IDEX Online Research: Movado Group Poised for Strong Growth

The following is a summary of each of Movado’s watch brands’ performance in 2005 and the outlook for 2006 and beyond.

• Movado – Retail prices $550-$2,995 – Movado brand watches showed a solid single digit sales gain in 2005, a trend that is expected to continue during 2006. This brand, which has been around since 1881, is the core of Movado Group’s product line.
• Ebel – Retail prices $1,400-$17,800 – Movado acquired Ebel in 2004; it had been losing money for its prior owner for several years. In 2005, Ebel sales were up 40 percent, and this brand posted a profit. The gross margin generated by the Ebel brand is above the company average. Movado plans to continue to revitalize this business and expand distribution in all markets including the U.S., Europe, the Middle East, and Asia.
• Concord – Retail prices $1,690-$14,900 – Concord was acquired more than 35 years ago, when Movado was still known as North American Watch Company (and prior to its acquisition of the Movado brand in 1983). Concord had a disappointing year in 2005. Concord suffered particularly in the Middle East, but sales in Japan strengthened. Despite weak sales (down high single digit), Concord was profitable last year. Movado’s goal is to re-engineer this brand over the next two-three years and restore it to health.
• ESQ – Retail prices $150-$395 – ESQ is the leading entry level Swiss watch brand in the U.S. It posted strong double digit sales gains in 2005. As a result of its popularity with U.S. consumers, Movado has accelerated its growth plan for ESQ: management plans to double this division’s revenues over the next few years. ESQ represents affordable luxury for the masses.
• Licensed Brands – Movado’s licensed brands – Coach, Hugo Boss, and Tommy Hilfiger – posted an aggregate sales gain of 21 percent in 2005. Most of these brands are still immature, and sales gains are expected to be well-above average for the foreseeable future. Movado management needs to be able to generate $20 million annually in revenues from its licensed brands in the early years, with mature brands producing at least $40-50 million annually. Management said that its current portfolio of licensed brands is "well-rounded;" it is not looking for new licenses currently.
  • Coach – Retail prices $228-$498 – Coach watches are an extension of the Coach leather goods brand and are distinctively American. The Coach brand posted high single-digit growth in 2005. The company will continue to expand distribution of this highly successful licensed watch brand in 2006.
  • Tommy Hilfiger – Retail prices $65-$125 – Tommy Hilfiger watches reflect the "fresh, fun all-American" look that comes with this brand name. Hilfiger watches posted a double digit sales gain in 2005, a trend we expect to continue in 2006.
  • Hugo Boss – Retail prices $195-695 – Hugo Boss is a global market leader in the world of fashion. Hugo Boss watches were introduced by Movado in early 2005, and have been in the line for just one year. While Movado began introducing Hugo Boss watches to the trade in 2005, its major introductions came during Baselworld 2006. Trade demand was very strong for those new introductions. Hugo Boss will be in 400-500 doors, mostly in Europe and Asia. Hugo Boss operates its own retail stores; it will carry Movado-produced Hugo Boss watches.
  • Juicy Couture and Couture Couture – In November 2005, Movado entered into an exclusive worldwide license agreement to design, produce, and market a collection of watches under the Juicy Couture and Couture Couture brand names. These watches will be produced in rich colors with exotic skins, jewelry elements, and distinctive shapes. Juicy Couture watches are slated to launch in the fall of 2006, and will be sold through select high-end retailers initially in the U.S., followed by Europe and Asia. Distribution will be highly limited. Juicy Couture is just starting to open its own stores; Movado-produced Juicy Couture watches will be in those stores. Juicy Couture merchandise targets fashion-conscious women between the ages of 18 and 45; it is owned by Liz Claiborne.
  • Lacoste – In late March 2006, the company entered into an exclusive worldwide license agreement to design, produce, market, and distribute Lacoste watches. All of these watches will be sold under the Lacoste name and will feature the distinctive Lacoste alligator logo. Distribution will begin in the first half of 2007 and will be limited to selected retailers. Lacoste retail stores will begin carrying Movado-produced Lacoste watches in 2007.

Movado Retail Stores
Movado operates two retail concepts – Movado Boutiques and Movado Outlets. These 55 stores generated $85.6 million in sales during 2005, making this chain the about 17th largest in the U.S., based on revenues. Despite strong growth, revenues from Movado retail have remained at about 18 percent of total corporate revenues for the past several years.

Source: Company Reports

• Movado Boutiques – There are 27 Movado Boutiques in upscale regional shopping centers and metropolitan areas. These stores reinforce the luxury image of the Movado brand and are a primary strategic focus of the company. These stores sell selected models of Movado watches as well as proprietary Movado-branded jewelry, tabletop and accessories and other product line extensions. The modern store design creates a distinctive environment for their upscale product line.