By Ian Salisbury
It isn't easy to find companies that deliver both dividends and earnings growth. Watchmaker Movado Group is doing it -- hiking its dividend to reach a 4.75% yield, while boosting its bottom line.
Unlike most other luxury brands, Movado is on a roll. The stock spiked 12% on Wednesday after the Swiss watchmaker reported adjusted operating earnings of 32 cents a share in the first quarter, up from eight cents a year earlier. Revenue rose 4.5% to $142 million on a constant currency basis, up from $132 million.
Movado is also delivering dividend growth. The company increased its quarterly dividend by five cents to 40 cents a share, giving it 4.75% yield at recent prices around $33.50. Movado generated $2.43 cents a share in free cash flow last year, easily enough to accommodate the new $1.60 annualized dividend.
Investors have noticed. Shares are up 63% this year, making the stock a breakout hit among luxury peers. Richemont is down 3.4% this year. LVMH Moët Hennessy is off 25%. Swatch, which recently had a hit with its Audemars Piguet collaboration, is an exception with shares up about 21%.
Several things are going right for Movado.
Along with its namesake brand, the watchmaker is known for midtier luxury brands like Ebel and Concord. The company, which is U.S.-based and listed on the New York Stock Exchange, also generates sales from selling watches under licensed brands such as Calvin Klein, Coach and Lacoste, a business that accounts for the bulk of revenue.
The Middle East proved "extremely challenging" during the first quarter, CEO Efraim Grinberg told analysts on Wednesday. But Movado offset that by delivering double-digit sales increases at company-owned stores and Movado.com. Its licensed brands division also saw growth, with sales up 6.5% year over year, excluding the Middle East, according to Grinberg.
One advantage for Movado is that it doesn't just play in the high-end market. Its licensed brands and relatively lower price points helped it generate 42% of sales in the U.S., one of the healthier global markets as wealthy Americans continue to spend. By contrast, only about 25% of Richemont sales are U.S.-based with more than 50% coming from Asia and the Middle East.
Wall Street doesn't seem to pay much attention to Movado. FactSet lists just two analysts who follow the stock. They forecast 15% to 19% profit growth over the next two years, on average.
The company is now reaping the fruits of its decision to increase ad and marketing spending several years ago, says Hamed Khorsand of Beating Wall Street. That investment cut into earnings per share and pressured the stock. But after a strong holiday season, Movado has now logged two strong quarters in a row.
Celebrity endorsements and tie-ins are helping, too. Khorsand cites the strength of Movado's BOLD watch line, endorsed by musician Ludacris and actress Jessica Alba, and a line of jewelry that Movado recently produced for Lacoste.
Shares aren't cheap anymore, trading at 20 times forward earnings, according to FactSet, up from 16 earlier this year. Still, that's below the S&P 500's average of 21, and well below Swatch, which trades at 47 times, and Richemont, at 26 times.
Khorsand's $31.50 price target, set in March, was eclipsed by Wednesday's rally. But he rates the stock a Buy and says he hasn't changed his mind.
"It's coming together for them," he says. "They are a growth story."
Write to Ian Salisbury at ian.salisbury@barrons.com
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(END) Dow Jones Newswires
May 29, 2026 21:30 ET (01:30 GMT)
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