


	Net Sales				Operating (Loss)/Income
	2024		2023		2024			2023
United States (1)	$	70,575	$	70,818	$	(5,293	)	$	(5,711	)
International (2)		88,738		89,572		8,323			15,359
Consolidated total	$	159,313	$	160,390	$	3,030		$	9,648

United States and International net sales are net of intercompany sales of $73.5 million and $48.9 million for the three months ended July 31, 2024 and 2023, respectively.

Geographic Location Data as of and for the Six Months Ended July 31, 2024 and 2023 (in thousands):


	Net Sales				Operating (Loss)/Income
	2024		2023		2024			2023
United States (1)	$	126,139	$	130,027	$	(14,330	)	$	(12,672	)
International (2)		169,843		175,268		20,671			33,219
Consolidated total	$	295,982	$	305,295	$	6,341		$	20,547

United States and International net sales are net of intercompany sales of $144.0 million and $113.5 million for the six months ended July 31, 2024 and 2023, respectively.

(1)

The United States operating loss included $7.2 million and $10.2 million of unallocated corporate expenses for the three months ended July 31, 2024 and 2023, respectively. The United States operating loss included $18.1 million and $21.7 million of unallocated corporate expenses for the six months ended July 31, 2024 and 2023, respectively.

(2)

The International operating income included $14.1 million and $15.3 million of certain intercompany profits related to the Company’s supply chain operations for the three months ended July 31, 2024 and 2023, respectively. The International operating income included $28.3 million and $32.5 million of certain intercompany profits related to the Company’s supply chain operations for the six months ended July 31, 2024 and 2023, respectively.


	Total Assets
	July 31, 2024		January 31, 2024		July 31, 2023
United States	$	349,562	$	361,980	$	359,233
International		409,626		407,102		390,464
Consolidated total	$	759,188	$	769,082	$	749,697


	Property, Plant and Equipment, Net
	July 31, 2024		January 31, 2024		July 31, 2023
United States	$	13,088	$	11,950	$	12,502
International		7,227		7,486		7,238
Consolidated total	$	20,315	$	19,436	$	19,740

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

FORWARD-LOOKING STATEMENTS

Statements in this Quarterly Report on Form 10-Q, including, without limitation, statements under Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this report, as well as statements in future filings by the Company with the Securities and Exchange Commission (the “SEC”), in the Company’s press releases and oral statements made by or with the approval of an authorized executive officer of the Company, which are not historical in nature, are intended to be, and are hereby identified as, “forward-looking statements” for purposes of the safe harbor provided by the Private Securities Litigation Reform Act of 1995. These statements are based on current expectations, estimates, forecasts and projections about the Company, its future performance, the industry in which the Company operates and management’s assumptions. Words such as “expects”, “anticipates”, “targets”, “goals”, “projects”, “intends”, “plans”, “believes”, “seeks”, “estimates”, “may”, “will”, “should” and variations of such words and similar expressions are also intended to identify such forward-looking statements. The Company cautions readers that forward-looking statements include, without limitation, those relating to the Company’s future business prospects, projected operating or financial results, revenues, working capital, liquidity, capital needs, inventory levels, plans for future operations, expectations regarding capital expenditures, operating efficiency initiatives and other items, cost savings initiatives, and operating expenses, effective tax rates, margins, interest costs, and income as well as assumptions relating to the foregoing. Forward-looking statements are subject to certain risks and uncertainties, some of which cannot be predicted or quantified. Actual results and future events could differ materially from those indicated in the forward-looking statements, due to several important factors herein identified, among others, and other risks and factors identified from time to time in the Company’s reports filed with the SEC, including, without limitation, the following: general economic and business conditions which may impact disposable income of consumers in the United States and the other significant markets (including Europe) where the Company’s products are sold; uncertainty regarding such economic and business conditions, including inflation, elevated interest rates; increased commodity prices and tightness in the labor market; trends in consumer debt levels and bad debt write-offs; general uncertainty related to geopolitical concerns; the impact of international hostilities, including the Russian invasion of Ukraine and war in the Middle East, on global markets, economies and consumer spending, on energy and shipping costs, and on the Company's supply chain and suppliers; supply disruptions, delivery delays and increased shipping costs; defaults on or downgrades of sovereign debt and the impact of any of those events on consumer spending; evolving stakeholder expectations and emerging complex laws on environmental, social and governance matters; changes in consumer preferences and popularity of particular designs, new product development and introduction; decrease in mall traffic and increase in e-commerce; the ability of the Company to successfully implement its business strategies, competitive products and pricing, including price increases to offset increased costs; the impact of “smart” watches and other wearable tech products on the traditional watch market; seasonality; availability of alternative sources of supply in the case of the loss of any significant supplier or any supplier’s inability to fulfill the Company’s orders; the loss of or curtailed sales to significant customers; the Company’s dependence on key employees and officers; the ability to successfully integrate the operations of acquired businesses without disruption to other business activities; the possible impairment of acquired intangible assets; risks associated with the Company's minority investments in early-stage growth companies and venture capital funds that invest in such companies; the continuation of the Company’s major warehouse and distribution centers; the continuation of licensing arrangements with third parties; losses possible from pending or future litigation and administrative proceedings; the ability to secure and protect trademarks, patents and other intellectual property rights; the ability to lease new stores on suitable terms in desired markets and to complete construction on a timely basis; the ability of the Company to successfully manage its expenses on a continuing basis; information systems failure or breaches of network security; complex and quickly-evolving regulations regarding privacy and data protection; the continued availability to the Company of financing and credit on favorable terms; business disruptions; and general risks associated with doing business internationally including, without limitation, import duties, tariffs (including retaliatory tariffs), quotas, political and economic stability, changes to existing laws or regulations, and impacts of currency exchange rate fluctuations and the success of hedging strategies related thereto.

These risks and uncertainties, along with the risk factors discussed under Item 1A. “Risk Factors” in the Company’s 2024 Annual Report on Form 10-K, should be considered in evaluating any forward-looking statements contained in this report or incorporated by reference herein. All forward-looking statements speak only as of the date of this report or, in the case of any document incorporated by reference, the date of that document. All subsequent written and oral forward-looking statements attributable to the Company or any person acting on its behalf are qualified by the cautionary statements in this section. The Company undertakes no obligation to update or publicly release any revisions to forward-looking statements to reflect events, circumstances or changes in expectations after the date of this report.

Critical Accounting Policies and Estimates

The Company’s Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States and those significant policies are more fully described in Note 1 to the Company’s Consolidated Financial Statements and contained in the Company's 2024 Annual Report on Form 10-K and are incorporated by reference herein. The preparation of these financial statements and the application of certain critical accounting policies require management to make judgments based on estimates and assumptions that affect the information reported. On an on-going basis, management evaluates its estimates and judgments, including those related to sales discounts and markdowns, product returns, bad debt, inventories, income taxes, warranty obligations, useful lives of property, plant and equipment, impairments of long-lived assets, stock-based compensation and contingencies and litigation. Management bases its estimates and judgments about the carrying values of assets and liabilities that are not readily apparent from other sources on historical experience, contractual commitments and on various other factors that are believed to be reasonable under the circumstances. Actual results could differ from these estimates.

Critical accounting policies are those that are most important to the portrayal of the Company’s financial condition and the results of operations and require management’s most difficult, subjective and complex judgments as a result of the need to make estimates about the effect of matters that are inherently uncertain. The Company's most critical accounting policies have been discussed in the Company's 2024 Annual Report on Form 10-K and are incorporated by reference herein. As of July 31, 2024, there have been no material changes to any of the Company's critical accounting policies.

Overview

The Company conducts its business in two operating segments: Watch and Accessory Brands and Company Stores. The Company’s Watch and Accessory Brands segment includes the designing, manufacturing and distribution of watches and, to a lesser extent, jewelry and other accessories, of owned and licensed brands, in addition to revenue generated from after-sales service activities and shipping. The Company Stores segment includes the Company’s retail outlet business in the United States and Canada. The Company also operates in two major geographic locations: United States and International, the latter of which includes the results of all non-U.S. Company operations.

The Company divides its watch and accessory business into two principal categories: the owned brands category and the licensed brands category. The owned brands category consists of the Movado®, Concord®, EBEL®, Olivia Burton® and MVMT® brands. Products in the licensed brands category include the following brands manufactured and distributed under license agreements with the respective brand owners: Coach®, Tommy Hilfiger®, Hugo Boss®, Lacoste® and Calvin Klein®.

Gross margins vary among the brands included in the Company’s portfolio and also among watch models within each brand. Watches in the Company’s owned brands category generally earn higher gross margin percentages than watches in the licensed brands category. The difference in gross margin percentages within the licensed brands category is primarily due to the impact of royalty payments made on the licensed brands. Gross margins in the Company’s e-commerce business generally earn higher gross margin percentages than those of the traditional wholesale business. Gross margins in the Company’s outlet business are affected by the mix of product sold and may exceed those of the wholesale business since the Company earns margins on its outlet store sales from manufacture to point of sale to the consumer.

Recent Developments and Initiatives

The Inflation Reduction Act of 2022

In August 2022, the Inflation Reduction Act of 2022 (the “IR Act”) was signed into law by President Biden. Among other things, the IR Act implemented a 1% excise tax on the fair market stock repurchases by covered corporations, a 15% minimum tax based on adjusted financial statement income of certain large corporations, and several tax incentives to promote clean energy. Although the Company is continuing to evaluate the IR Act and its potential impact on future periods, to date, the IR Act has not had a material impact on its Consolidated Financial Statements.

The OECD has issued Pillar Two model rules implementing a new global minimum tax of 15%, which is intended to be effective on January 1, 2024. While the U.S. has not yet adopted the Pillar Two rules, several other countries have adopted and enacted changes to their legislation in response to Pillar Two. The Company's turnover currently does not meet the minimum requirements that were set by OECD inclusive framework and rules. Although the Company will continue to evaluate and monitor the enactments of Pillar Two, to the extent that Pillar Two becomes applicable, the Company does not expect a material impact on its Consolidated Financial Statements.

Results of Operations Overview

The following is a discussion of the results of operations for the three and six months ended July 31, 2024 compared to the three and six months ended July 31, 2023, along with a discussion of the changes in financial condition during the first six months of fiscal 2025. The

Company’s results of operations for the first six months of fiscal 2025 should not be deemed indicative of the results that the Company will experience for the full year of fiscal 2025. See “Recent Developments and Initiatives” above. See also “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended January 31, 2024 filed with the Securities and Exchange Commission on March 26, 2024.

Results of operations for the three months ended July 31, 2024 as compared to the three months ended July 31, 2023

Net Sales: Comparative net sales by business segment were as follows (in thousands):


	Three Months Ended July 31,
	2024		2023
Watch and Accessory Brands:
United States	$	46,508	$	45,879
International		87,416		88,241
Total Watch and Accessory Brands		133,924		134,120
Company Stores:
United States		24,067		24,939
International		1,322		1,331
Total Company Stores		25,389		26,270
Net Sales	$	159,313	$	160,390

Comparative net sales by categories were as follows (in thousands):


	Three Months Ended July 31,
	2024		2023
Watch and Accessory Brands:
Owned brands category	$	45,466	$	48,888
Licensed brands category		86,600		84,450
After-sales service and all other		1,858		782
Total Watch and Accessory Brands		133,924		134,120
Company Stores		25,389		26,270
Net Sales	$	159,313	$	160,390

Net Sales

Net sales for the three months ended July 31, 2024 were $159.3 million, representing a $1.1 million or 0.7% decrease from the prior year period. This decrease is attributable to the Company Stores segment and, to a lesser extent, the Watch and Accessory Brands segment. For the three months ended July 31, 2024, fluctuations in foreign currency exchange rates negatively impacted net sales by $0.6 million when compared to the prior year period. Excluding this $0.6 million impact, net sales would have decreased by 0.3% as compared to the prior year period.

Watch and Accessory Brands Net Sales

Net sales for the three months ended July 31, 2024 in the Watch and Accessory Brands segment were $133.9 million, below the prior year period by $0.2 million, or 0.1%. The decrease in net sales was primarily due to unfavorable sales mix in the Company's wholesale customers, mainly in the International locations, and the negative impact of fluctuations in foreign exchange rates, partially offset by an increase in online retail in the United States locations.

United States Watch and Accessory Brands Net Sales

Net sales for the three months ended July 31, 2024 in the United States locations of the Watch and Accessory Brands segment were $46.5 million, above the prior year period by $0.6 million, or 1.4%, resulting primarily from an increase in online retail. The net sales recorded in the licensed brands category increased $1.3 million, or 13.1%, partially offset by a decrease in net sales recorded in the owned brands category of $1.0 million, or 2.9%.

International Watch and Accessory Brands Net Sales

Net sales for the three months ended July 31, 2024 in the International locations of the Watch and Accessory Brands segment were $87.4 million, below the prior year by $0.8 million, or 0.9%, which included fluctuations in foreign currency exchange rates that negatively impacted net sales by $0.6 million when compared to the prior year period. The decrease in net sales was primarily due to unfavorable sales mix in the Company's wholesale customers and the negative impact of fluctuations in foreign exchange rates. The net sales decrease recorded in the owned brands category was $2.4 million, or 18.1%, due to net sales decreases across all regions. The net sales increase recorded in the licensed brands category was $0.9 million, or 1.2%, primarily due to net sales increases in the Americas (excluding the United States), Europe and Asia, partially offset by a net sales decrease in the Middle East.

Company Stores Net Sales

Net sales for the three months ended July 31, 2024 in the Company Stores segment were $25.4 million, $0.9 million or 3.4% below the prior year period. The net sales decrease was primarily due to unfavorable sales mix in the Company stores, partially offset by an increase in sales from the Company's online outlet store at www.movadocompanystore.com. As of July 31, 2024 and 2023, the Company operated 56 and 55 retail outlet locations, respectively.

Gross Profit

Gross profit for the three months ended July 31, 2024 was $86.4 million or 54.2% of net sales as compared to $89.3 million or 55.7% of net sales in the prior year period. The decrease in gross profit of $2.9 million was primarily due to lower net sales combined with a lower gross margin percentage. The decrease in the gross margin percentage of approximately 150 basis points for the three months ended July 31, 2024 was primarily due to an unfavorable impact of sales mix.

Selling, General and Administrative (“SG&A”)

SG&A expenses for the three months ended July 31, 2024 were $83.3 million, representing an increase from the prior year period of $3.7 million, or 4.6%. The increase in SG&A expenses was primarily due to higher marketing expenses of $5.0 million, partially offset by a decrease in performance-based compensation of $0.9 million and a decrease of $0.2 million in amortization expense related to certain intangible assets being fully amortized. For the three months ended July 31, 2024, fluctuations in foreign currency rates related to the foreign subsidiaries favorably impacted SG&A expenses by $0.3 million when compared to the prior year period.

Watch and Accessory Brands Operating (Loss)/Income

For the three months ended July 31, 2024 the Company recorded operating loss of $0.6 million in the Watch and Accessory Brands segment which includes $7.2 million of unallocated corporate expenses as well as $14.1 million of certain intercompany profits related to the Company’s supply chain operations. For the three months ended July 31, 2023, the Company recorded operating income of $4.6 million in the Watch and Accessory Brands segment which included $10.2 million of unallocated corporate expenses as well as $15.3 million of certain intercompany profits related to the Company’s supply chain operations. The change to operating loss from operating income of $5.2 million was the result of a decrease in gross profit of $1.9 million combined with higher SG&A expenses of $3.3 million when compared to the prior year period. The decrease in gross profit was primarily the result of a lower gross margin percentage primarily due to an unfavorable impact of sales mix. The increase in SG&A expenses of $3.3 million was primarily due to higher marketing expenses of $4.8 million, partially offset by a decrease in performance-based compensation of $0.9 million and a decrease of $0.2 million in amortization expense related to certain intangible assets being fully amortized.

U.S. Watch and Accessory Brands Operating Loss

In the United States locations of the Watch and Accessory Brands segment, for the three months ended July 31, 2024, the Company recorded an operating loss of $8.6 million which includes unallocated corporate expenses of $7.2 million. For the three months ended July 31, 2023 the Company recorded an operating loss of $10.4 million in the United States locations of the Watch and Accessory Brands segment which included unallocated corporate expenses of $10.2 million. The decrease in operating loss was the result of an increase in gross profit of $1.6 million combined with a decrease in SG&A expenses of $0.2 million when compared to the prior year period. The increase in gross profit of $1.6 million was primarily the result of higher net sales combined with a higher gross margin percentage primarily due to the favorable impact of sales mix. The decrease in SG&A expenses of $0.2 million was primarily due to a decrease in performance-based compensation and payroll related expenses of $1.5 million offset by higher marketing expenses of $1.5 million.

International Watch and Accessory Brands Operating Income

In the International locations of the Watch and Accessory Brands segment, for the three months ended July 31, 2024, the Company recorded operating income of $8.0 million which includes $14.1 million of certain intercompany profits related to the Company’s International supply chain operations. For the three months ended July 31, 2023 the Company recorded operating income of $15.0 million in the International locations of the Watch and Accessory Brands segment which included $15.3 million of certain intercompany

profits related to the Company’s supply chain operations. The decrease in operating income was the result of lower gross profit of $3.4 million combined with higher SG&A expenses of $3.6 million. The decrease in gross profit of $3.4 million was primarily the result of lower net sales, combined with a lower gross margin percentage primarily due to an unfavorable impact of sales mix. The increase in SG&A expenses of $3.6 million was primarily due to the following factors: higher marketing expenses of $3.3 million and an increase in payroll related expenses of $0.5 million. These increases in SG&A expenses were partially offset by a decrease of $0.2 million in amortization expense related to certain intangible assets being fully amortized.

Company Stores Operating Income

The Company recorded operating income of $3.7 million and $5.1 million in the Company Stores segment for the three months ended July 31, 2024 and 2023, respectively. The decrease in operating income of $1.4 million was primarily related to a decrease in gross profit of $1.0 million, mainly due to lower sales combined with a lower gross margin percentage, and higher SG&A expenses of $0.4 million primarily due to higher marketing expenses of $0.2 million and an increase in payroll related expenses of $0.2 million. As of July 31, 2024, and 2023, the Company Stores segment operated 56 and 55 retail outlet locations, respectively.

Other Non-Operating Income, net

The Company recorded other income, net of $1.9 million primarily due to interest income for the three months ended July 31, 2024.

The Company recorded other income, net of $1.5 million primarily due to interest income for the three months ended July 31, 2023.

Interest Expense

Interest expense was $0.1 million primarily due to the payment of unused commitment fees for both the three months ended July 31, 2024 and 2023. There were no borrowings under the Company's revolving credit facility during the three months ended July 31, 2024 and 2023.

Income Taxes

The Company recorded an income tax provision of $0.9 million and $2.9 million for the three months ended July 31, 2024 and 2023, respectively.

Net Income Attributable to Movado Group, Inc.

The Company recorded net income attributable to Movado Group, Inc. of $3.7 million and $8.0 million for the three months ended July 31, 2024 and 2023, respectively.

Results of operations for the six months ended July 31, 2024 as compared to the six months ended July 31, 2023

Net Sales: Comparative net sales by business segment were as follows (in thousands):


	Six Months Ended July 31,
	2024		2023
Watch and Accessory Brands:
United States	$	85,622	$	86,623
International		167,704		173,056
Total Watch and Accessory Brands		253,326		259,679
Company Stores:
United States		40,517		43,404
International		2,139		2,212
Total Company Stores		42,656		45,616
Net Sales	$	295,982	$	305,295

Comparative net sales by categories were as follows (in thousands):


	Six Months Ended July 31,
	2024		2023
Watch and Accessory Brands:
Owned brands category	$	85,413	$	94,020
Licensed brands category		162,957		164,657
After-sales service and all other		4,956		1,002
Total Watch and Accessory Brands		253,326		259,679
Company Stores		42,656		45,616
Net Sales	$	295,982	$	305,295

Net Sales

Net sales for the six months ended July 31, 2024 were $296.0 million, representing a $9.3 million or 3.1% decrease from the prior year period. This decrease is attributable to the Watch and Accessory Brands segment and the Company Stores segment. For the six months ended July 31, 2024, fluctuations in foreign currency exchange rates had an immaterial impact when compared to the prior year period.

Watch and Accessory Brands Net Sales

Net sales for the six months ended July 31, 2024 in the Watch and Accessory Brands segment were $253.3 million, below the prior year period by $6.4 million, or 2.4%. The decrease in net sales was primarily due to unfavorable sales mix in the Company's wholesale customers, mainly in the International locations, and decreased volumes resulting from lower demand in the Company's wholesale customers in the United States locations, partially offset by an increase in online retail in the United States locations.

United States Watch and Accessory Brands Net Sales

Net sales for the six months ended July 31, 2024 in the United States locations of the Watch and Accessory Brands segment were $85.6 million, below the prior year period by $1.0 million, or 1.2%, resulting primarily from decreased volumes due to lower demand in the Company's wholesale customers, partially offset by an increase in online retail. The net sales recorded in the owned brands category decreased $3.8 million, or 5.6%, partially offset by an increase in net sales recorded in the licensed brand category of $1.4 million, or 7.9%.

International Watch and Accessory Brands Net Sales

Net sales for the six months ended July 31, 2024 in the International locations of the Watch and Accessory Brands segment were $167.7 million, below the prior year by $5.4 million, or 3.1%, which included an immaterial impact of fluctuations in foreign currency exchange rates when compared to the prior year period. The decrease in net sales was across most brands in both the owned and licensed brand categories primarily due to unfavorable sales mix in the Company's wholesale customers. The net sales decrease recorded in the owned brands category was $4.8 million, or 18.2%, due to net sales decreases across all regions. The net sales decrease in the licensed brands category was $3.1 million, or 2.1%, primarily due to net sales decreases in the Americas (excluding the United States) and the Middle East, partially offset by net sales increases Europe and Asia.

Company Stores Net Sales

Net sales for the six months ended July 31, 2024 in the Company Stores segment were $42.7 million, $3.0 million or 6.5% below the prior year period. The net sales decrease was primarily due to unfavorable sales mix in the Company stores, partially offset by an increase in sales from the Company's online outlet store at www.movadocompanystore.com. As of July 31, 2024 and 2023, the Company operated 56 and 55 retail outlet locations, respectively.

Gross Profit

Gross profit for the six months ended July 31, 2024 was $161.9 million or 54.7% of net sales as compared to $171.3 million or 56.1% of net sales in the prior year period. The decrease in gross profit of $9.4 million was primarily due to lower net sales combined with a lower gross margin percentage. The decrease in the gross margin percentage of approximately 140 basis points for the six months ended July 31, 2024 reflected an unfavorable impact of sales mix of approximately 110 basis points, the decreased leveraging of certain fixed costs as a result of lower sales of approximately 30 basis points and a negative impact of fluctuations in foreign exchange rates of approximately 10 basis points, partially offset by decreased shipping costs of approximately 10 basis points.

Selling, General and Administrative (“SG&A”)

SG&A expenses for the six months ended July 31, 2024 were $155.5 million, representing an increase from the prior year period of $4.8 million, or 3.2%. The increase in SG&A expenses was primarily due to the following factors: higher marketing expenses of $5.3 million and an increase in payroll related expenses of $1.7 million. These increases in SG&A expenses were partially offset by a decrease in performance-based compensation of $1.4 million and a decrease of $0.6 million in amortization expense related to certain intangible assets being fully amortized. For the six months ended July 31, 2024, fluctuations in foreign currency rates related to the foreign subsidiaries favorably impacted SG&A expenses by $0.1 million when compared to the prior year period.

Watch and Accessory Brands Operating Income

For the six months ended July 31, 2024 the Company recorded operating income of $2.2 million in the Watch and Accessory Brands segment which includes $18.1 million of unallocated corporate expenses as well as $28.3 million of certain intercompany profits related to the Company’s supply chain operations. For the six months ended July 31, 2023, the Company recorded operating income of $13.4 million in the Watch and Accessory Brands segment which included $21.7 million of unallocated corporate expenses as well as $32.5 million of certain intercompany profits related to the Company’s supply chain operations. The decrease in operating income was the result of a decrease in gross profit of $7.3 million combined with higher SG&A expenses of $3.9 million when compared to the prior year period. The decrease in gross profit was primarily the result of lower net sales combined with a lower gross margin percentage primarily due to an unfavorable impact of sales mix, the decreased leveraging of certain fixed costs as a result of lower sales and a negative impact of fluctuations in foreign exchange rates, partially offset by lower shipping costs. The increase in SG&A expenses of $3.9 million was primarily due to the following factors: higher marketing expenses of $5.0 million and an increase in payroll related expenses of $1.3 million. These increases in SG&A expenses were partially offset by a decrease in performance-based compensation of $1.5 million and decrease of $0.6 million in amortization expense related to certain intangible assets being fully amortized.

U.S. Watch and Accessory Brands Operating Loss

In the United States locations of the Watch and Accessory Brands segment, for the six months ended July 31, 2024, the Company recorded an operating loss of $18.1 million which includes unallocated corporate expenses of $18.1 million. For the six months ended July 31, 2023 the Company recorded an operating loss of $19.4 million in the United States locations of the Watch and Accessory Brands segment which included unallocated corporate expenses of $21.7 million. The decrease in operating loss was the result of an increase in gross profit of $1.5 million, partially offset by an increase in SG&A expenses of $0.2 million when compared to the prior year period. The increase in gross profit of $1.5 million was primarily the result of a higher gross margin percentage primarily due to the favorable impact of sales mix and lower shipping costs. The increase in SG&A expenses of $0.2 million was primarily due to the following factors: higher marketing expenses of $0.8 million and an increase in payroll related expenses of $0.6 million. These increases in SG&A expenses were offset by a decrease in performance-based compensation of $1.4 million.

International Watch and Accessory Brands Operating Income

In the International locations of the Watch and Accessory Brands segment, for the six months ended July 31, 2024, the Company recorded operating income of $20.3 million which includes $28.3 million of certain intercompany profits related to the Company’s International supply chain operations. For the six months ended July 31, 2023 the Company recorded operating income of $32.8 million in the International locations of the Watch and Accessory Brands segment which included $32.5 million of certain intercompany profits related to the Company’s supply chain operations. The decrease in operating income was the result of lower gross profit of $8.8 million combined with higher SG&A expenses of $3.7 million. The decrease in gross profit of $8.8 million was primarily the result of lower net sales, combined with a lower gross margin percentage primarily due to an unfavorable impact of sales mix, the decreased leveraging of certain fixed costs as a result of lower sales and a negative impact of fluctuations in foreign exchange rates, partially offset by lower shipping costs. The increase in SG&A expenses of $3.7 million was primarily due was primarily due to the following factors: higher marketing expenses of $4.2 million and an increase in payroll related expenses of $0.7 million. These increases in SG&A expenses were partially offset by a decrease of $0.6 million in amortization expense related to certain intangible assets being fully amortized and a decrease in performance-based compensation of $0.1 million.

Company Stores Operating Income

The Company recorded operating income of $4.1 million and $7.1 million in the Company Stores segment for the six months ended July 31, 2024 and 2023, respectively. The decrease in operating income of $3.0 million was primarily related to a decrease in gross profit of $2.1 million, mainly due to lower sales combined with a lower gross margin percentage, and higher SG&A expenses of $0.9 million primarily due to an increase in payroll related expenses of $0.4 million and higher marketing expenses of $0.3 million. As of July 31, 2024, and 2023, the Company Stores segment operated 56 and 55 retail outlet locations, respectively.

Other Non-Operating Income, net

The Company recorded other income, net of $4.0 million primarily due to interest income for the six months ended July 31, 2024.

For the six months ended July 31, 2023, the Company recorded other income, net of $2.6 million primarily due to interest income, partially offset by a $0.5 million impairment related to an equity investment in a consumer products company that sold its business and assets in a transaction that yielded little return for equity holders.

Interest Expense

Interest expense was $0.2 million primarily due to the payment of unused commitment fees for both the six months ended July 31, 2024 and 2023. There were no borrowings under the Company's revolving credit facility during the six months ended July 31, 2024 and 2023.

Income Taxes

The Company recorded an income tax provision of $3.2 million and $5.4 million for the six months ended July 31, 2024 and 2023, respectively.

Net Income Attributable to Movado Group, Inc.

The Company recorded net income attributable to Movado Group, Inc. of $6.6 million and $17.2 million for the six months ended July 31, 2024 and 2023, respectively.

LIQUIDITY AND CAPITAL RESOURCES

At July 31, 2024 and July 31, 2023, the Company had $198.3 million and $218.9 million, respectively, of cash and cash equivalents. Of this total, $142.4 million and $133.8 million, respectively, consisted of cash and cash equivalents at the Company's foreign subsidiaries.

At July 31, 2024 the Company had working capital of $405.0 million as compared to $412.7 million at July 31, 2023. The decrease in working capital was primarily the result of a decrease in cash and an increase in accounts payable, partially offset by an increase in trade receivables and a decrease in income taxes payable. The Company defines working capital as the difference between current assets and current liabilities.

The Company had $35.9 million of cash used in operating activities for the six months ended July 31, 2024 as compared to $9.2 million of cash provided by operating activities for the six months ended July 31, 2023. Cash used in operating activities for the six months ended July 31, 2024 included net income of $6.9 million, positively adjusted by $9.3 million related to non-cash items. Cash used in operating activities for the six months ended July 31, 2024 included a $31.4 million increase in investment in inventories primarily due to timing of receipts to align with sales levels, a $6.9 million increase in trade receivables due to timing of sales during the quarter and increases in net payments related to taxes, other current assets, accrued liabilities and accrued payroll and benefits totaling $17.6 million primarily due to timing. Cash provided by operating activities for the six months ended July 31, 2023 included net income of $17.5 million, positively adjusted by $10.5 million related to non-cash items. Cash provided by operating activities for the six months ended July 31, 2023 included a $6.9 million decrease in investment in inventories primarily due to timing of receipts to align with sales levels, partially offset by a change in income taxes of $18.1 million primarily due to timing of payments and a decrease in accrued payroll and benefits of $6.5 million primarily as a result of payments of performance-based compensation.

Cash used in investing activities was $8.3 million for the six months ended July 31, 2024 as compared to cash used in investing activities of $6.1 million for the six months ended July 31, 2023. The cash used in the six months ended July 31, 2024 was primarily related to $4.3 million of long-term investments and capital expenditures of $3.9 million primarily due to construction in progress mainly related to Company stores and shop-in-shops. Cash used in investing activities for the six months ended July 31, 2023 included $4.6 million of capital expenditures and $1.4 million of long-term investments.

Cash used in financing activities was $17.7 million for the six months ended July 31, 2024 as compared to cash used in financing activities of $38.2 million for the six months ended July 31, 2023. The cash used in the six months ended July 31, 2024 included $15.5 million in dividends paid, $1.1 million in stock repurchased in the open market and $1.1 million of shares repurchased as a result of the surrender of shares by employees in connection with the vesting of certain stock awards. Cash used in financing activities for the six months ended July 31, 2023 included $37.7 million in dividends paid, which included a special cash dividend of $1.00 per share, and $0.4 million in stock repurchased in the open market.

Bank of America, N.A. as administrative agent (in such capacity, the “Agent”). The Credit Agreement provides for a $100.0 million senior secured revolving credit facility (the “Facility”) and has a maturity date of October 28, 2026. The Facility includes a $15.0 million letter of credit subfacility, a $25.0 million swingline subfacility and a $75.0 million sublimit for borrowings by the Swiss Borrower, with provisions for uncommitted increases to the Facility of up to $50.0 million in the aggregate subject to customary terms and conditions. The Credit Agreement contains affirmative and negative covenants binding on the Company and its subsidiaries that are customary for credit facilities of this type, including, but not limited to, restrictions and limitations on the incurrence of debt and liens, dispositions of assets, capital expenditures, dividends and other payments in respect of equity interests, the making of loans and equity investments, mergers, consolidations, liquidations and dissolutions, and transactions with affiliates (in each case, subject to various exceptions).

The Company had weighted average borrowings under the Facility of zero during both the three and six months ended July 31, 2024 and 2023, respectively.

Cash paid for interest, including unused commitments fees, was $0.1 million for both the six month periods ended July 31, 2024 and July 31, 2023, respectively.

From time to time the Company may make minority investments in growth companies in the consumer products sector and other sectors relevant to its business, including certain of the Company's suppliers and customers, as well as in venture capital funds that invest in companies in media, entertainment, information technology and technology-related fields and in digital assets. During fiscal 2022, the Company committed to invest up to $21.5 million in such investments. The Company funded approximately $8.4 million of these commitments through fiscal 2024 and an additional $4.3 million during the first six months of fiscal 2025 and may be called upon to satisfy capital calls in respect of the remaining $8.8 million in such commitments at any time during a period generally ending ten years after the first capital call in respect of a given commitment. One consumer products company in which the Company made an equity investment in fiscal year 2022 sold its business and assets in the first quarter of fiscal 2024 in a transaction that yielded little return for equity holders. As a result, the Company fully impaired its $0.5 million investment in this entity in the first quarter of fiscal 2024.

The Company paid cash dividends of $0.35 per share, or $7.8 million, during the three months ended April 30, 2024 and $0.35 per share, or $7.8 million, during the three months ended July 31, 2024. During the three months ended April 30, 2023, the Company paid a special cash dividend of $1.00 per share, as well as a quarterly cash dividend of $0.35 per share, for a total amount of $29.9 million and $0.35 per share, or $7.7 million, during the three months ended July 31, 2023. Although the Company currently expects to continue to declare cash dividends in the future, the decision of whether to declare any future cash dividend, including the amount of any such dividend and the establishment of record and payment dates, will be determined, in each quarter, by the Board of Directors, in its sole discretion.

On November 23, 2021, the Board approved a share repurchase program under which the Company is authorized to purchase up to $50.0 million of its outstanding common stock through November 23, 2024, depending on market conditions, share price and other factors. Under the share repurchase program, the Company is permitted to purchase shares of its common stock from time to time through open market purchases, repurchase plans, block trades or otherwise. During the six months ended July 31, 2024, the Company repurchased a total of 39,000 shares of its common stock at a total cost of $1.1 million, or an average of $27.85 per share. At July 31, 2024, $16.8 million remains available for purchase under the Company's November 23, 2021 repurchase program. During the six months

ended July 31, 2023, the Company repurchased a total of 16,000 shares of its common stock at a total cost of $0.4 million, or an average of $27.04 per share.

Off-Balance Sheet Arrangements

The Company does not have off-balance sheet financing or unconsolidated special-purpose entities.

Accounting Changes and Recent Accounting Pronouncements

See Note 2- Recent Accounting Pronouncements to the accompanying unaudited Consolidated Financial Statements for a description of recent accounting pronouncements which may impact the Company’s Consolidated Financial Statements in future reporting periods.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Foreign Currency Exchange Rate Risk

The Company’s primary market risk exposure relates to foreign currency exchange risk (see Note 6 – Derivative Financial Instruments to the Consolidated Financial Statements). A significant portion of the Company’s purchases are denominated in Swiss Francs and, to a lesser extent, the Japanese Yen. The Company also sells to third-party customers in a variety of foreign currencies, most notably the Euro, Swiss Franc and the British Pound. The Company reduces its exposure to the Swiss Franc, Euro, British Pound, Chinese Yuan and Japanese Yen exchange rate risk through a hedging program. Under the hedging program, the Company manages most of its foreign currency exposures on a consolidated basis, which allows it to net certain exposures and take advantage of natural offsets. In the event these exposures do not offset, from time to time the Company uses various derivative financial instruments to further reduce the net exposures to currency fluctuations, predominately forward and option contracts. Certain of these contracts meet the requirements of qualified hedges. In these circumstances, the Company designates and documents these derivative instruments as a cash flow hedge of a specific underlying exposure, as well as the risk management objectives and strategies for undertaking the hedge transactions. Changes in the fair value of hedges designated and documented as a cash flow hedge and which are highly effective, are recorded in other comprehensive income until the underlying transaction affects earnings, and then are later reclassified into earnings in the same account as the hedged transaction. The earnings impact is mostly offset by the effects of currency movements on the underlying hedged transactions. To the extent that the Company does not engage in a hedging program, any change in the Swiss Franc, Euro, British Pound, Chinese Yuan and Japanese Yen exchange rates to local currency would have an equal effect on the Company’s earnings.

From time to time the Company uses forward exchange contracts, which do not meet the requirements of qualified hedges, to offset its exposure to certain foreign currency receivables and liabilities. These forward contracts are not designated as qualified hedges and, therefore, changes in the fair value of these derivatives are recognized in earnings in the period they arise, thereby offsetting the current earnings effect resulting from the revaluation of the related foreign currency receivables and liabilities.

As of July 31, 2024, the Company’s entire net forward contracts hedging portfolio consisted of 25.0 million Chinese Yuan equivalent, 22.0 million Swiss Francs equivalent, 30.0 million U.S. dollars equivalent, 35.9 million Euros equivalent (including 17.0 million Euros designated as cash flow hedges) and 2.7 million British Pounds equivalent with various expiry dates ranging through January 9, 2025, compared to a portfolio of 17.3 million Chinese Yuan equivalent, 20.0 million Swiss Francs equivalent, 20.7 million U.S. dollars equivalent, 29.8 million Euros equivalent (including 14.0 million Euros designated as cash flow hedges) and 2.0 million British Pounds equivalent with various expiry dates ranging through December 7, 2023, as of July 31, 2023. If the Company were to settle its Swiss Franc forward contracts at July 31, 2024, the result would be a $0.4 million gain. If the Company were to settle its Euro forward contracts at July 31, 2024, the result would be an immaterial gain. As of July 31, 2024, the Company’s British Pound, Chinese Yuan and US Dollar forward contracts had no gain or loss.

Commodity Risk

The Company considers its exposure to fluctuations in commodity prices to be primarily related to gold used in the manufacturing of the Company’s watches. Under its hedging program, the Company can purchase various commodity derivative instruments, primarily futures contracts. When held, these derivatives are documented as qualified cash flow hedges, and the resulting gains and losses on these derivative instruments are first reflected in other comprehensive income, and later reclassified into earnings, partially offset by the effects of gold market price changes on the underlying actual gold purchases. The Company did not hold any future contracts in its gold hedge portfolio as of July 31, 2024 and 2023; thus, any changes in the gold purchase price will have an equal effect on the Company’s cost of sales.

Debt and Interest Rate Risk

Floating rate debt at July 31, 2024 and 2023 was zero for both periods. During the six months ended July 31, 2024, the Company had no weighted average borrowings. The Company does not hedge these interest rate risks.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company’s disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives. However, it should be noted that a control system, no matter how well conceived or operated, can only provide reasonable, not absolute, assurance that its objectives will be met and may not prevent all errors or instances of fraud.

The Company, under the supervision and with the participation of its management, including the Chief Executive Officer and the Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures, as such terms are defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective at a reasonable assurance level as of the end of the period covered by this report.

Changes in Internal Control Over Financial Reporting

There have been no changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during the three months ended July 31, 2024, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

In addition to the above matters, the Company is involved in other legal proceedings and contingencies, the resolution of which is not expected to materially affect its financial condition, future results of operations, or cash flows.

Item 1A. Risk Factors

As of July 31, 2024, there have been no material changes to any of the risk factors previously reported in the Company’s 2024 Annual Report on Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

On November 23, 2021, the Board approved a share repurchase program under which the Company is authorized to purchase up to $50.0 million of its outstanding common stock from time to time through November 23, 2024, depending on market conditions, share price and other factors. Under the share repurchase program, the Company is permitted to purchase shares of its common stock through open market purchases, repurchase plans, block trades or otherwise. During the three months ended July 31, 2024, the Company did not repurchase any shares of its common stock.

At the election of an employee, upon the vesting of a stock award or the exercise of a stock option, shares of common stock having an aggregate value on the vesting of the award or the exercise date of the option, as the case may be, equal to the employee’s withholding tax obligation may be surrendered to the Company by netting them from the vested shares issued. Similarly, shares having an aggregate value equal to the exercise price of an option may be tendered to the Company in payment of the option exercise price and netted from the shares of common stock issued upon the option exercise. An aggregate of 3,380 shares were repurchased during the three months ended July 31, 2024 as a result of the surrender of shares of common stock in connection with the vesting of restricted stock awards or stock options.

The following table summarizes information about the Company’s purchases for the three months ended July 31, 2024 of equity securities that are registered by the Company pursuant to Section 12 of the Securities Exchange Act of 1934, as amended:

Issuer Repurchase of Equity Securities


Period	Total Number of Shares Purchased		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Amount that May Yet Be Purchased Under the Plans or Programs
May 1, 2024 – May 31, 2024		—	$	—		—	$	16,786,673
June 1, 2024 – June 30, 2024		—		—		—		16,786,673
July 1, 2024 – July 31, 2024		3,380		25.21		—		16,786,673
Total		3,380	$	25.21		—	$	16,786,673

Item 5. Other Information

During the quarterly period ended July 31, 2024, none of the Company's directors or officers informed the Company of the adoption, modification or termination of a "Rule 10b5-1 trading arrangement" or a "non-Rule 10b5-1 trading arrangement", as those terms are defined in Item 408 of Regulation S-K.

Item 6. Exhibits



10.1		Sixth Amendment, dated as of May 15, 2024, to the Corporate Credit Agreement.***

31.1		Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.***

31.2		Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.***

32.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.***

32.2		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.***

101		The following financial information from Movado Group, Inc.’s Quarterly Report on Form 10-Q for the quarter ended July 31, 2024 filed with the SEC, formatted in Inline Extensible Business Reporting Language (iXBRL): (i) the Consolidated Balance Sheets; (ii) the Consolidated Statements of Operations; (iii) the Consolidated Statements of Comprehensive Income; (iv) the Consolidated Statements of Cash Flows; and (v) the Notes to the Consolidated Financial Statements. XBRL Instance Document – the XBRL Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL Document.

104		Cover Page Interactive Data File, formatted in Inline Extensible Business Reporting Language (iXBRL).

*** Filed herewith

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		MOVADO GROUP, INC.

Dated: September 5, 2024	By:	/s/ Linda Feeney
		Linda Feeney Senior Vice President, Principal Accounting Officer (duly authorized signatory and principal accounting officer)

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