Movado's Profit Dips Amid Sales Restatement Fallout

TL;DR

**Movado's restatement and SEC inquiry make it a risky bet, despite a slight sales bump; steer clear until internal controls are proven solid.**

AI Summary

Movado Group Inc. reported a net income attributable to Movado Group, Inc. of $2.986 million for the three months ended July 31, 2025, a decrease of 13.9% from $3.469 million in the prior year. For the six months ended July 31, 2025, net income attributable to Movado Group, Inc. was $4.406 million, down 19.7% from $5.484 million in the same period last year. Net sales increased slightly to $161.829 million for the three months ended July 31, 2025, up from $157.000 million in the prior year, and to $293.598 million for the six months, up from $291.379 million. Gross profit for the three months increased to $87.565 million from $85.252 million, while selling, general and administrative expenses rose to $83.558 million from $82.610 million. The company's balance sheet shows total current assets of $516.191 million as of July 31, 2025, an increase from $489.941 million at January 31, 2025, primarily driven by a significant increase in inventories to $211.504 million from $156.738 million. Cash and cash equivalents decreased to $180.493 million from $208.501 million over the same period. A significant development is the restatement of prior financial statements due to misconduct in the Dubai branch, which led to an overstatement of sales and premature revenue recognition, impacting fiscal years ended January 31, 2024 and 2023, and interim periods within fiscal years 2025 and 2024. The SEC has requested documents related to this restatement.

Why It Matters

Movado's restatement of past financials due to misconduct in its Dubai branch, involving falsified documents and premature revenue recognition, signals significant internal control weaknesses. This could erode investor confidence and lead to further regulatory scrutiny from the SEC, which has already requested documents. For employees, it highlights potential ethical lapses and the need for stronger oversight. Customers in the Affected Region might question the transparency of past transactions. In a competitive luxury watch market, such reputational damage could be particularly detrimental, potentially impacting future sales and market share against rivals.

Risk Assessment

Risk Level: high — The risk level is high due to the restatement of financial statements for multiple periods (fiscal years ended January 31, 2024 and 2023, and interim periods within fiscal years 2025 and 2024) caused by misconduct in the Dubai branch, including falsification of documents and premature revenue recognition. This indicates severe internal control deficiencies. Furthermore, the SEC's voluntary request for documents and information on April 28, 2025, signals ongoing regulatory investigation, which could lead to penalties or further reputational damage.

Analyst Insight

Investors should exercise extreme caution and consider holding off on new investments in MOVAA until the SEC investigation concludes and the company demonstrates robust remediation of its internal control weaknesses. Existing investors should closely monitor further disclosures regarding the SEC inquiry and any potential financial penalties or operational impacts.

Financial Highlights

revenue

$161.829M

total Assets

$748.719M

net Income

$2.986M

gross Margin

54.1%

cash Position

$180.493M

revenue Growth

+3.1%

Key Numbers

• $161.829M — Net sales (3 months) (Increased from $157.000M in prior year)
• $2.986M — Net income attributable to Movado Group, Inc. (3 months) (Decreased 13.9% from $3.469M in prior year)
• $4.406M — Net income attributable to Movado Group, Inc. (6 months) (Decreased 19.7% from $5.484M in prior year)
• $211.504M — Inventories (Increased significantly from $156.738M at January 31, 2025)
• $180.493M — Cash and cash equivalents (Decreased from $208.501M at January 31, 2025)
• $23.075M — Trade receivables adjustment (July 31, 2024) (Reduction due to restatement)
• $12.036M — Retained earnings adjustment (July 31, 2024) (Reduction due to restatement)
• 5 years — Duration of misconduct (Beginning with fiscal year ended January 31, 2021)

Key Players & Entities

• MOVADO GROUP, INC. (company) — Registrant of the 10-Q filing
• MGI Luxury Group Srl (company) — Swiss subsidiary of Movado Group Inc. with a Dubai branch
• Securities and Exchange Commission (regulator) — Requested documents and information regarding the restatement
• Dubai branch (company) — Location of misconduct leading to financial restatement
• former managing director (person) — Individual terminated for misconduct in the Dubai branch
• $2.986 million (dollar_amount) — Net income attributable to Movado Group, Inc. for three months ended July 31, 2025
• $3.469 million (dollar_amount) — Net income attributable to Movado Group, Inc. for three months ended July 31, 2024 (restated)
• $4.406 million (dollar_amount) — Net income attributable to Movado Group, Inc. for six months ended July 31, 2025
• $5.484 million (dollar_amount) — Net income attributable to Movado Group, Inc. for six months ended July 31, 2024 (restated)
• $211.504 million (dollar_amount) — Inventories as of July 31, 2025

FAQ

Risk Factors

• Misconduct in Dubai Branch [high — operational]: Misconduct in the Dubai branch led to an overstatement of sales and premature revenue recognition over approximately five years, starting from the fiscal year ended January 31, 2021. This involved falsified documents and the use of a third-party warehouse to circumvent controls, impacting sales to customers in the Middle East, India & Asia Pacific region.
• SEC Investigation [high — legal]: The Securities and Exchange Commission (SEC) has requested documents related to the restatement of financial statements due to misconduct in the Dubai branch. This indicates potential regulatory scrutiny and legal proceedings.
• Inventory Buildup [medium — financial]: Inventories increased significantly to $211.504 million as of July 31, 2025, from $156.738 million at January 31, 2025. This substantial increase may indicate slower sales or potential obsolescence risks.
• Declining Net Income [medium — financial]: Net income attributable to Movado Group, Inc. decreased by 13.9% to $2.986 million for the three months ended July 31, 2025, and by 19.7% to $4.406 million for the six months ended July 31, 2025, compared to the prior year periods.
• Decreasing Cash Reserves [medium — financial]: Cash and cash equivalents decreased to $180.493 million as of July 31, 2025, from $208.501 million at January 31, 2025. This reduction in liquidity could impact operational flexibility.

Industry Context

The luxury watch market is highly competitive, with established brands and new entrants vying for market share. Trends include a growing demand for smartwatches, a focus on sustainability, and the increasing importance of e-commerce channels. Companies must balance traditional craftsmanship with technological innovation and adapt to evolving consumer preferences.

Regulatory Implications

The restatement of financial statements and the SEC's request for documents highlight significant regulatory risks. Movado Group must ensure robust internal controls and compliance with accounting standards to avoid further penalties and maintain investor confidence.

What Investors Should Do

1. Monitor SEC investigation and any potential penalties.
2. Analyze the impact of increased inventory on future sales and margins.
3. Evaluate the company's strategy to address declining net income.
4. Assess the long-term implications of the Dubai branch misconduct.

Key Dates

• 2025-07-31: End of Q2 Fiscal Year 2025 — Reporting period for the latest 10-Q, showing decreased net income and increased inventory.
• 2025-01-31: End of Fiscal Year 2025 — Balance sheet date for comparison, showing a significant increase in inventory and decrease in cash from this point.
• 2025-01: Company became aware of misconduct allegations in Dubai branch — Triggered internal investigation and subsequent restatement of financial statements.
• 2021-01-31: Start of Fiscal Year 2021 — Beginning of the period during which misconduct in the Dubai branch occurred.

Glossary

Restatement of Previously Issued Consolidated Financial Statements

The process of correcting errors in previously issued financial statements to ensure they comply with accounting principles. (Movado Group is undergoing this due to misconduct in its Dubai branch, impacting reported sales and revenue recognition.)

Premature Recognition of Sales

Recording sales revenue before it is earned according to accounting rules, often before goods are delivered or services are rendered. (This was one of the fraudulent activities identified in the Dubai branch, leading to an overstatement of revenue.)

Accumulated Other Comprehensive Income

A component of equity that includes unrealized gains and losses on certain investments and foreign currency translations that are not included in net income. (This account shows a significant increase from $79.981 million to $99.499 million, indicating potential foreign currency gains or unrealized investment gains.)

Treasury Stock

Shares of a company's own stock that it has repurchased from the open market. (Movado Group holds a substantial amount of treasury stock, which reduces total shareholders' equity.)

Year-Over-Year Comparison

Compared to the prior year's comparable periods, Movado Group reported a slight increase in net sales for both the three-month ($161.829M vs $157.000M) and six-month ($293.598M vs $291.379M) periods ended July 31, 2025. However, net income attributable to the company saw a notable decline, down 13.9% for the quarter and 19.7% for the half-year. A significant risk factor has emerged due to the restatement of prior financial statements stemming from misconduct in the Dubai branch, which has also triggered an SEC inquiry. Additionally, the company's balance sheet shows a substantial increase in inventories and a decrease in cash and cash equivalents compared to the fiscal year-end.

Key Financial Figures

• $0.01 — ch registered Common Stock, par value $0.01 per share MOV New York Stock Exchan

Filing Documents

• mov-20250731.htm (10-Q) — 4140KB
• mov-ex31_1.htm (EX-31.1) — 18KB
• mov-ex31_2.htm (EX-31.2) — 19KB
• mov-ex32_1.htm (EX-32.1) — 8KB
• mov-ex32_2.htm (EX-32.2) — 8KB
• 0001193125-25-190723.txt ( ) — 20915KB
• mov-20250731.xsd (EX-101.SCH) — 1587KB
• mov-20250731_htm.xml (XML) — 6294KB

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements 7 Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 27 Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures About Market Risk 37 Item 4.

Controls and Procedures

Controls and Procedures 38 Part II Other Information Item 1.

Legal Proceedings

Legal Proceedings 39 Item 1A.

Risk Factors

Risk Factors 39 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 39 Item 5. Other Information 40 Item 6. Exhibits 41 Signature 42

– FINANCIAL INFORMATION

PART I – FINANCIAL INFORMATION

Financial Statements

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, 2025 2025 2024 (As Restated) ASSETS Current assets: Cash and cash equivalents $ 180,493 $ 208,501 $ 198,251 Trade receivables, net 94,397 93,382 86,709 Inventories 211,504 156,738 183,160 Other current assets 22,949 21,786 26,421 Income taxes receivable 6,848 9,534 12,691 Total current assets 516,191 489,941 507,232 Property, plant and equipment, net 19,196 19,920 20,315 Operating lease right-of-use assets 77,130 86,009 85,350 Deferred and non-current income taxes 43,129 41,330 42,685 Other intangibles, net 4,930 5,537 6,645 Other non-current assets 88,143 86,494 80,253 Total assets $ 748,719 $ 729,231 $ 742,480 LIABILITIES AND EQUITY Current liabilities: Accounts payable $ 35,347 $ 34,312 $ 36,769 Accrued liabilities 63,766 42,610 44,574 Accrued payroll and benefits 11,426 7,840 8,153 Current operating lease liabilities 19,871 19,263 18,352 Income taxes payable 1,014 8,935 6,542 Total current liabilities 131,424 112,960 114,390 Deferred and non-current income taxes payable 933 1,008 1,028 Non-current operating lease liabilities 67,908 75,508 76,314 Other non-current liabilities 56,219 56,176 56,336 Total liabilities 256,484 245,652 248,068 Commitments and contingencies (Note 9) 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; 29,299,027 , 29,178,287 and 29,169,952 shares issued, respectively 293 292 292 Class A Common Stock, $ 0.01 par value, 30,000,000 shares authorized; 6,455,602 , 6,458,376 and 6,458,376 shares issued, respectively 64 64 64

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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, 2025 (the "2025 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, 2025 is derived from the audited annual financial statements, which are included in the Company's 2025 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 1A – RESTATEMENT OF PREVIOUSLY ISSUED CONSOLIDATED FINANCIAL STATEMENTS In late January 2025, the Company became aware of allegations of misconduct within the Dubai branch (the "Dubai Branch") of the Company's Swiss subsidiary, MGI Luxury Group Srl, related to sales to certain customers in the Middle East, Indi

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