The stores, scheduled to close by June 30, include New Jersey locations at the Pier Shop at Caesars in Atlantic City, the Shops at Riverside in Hackensack and the Mall at Short Hills. The company will continue to operate its flagship at Rockefeller Center in New York as well as its 31 outlet stores. The company said it doesn't intend to run any store closing or liquidation sales, a move to protect its brand name.
The move is one that Movado is taking to improve its overall profitability, redirecting investment toward what it believes are higher-return businesses. The company said it expects to increase its market share by expanding relationships with existing wholesaler customers and by enhancing its relationships with independent retailers.
Though shifting its focus to a wholesale model, Movado Retail Group will continue to sell all of the company's watch brands directly to consumers through its 31 outlet stores. It will also keep the Movado boutique located in New York City's Rockefeller Center open as a flagship store.
Movado Group president and COO Rick Cote said the decision to close the retail boutique division came after several years of unprofitability and a strategic review of the business. In fact, the retail division was losing an average of $10 million a year and was expected to lose $7 million in fiscal 2011, he said, adding that the stores, which average 2,200 square feet, are too big to be profitable in the current economic environment.
The company said it anticipates that closing the retail boutique division will lower annual revenues by approximately $30 million, but will immediately improve profitability for the 2011 fiscal year on an adjusted basis. In addition, Movado said it believes the move will have a favorable impact on the multi-year profitability and cash flow plan that it expects to present later this year.
As for Movado Group's first quarter results, the company revealed that adjusted net loss for the period ended April 30, 2010, was $4.8 million, or $0.19 per diluted share. Top-line growth for the quarter was reported at 25%, excluding sales of excess discontinued product for the previous year. Net sales for the quarter increased 16.7% to $78.9 million, primarily driven by an increase in consumer demand and a return to normalized buying and inventory replenishment patterns among retailers, the company said. Movado reported gross profits of $44.2 million, or 56% of sales for the quarter, while operating expenses increased $5.5 million, or 11.4%.
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