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Movado Q4 results in line with revised expectations

Apr '10
Movado Group Inc announced results for the fourth quarter and fiscal year ended January 31, 2010.

Efraim Grinberg, Chairman and Chief Executive Officer, stated, "Our results for the fourth quarter and fiscal 2010 were in line with our revised expectations. Although we recorded charges related to challenges within the U.S. jewelry market and the proactive steps we took to manage our business within this environment, we were able to significantly strengthen our financial position this year. For fiscal 2011, we are focused on addressing both the challenges and opportunities we see in the current marketplace. We are substantially increasing investments in our brands to elevate our connection with consumers and drive the top-line growth that will enable us to achieve our long-term profitability objectives. We are confident in our ability to leverage the Company's strong assets, including iconic brands, talented people and a solid balance sheet, and maximize our performance over time."

Fourth Quarter Fiscal 2010

Adjusted net loss in the fourth quarter of fiscal 2010 was $7.0 million, or $0.28 per diluted share, compared to an adjusted net loss of $8.8 million, or $0.36 per diluted share, in fiscal 2009. On a GAAP basis, fourth quarter 2010 net loss was $23.6 million, or $0.96 per diluted share, which includes the following items: (i) a pre-tax, non-cash reserve of $8.8 million, or $0.28 per diluted share, primarily related to excess non-core component inventory; (ii) a pre-tax, non-cash impairment charge of $7.6 million, or $0.29 per diluted share, primarily related to the write down of certain assets of the Company's Movado boutiques and, to a lesser extent, tradeshow booths for the Basel Fair; and (iii) a tax provision that includes a non-cash deferred tax expense of $11.1 million, or $0.45 per diluted share, related to a valuation allowance on net deferred tax assets, partially offset by a cash income tax benefit of $8.0 million, or $0.32 per diluted share, attributable to the recent U.S. tax law changes increasing the net operating loss carry back period to five years. This compares to a net loss of $22.8 million, or $0.93 per diluted share in the fourth quarter of fiscal 2009, which included one-time items totaling $14.0 million, or $0.57 per diluted share.

Net sales in the fourth quarter of fiscal 2010 decreased 1.9% to $92.2 million compared to $94.0 million in the fourth quarter of fiscal 2009. The decline was primarily the result of the challenging macroeconomic environment and the Company's proactive sales management in light of industry liquidation and credit risks.

Gross profit in the fourth quarter of fiscal 2010 was $36.8 million, or 40.0% of sales compared to $52.0 million, or 55.3% last year. Excluding the impact of the sale of excess discontinued product and the reserve for excess non-core component inventory, gross profit as a percent of sales was 49.3%.

Operating expenses decreased by $10.1 million, or 13.3%, to $65.9 million versus $76.0 million in the same period last year, primarily as a result of the Company's cost reduction plan.

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