MOVADO GROUP INC (MOV)

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

RESTATEMENT OF PREVIOUSLY ISSUED CONSOLIDATED FINANCIAL STATEMENTS

The Company has restated our previously issued Consolidated Financial Statements contained in this Annual Report on Form 10-K. Refer to the "Explanatory Note" preceding Item 1, Business, for background on the restatement, the fiscal periods impacted, control considerations and other information.

In addition, we have restated certain previously reported financial information at January 31, 2024 and for the fiscal years ended January 31, 2024 and January 31, 2023 in this Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, including but not limited to information within the Results of Operations and Liquidity and Capital Resources.

See Note 1A - Restatement of Previously Issued Consolidated Financial Statements, in Item 8, Financial Statements and Supplementary Data, for additional information related to the restatement, including descriptions of the misstatements and the impacts on our Consolidated Financial Statements.

GENERAL

Net Sales

The Company operates and manages its business in two principal business segments: Watch and Accessory Brands and Company Stores. The Company also operates in two geographic locations: United States and International.

The Company divides its watch and accessory business into two principal categories: the owned brands category and the licensed brands category. The owned brands category consists of the Movado®, Concord®, EBEL®, Olivia Burton® and MVMT® brands. Products in the licensed brands category include the following brands manufactured and distributed under license agreements with the respective brand owners: Coach®, Tommy Hilfiger®, Hugo Boss®, Lacoste® and Calvin Klein®.

The primary factors that influence annual sales are general economic conditions in the Company’s U.S. and international markets, new product introductions, the level and effectiveness of advertising and marketing expenditures and product pricing decisions.

57.4% of the Company’s total sales are from international markets (see Note 19 to the Consolidated Financial Statements), and therefore reported sales made in those markets are affected by foreign exchange rates. The Company’s international sales are primarily billed in local currencies (predominantly Euros, British Pounds and Swiss Francs) and translated to U.S. dollars at average exchange rates for financial reporting purposes. The Company reduces its exposure to exchange rate risk through a hedging program.

The Company divides its business into two major geographic locations: United States operations, and International, which includes the results of all other non-U.S. Company operations. The allocation of geographic revenue is based upon the location of the customer. The Company’s International operations in Europe, the Americas (excluding the United States), Asia and the Middle East account for 31.0%, 9.9%, 8.9% and 7.6%, respectively, of the Company’s total net sales for fiscal 2025. A vast majority of the Company’s tangible International assets are owned by the Company’s Swiss and Hong Kong subsidiaries.

The Company’s business is seasonal. There are two major selling seasons in the Company’s markets: the spring season, which includes school graduations and several holidays and, most importantly, the Christmas and holiday season. Major selling seasons in certain international markets center on significant local holidays that occur in late winter or early spring. The Company’s net sales historically have been higher during the second half of the fiscal year. The second half of each fiscal year accounted for 55.4% and 54.2% of the Company’s net sales for the fiscal years ended January 31, 2025 and 2024, respectively.

The Company’s retail operations consist of 52 retail outlet locations in the United States and four locations in Canada.

The significant factors that influence annual sales volumes in the Company’s retail operations are similar to those that influence U.S. wholesale sales. In addition, most of the Company’s retail outlet locations are near vacation destinations and, therefore, the seasonality of these stores is driven by the peak tourist seasons associated with these locations.

Gross Margins

The Company’s overall gross margins are primarily affected by four major factors: channel and product sales mix, product pricing strategy, manufacturing costs and fluctuation in foreign currency exchange rates, in particular the relationship between the U.S. dollar and the Swiss Franc, British Pound and the Euro. Gross margins for the Company may not be comparable to those of other companies, since some companies include all the costs related to their distribution networks in cost of sales whereas the Company does not include

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the costs associated with its warehousing and distribution facilities nor the occupancy costs for the Company Stores segment in the cost of sales line item. Those costs are included in selling, general and administrative expenses.

Gross margins vary among the brands included in the Company’s portfolio and also among watch models within each brand. Watches in the Company’s owned brands category generally earn higher gross margin percentages than watches in the licensed brands category. The difference in gross margin percentages within the licensed brands category is primarily due to the impact of royalty payments made on the licensed brands. Gross margins in the Company’s e-commerce business generally earn higher gross margin percentages than those of the traditional wholesale business. Gross margins in the Company’s outlet business are affected by the mix of product sold and may exceed those of the wholesale business since the Company earns margins on its outlet store sales from manufacture to point of sale to the consumer.

All of the Company’s brands compete with a number of other brands not only on styling but also on wholesale and retail price. The Company’s ability to improve margins through price increases is therefore, to some extent, constrained by competitors’ actions.

Cost of sales of the Company’s products consists primarily of costs for raw materials, component costs, royalties, depreciation, amortization, assembly costs, shipping to customers, import duties, design costs and unit overhead costs associated with the Company’s supply chain operations predominately in Switzerland and Asia. The Company’s supply chain operations consist of logistics management of assembly operations and product sourcing predominately in Switzerland and Asia and minor assembly in Switzerland. Through productivity improvement efforts, the Company has controlled the level of overhead costs and maintained flexibility in its cost structure by outsourcing a significant portion of its component and assembly requirements.

Since a significant amount of the Company’s product costs are incurred in Swiss Francs, fluctuations in the U.S. dollar/Swiss Franc exchange rate can impact the Company’s cost of goods sold and, therefore, its gross margins. The Company reduces its exposure to the Swiss Franc exchange rate risk through a hedging program. Under the hedging program, the Company manages most of its foreign currency exposures on a consolidated basis, which allows it to net certain exposures and take advantage of natural offsets. In the event these exposures do not offset, the Company has the ability to hedge its Swiss Franc purchases using a combination of forward contracts and purchased currency options. The Company’s hedging program mitigated the impact of the exchange rate fluctuations on product costs and gross margins for fiscal years 2025 and 2024.

Selling, General and Administrative (“SG&A”) Expenses

The Company’s SG&A expenses consist primarily of marketing, selling, distribution, general and administrative expenses.

Marketing expenditures are based principally on overall strategic considerations relative to maintaining or increasing market share in markets that management considers to be crucial to the Company’s continued success as well as on general economic conditions in the various markets around the world in which the Company sells its products. Marketing expenses include salaries, various forms of media advertising, digital advertising (including social media), customer acquisition costs and co-operative advertising with customers and distributors and other point of sale marketing and promotional spending.

Selling expenses consist primarily of salaries, sales commissions, sales force travel and related expenses, credit card fees, depreciation and amortization, expenses associated with the Company’s customer conferences and industry trade shows and operating costs incurred in connection with the Company’s retail business. Sales commissions vary with overall sales levels. Retail selling expenses consist primarily of payroll related and store occupancy costs.

Distribution expenses consist primarily of costs of running distribution centers and customer service and include salaries, rental and other occupancy costs, security, depreciation and amortization of furniture and leasehold improvements and shipping supplies.

General and administrative expenses consist primarily of salaries and other employee compensation including performance-based compensation, employee benefit plan costs, office rent, management information systems costs, professional fees, bad debts, depreciation and amortization of furniture, computer software, leasehold improvements, amortization of finite lived intangible assets, patent and trademark expenses and various other general corporate expenses.

Other Non-Operating Income, net

Other non-operating income, net consist primarily of interest income and the non-service components of the Company's Swiss pension plan. In addition, for the fiscal year ended January 31, 2024, the Company recorded an impairment related to an equity investment in a consumer products company that sold its business and assets in which the Company expects to receive little or no return on its investment.

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Interest Expense

To the extent it borrows, the Company records interest expense on its revolving credit facility. Additionally, interest expense includes the amortization of deferred financing costs, and unused commitment fees associated with the Company’s revolving credit facility.

Income Taxes

The Company follows the asset and liability method of accounting for income taxes as prescribed under the Accounting Standards Codification guidance for Income Taxes (“ASC Topic 740”). ASC Topic 740 requires the Company to recognize deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts and tax bases of existing assets and liabilities.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The Company’s Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States and those significant policies are more fully described in Note 1 to the Company’s Consolidated Financial Statements. The preparation of these financial statements and the application of certain critical accounting policies require management to make judgments based on estimates and assumptions that affect the information reported. On an on-going basis, management evaluates its estimates and judgments, including those related to sales discounts and markdowns, product returns, bad debt, inventories, income taxes, warranty obligations, useful lives of property, plant and equipment, impairments of long-lived assets, stock-based compensation and contingencies and litigation. Management bases its estimates and judgments about the carrying values of assets and liabilities that are not readily apparent from other sources on historical experience, contractual commitments and on various other factors that are believed to be reasonable under the circumstances. Actual results could differ from these estimates. Management believes the following are the critical accounting policies requiring significant judgments and estimates used in the preparation of its Consolidated Financial Statements.

Revenue Recognition

In the wholesale channel, revenue is recognized and recorded when a contract is in place, obligations under the terms of a contract with the customer are satisfied and control is transferred to the customer. Such revenue is measured as the ultimate amount of consideration the Company expects to receive in exchange for transferring goods including variable consideration. The Company has determined that transfer of control passes to the wholesale customer upon shipment or upon receipt depending on the agreement with the customer and shipping terms. Control passes to outlet store customers at the time of sale and to substantially all e-commerce customers upon shipment. Factors considered in the transfer of control include the right to payment, transfer of legal title, physical possession and customer acceptance of the goods and whether the significant risks and rewards for the goods belong with the customer. The Company records estimates of variable consideration, which includes sales returns, markdowns, volume-based programs and sales and cash discount allowances as a reduction of revenue in the same period that the sales are recorded. These estimates are based upon the expected value method considering all reasonably available information including historical analysis, customer agreements and/or currently known factors that arise in the normal course of business. Returns, discounts and allowances have historically been within the Company’s expectations and the provisions established. The future provisional rates may differ from those experienced in the past. Taxes imposed by governmental authorities on the Company's revenue-producing activities with customers, such as sales taxes and value added taxes, are excluded from net sales.

Intangibles

Intangible assets consist primarily of trade names, customer relationships and trademarks. In accordance with applicable guidance, the Company estimates and records the fair value of purchased intangible assets at the time of their acquisition. The fair values of these intangible assets are estimated at the time of acquisition based on independent third-party appraisals. Finite-lived intangible assets are amortized over their respective estimated useful lives, which range from three to ten years, and are evaluated for impairment whenever events or changes in circumstances indicate that their related carrying values may not be fully recoverable. The Company determined that there was no impairment in fiscal 2025, fiscal 2024 or in fiscal 2023.

Inventories

The Company values its inventory at the lower of cost or net realizable value. Cost is determined using the average cost method. The Company performs reviews of its on-hand inventory to determine amounts, if any, of inventory that is deemed discontinued, excess, or unsaleable. Inventory classified as discontinued, together with the related component parts that can be assembled into saleable finished goods, is sold primarily through the Company’s retail outlet locations. The Company retains adequate levels of component parts to facilitate both the manufacturing of its watches as well as the after-sales service of its watches for an extended period of time after the

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discontinuance of the manufacturing of such watches. The adjustment to reduce the value of component parts below their cost to their net realizable value is based on the timing of when a component part is no longer associated with a watch that is being manufactured as well as the significant assumption related to the anticipated utilization of component parts for after-sales service.

Long-Lived Assets

The Company periodically reviews the estimated useful lives of its depreciable assets based on factors including historical experience, the expected beneficial service period of the asset, the quality and durability of the asset and the Company’s maintenance policy including periodic upgrades. Changes in useful lives are made on a prospective basis unless factors indicate the carrying amounts of the assets may not be recoverable and an impairment is necessary.

The Company performs an impairment review of its long-lived assets once events or changes in circumstances indicate, in management’s judgment, that the carrying value of such assets may not be recoverable. When such a determination has been made, management compares the carrying value of the asset groups with their estimated future undiscounted cash flows. If it is determined that an impairment has occurred, the fair value of the asset group is determined and compared to its carrying value. The excess of the carrying value over the fair value, if any, is recognized as a loss during that period. The impairment is calculated as the difference between asset carrying values and their estimated fair values. No impairment charge was recorded in fiscal 2025, fiscal 2024 or fiscal 2023.

Stock-Based Compensation

The Company utilizes the Black-Scholes option-pricing model which requires that certain assumptions be made to calculate the fair value of each option at the grant date. The expected life of stock option grants is determined using historical data and represents the time period during which the stock option is expected to be outstanding until it is exercised. The risk-free interest rate is based on the U.S. treasury note interest rate in effect on the date of grant for the expected life of the stock option. The expected stock price volatility is derived from historical volatility and calculated based on the estimated term structure of the stock option grant. The expected dividend yield is calculated using the Company’s expected average of annualized dividend yields and applied over the expected term of the option. Management monitors stock option exercises and employee termination patterns to estimate forfeitures rates within the valuation model. Separate groups of employees that have similar historical exercise behavior are considered separately for valuation purposes.

In addition to stock options, the Company may also grant stock awards to employees and directors. The stock awards are generally in the form of time-vesting restricted stock unit awards (pursuant to which unrestricted shares of Common Stock are issued to the grantee when the award vests) or performance-based awards (under which vesting occurs only if one or more predetermined financial goals are achieved within the relevant performance period); both are subject to the participant’s continued employment (or board service) with the Company through such vesting date. Stock awards generally are cliff-vested after three years from the date of grant (one year in the case of directors’ awards). The fair value of stock awards is generally equal to the closing price of the Company’s publicly-traded common stock on the grant date.

Compensation expense for all awards is accrued based on the estimated number of instruments for which the requisite service is expected to be rendered. This estimate is reflected in the period the stock option and stock awards are either granted or canceled. Expense related to stock options and stock awards compensation is recognized on a straight-line basis over the vesting term and only if the performance condition is probable of being achieved.

Income Taxes

The Company, under ASC Topic 740, follows the asset and liability method of accounting for income taxes under which deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax laws and tax rates, in each jurisdiction where the Company operates, and applied to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities due to a change in tax rates is recognized in income in the period that includes the enactment date. In addition, the amounts of any future tax benefits are reduced by a valuation allowance to the extent such benefits are not expected to be realized on a more-likely-than-not basis. The Company calculates estimated income taxes in each of the jurisdictions in which it operates. This process involves estimating actual current tax expense along with assessing temporary differences resulting from differing treatment of items for both book and tax purposes.

The Company follows guidance for accounting for uncertainty in income taxes. This guidance clarifies the accounting for uncertainty in income taxes recognized in a company’s financial statements and prescribes a recognition threshold and measurement standard for the financial statement recognition and measurement of an income tax position taken or expected to be taken in a tax return. This

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guidance also provides guidance for de-recognition, classification, interest and penalties, accounting in interim periods, disclosures and transitions.

RECENT DEVELOPMENTS AND INITIATIVES

Tariffs

Most of the bands used in the production of the Company’s traditional watches, as well as most of the Company’s jewelry, are made in China and have been subject to a U.S. special 7.5% tariff since February 2020. In March and April 2025, the Trump Administration announced a series of additional special tariffs, some of which have been temporarily paused. The additional such special tariffs already in effect as of the date of this annual report on Form 10-K include tariffs of 10% on all or substantially all products imported by the Company, and a 145% tariff on substantially all products of Chinese origin. Together with the special tariffs applicable to Chinese products implemented in 2018, the special tariffs on Chinese products implemented in 2025 have increased the total U.S. special tariff on Chinese packaging materials to 170% and on Chinese watch bands and jewelry to 152.5%. In addition, the special 10% tariff applicable to all other countries applies to substantially all other products imported by the Company, including all Swiss watches as well as all watch heads (i.e., the entirety of a watch other than the watch band) produced in the Far East (which generally have Japanese movements and are therefore considered products of Japan for U.S. customs purposes). These actions are expected to increase the Company’s cost of sales. If the additional special tariffs that went into effect in March and April 2025 had been in effect during fiscal 2025, cost of sales would have been approximately $25 million to $30 million higher than the $300.2 million reported, assuming all else remained unchanged. However, the Company is developing plans to lessen the impact of these tariffs, including select price increases at the wholesale and retail levels, as well as possible operational changes that could result in a change in the country of origin for certain of the Company's products. In addition, in April 2025, the Trump Administration announced a series of so-called “reciprocal” tariffs on dozens of countries with which the U.S. has a trade deficit, including special incremental tariffs of 32% on Swiss goods and 24% on Japanese goods. On April 9, 2025, the Trump Administration announced a 90-day pause in the implementation of these “reciprocal” tariffs (other than the reciprocal tariffs on China, discussed above). However, if these additional “reciprocal” tariffs go into effect, the Company will incur substantial additional increases in its cost of sales and sales volumes into the U.S. would likely decline.

Cost-Savings Initiative

During fiscal year 2025, in light of the ongoing challenging consumer-spending environment, the Company committed to a cost-savings initiative to reduce operating expenses through headcount reductions, bringing them more in line with sales. As a result of this initiative, the Company recorded $4.6 million in accruals for severance and employee-related charges and early lease termination charges of which $1.3 million was paid related to severance and employee related charges during fiscal year 2025, with the balance expected to be paid during fiscal year 2026. The Company expects go-forward annual savings from the cost-savings initiatives of approximately $10.0 million.

The Inflation Reduction Act of 2022

In August 2022, the Inflation Reduction Act of 2022 (the “IR Act”) was signed into law by President Biden. Among other things, the IR Act implemented a 1% excise tax on the fair market stock repurchases by covered corporations, a 15% minimum tax based on adjusted financial statement income of certain large corporations, and several tax incentives to promote clean energy. Although the Company is continuing to evaluate the IR Act and its potential impact on future periods, to date, the IR Act has not had a material impact on its Consolidated Financial Statements.

The Organization for Economic Cooperation and Development ("OECD") has issued Pillar Two model rules implementing a new global minimum tax of 15%, which was intended to be effective on January 1, 2024. While several countries have adopted and enacted changes to their legislation in response to Pillar Two, in January 2025, the President of the United States issued an executive order announcing the United States’ opposition to aspects of these rules. The Company's revenue currently does not meet the minimum requirements that were set by OECD inclusive framework and rules. Although the Company will continue to evaluate and monitor the enactments of Pillar Two, to the extent that Pillar Two becomes applicable, the Company does not expect a material impact on its Consolidated Financial Statements.

RESULTS OF OPERATIONS

The following is a discussion of the results of operations for fiscal 2025 compared to fiscal 2024 and fiscal 2024 compared to fiscal 2023 along with a discussion of the changes in financial condition during fiscal 2025. The fiscal year 2024 and 2023 amounts reflect the restatements described in Note 1A - Restatement of Previously Issued Consolidated Financial Statements, in Item 8, Financial Statements and Supplementary Data.

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The following are net sales by business segment and geographic location (in thousands):

The following are net sales by category (in thousands):

The following table presents the Company’s results of operations expressed as a percentage of net sales for the fiscal years indicated:

Fiscal 2025 Compared to Fiscal 2024 (As Restated)

Net Sales

Net sales for fiscal 2025 were $653.4 million, representing an $11.0 million or 1.7% decrease from the prior year. Both of the Company's operating segments experienced net sales declines. For fiscal 2025, fluctuations in foreign currency exchange rates negatively impacted net sales by $1.4 million when compared to the prior year. Excluding this $1.4 million impact, net sales would have decreased by 1.5% as compared to the prior year.

Watch and Accessory Brands Net Sales

Net sales for fiscal 2025 in the Watch and Accessory Brands segment were $556.4 million, below the prior year by $4.1 million, or 0.7%. The decrease in net sales was primarily due to unfavorable sales mix, mainly in the United States locations, and the negative

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impact of fluctuations in foreign exchange rates, partially offset by an increase in online retail in the United States locations and increased volumes resulting from higher demand in the Company's wholesale customers, mainly in the International locations.

United States Watch and Accessory Brands Net Sales

Net sales for fiscal 2025 in the United States locations of the Watch and Accessory Brands segment were $186.5 million, below the prior year by $4.8 million, or 2.5%, resulting primarily from unfavorable sales mix, partially offset by an increase in online retail. The net sales recorded in the owned brands category decreased $11.2 million, or 7.7%, partially offset by an increase in net sales recorded in the licensed brand category of $6.8 million, or 16.0%.

International Watch and Accessory Brands Net Sales

Net sales for fiscal 2025 in the International locations of the Watch and Accessory Brands segment were $369.9 million, above the prior year by $0.7 million, or 0.2%, which included fluctuations in foreign currency exchange rates that negatively impacted net sales by $1.4 million when compared to the prior year. The increase in net sales was primarily due to increased volumes resulting from higher demand in the Company's wholesale customers, partially offset by the negative impact of fluctuations in foreign exchange rates. The net sales decrease recorded in the owned brands category was $3.8 million, or 7.1%, due to net sales decreases in Europe, the Middle East and the Americas (excluding the United States), partially offset by an increase in Asia. The net sales increase in the licensed brands category was $4.3 million, or 1.4%, primarily due to net sales increases in Asia and the Americas (excluding the United States), partially offset by net sales decreases in the Middle East and Europe.

Company Stores Net Sales

Net sales for fiscal 2025 in the Company Stores segment were $97.0 million, $6.9 million or 6.7% below the prior year. The net sales decrease was primarily due to unfavorable sales mix in the Company stores, partially offset by an increase in sales from the Company's online outlet store at www.movadocompanystore.com and a new store opening. As of January 31, 2025 and 2024, the Company operated 56 and 55 retail outlet locations, respectively.

Gross Profit

Gross profit for fiscal 2025 was $353.1 million or 54.0% of net sales as compared to $364.2 million or 54.8% of net sales in the prior year. The decrease in gross profit of $11.1 million was due to lower net sales combined with a lower gross margin percentage. The decrease in the gross margin percentage of approximately 80 basis points for fiscal 2025 reflected an unfavorable impact of sales mix of approximately 50 basis points, the decreased leveraging of certain fixed costs as a result of lower sales of approximately 30 basis points and a negative impact of fluctuations in foreign exchange rates of approximately 10 basis points, partially offset by decreased shipping costs of approximately 10 basis points.

Selling, General and Administrative (“SG&A”)

SG&A expenses for fiscal 2025 were $333.1 million, representing an increase from the prior year of $17.4 million, or 5.5%. The increase in SG&A expenses was primarily due to the following factors: higher marketing expenses of $17.2 million, a $2.5 million provision for professional fees related to the internal investigation of allegations of misconduct within the Dubai branch of the Company's Swiss subsidiary that resulted in a restatement of previously issued financial statements, an increase in payroll related expenses of $2.1 million (which included severance and payroll related costs of $4.1 million related to the cost-savings initiative discussed above under “Recent Developments and Initiatives”) and an increase in credit card and platform fees of $0.7 million. These increases were partially offset by a decrease in professional fees of $2.8 million, a decrease in the reduction of accruals for donations and doubtful accounts of $1.8 million and a decrease of $0.5 million in amortization expense related to certain intangible assets being fully amortized. For the year ended January 31, 2025, fluctuations in foreign currency rates related to the foreign subsidiaries favorably impacted SG&A expenses by $1.5 million when compared to the prior year.

Watch and Accessory Brands Operating Income

For fiscal 2025, the Company recorded operating income of $7.7 million in the Watch and Accessory Brands segment which includes $30.0 million of unallocated corporate expenses as well as $67.0 million of certain intercompany profits related to the Company’s supply chain operations. For fiscal 2024, the Company recorded operating income of $31.3 million in the Watch and Accessory Brands segment which included $30.8 million of unallocated corporate expenses as well as $71.5 million of certain intercompany profits related to the Company’s supply chain operations. The decrease in operating income was the result of a decrease in gross profit of $6.6 million combined with higher SG&A expenses of $17.0 million when compared to the prior year. The decrease in gross profit was the result of lower net sales combined with a lower gross margin percentage primarily due to an unfavorable impact of sales mix, the decreased leveraging of certain fixed costs as a result of lower sales and a negative impact of fluctuations in foreign exchange rates, partially offset by decreased shipping costs. The increase in SG&A expenses of $17.0 million was primarily due to the following factors: higher marketing expenses of $16.9 million, a $2.5 million provision for professional fees related to the internal investigation of allegations of

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misconduct within the Dubai branch of the Company's Swiss subsidiary that resulted in a restatement of previously issued financial statements, an increase in payroll related expenses of $1.8 million (which included severance and payroll related costs of $4.1 million related to the cost-savings initiative) and an increase in credit card and platform fees of $0.7 million. These increases in SG&A expenses were partially offset by a decrease in professional fees of $2.8 million, a decrease in the reduction of accruals for donations and doubtful accounts of $1.8 million and a decrease of $0.5 million in amortization expense related to certain intangible assets being fully amortized.

U.S. Watch and Accessory Brands Operating Loss

In the United States locations of the Watch and Accessory Brands segment, for the twelve months ended January 31, 2025, the Company recorded an operating loss of $40.1 million which includes unallocated corporate expenses of $30.0 million. For the twelve months ended January 31, 2024 the Company recorded an operating loss of $30.0 million in the United States locations of the Watch and Accessory Brands segment which included unallocated corporate expenses of $30.8 million. The increase in operating loss was the result of an increase in gross profit of $2.0 million, offset by an increase in SG&A expenses of $12.1 million when compared to the prior year. The increase in gross profit of $2.0 million was the result of a higher gross margin percentage primarily due to the favorable impact of sales mix and decreased shipping costs, partially offset by decreased leveraging of certain fixed costs as a result of lower sales. The increase in SG&A expenses of $12.1 million was primarily due to the following factors: higher marketing expenses of $11.7 million, a $2.5 million provision for professional fees related to the internal investigation of allegations of misconduct within the Dubai branch of the Company's Swiss subsidiary that resulted in a restatement of previously issued financial statements, an increase in credit card and platform fees of $0.7 million, while payroll related expenses remained flat (but included severance and payroll related costs of $1.9 million related to the cost-savings initiative). These increases in SG&A expenses were partially offset by a decrease in professional fees of $2.4 million and a decrease in the reduction of accruals for donations and doubtful accounts of $2.0 million.

International Watch and Accessory Brands Operating Income

In the International locations of the Watch and Accessory Brands segment, for the twelve months ended January 31, 2025, the Company recorded operating income of $47.8 million which includes $67.0 million of certain intercompany profits related to the Company’s International supply chain operations. For the twelve months ended January 31, 2024, the Company recorded operating income of $61.3 million in the International locations of the Watch and Accessory Brands segment which included $71.5 million of certain intercompany profits related to the Company’s supply chain operations. The decrease in operating income was the result of lower gross profit of $8.7 million combined with higher SG&A expenses of $4.8 million when compared to the prior year. The decrease in gross profit of $8.7 million was the result of a lower gross margin percentage primarily due to the unfavorable impact of sales mix and a negative impact of fluctuations in foreign exchange rates, partially offset by decreased shipping costs. The increase in SG&A expenses of $4.8 million was primarily due to the following factors: higher marketing expenses of $5.2 million and an increase in payroll related expenses of $1.8 million (which included severance and payroll related costs of $2.2 million related to the cost-savings initiative). These increases in SG&A expenses were partially offset by a decrease of $0.5 million in amortization expense related to certain intangible assets being fully amortized and a decrease in professional fees of $0.4 million.

Company Stores Operating Income

The Company recorded operating income of $12.3 million and $17.2 million in the Company Stores segment for fiscal 2025 and 2024, respectively. The decrease in operating income of $4.9 million was primarily related to a decrease in gross profit of $4.4 million, mainly due to lower net sales combined with a lower gross margin percentage, and higher SG&A expenses of $0.5 million primarily due to an increase in payroll related expenses of $0.3 million and higher marketing expenses of $0.3 million. As of January 31, 2025, and 2024, the Company Stores segment operated 56 and 55 retail outlet locations, respectively.

Other Non-Operating Income

The Company recorded other income, net of $7.1 million primarily due to interest income for the twelve months ended January 31, 2025.

For the twelve months ended January 31, 2024, the Company recorded other income, net of $6.0 million primarily due to interest income, partially offset by a $0.5 million impairment related to an equity investment in a consumer products company that sold its business and assets in a transaction that yielded little return for equity holders.

Interest Expense

Interest expense was $0.5 million primarily due to the payment of unused commitment fees for both fiscal 2025 and 2024. There were no borrowings under the Company's revolving credit facility during fiscal 2025 and 2024.

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Income Taxes

The Company recorded an income tax provision of $7.4 million and $11.8 million for fiscal 2025 and 2024, respectively.

The effective tax rate for fiscal 2025 was 27.9% and differed from the U.S. statutory tax rate of 21.0% primarily due to the tax consequences of a foreign currency gain related to an extraordinary intercompany dividend and an increase in valuation allowances against certain foreign losses, partially offset by foreign profits being taxed in lower taxing jurisdictions. The effective tax rate for fiscal 2024 was 21.8% and differed from the U.S. statutory tax rate of 21.0% primarily due to foreign profits being taxed in lower taxing jurisdictions, partially offset by cross-border tax effects and U.S. state and local taxes, net of the federal benefit.

Net Income Attributable to Movado Group, Inc.

The Company recorded net income attributable to Movado Group, Inc. of $18.4 million and $41.3 million for fiscal 2025 and 2024, respectively.

Fiscal 2024 (As Restated) Compared to Fiscal 2023 (As Restated)

The following are net sales by business segment and geographic location (in thousands):

The following are net sales by category (in thousands):

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The following table presents the Company’s results of operations expressed as a percentage of net sales for the fiscal years indicated:

Net Sales

Net sales for fiscal 2024 were $664.4 million, representing a $79.8 million or 10.7% decrease from the prior year. This decrease is attributable to the Watch and Accessory Brands segment and, to a lesser extent, the Company Stores segment. For fiscal 2024, fluctuations in foreign currency exchange rates positively impacted net sales by $8.6 million when compared to the prior year. Excluding this $8.6 million impact, net sales would have decreased by 11.9% as compared to the prior year.

Watch and Accessory Brands Net Sales

Net sales for fiscal 2024 in the Watch and Accessory Brands segment were $560.5 million, below the prior year by $72.2 million, or 11.4%. The decrease in net sales was primarily due to decreased volumes resulting from lower demand in the Company's wholesale customers in both the United States and International locations and a decrease in online retail, partially offset by the positive impact of fluctuations in foreign exchange rates.

United States Watch and Accessory Brands Net Sales

Net sales for fiscal 2024 in the United States locations of the Watch and Accessory Brands segment were $191.3 million, below the prior year by $36.0 million, or 15.8%, resulting primarily from decreased volumes due to lower demand in the Company's wholesale customers in both the owned and licensed brand categories and a decrease in online retail. The net sales recorded in the owned brands category decreased $27.2 million, or 15.8%, and net sales recorded in the licensed brand category decreased $8.7 million, or 17.1%.

International Watch and Accessory Brands Net Sales

Net sales for fiscal 2024 in the International locations of the Watch and Accessory Brands segment were $369.2 million, below the prior year by $36.2 million, or 8.9%, which included fluctuations in foreign currency exchange rates that positively impacted net sales by $8.6 million when compared to the prior year. The decrease in net sales was in both the owned and licensed brand categories primarily due to decreased volumes resulting from lower demand in the Company's wholesale customers and a decrease in online retail, partially offset by the positive impact of fluctuations in foreign exchange rates. The net sales decrease recorded in the owned brands category was $4.5 million, or 7.7%, primarily due to net sales decreases in Europe, the Americas (excluding the United States) and the Middle East, partially offset by a net sales increase in Asia. The net sales decrease in the licensed brands category was $29.1 million, or 8.5%, primarily due to net sales decreases in Europe and the Americas (excluding the United States), partially offset by net sales increases in the Middle East and Asia.

Company Stores Net Sales

Net sales for fiscal 2024 in the Company Stores segment were $103.9 million, $7.6 million or 6.8% below the prior year. The net sales decrease was primarily due to sales mix in the Company stores and a decrease in sales from the Company's online outlet store at www.movadocompanystore.com, partially offset by new store openings. As of January 31, 2024 and 2023, the Company operated 55 retail outlet locations.

Gross Profit

Gross profit for fiscal 2024 was $364.2 million or 54.8% of net sales as compared to $429.1 million or 57.7% of net sales in the prior year. The decrease in gross profit of $64.9 million was primarily due to lower net sales combined with a lower gross margin percentage.

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The decrease in the gross margin percentage of approximately 290 basis points for fiscal 2024 reflected an unfavorable impact of sales mix of approximately 210 basis points, the decreased leveraging of higher fixed costs over lower sales of approximately 90 basis points and a negative impact of fluctuations in foreign exchange rates of approximately 30 basis points, partially offset by decreased shipping costs of approximately 40 basis points.

Selling, General and Administrative (“SG&A”)

SG&A expenses for fiscal 2024 were $315.7 million, representing an increase from the prior year of $2.1 million, or 0.7%. The increase in SG&A expenses was primarily due to the following factors: an increase in payroll related expenses of $11.0 million; higher marketing expenses of $1.4 million; and an increase in travel and entertainment expenses of $1.1 million. These increases in SG&A expenses were partially offset by a decrease in performance-based compensation of $10.9 million and a decrease in professional service fees of $0.4 million. For the year ended January 31, 2024, fluctuations in foreign currency rates related to the foreign subsidiaries unfavorably impacted SG&A expenses by $3.7 million when compared to the prior year.

Watch and Accessory Brands Operating Income

For fiscal 2024, the Company recorded operating income of $31.3 million in the Watch and Accessory Brands segment which includes $30.8 million of unallocated corporate expenses as well as $71.5 million of certain intercompany profits related to the Company’s supply chain operations. For fiscal 2023, the Company recorded operating income of $90.3 million in the Watch and Accessory Brands segment which included $37.0 million of unallocated corporate expenses as well as $81.0 million of certain intercompany profits related to the Company’s supply chain operations. The decrease in operating income was the result of a decrease in gross profit of $57.5 million combined with higher SG&A expenses of $1.5 million when compared to the prior year. The decrease in gross profit was primarily the result of lower net sales combined with a lower gross margin percentage primarily due to an unfavorable impact of sales mix, the decreased leveraging of higher fixed costs over lower sales and a negative impact of fluctuations in foreign exchange rates, partially offset by lower shipping costs. The increase in SG&A expenses of $1.5 million was primarily due to the following factors: an increase in payroll related expenses of $9.8 million; higher marketing expenses of $1.5 million; and an increase in travel and entertainment expenses of $1.1 million. Increased SG&A expenses were partially offset by a decrease in performance-based compensation of $10.8 million.

U.S. Watch and Accessory Brands Operating Loss

In the United States locations of the Watch and Accessory Brands segment, for the twelve months ended January 31, 2024, the Company recorded an operating loss of $30.0 million which includes unallocated corporate expenses of $30.8 million. For the twelve months ended January 31, 2023 the Company recorded an operating loss of $3.0 million in the United States locations of the Watch and Accessory Brands segment which included unallocated corporate expenses of $37.0 million. The increase in operating loss was the result of lower gross profit of $29.9 million, partially offset by a decrease in SG&A expenses of $2.9 million when compared to the prior year period. The decrease in gross profit of $29.9 million was primarily the result of lower net sales, combined with a lower gross margin percentage primarily due to an unfavorable impact of sales mix, the decreased leveraging of higher fixed costs over lower sales, partially offset by lower shipping costs. The decrease in SG&A expenses of $2.9 million was primarily due to a decrease in performance-based compensation of $8.1 million. This decrease in SG&A expenses was partially offset by an increase in payroll related expenses of $5.5 million and an increase in travel and entertainment expenses of $0.6 million.

International Watch and Accessory Brands Operating Income

In the International locations of the Watch and Accessory Brands segment, for the twelve months ended January 31, 2024, the Company recorded operating income of $61.3 million which includes $71.5 million of certain intercompany profits related to the Company’s International supply chain operations. For the twelve months ended January 31, 2023 the Company recorded operating income of $93.3 million in the International locations of the Watch and Accessory Brands segment which included $81.0 million of certain intercompany profits related to the Company’s supply chain operations. The decrease in operating income was the result of lower gross profit of $27.6 million combined with higher SG&A expenses of $4.4 million. The decrease in gross profit of $27.6 million was primarily the result of lower net sales, combined with a lower gross margin percentage primarily due to an unfavorable impact of sales mix, the decreased leveraging of higher fixed costs over lower sales and a negative impact of fluctuations in foreign exchange rates, partially offset by lower shipping costs. The increase in SG&A expenses of $4.4 million was primarily due to the following factors: an increase in payroll related expenses of $4.3 million; higher marketing expenses of $1.5 million; and an increase in travel and entertainment expenses of $0.5 million. These increases in SG&A expenses were partially offset by a decrease in performance-based compensation of $2.7 million.

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Company Stores Operating Income

The Company recorded operating income of $17.2 million and $25.3 million in the Company Stores segment for fiscal 2024 and 2023, respectively. The decrease in operating income of $8.1 million was primarily related to a decrease in gross profit of $7.5 million, mainly due to lower net sales combined with a lower gross margin percentage, and higher SG&A expenses of $0.6 million, reflecting a $1.2 million increase in payroll related expenses, partially offset by a decrease of $0.4 million in professional service fees. As of both January 31, 2024, and 2023, the Company Stores segment operated 55 retail outlet locations.

Other Non-Operating Income

For the twelve months ended January 31, 2024, the Company recorded other income, net of $6.0 million primarily due to interest income, partially offset by a $0.5 million impairment related to an equity investment in a consumer products company that sold its business and assets in which the Company expects to receive little or no return on its investment.

For the twelve months ended January 31, 2023, the Company recorded other income of $2.1 million primarily due to interest income.

Interest Expense

Interest expense was $0.5 million primarily due to the payment of unused commitment fees for fiscal 2024 and 2023. There were no borrowings under the Company's revolving credit facility during fiscal 2024 and 2023.

Income Taxes

The Company recorded an income tax provision of $11.8 million and $24.3 million for fiscal 2024 and 2023, respectively.

The effective tax rate for fiscal 2024 was 21.8% and differed from the U.S. statutory tax rate of 21.0% primarily due to foreign profits being taxed in lower taxing jurisdictions, partially offset by cross-border tax effects and U.S. state and local taxes, net of the federal benefit. The effective tax rate for fiscal 2023 was 20.7% and differed from the U.S. statutory tax rate of 21.0% primarily due to foreign profits being taxed in lower taxing jurisdictions and the release of certain foreign valuation allowances, partially offset by U.S. state and local taxes, net of the federal benefit.

Net Income Attributable to Movado Group, Inc.

The Company recorded net income attributable to Movado Group, Inc. of $41.3 million and $90.4 million for fiscal 2024 and 2023, respectively.

LIQUIDITY AND CAPITAL RESOURCES

At January 31, 2025 and January 31, 2024, the Company had $208.5 million and $262.1 million, respectively, of cash and cash equivalents. Of this total, $83.3 million and $176.1 million, respectively, consisted of cash and cash equivalents at the Company’s foreign subsidiaries.

The Company believes that based on the Company’s current expectations, cash flows from operations and its credit lines and cash on-hand, the Company has adequate funds to support its operating, capital and debt service requirements and expects to maintain compliance with its debt covenants for the next twelve months subsequent to the issuance of the accompanying Consolidated Financial Statements.

At January 31, 2025 the Company had working capital of $377.0 million as compared to $419.9 million at January 31, 2024. The decrease in working capital was primarily the result of a decrease in cash and an increase in accrued liabilities, partially offset by an increase in trade receivables and a decrease in income taxes payable. The Company defines working capital as the difference between current assets and current liabilities.

The Company had $1.5 million of cash used in operating activities for fiscal 2025 as compared to $76.8 million of cash provided by operating activities for fiscal 2024. Cash used in operating activities for fiscal 2025 included $19.2 million of net income, adjusted for non-cash items of $18.9 million. Cash used in operating activities primarily included tax related net payments of $12.4 million, $11.6 million increase in trade receivables due to timing of receipts and changes in sales mix and increase in inventories of $11.7 million based on timing of receipts and sales. Cash provided by operating activities for fiscal 2024 included net income of $42.2 million, positively adjusted by $24.6 million related to non-cash items. Cash provided by operating activities for fiscal 2024 included a $35.7 million decrease in investment in inventories primarily due to timing of receipts to align with sales levels, partially offset by a change in payments related to income taxes of $17.6 million primarily due to timing and a decrease in accrued payroll and benefits of $9.9 million primarily as a result of payments of fiscal year 2023 performance-based compensation.

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Cash used in investing was $13.7 million for fiscal 2025 as compared to $11.5 million for fiscal 2024. The cash used in fiscal 2025 was primarily related to capital expenditures of $8.0 million mainly due to expenditures for computer software, shop-in-shops and leasehold improvements and $5.7 million of long-term investments. Cash used in investing activities for fiscal 2024 included $8.2 million of capital expenditures and $3.1 million of long-term investments.

The Company expects that capital expenditures in fiscal 2026 will be approximately $10.0 million as compared to $8.0 million in fiscal 2025. The capital spending will be primarily for projects in the ordinary course of business including facilities improvements, shop-in-shops, website development, computer hardware and software and tooling costs. The Company has the ability to manage its capital expenditures on discretionary projects.

Cash used in financing activities was $35.4 million for fiscal 2025 as compared to $57.6 million for fiscal 2024. The cash used in fiscal 2025 included $31.1 million in dividends paid, $2.6 million in stock repurchased in the open market, $1.2 million of shares repurchased as a result of the surrender of shares by employees in connection with the vesting of certain stock awards and $0.6 million paid for the distribution of noncontrolling interest earnings. Cash used in financing activities in fiscal 2024 included $53.1 million in dividends paid, which included a special cash dividend of $1.00 per share, $3.1 million in stock repurchased in the open market and $1.4 million paid for the distribution of noncontrolling interest earnings.

The Company and its U.S. and Swiss subsidiaries (collectively, the "Borrowers") are parties to an Amended and Restated Credit Agreement originally dated October 12, 2018 (as subsequently amended, the “Credit Agreement”) with the lenders party thereto and Bank of America, N.A. as administrative agent (in such capacity, the “Agent”). The Credit Agreement provides for a $100.0 million senior secured revolving credit facility (the “Facility”) and has a maturity date of October 28, 2026. The Facility includes a $15.0 million letter of credit subfacility, a $25.0 million swingline subfacility and a $75.0 million sublimit for borrowings by the Swiss Borrower, with provisions for uncommitted increases to the Facility of up to $50.0 million in the aggregate subject to customary terms and conditions. The Credit Agreement contains affirmative and negative covenants binding on the Company and its subsidiaries that are customary for credit facilities of this type, including, but not limited to, restrictions and limitations on the incurrence of debt and liens, dispositions of assets, capital expenditures, dividends and other payments in respect of equity interests, the making of loans and equity investments, mergers, consolidations, liquidations and dissolutions, and transactions with affiliates (in each case, subject to various exceptions).

The borrowings under the Facility are joint and several obligations of the Borrowers and are also cross-guaranteed by each Borrower, except that the Swiss Borrower is not liable for, nor does it guarantee, the obligations of the U.S. Borrowers. In addition, the Borrowers' obligations under the Facility are secured by first priority liens, subject to permitted liens, on substantially all of the U.S. Borrowers' assets other than certain excluded assets. The Swiss Borrower does not provide collateral to secure the obligations under the Facility.

As of both January 31, 2025, and January 31, 2024, there were no amounts of loans outstanding under the Facility. Availability under the Facility was reduced by the aggregate amount of letters of credit outstanding, issued in connection with retail and operating facility leases to various landlords and for Canadian payroll to the Royal Bank of Canada, totaling approximately $0.3 million at both January 31, 2025, and January 31, 2024. At January 31, 2025, the letters of credit have expiration dates through June 2, 2025. As of both January 31, 2025, and January 31, 2024, availability under the Facility was $99.7 million. For additional information regarding the Facility, see Note 8 – Debt and Lines of Credit to the Consolidated Financial Statements.

The Company had weighted average borrowings under the Facility of zero during both fiscal 2025 and fiscal 2024, respectively.

Borrowings under the Credit Agreement bear interest at rates generally based on either the Term Secured Overnight Financing Rate ("SOFR") as administered by the Federal Reserve Bank of New York or a specified base rate, as selected periodically by the Company. The SOFR-based loans bear interest at SOFR plus a spread ranging from 1.00% to 1.75% per annum and the base rate loans bear interest at the base rate plus a spread ranging from 0% to 0.75% per annum, with the spread in each case being based on the Company’s consolidated leverage ratio (as defined in the Credit Agreement). As of both January 31, 2025, and 2024, the Company’s spreads were 1.00% over SOFR and 0% over the base rate.

The Company's Swiss subsidiary maintains unsecured lines of credit with a Swiss bank that are subject to repayment upon demand. As of January 31, 2025, and 2024, these lines of credit totaled 6.5 million Swiss Francs for both periods, with a dollar equivalent of $7.1 million and $7.5 million, respectively. As of January 31, 2025, and 2024, there were no borrowings against these lines. As of January 31, 2025, and 2024, two European banks had guaranteed obligations to third parties on behalf of two of the Company’s foreign subsidiaries in the dollar equivalent of $1.3 million and $1.4 million, respectively, in various foreign currencies, of which $0.7 million and $0.8 million, respectively, was a restricted deposit as it relates to lease agreements.

Cash paid for interest, including unused commitments fees, was $0.3 million during both fiscal 2025 and 2024, respectively.

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From time to time, the Company may make minority investments in growth companies in the consumer products sector and other sectors relevant to its business, including certain of the Company's suppliers and customers, as well as in venture capital funds that invest in companies in media, entertainment, information technology and technology-related fields and in digital assets. During fiscal 2022, the Company committed to invest up to $21.5 million in such investments. The Company funded approximately $8.4 million of these commitments through fiscal 2024 and an additional $5.7 million during fiscal 2025 and may be called upon to satisfy capital calls in respect of the remaining $7.5 million in such commitments at any time during a period generally ending ten years after the first capital call in respect of a given commitment. One consumer products company in which the Company made an equity investment in fiscal year 2022 sold its business and assets in the first quarter of fiscal 2024 in a transaction that yielded little return for equity holders. As a result, the Company fully impaired its $0.5 million investment in this entity in fiscal 2024.

During fiscal 2025, the Company has declared and paid a total of four separate cash dividends of $0.35 per share aggregating to $31.1 million. During fiscal 2024, the Company declared and paid four separate cash dividends of $0.35 per share and a special cash dividend of $1.00 per share aggregating to $53.1 million. Although the Company currently expects to continue to declare cash dividends in the future, the decision of whether to declare any future cash dividend, including the amount of any such dividend and the establishment of record and payment dates, will be determined, in each quarter, by the Board of Directors, in its sole discretion.

On November 23, 2021, the Board approved a share repurchase program under which the Company was authorized to purchase up to $50.0 million of its outstanding common stock through November 23, 2024, depending on market conditions, share price and other factors. On December 5, 2024, the Board approved a new share repurchase program under which the Company is authorized to purchase up to $50.0 million of its outstanding common stock through December 5, 2027, depending on market conditions, share price and other factors. These repurchases may be made through open market purchases, repurchase plans, block trades or otherwise. During fiscal 2025, the Company repurchased a total of 120,000 shares of its common stock at a total cost of $2.6 million, or an average of $21.90 per share. During fiscal 2024, the Company repurchased a total of 111,722 shares of its common stock at a total cost of $3.1 million, or an average of $27.89 per share. At January 31, 2025, all $50.0 million remains available for purchase under the Company's December 5, 2024 repurchase program.

The Company has various contractual obligations as part of its ordinary course of business. The Company's obligations include operating lease obligations (see Note 12- Leases), licensing agreements (see Note 11 - Commitments and Contingencies), purchase obligations (see Note 11 - Commitments and Contingencies) and transition tax obligation (see Note 11 - Commitments and Contingencies).

Accounting Changes and Recent Accounting Pronouncements

See Note 2 to the accompanying audited Consolidated Financial Statements for a description of recent accounting pronouncements which may impact the Company's Consolidated Financial Statements in future reporting periods.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

GENERAL

Net Sales

The Company operates and manages its business in two principal business segments: Watch and Accessory Brands and Company Stores. The Company also operates in two geographic locations: United States and International.

The Company divides its watch and accessory business into two principal categories: the owned brands category and the licensed brands category. The owned brands category consists of the Movado®, Concord®, EBEL®, Olivia Burton® and MVMT® brands. Products in the licensed brands category include the following brands manufactured and distributed under license agreements with the respective brand owners: Coach®, Tommy Hilfiger®, Hugo Boss®, Lacoste® and Calvin Klein®.

The primary factors that influence annual sales are general economic conditions in the Company’s U.S. and international markets, new product introductions, the level and effectiveness of advertising and marketing expenditures and product pricing decisions.

56.8% of the Company’s total sales are from international markets (see Note 18 to the Consolidated Financial Statements), and therefore reported sales made in those markets are affected by foreign exchange rates. The Company’s international sales are primarily billed in local currencies (predominantly Euros, British Pounds and Swiss Francs) and translated to U.S. dollars at average exchange rates for financial reporting purposes. The Company reduces its exposure to exchange rate risk through a hedging program.

The Company divides its business into two major geographic locations: United States operations, and International, which includes the results of all other non-U.S. Company operations. The allocation of geographic revenue is based upon the location of the customer. The Company’s International operations in Europe, the Americas (excluding the United States), the Middle East and Asia account for 30.5%, 9.3%, 9.0% and 8.0%, respectively, of the Company’s total net sales for fiscal 2024. A vast majority of the Company’s tangible International assets are owned by the Company’s Swiss and Hong Kong subsidiaries.

The Company’s business is seasonal. There are two major selling seasons in the Company’s markets: the spring season, which includes school graduations and several holidays; and, most importantly, the Christmas and holiday season. Major selling seasons in certain international markets center on significant local holidays that occur in late winter or early spring. The Company’s net sales historically have been higher during the second half of the fiscal year. The second half of each fiscal year accounted for 54.6% and 54.0% of the Company’s net sales for the fiscal years ended January 31, 2024 and 2023, respectively.

The Company’s retail operations consist of 51 retail outlet locations in the United States and four locations in Canada.

The significant factors that influence annual sales volumes in the Company’s retail operations are similar to those that influence U.S. wholesale sales. In addition, most of the Company’s retail outlet locations are near vacation destinations and, therefore, the seasonality of these stores is driven by the peak tourist seasons associated with these locations.

Gross Margins

The Company’s overall gross margins are primarily affected by four major factors: channel and product sales mix, product pricing strategy, manufacturing costs and fluctuation in foreign currency exchange rates, in particular the relationship between the U.S. dollar and the Swiss Franc, British Pound and the Euro. Gross margins for the Company may not be comparable to those of other companies, since some companies include all the costs related to their distribution networks in cost of sales whereas the Company does not include the costs associated with its warehousing and distribution facilities nor the occupancy costs for the Company Stores segment in the cost of sales line item. Those costs are included in selling, general and administrative expenses.

Gross margins vary among the brands included in the Company’s portfolio and also among watch models within each brand. Watches in the Company’s owned brands category generally earn higher gross margin percentages than watches in the licensed brands category. The difference in gross margin percentages within the licensed brands category is primarily due to the impact of royalty payments made on the licensed brands. Gross margins in the Company’s e-commerce business generally earn higher gross margin percentages than those of the traditional wholesale business. Gross margins in the Company’s outlet business are affected by the mix of product sold and may exceed those of the wholesale business since the Company earns margins on its outlet store sales from manufacture to point of sale to the consumer.

All of the Company’s brands compete with a number of other brands not only on styling but also on wholesale and retail price. The Company’s ability to improve margins through price increases is therefore, to some extent, constrained by competitors’ actions.

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Cost of sales of the Company’s products consists primarily of costs for raw materials, component costs, royalties, depreciation, amortization, assembly costs, shipping to customers, design costs and unit overhead costs associated with the Company’s supply chain operations predominately in Switzerland and Asia. The Company’s supply chain operations consist of logistics management of assembly operations and product sourcing predominately in Switzerland and Asia and minor assembly in Switzerland. Through productivity improvement efforts, the Company has controlled the level of overhead costs and maintained flexibility in its cost structure by outsourcing a significant portion of its component and assembly requirements.

Since a significant amount of the Company’s product costs are incurred in Swiss Francs, fluctuations in the U.S. dollar/Swiss Franc exchange rate can impact the Company’s cost of goods sold and, therefore, its gross margins. The Company reduces its exposure to the Swiss Franc exchange rate risk through a hedging program. Under the hedging program, the Company manages most of its foreign currency exposures on a consolidated basis, which allows it to net certain exposures and take advantage of natural offsets. In the event these exposures do not offset, the Company has the ability to hedge its Swiss Franc purchases using a combination of forward contracts and purchased currency options. The Company’s hedging program mitigated the impact of the exchange rate fluctuations on product costs and gross margins for fiscal years 2024 and 2023.

Selling, General and Administrative (“SG&A”) Expenses

The Company’s SG&A expenses consist primarily of marketing, selling, distribution, general and administrative expenses.

Marketing expenditures are based principally on overall strategic considerations relative to maintaining or increasing market share in markets that management considers to be crucial to the Company’s continued success as well as on general economic conditions in the various markets around the world in which the Company sells its products. Marketing expenses include salaries, various forms of media advertising, digital advertising (including social media), customer acquisition costs and co-operative advertising with customers and distributors and other point of sale marketing and promotional spending.

Selling expenses consist primarily of salaries, sales commissions, sales force travel and related expenses, credit card fees, depreciation and amortization, expenses associated with the Company’s customer conferences and industry trade shows and operating costs incurred in connection with the Company’s retail business. Sales commissions vary with overall sales levels. Retail selling expenses consist primarily of payroll related and store occupancy costs.

Distribution expenses consist primarily of costs of running distribution centers and customer service and include salaries, rental and other occupancy costs, security, depreciation and amortization of furniture and leasehold improvements and shipping supplies.

General and administrative expenses consist primarily of salaries and other employee compensation including performance-based compensation, employee benefit plan costs, office rent, management information systems costs, professional fees, bad debts, depreciation and amortization of furniture, computer software, leasehold improvements, amortization of finite lived intangible assets, patent and trademark expenses and various other general corporate expenses.

Other Non-Operating Income, net

Other non-operating income, net consist primarily of interest income and the non-service components of the Company's Swiss pension plan. In addition, for the fiscal year ended January 31, 2024, the Company recorded an impairment related to an equity investment in a consumer products company that sold its business and assets in which the Company expects to receive little or no return on its investment. Also, for the fiscal year ended January 31, 2022, the Company recorded other non-operating income due to the final settlement related to a sale of a building in an international location in the prior year period.

Interest Expense

To the extent it borrows, the Company records interest expense on its revolving credit facility. Additionally, interest expense includes the amortization of deferred financing costs, and unused commitment fees associated with the Company’s revolving credit facility.

Income Taxes

The Company follows the asset and liability method of accounting for income taxes as prescribed under the Accounting Standards Codification guidance for Income Taxes (“ASC Topic 740”). ASC Topic 740 requires the Company to recognize deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts and tax bases of existing assets and liabilities.

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CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The Company’s Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States and those significant policies are more fully described in Note 1 to the Company’s Consolidated Financial Statements. The preparation of these financial statements and the application of certain critical accounting policies require management to make judgments based on estimates and assumptions that affect the information reported. On an on-going basis, management evaluates its estimates and judgments, including those related to sales discounts and markdowns, product returns, bad debt, inventories, income taxes, warranty obligations, useful lives of property, plant and equipment, impairments of long-lived assets, stock-based compensation and contingencies and litigation. Management bases its estimates and judgments about the carrying values of assets and liabilities that are not readily apparent from other sources on historical experience, contractual commitments and on various other factors that are believed to be reasonable under the circumstances. Actual results could differ from these estimates. Management believes the following are the critical accounting policies requiring significant judgments and estimates used in the preparation of its Consolidated Financial Statements.

Revenue Recognition

In the wholesale channel, revenue is recognized and recorded when a contract is in place, obligations under the terms of a contract with the customer are satisfied and control is transferred to the customer. Such revenue is measured as the ultimate amount of consideration the Company expects to receive in exchange for transferring goods including variable consideration. The Company has determined that transfer of control passes to the wholesale customer upon shipment or upon receipt depending on the agreement with the customer and shipping terms. Control passes to outlet store customers at the time of sale and to substantially all e-commerce customers upon shipment. Factors considered in the transfer of control include the right to payment, transfer of legal title, physical possession and customer acceptance of the goods and whether the significant risks and rewards for the goods belong with the customer. The Company records estimates of variable consideration, which includes sales returns, markdowns, volume-based programs and sales and cash discount allowances as a reduction of revenue in the same period that the sales are recorded. These estimates are based upon the expected value method considering all reasonably available information including historical analysis, customer agreements and/or currently known factors that arise in the normal course of business. Returns, discounts and allowances have historically been within the Company’s expectations and the provisions established. The future provisional rates may differ from those experienced in the past. Taxes imposed by governmental authorities on the Company's revenue-producing activities with customers, such as sales taxes and value added taxes, are excluded from net sales.

Intangibles

Intangible assets consist primarily of trade names, customer relationships and trademarks. In accordance with applicable guidance, the Company estimates and records the fair value of purchased intangible assets at the time of their acquisition. The fair values of these intangible assets are estimated at the time of acquisition based on independent third-party appraisals. Finite-lived intangible assets are amortized over their respective estimated useful lives, which range from three to ten years, and are evaluated for impairment whenever events or changes in circumstances indicate that their related carrying values may not be fully recoverable. The Company determined that there was no impairment in fiscal 2024, fiscal 2023 or in fiscal 2022.

Inventories

The Company values its inventory at the lower of cost or net realizable value. Cost is determined using the average cost method. The Company performs reviews of its on-hand inventory to determine amounts, if any, of inventory that is deemed discontinued, excess, or unsaleable. Inventory classified as discontinued, together with the related component parts that can be assembled into saleable finished goods, is sold primarily through the Company’s retail outlet locations. The Company retains adequate levels of component parts to facilitate both the manufacturing of its watches as well as the after-sales service of its watches for an extended period of time after the discontinuance of the manufacturing of such watches. The adjustment to reduce the value of component parts below their cost to their net realizable value is based on the timing of when a component part is no longer associated with a watch that is being manufactured as well as the significant assumption related to the anticipated utilization of component parts for after-sales service.

Long-Lived Assets

The Company periodically reviews the estimated useful lives of its depreciable assets based on factors including historical experience, the expected beneficial service period of the asset, the quality and durability of the asset and the Company’s maintenance policy including periodic upgrades. Changes in useful lives are made on a prospective basis unless factors indicate the carrying amounts of the assets may not be recoverable and an impairment is necessary.

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The Company performs an impairment review of its long-lived assets once events or changes in circumstances indicate, in management’s judgment, that the carrying value of such assets may not be recoverable. When such a determination has been made, management compares the carrying value of the asset groups with their estimated future undiscounted cash flows. If it is determined that an impairment has occurred, the fair value of the asset group is determined and compared to its carrying value. The excess of the carrying value over the fair value, if any, is recognized as a loss during that period. The impairment is calculated as the difference between asset carrying values and their estimated fair values. No impairment charge was recorded in fiscal 2024, fiscal 2023 or fiscal 2022.

Stock-Based Compensation

The Company utilizes the Black-Scholes option-pricing model which requires that certain assumptions be made to calculate the fair value of each option at the grant date. The expected life of stock option grants is determined using historical data and represents the time period during which the stock option is expected to be outstanding until it is exercised. The risk-free interest rate is based on the U.S. treasury note interest rate in effect on the date of grant for the expected life of the stock option. The expected stock price volatility is derived from historical volatility and calculated based on the estimated term structure of the stock option grant. The expected dividend yield is calculated using the Company’s expected average of annualized dividend yields and applied over the expected term of the option. Management monitors stock option exercises and employee termination patterns to estimate forfeitures rates within the valuation model. Separate groups of employees that have similar historical exercise behavior are considered separately for valuation purposes.

In addition to stock options, the Company may also grant stock awards to employees and directors. The stock awards are generally in the form of time-vesting restricted stock unit awards (pursuant to which unrestricted shares of Common Stock are issued to the grantee when the award vests) or performance-based awards (under which vesting occurs only if one or more predetermined financial goals are achieved within the relevant performance period); both are subject to the participant’s continued employment (or board service) with the Company through such vesting date. Stock awards generally are cliff-vested after three years from the date of grant (one year in the case of directors’ awards). The fair value of stock awards is generally equal to the closing price of the Company’s publicly-traded common stock on the grant date.

Compensation expense for all awards is accrued based on the estimated number of instruments for which the requisite service is expected to be rendered. This estimate is reflected in the period the stock option and stock awards are either granted or canceled. Expense related to stock options and stock awards compensation is recognized on a straight-line basis over the vesting term and only if the performance condition is probable of being achieved.

Income Taxes

The Company, under ASC Topic 740, follows the asset and liability method of accounting for income taxes under which deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax laws and tax rates, in each jurisdiction where the Company operates, and applied to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities due to a change in tax rates is recognized in income in the period that includes the enactment date. In addition, the amounts of any future tax benefits are reduced by a valuation allowance to the extent such benefits are not expected to be realized on a more-likely-than-not basis. The Company calculates estimated income taxes in each of the jurisdictions in which it operates. This process involves estimating actual current tax expense along with assessing temporary differences resulting from differing treatment of items for both book and tax purposes.

The Company follows guidance for accounting for uncertainty in income taxes. This guidance clarifies the accounting for uncertainty in income taxes recognized in a company’s financial statements and prescribes a recognition threshold and measurement standard for the financial statement recognition and measurement of an income tax position taken or expected to be taken in a tax return. This guidance also provides guidance for de-recognition, classification, interest and penalties, accounting in interim periods, disclosures and transitions.

RECENT DEVELOPMENTS AND INITIATIVES

The Inflation Reduction Act of 2022

In August 2022, the Inflation Reduction Act of 2022 (the “IR Act”) was signed into law by President Biden. Among other things, the IR Act implemented a 1% excise tax on the fair market stock repurchases by covered corporations, a 15% minimum tax based on adjusted financial statement income of certain large corporations, and several tax incentives to promote clean energy. Although the Company is continuing to evaluate the IR Act and its potential impact on future periods, at this time the Company does not expect the IR Act to have a material impact on its Consolidated Financial Statements.

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The OECD has issued Pillar Two model rules implementing a new global minimum tax of 15%, which is intended to be effective on January 1, 2024. While the U.S. has not yet adopted the Pillar Two rules, several other countries have adopted and enacted changes to their legislation in response to Pillar Two. The Company's turnover currently does not meet the minimum requirements that were set by OECD inclusive framework and rules. Although the Company will continue to evaluate and monitor the enactments of Pillar Two, to the extent that Pillar Two becomes applicable, the Company does not expect a material impact on its Consolidated Financial Statements.

RESULTS OF OPERATIONS

The following is a discussion of the results of operations for fiscal 2024 compared to fiscal 2023 along with a discussion of the changes in financial condition during fiscal 2024. For a discussion of our results of operations in fiscal year 2023 compared to fiscal year 2022, please see “Results of Operations” in Item 7 (Management’s Discussion and Analysis of Financial Condition and Results of Operations) of our Annual Report on Form 10-K for the fiscal year ended January 31, 2023, filed with the SEC on March 23, 2023.

The following are net sales by business segment and geographic location (in thousands):

The following are net sales by category (in thousands):

The following table presents the Company’s results of operations expressed as a percentage of net sales for the fiscal years indicated:

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Fiscal 2024 Compared to Fiscal 2023

Net Sales

Net sales for fiscal 2024 were $672.6 million, representing a $79.3 million or 10.5% decrease from the prior year. This decrease is attributable to the Watch and Accessory Brands segment and, to a lesser extent, the Company Stores segment. For fiscal 2024, fluctuations in foreign currency exchange rates positively impacted net sales by $8.6 million when compared to the prior year. Excluding this $8.6 million impact, net sales would have decreased by 11.7% as compared to the prior year.

Watch and Accessory Brands Net Sales

Net sales for fiscal 2024 in the Watch and Accessory Brands segment were $568.7 million, below the prior year by $71.7 million, or 11.2%. The decrease in net sales was primarily due to decreased volumes resulting from lower demand in the Company's wholesale customers in both the United States and International locations and a decrease in online retail, partially offset by the positive impact of fluctuations in foreign exchange rates.

United States Watch and Accessory Brands Net Sales

Net sales for fiscal 2024 in the United States locations of the Watch and Accessory Brands segment were $191.3 million, below the prior year by $36.0 million, or 15.8%, resulting primarily from decreased volumes due to lower demand in the Company's wholesale customers in both the owned and licensed brand categories and a decrease in online retail. The net sales recorded in the owned brands category decreased $27.2 million, or 15.8%, and net sales recorded in the licensed brand category decreased $8.7 million, or 17.1%.

International Watch and Accessory Brands Net Sales

Net sales for fiscal 2024 in the International locations of the Watch and Accessory Brands segment were $377.4 million, below the prior year by $35.7 million, or 8.6%, which included fluctuations in foreign currency exchange rates that positively impacted net sales by $8.6 million when compared to the prior year. The decrease in net sales was in both the owned and licensed brand categories primarily due to decreased volumes resulting from lower demand in the Company's wholesale customers and a decrease in online retail, partially offset by the positive impact of fluctuations in foreign exchange rates. The net sales decrease recorded in the owned brands category was $4.5 million, or 7.7%, primarily due to net sales decreases in Europe, the Americas (excluding the United States) and the Middle East, partially offset by a net sales increase in Asia. The net sales decrease in the licensed brands category was $28.5 million, or 8.2%, primarily due to net sales decreases in Europe and the Americas (excluding the United States), partially offset by net sales increases in the Middle East and Asia.

Company Stores Net Sales

Net sales for fiscal 2024 in the Company Stores segment were $103.9 million, $7.6 million or 6.8% below the prior year. The net sales decrease was primarily due to sales mix in the Company stores and a decrease in sales from the Company's online outlet store at www.movadocompanystore.com, partially offset by new store openings. As of January 31, 2024 and 2023, the Company operated 55 retail outlet locations.

Gross Profit

Gross profit for fiscal 2024 was $370.4 million or 55.1% of net sales as compared to $433.9 million or 57.7% of net sales in the prior year. The decrease in gross profit of $63.5 million was primarily due to lower net sales combined with a lower gross margin percentage. The decrease in the gross margin percentage of approximately 260 basis points for fiscal 2024 reflected an unfavorable impact of sales mix of approximately 180 basis points, the decreased leveraging of higher fixed costs over lower sales of approximately 90 basis points and a negative impact of fluctuations in foreign exchange rates of approximately 30 basis points, partially offset by decreased shipping costs of approximately 40 basis points.

Selling, General and Administrative (“SG&A”)

SG&A expenses for fiscal 2024 were $315.7 million, representing an increase from the prior year of $2.1 million, or 0.7%. The increase in SG&A expenses was primarily due to the following factors: an increase in payroll related expenses of $11.0 million; higher marketing expenses of $1.4 million; and an increase in travel and entertainment expenses of $1.1 million. These increases in SG&A expenses were partially offset by a decrease in performance-based compensation of $10.9 million and a decrease in professional service fees of $0.4 million. For the year ended January 31, 2024, fluctuations in foreign currency rates related to the foreign subsidiaries unfavorably impacted SG&A expenses by $3.7 million when compared to the prior year.

Watch and Accessory Brands Operating Income

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For fiscal 2024, the Company recorded operating income of $37.5 million in the Watch and Accessory Brands segment which includes $30.8 million of unallocated corporate expenses as well as $71.5 million of certain intercompany profits related to the Company’s supply chain operations. For fiscal 2023, the Company recorded operating income of $95.0 million in the Watch and Accessory Brands segment which included $37.0 million of unallocated corporate expenses as well as $81.0 million of certain intercompany profits related to the Company’s supply chain operations. The decrease in operating income was the result of a decrease in gross profit of $56.0 million combined with higher SG&A expenses of $1.5 million when compared to the prior year. The decrease in gross profit was primarily the result of lower net sales combined with a lower gross margin percentage primarily due to an unfavorable impact of sales mix, the decreased leveraging of higher fixed costs over lower sales and a negative impact of fluctuations in foreign exchange rates, partially offset by lower shipping costs. The increase in SG&A expenses of $1.5 million was primarily due to the following factors: an increase in payroll related expenses of $9.8 million; higher marketing expenses of $1.5 million; and an increase in travel and entertainment expenses of $1.1 million. Increased SG&A expenses were partially offset by a decrease in performance-based compensation of $10.8 million.

U.S. Watch and Accessory Brands Operating Loss

In the United States locations of the Watch and Accessory Brands segment, for the twelve months ended January 31, 2024, the Company recorded an operating loss of $30.0 million which includes unallocated corporate expenses of $30.8 million. For the twelve months ended January 31, 2023 the Company recorded an operating loss of $3.0 million in the United States locations of the Watch and Accessory Brands segment which included unallocated corporate expenses of $37.0 million. The increase in operating loss was the result of lower gross profit of $29.9 million, partially offset by a decrease in SG&A expenses of $2.9 million when compared to the prior year period. The decrease in gross profit of $29.9 million was primarily the result of lower net sales, combined with a lower gross margin percentage primarily due to an unfavorable impact of sales mix, the decreased leveraging of higher fixed costs over lower sales, partially offset by lower shipping costs. The decrease in SG&A expenses of $2.9 million was primarily due to a decrease in performance-based compensation of $8.1 million. This decrease in SG&A expenses was partially offset by an increase in payroll related expenses of $5.5 million and an increase in travel and entertainment expenses of $0.6 million.

International Watch and Accessory Brands Operating Income

In the International locations of the Watch and Accessory Brands segment, for the twelve months ended January 31, 2024, the Company recorded operating income of $67.6 million which includes $71.5 million of certain intercompany profits related to the Company’s International supply chain operations. For the twelve months ended January 31, 2023 the Company recorded operating income of $98.1 million in the International locations of the Watch and Accessory Brands segment which included $81.0 million of certain intercompany profits related to the Company’s supply chain operations. The decrease in operating income was the result of lower gross profit of $26.1 million combined with higher SG&A expenses of $4.4 million. The decrease in gross profit of $26.1 million was primarily the result of lower net sales, combined with a lower gross margin percentage primarily due to an unfavorable impact of sales mix, the decreased leveraging of higher fixed costs over lower sales and a negative impact of fluctuations in foreign exchange rates, partially offset by lower shipping costs. The increase in SG&A expenses of $4.4 million was primarily due to the following factors: an increase in payroll related expenses of $4.3 million; higher marketing expenses of $1.5 million; and an increase in travel and entertainment expenses of $0.5 million. These increases in SG&A expenses were partially offset by a decrease in performance-based compensation of $2.7 million.

Company Stores Operating Income

The Company recorded operating income of $17.2 million and $25.3 million in the Company Stores segment for fiscal 2024 and 2023, respectively. The decrease in operating income of $8.1 million was primarily related to a decrease in gross profit of $7.5 million, mainly due to lower net sales combined with a lower gross margin percentage, and higher SG&A expenses of $0.6 million, reflecting a $1.2 million increase in payroll related expenses, partially offset by a decrease of $0.4 million in professional service fees. As of both January 31, 2024, and 2023, the Company Stores segment operated 55 retail outlet locations.

Other Non-Operating Income

For the twelve months ended January 31, 2024, the Company recorded other income, net of $6.0 million primarily due to interest income, partially offset by a $0.5 million impairment related to an equity investment in a consumer products company that sold its business and assets in which the Company expects to receive little or no return on its investment.

For the twelve months ended January 31, 2023, the Company recorded other income of $2.1 million primarily due to interest income.

Interest Expense

Interest expense was $0.5 million primarily due to the payment of unused commitment fees for fiscal 2024 and 2023. There were no borrowings under the Company's revolving credit facility during fiscal 2024 and 2023.

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Income Taxes

The Company recorded an income tax provision of $12.7 million and $24.9 million for fiscal 2024 and 2023, respectively.

The effective tax rate for fiscal 2024 was 21.0% and was essentially equivalent to the U.S. statutory tax rate of 21.0% primarily due to foreign profits being taxed in lower taxing jurisdictions, partially offset by U.S. state and local taxes, net of the federal benefit. The effective tax rate for fiscal 2023 was 20.4% and differed from the U.S. statutory tax rate of 21.0% primarily due to foreign profits being taxed in lower taxing jurisdictions and the release of certain foreign valuation allowances, partially offset by U.S. state and local taxes, net of the federal benefit.

Net Income Attributable to Movado Group, Inc.

The Company recorded net income attributable to Movado Group, Inc. of $46.7 million and $94.5 million for fiscal 2024 and 2023, respectively.

LIQUIDITY AND CAPITAL RESOURCES

At January 31, 2024 and January 31, 2023, the Company had $262.1 million and $251.6 million, respectively, of cash and cash equivalents. Of this total, $176.1 million and $114.0 million, respectively, consisted of cash and cash equivalents at the Company’s foreign subsidiaries.

The Company believes that based on the Company’s current expectations, cash flows from operations and its credit lines and cash on-hand, the Company has adequate funds to support its operating, capital and debt service requirements and expects to maintain compliance with its debt covenants for the next twelve months subsequent to the issuance of the accompanying Consolidated Financial Statements.

At January 31, 2024 the Company had working capital of $430.8 million as compared to $424.8 million at January 31, 2023. The increase in working capital was primarily the result of an increase in cash and trade receivables and a decrease in income taxes payable, accrued liabilities and accrued payroll and benefits, partially offset by a decrease in inventories. The Company defines working capital as the difference between current assets and current liabilities.

The Company had $76.8 million of cash provided by operating activities for fiscal 2024 as compared to $54.3 million for fiscal 2023. Cash provided by operating activities for fiscal 2024 included net income of $47.5 million, positively adjusted by $24.6 million related to non-cash items. Cash provided by operating activities for fiscal 2024 included a $37.7 million decrease in investment in inventories primarily due to timing of receipts to align with sales levels, partially offset by a change in payments related to income taxes of $16.7 million primarily due to timing, a decrease in accrued payroll and benefits of $9.9 million primarily as a result of payments of fiscal year 2023 performance-based compensation and an increase of $9.1 million in trade receivables as a result of timing of receipts and change in sales mix. Cash provided by operating activities for fiscal 2023 included net income of $97.0 million, positively adjusted by $20.3 million related to non-cash items. Cash used in operating activities for fiscal 2023 was impacted by a $28.9 million increase in investment in inventories primarily due to timing of receipts, a decrease of $13.7 million in accounts payable primarily due to timing of payments and a decrease in accrued payroll of $7.7 million primarily as a result of payments of fiscal year 2022 performance-based compensation, net of fiscal year 2023 accrual.

Cash used in investing was $11.5 million for fiscal 2024 as compared to $10.6 million for fiscal 2023. The cash used in fiscal 2024 was primarily related to capital expenditures of $8.2 million primarily due to new computer software and leasehold improvements and $3.1 million of long-term investments. Cash used in investing activities for fiscal 2023 included $7.1 million of capital expenditures and $3.3 million of long-term investments.

The Company expects that capital expenditures in fiscal 2025 will be approximately $11.0 million as compared to $8.2 million in fiscal 2024. The capital spending will be primarily for projects in the ordinary course of business including facilities improvements, shop-in-shops, website development, computer hardware and software and tooling costs. The Company has the ability to manage its capital expenditures on discretionary projects.

Cash used in financing activities was $57.6 million for fiscal 2024 as compared to $65.3 million for fiscal 2023. The cash used in fiscal 2024 included $53.1 million in dividends paid, which included a special cash dividend of $1.00 per share, $3.1 million in stock repurchased in the open market and $1.4 million paid for the distribution of noncontrolling interest earnings. Cash used in financing activities in fiscal 2023 included $31.4 million in stock repurchased in the open market and $31.4 million in dividends paid.

The Company and its U.S. and Swiss subsidiaries (collectively, the "Borrowers") are parties to an Amended and Restated Credit Agreement originally dated October 12, 2018 (as subsequently amended, the “Credit Agreement”) with the lenders party thereto and Bank of America, N.A. as administrative agent (in such capacity, the “Agent”). The Credit Agreement provides for a $100.0 million

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senior secured revolving credit facility (the “Facility”) and has a maturity date of October 28, 2026. The Facility includes a $15.0 million letter of credit subfacility, a $25.0 million swingline subfacility and a $75.0 million sublimit for borrowings by the Swiss Borrower, with provisions for uncommitted increases to the Facility of up to $50.0 million in the aggregate subject to customary terms and conditions. The Credit Agreement contains affirmative and negative covenants binding on the Company and its subsidiaries that are customary for credit facilities of this type, including, but not limited to, restrictions and limitations on the incurrence of debt and liens, dispositions of assets, capital expenditures, dividends and other payments in respect of equity interests, the making of loans and equity investments, mergers, consolidations, liquidations and dissolutions, and transactions with affiliates (in each case, subject to various exceptions).

The borrowings under the Facility are joint and several obligations of the Borrowers and are also cross-guaranteed by each Borrower, except that the Swiss Borrower is not liable for, nor does it guarantee, the obligations of the U.S. Borrowers. In addition, the Borrowers’ obligations under the Facility are secured by first priority liens, subject to permitted liens, on substantially all of the U.S. Borrowers’ assets other than certain excluded assets. The Swiss Borrower does not provide collateral to secure the obligations under the Facility.

As of both January 31, 2024, and January 31, 2023, there were no amounts of loans outstanding under the Facility. Availability under the Facility was reduced by the aggregate amount of letters of credit outstanding, issued in connection with retail and operating facility leases to various landlords and for Canadian payroll to the Royal Bank of Canada, totaling approximately $0.3 million at both January 31, 2024, and January 31, 2023. At January 31, 2024, the letters of credit have expiration dates through May 31, 2024. As of both January 31, 2024, and January 31, 2023, availability under the Facility was $99.7 million. For additional information regarding the Facility, see Note 7 – Debt and Lines of Credit to the Consolidated Financial Statements.

The Company had weighted average borrowings under the Facility of zero during both fiscal 2024 and fiscal 2023, respectively.

Borrowings under the Credit Agreement bear interest at rates generally based on either the Term Secured Overnight Financing Rate ("SOFR") as administered by the Federal Reserve Bank of New York or a specified base rate, as selected periodically by the Company. The SOFR-based loans bear interest at SOFR plus a spread ranging from 1.00% to 1.75% per annum and the base rate loans bear interest at the base rate plus a spread ranging from 0% to 0.75% per annum, with the spread in each case being based on the Company’s consolidated leverage ratio (as defined in the Credit Agreement). As of both January 31, 2024, and 2023, the Company’s spreads were 1.00% over SOFR and 0% over the base rate.

The Company's Swiss subsidiary maintains unsecured lines of credit with a Swiss bank that are subject to repayment upon demand. As of January 31, 2024, and 2023, these lines of credit totaled 6.5 million Swiss Francs for both periods, with a dollar equivalent of $7.5 million and $7.1 million, respectively. As of January 31, 2024, and 2023, there were no borrowings against these lines. As of January 31, 2024, and 2023, two European banks had guaranteed obligations to third parties on behalf of two of the Company’s foreign subsidiaries in the dollar equivalent of $1.4 million and $1.2 million, respectively, in various foreign currencies, of which $0.8 million and $0.6 million, respectively, was a restricted deposit as it relates to lease agreements.

Cash paid for interest, including unused commitments fees and amortization of debt fees, was $0.3 million during both fiscal 2024 and 2023, respectively.

From time to time the Company may make minority investments in growth companies in the consumer products sector and other sectors relevant to its business, including certain of the Company's suppliers and customers, as well as in venture capital funds that invest in companies in media, entertainment, information technology and technology-related fields and in digital assets. During fiscal 2022, the Company committed to invest up to $21.5 million in such investments. The Company funded approximately $5.3 million of these commitments through fiscal 2023 and an additional $3.1 million during fiscal 2024 and may be called upon to satisfy capital calls in respect of the remaining $13.1 million in such commitments at any time during a period generally ending ten years after the first capital call in respect of a given commitment. One consumer products company in which the Company made an equity investment in fiscal year 2022 sold its business and assets in the first quarter of fiscal 2024 in a transaction that is expected to yield little or no return for equity holders. As a result, the Company fully impaired its $0.5 million investment in this entity in the first quarter of fiscal 2024.

On March 23, 2023, the Company declared a special cash dividend of $1.00 per share, as well as a quarterly cash dividend of $0.35 per share, both paid on April 19, 2023, to shareholders of record on April 5, 2023. The total dividends of $29.9 million were paid on April 19, 2023. The Company paid cash dividends of $0.35 per share, or $7.7 million, during the three months ended July 31, 2023; $0.35 per share, or $7.8 million, during the three months ended October 31, 2023; and $0.35 per share, or $7.7 million, during the three months ended January 31, 2024. The Company paid cash dividends of $0.35 per share, or $7.9 million, during the three months ended April 30, 2022; $0.35 per share, or $7.9 million, during the three months ended July 31, 2022; $0.35 per share, or $7.8 million, during the three months ended October 31, 2022; and $0.35 per share, or $7.8 million, during the three months ended January 31, 2023.

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Although the Company currently expects to continue to declare cash dividends in the future, the decision of whether to declare any future cash dividend, including the amount of any such dividend and the establishment of record and payment dates, will be determined, in each quarter, by the Board of Directors, in its sole discretion.

On November 23, 2021, the Board approved a share repurchase program under which the Company is authorized to purchase up to $50.0 million of its outstanding common stock through November 23, 2024, depending on market conditions, share price and other factors. Under the share repurchase program, the Company is permitted to purchase shares of its common stock from time to time through open market purchases, repurchase plans, block trades or otherwise. During fiscal 2024, the Company repurchased a total of 111,722 shares of its common stock at a total cost of $3.1 million, or an average of $27.89 per share. At January 31, 2024, $17.9 million remains available for purchase under the Company's November 23, 2021 repurchase program. During fiscal 2023, the Company repurchased a total of 898,956 shares of its common stock under the November 23, 2021 share repurchase program and a prior share repurchase program that expired on September 30, 2022 at a total cost of $31.4 million, or an average of $34.94 per share.

The Company has various contractual obligations as part of its ordinary course of business. The Company's obligations include operating lease obligations (see Note 11- Leases), licensing agreements (see Note 10 - Commitments and Contingencies), purchase obligations (see Note 10 - Commitments and Contingencies) and transition tax obligation (see Note 10 - Commitments and Contingencies).

Accounting Changes and Recent Accounting Pronouncements

See Note 2 to the accompanying audited Consolidated Financial Statements for a description of recent accounting pronouncements which may impact the Company's Consolidated Financial Statements in future reporting periods.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

GENERAL

Net Sales

The Company operates and manages its business in two principal business segments: Watch and Accessory Brands and Company Stores. The Company also operates in two geographic locations: United States and International.

The Company divides its watch and accessory business into two principal categories: the owned brands category and the licensed brands category. The owned brands category consists of the Movado®, Concord®, Ebel®, Olivia Burton® and MVMT® brands. Products in the licensed brands category include the following brands manufactured and distributed under license agreements with the respective brand owners: Coach®, Tommy Hilfiger®, Hugo Boss®, Lacoste® and Calvin Klein®. The Company's collaboration with Scuderia Ferrari ended on June 30, 2022, although the Company had the right to sell remaining inventory through December 31, 2022.

The primary factors that influence annual sales are general economic conditions in the Company’s U.S. and international markets, new product introductions, the level and effectiveness of advertising and marketing expenditures and product pricing decisions.

55.6% of the Company’s total sales are from international markets (see Note 20 to the Consolidated Financial Statements), and therefore reported sales made in those markets are affected by foreign exchange rates. The Company’s international sales are primarily billed in local currencies (predominantly Euros, British Pounds and Swiss Francs) and translated to U.S. dollars at average exchange rates for financial reporting purposes. The Company reduces its exposure to exchange rate risk through a hedging program.

The Company divides its business into two major geographic locations: United States operations, and International, which includes the results of all other non-U.S. Company operations. The allocation of geographic revenue is based upon the location of the customer. The Company’s International operations in Europe, the Middle East, the Americas (excluding the United States), and Asia account for 32.8%, 10.3%, 7.8% and 4.7%, respectively, of the Company’s total net sales for fiscal 2023. A vast majority of the Company’s tangible International assets are owned by the Company’s Swiss and Hong Kong subsidiaries.

The Company’s business is seasonal. There are two major selling seasons in the Company’s markets: the spring season, which includes school graduations and several holidays; and, most importantly, the Christmas and holiday season. Major selling seasons in certain international markets center on significant local holidays that occur in late winter or early spring. The Company’s net sales historically have been higher during the second half of the fiscal year. The second half of each fiscal year accounted for 54.0% and 57.9% of the Company’s net sales for the fiscal years ended January 31, 2023 and 2022, respectively.

The Company’s retail operations consist of 51 retail outlet locations in the United States and four locations in Canada.

The significant factors that influence annual sales volumes in the Company’s retail operations are similar to those that influence U.S. wholesale sales. In addition, most of the Company’s retail outlet locations are near vacation destinations and, therefore, the seasonality of these stores is driven by the peak tourist seasons associated with these locations.

Gross Margins

The Company’s overall gross margins are primarily affected by four major factors: channel and product sales mix, product pricing strategy, manufacturing costs and fluctuation in foreign currency exchange rates, in particular the relationship between the U.S. dollar and the Swiss Franc, British Pound and the Euro. Gross margins for the Company may not be comparable to those of other companies, since some companies include all the costs related to their distribution networks in cost of sales whereas the Company does not include the costs associated with its warehousing and distribution facilities nor the occupancy costs for the Company Stores segment in the cost of sales line item. Those costs are included in selling, general and administrative expenses.

Gross margins vary among the brands included in the Company’s portfolio and also among watch models within each brand. Watches in the Company’s owned brands category generally earn higher gross margin percentages than watches in the licensed brands category. The difference in gross margin percentages within the licensed brands category is primarily due to the impact of royalty payments made on the licensed brands. Gross margins in the Company’s e-commerce business generally earn higher gross margin percentages than those of the traditional wholesale business. Gross margins in the Company’s outlet business are affected by the mix of product sold and may exceed those of the wholesale business since the Company earns margins on its outlet store sales from manufacture to point of sale to the consumer.

All of the Company’s brands compete with a number of other brands not only on styling but also on wholesale and retail price. The Company’s ability to improve margins through price increases is therefore, to some extent, constrained by competitors’ actions.

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Cost of sales of the Company’s products consists primarily of costs for raw materials, component costs, royalties, depreciation, amortization, assembly costs, shipping to customers, design costs and unit overhead costs associated with the Company’s supply chain operations predominately in Switzerland and Asia. The Company’s supply chain operations consist of logistics management of assembly operations and product sourcing predominately in Switzerland and Asia and minor assembly in Switzerland. The Swiss watch movements used in the manufacture of Movado, Ebel and Concord watches are purchased from three suppliers, one of which is a wholly-owned subsidiary of one of the Company’s competitors. That competitive supplier announced in February 2021 that it will no longer sell mechanical Swiss movements to third parties, although it continues to sell Swiss quartz movements. As a result of this development, the Company currently sources all of its mechanical Swiss movements from a single supplier. Although mechanical movements are only used in a relatively small number of the Company’s watch styles, the elimination of a source of supply could make it more difficult for the Company to satisfy its requirements for mechanical movements. Through productivity improvement efforts, the Company has controlled the level of overhead costs and maintained flexibility in its cost structure by outsourcing a significant portion of its component and assembly requirements.

Since a significant amount of the Company’s product costs are incurred in Swiss Francs, fluctuations in the U.S. dollar/Swiss Franc exchange rate can impact the Company’s cost of goods sold and, therefore, its gross margins. The Company reduces its exposure to the Swiss Franc exchange rate risk through a hedging program. Under the hedging program, the Company manages most of its foreign currency exposures on a consolidated basis, which allows it to net certain exposures and take advantage of natural offsets. In the event these exposures do not offset, the Company has the ability to hedge its Swiss Franc purchases using a combination of forward contracts and purchased currency options. The Company’s hedging program mitigated the impact of the exchange rate fluctuations on product costs and gross margins for fiscal years 2023 and 2022.

Selling, General and Administrative (“SG&A”) Expenses

The Company’s SG&A expenses consist primarily of marketing, selling, distribution, general and administrative expenses.

Marketing expenditures are based principally on overall strategic considerations relative to maintaining or increasing market share in markets that management considers to be crucial to the Company’s continued success as well as on general economic conditions in the various markets around the world in which the Company sells its products. Marketing expenses include salaries, various forms of media advertising, digital advertising (including social media), customer acquisition costs and co-operative advertising with customers and distributors and other point of sale marketing and promotional spending.

Selling expenses consist primarily of salaries, sales commissions, sales force travel and related expenses, credit card fees, depreciation and amortization, expenses associated with the Company’s customer conferences and industry trade shows and operating costs incurred in connection with the Company’s retail business. Sales commissions vary with overall sales levels. Retail selling expenses consist primarily of payroll related and store occupancy costs.

Distribution expenses consist primarily of costs of running distribution centers and customer service and include salaries, rental and other occupancy costs, security, depreciation and amortization of furniture and leasehold improvements and shipping supplies.

General and administrative expenses consist primarily of salaries and other employee compensation including performance-based compensation, employee benefit plan costs, office rent, management information systems costs, professional fees, bad debts, depreciation and amortization of furniture, computer software, leasehold improvements, amortization of finite lived intangible assets, patent and trademark expenses and various other general corporate expenses.

Other Non-Operating Income

Other non-operating income consist primarily of interest income and the non-service components of the Company's Swiss pension plan. In addition, for the fiscal year ended January 31, 2022, the Company recorded other non-operating income due to the final settlement related to a sale of a building in an international location in the prior year period.

Interest Expense

To the extent it borrows, the Company records interest expense on its revolving credit facility. Additionally, interest expense includes the amortization of deferred financing costs, and unused commitment fees associated with the Company’s revolving credit facility.

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Income Taxes

The Company follows the asset and liability method of accounting for income taxes as prescribed under the Accounting Standards Codification guidance for Income Taxes (“ASC Topic 740”). ASC Topic 740 requires the Company to recognize deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts and tax bases of existing assets and liabilities.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The Company’s consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States and those significant policies are more fully described in Note 1 to the Company’s consolidated financial statements. The preparation of these financial statements and the application of certain critical accounting policies require management to make judgments based on estimates and assumptions that affect the information reported. On an on-going basis, management evaluates its estimates and judgments, including those related to sales discounts and markdowns, product returns, bad debt, inventories, income taxes, warranty obligations, useful lives of property, plant and equipment, impairments of long-lived assets, stock-based compensation and contingencies and litigation. Management bases its estimates and judgments about the carrying values of assets and liabilities that are not readily apparent from other sources on historical experience, contractual commitments and on various other factors that are believed to be reasonable under the circumstances. Actual results could differ from these estimates. Management believes the following are the critical accounting policies requiring significant judgments and estimates used in the preparation of its consolidated financial statements.

Revenue Recognition

In the wholesale channel, revenue is recognized and recorded when a contract is in place, obligations under the terms of a contract with the customer are satisfied and control is transferred to the customer. Such revenue is measured as the ultimate amount of consideration the Company expects to receive in exchange for transferring goods including variable consideration. The Company has determined that transfer of control passes to the wholesale customer upon shipment or upon receipt depending on the agreement with the customer and shipping terms. Control passes to outlet store customers at the time of sale and to substantially all e-commerce customers upon shipment. Prior to January 1, 2021, the requirement for recognizing revenue for e-commerce was met upon delivery to the customer. Factors considered in the transfer of control include the right to payment, transfer of legal title, physical possession and customer acceptance of the goods and whether the significant risks and rewards for the goods belong with the customer. The Company records estimates of variable consideration, which includes sales returns, markdowns, volume-based programs and sales and cash discount allowances as a reduction of revenue in the same period that the sales are recorded. These estimates are based upon the expected value method considering all reasonably available information including historical analysis, customer agreements and/or currently known factors that arise in the normal course of business. Returns, discounts and allowances have historically been within the Company’s expectations and the provisions established. The future provisional rates may differ from those experienced in the past. Taxes imposed by governmental authorities on the Company's revenue-producing activities with customers, such as sales taxes and value added taxes, are excluded from net sales.

Intangibles

Intangible assets consist primarily of trade names, customer relationships and trademarks. In accordance with applicable guidance, the Company estimates and records the fair value of purchased intangible assets at the time of their acquisition. The fair values of these intangible assets are estimated based on independent third-party appraisals. Finite-lived intangible assets are amortized over their respective estimated useful lives, which range from three to ten years, and are evaluated for impairment periodically and whenever events or changes in circumstances indicate that their related carrying values may not be fully recoverable. The Company determined that there was no impairment in fiscal 2023 or in fiscal 2022.

During the three months ended April 30, 2020, in light of the COVID-19 pandemic that resulted in the closing of the Company’s stores and of the vast majority of the stores of the Company’s wholesale customers (resulting in a decrease in revenues and gross margin), the Company performed recoverability tests for the long-lived assets of MVMT, Olivia Burton and the Company Stores as of April 30, 2020. As a result of this analysis, the Company recorded impairment charges in the Watch and Accessory Brands segment totaling $22.2 million in the first quarter of fiscal 2021, decreasing MVMT's trade name to $2.4 million and MVMT's customer relationships to zero.

Inventories

The Company values its inventory at the lower of cost or net realizable value. Cost is determined using the average cost method. The Company performs reviews of its on-hand inventory to determine amounts, if any, of inventory that is deemed discontinued, excess, or unsaleable. Inventory classified as discontinued, together with the related component parts that can be assembled into saleable finished goods, is sold primarily through the Company’s retail outlet locations. The Company retains adequate levels of component parts to

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facilitate both the manufacturing of its watches as well as the after-sales service of its watches for an extended period of time after the discontinuance of the manufacturing of such watches. The adjustment to reduce the value of component parts below their cost to their net realizable value is based on the timing of when a component part is no longer associated with a watch that is being manufactured as well as the significant assumption related to the anticipated utilization of component parts for after-sales service.

Long-Lived Assets

The Company periodically reviews the estimated useful lives of its depreciable assets based on factors including historical experience, the expected beneficial service period of the asset, the quality and durability of the asset and the Company’s maintenance policy including periodic upgrades. Changes in useful lives are made on a prospective basis unless factors indicate the carrying amounts of the assets may not be recoverable and an impairment is necessary.

The Company performs an impairment review of its long-lived assets once events or changes in circumstances indicate, in management’s judgment, that the carrying value of such assets may not be recoverable. When such a determination has been made, management compares the carrying value of the asset groups with their estimated future undiscounted cash flows. If it is determined that an impairment has occurred, the fair value of the asset group is determined and compared to its carrying value. The excess of the carrying value over the fair value, if any, is recognized as a loss during that period. The impairment is calculated as the difference between asset carrying values and their estimated fair values. No impairment charge was recorded in fiscal 2023 or in fiscal 2022.

Stock-Based Compensation

The Company utilizes the Black-Scholes option-pricing model which requires that certain assumptions be made to calculate the fair value of each option at the grant date. The expected life of stock option grants is determined using historical data and represents the time period during which the stock option is expected to be outstanding until it is exercised. The risk-free interest rate is based on the U.S. treasury note interest rate in effect on the date of grant for the expected life of the stock option. The expected stock price volatility is derived from historical volatility and calculated based on the estimated term structure of the stock option grant. The expected dividend yield is calculated using the Company’s expected average of annualized dividend yields and applied over the expected term of the option. Management monitors stock option exercises and employee termination patterns to estimate forfeitures rates within the valuation model. Separate groups of employees that have similar historical exercise behavior are considered separately for valuation purposes.

In addition to stock options, the Company may also grant stock awards to employees and directors. The stock awards are generally in the form of time-vesting restricted stock unit awards (pursuant to which unrestricted shares of Common Stock are issued to the grantee when the award vests) or performance-based awards (under which vesting occurs only if one or more predetermined financial goals are achieved within the relevant performance period); both are subject to the participant’s continued employment (or board service) with the Company through such vesting date. Stock awards generally are cliff-vested after three years from the date of grant (one year in the case of directors’ awards). The fair value of stock awards is generally equal to the closing price of the Company’s publicly-traded common stock on the grant date.

Compensation expense for all awards is accrued based on the estimated number of instruments for which the requisite service is expected to be rendered. This estimate is reflected in the period the stock option and stock awards are either granted or canceled. Expense related to stock options and stock awards compensation is recognized on a straight-line basis over the vesting term and only if the performance condition is probable of being achieved.

Income Taxes

The Company, under ASC Topic 740, follows the asset and liability method of accounting for income taxes under which deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax laws and tax rates, in each jurisdiction where the Company operates, and applied to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities due to a change in tax rates is recognized in income in the period that includes the enactment date. In addition, the amounts of any future tax benefits are reduced by a valuation allowance to the extent such benefits are not expected to be realized on a more-likely-than-not basis. The Company calculates estimated income taxes in each of the jurisdictions in which it operates. This process involves estimating actual current tax expense along with assessing temporary differences resulting from differing treatment of items for both book and tax purposes.

The Company follows guidance for accounting for uncertainty in income taxes. This guidance clarifies the accounting for uncertainty in income taxes recognized in a company’s financial statements and prescribes a recognition threshold and measurement standard for the financial statement recognition and measurement of an income tax position taken or expected to be taken in a tax return. This

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guidance also provides guidance for de-recognition, classification, interest and penalties, accounting in interim periods, disclosures and transitions.

RECENT DEVELOPMENTS AND INITIATIVES

COVID-19

The COVID-19 pandemic and related public health measures materially impacted the Company’s operating results for the fiscal year ended January 31, 2021 and continue to affect how the Company and its customers and suppliers operate their businesses to varying degrees. Various containment and mitigation measures that have at times been imposed by governmental and other authorities around the world have adversely affected sales of our products and our supply chain.

Although the COVID-19 pandemic's adverse impact on the Company has significantly diminished in recent quarters, the pandemic is expected to continue to affect the Company's results of operations for the foreseeable future due to impacts on supply chains, shipping operations, consumer behavior, spending levels, shopping preferences and tourism.

Russia's invasion of Ukraine

On February 24, 2022, Russia launched a comprehensive invasion of Ukraine. The invasion and the subsequent economic sanctions imposed by some countries have negatively impacted the Company's revenue to the extent the conflict and the sanctions negatively impacted economic conditions and our ability to sell products to customers in the affected region. In response to the invasion, the Company decided in March 2022 to suspend all sales to Russia and Belarus. Sales and assets in Russia, Belarus and Ukraine for all periods presented are immaterial to the Company's results of operations, financial condition and cash flows. In addition, the conflict has had broader implications on economies outside the region, such as the global inflationary impact of boycotts of Russian oil and gas by other countries and the blockade of Ukrainian grain exports.

The Inflation Reduction Act of 2022

In August 2022, the Inflation Reduction Act of 2022 (the “IR Act”) was signed into law by President Biden. Among other things, the IR Act introduces a 1% excise tax on the fair market stock repurchases by covered corporations, a 15% minimum tax based on adjusted financial statement income of certain large corporations, and several tax incentives to promote clean energy. Although the Company is continuing to evaluate the IR Act and its potential impact on future periods, at this time the Company does not expect the IR Act to have a material impact on its consolidated financial statements. However, the 1% excise tax on stock repurchases will increase the Company’s cost, to the extent that the stock repurchases are greater than shares issued, after December 31, 2022.

RESULTS OF OPERATIONS

The following is a discussion of the results of operations for fiscal 2023 compared to fiscal 2022 along with a discussion of the changes in financial condition during fiscal 2023. For a discussion of our results of operations in fiscal year 2022 compared to fiscal year 2021, please see “Results of Operations” in Item 7 (Management’s Discussion and Analysis of Financial Condition and Results of Operations) of our Annual Report on Form 10-K for the fiscal year ended January 31, 2022, filed with the SEC on March 24, 2022.

The following are net sales by business segment and geographic location (in thousands):

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The following are net sales by category (in thousands):

The following table presents the Company’s results of operations expressed as a percentage of net sales for the fiscal years indicated:

Fiscal 2023 Compared to Fiscal 2022

Net Sales

Net sales in fiscal 2023 were $751.9 million, representing a $19.5 million or 2.7% increase above the prior year. This increase is attributable to growth in both the Watch and Accessory Brands segment and Company Stores segment. For fiscal 2023, fluctuations in foreign currency exchange rates negatively impacted net sales by $31.8 million when compared to the prior year. On a constant dollar basis net sales increased 7.0% as compared to the prior year.

Watch and Accessory Brands Net Sales

Net sales in fiscal 2023 in the Watch and Accessory Brands segment were $640.3 million, an increase above the prior year period of $14.1 million, or 2.3%. The increase in net sales was primarily due to the addition of the Calvin Klein brand, increased volumes resulting from higher demand with growth from the Company's wholesale customers in the International locations and, to a lesser extent, the impact of pricing increases, partially offset by the negative impact of fluctuations in foreign exchange rates, a decrease in online retail and a decrease in the United States locations.

United States Watch and Accessory Brands Net Sales

Net sales in fiscal 2023 in the United States locations of the Watch and Accessory Brands segment were $227.3 million, below the prior year period by $16.9 million, or 6.9%, resulting primarily from decreased volumes resulting from lower demand in the Company's wholesale customers in the owned brand category and a decrease in online retail, partially offset by the impact of pricing increases. The net sales recorded in the owned brands category decreased $19.3 million, or 10.1%, and net sales recorded in the licensed brand category increased $2.5 million, or 5.2%.

International Watch and Accessory Brands Net Sales

Net sales in fiscal 2023 in the International locations of the Watch and Accessory Brands segment were $413.1 million, above the prior year by $31.1 million, or 8.1%, which included fluctuations in foreign currency exchange rates that negatively impacted net sales by $31.8 million when compared to the prior year. The increase in net sales in the licensed brand category was $28.7 million, or 9.0%, due to net sales increases across the Middle East, Asia, and the Americas (excluding the United States), partially offset by a decrease in Europe. The increase is primarily due to the addition of the Calvin Klein brand, increased volumes resulting from higher demand with growth in the Company's wholesale customers and, to a lesser extent, the impact of pricing increases, partially offset by fluctuations in foreign currency exchange rates. The net sales decrease recorded in the owned brands category was $0.4 million, or 0.7%, due to net

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sales decreases in Europe and Asia, partially offset by increases in the Middle East and the Americas (excluding the United States). The decrease is primarily due to fluctuations in foreign currency exchange rates and online retail, partially offset from higher demand with growth in the Company's wholesale customers, and to a lesser extent, the impact of pricing increases.

Company Stores Net Sales

Net sales in fiscal 2023 in the Company Stores segment were $111.6 million, $5.4 million or 5.1% above the prior year period. The net sales increase was primarily the result of the growth of the Company's online outlet store at www.movadocompanystore.com and the opening of new retail outlet stores. As of January 31, 2023 and 2022, the Company operated 55 and 51 retail outlet locations, respectively.

Gross Profit

Gross profit for fiscal 2023 was $433.9 million or 57.7% of net sales as compared to $419.1 million or 57.2% of net sales in the prior year. The increase in gross profit of $14.8 million was primarily due to higher net sales combined with a higher gross margin percentage. The increase in gross margin percentage of approximately 50 basis points for fiscal 2023 resulted primarily from a favorable impact of sales mix of approximately 120 basis points, partially offset by a negative impact of fluctuations in foreign exchange rates of approximately 70 basis points and approximately 20 basis points impact due to increased shipping costs.

Selling, General and Administrative (“SG&A”)

SG&A expenses in fiscal 2023 were $313.5 million, representing an increase from the prior year of $12.0 million, or 4.0%. The prior year included a reversal in certain fiscal 2021 corporate initiative charges of $1.1 million due to a change in estimate primarily impacting the accounts receivable reserve due to collection of a previously reserved receivable. Excluding the reversal in corporate initiative charges in the prior year SG&A expenses would have increased $10.9 million primarily from the following factors: an increase in payroll related expense of $8.5 million; higher marketing expenses of $4.7 million; an increase of $2.1 million in professional service fees primarily to support enhancement to the Company's commercial and administrative systems; an increase in rent and rent related charges of $0.8 million; and an increase in sales commissions of $0.5 million. Increased SG&A expenses were partially offset by a decrease in performance-based compensation of $7.8 million. For the year ended January 31, 2023, fluctuations in foreign currency rates related to the foreign subsidiaries favorably impacted SG&A expenses by $9.1 million when compared to the prior year.

Watch and Accessory Brands Operating Income

For fiscal 2023, the Company recorded operating income of $95.1 million in the Watch and Accessory Brands segment which includes $37.0 million of unallocated corporate expenses as well as $81.0 million of certain intercompany profits related to the Company’s supply chain operations. For fiscal 2022, the Company recorded operating income of $85.6 million in the Watch and Accessory Brands segment which included $38.7 million of unallocated corporate expenses as well as $80.5 million of certain intercompany profits related to the Company’s supply chain operations. The increase in operating income was the result of an increase in gross profit of $14.9 million, partially offset by an increase in SG&A expenses of $5.4 million when compared to the prior year. The increase in gross profit of $14.9 million was primarily the result of higher net sales, combined with a higher gross margin percentage primarily due to a favorable change of sales mix, partially offset by a negative impact of fluctuations in foreign exchange rates and increased shipping costs. Prior year SG&A expenses included a reversal in certain fiscal 2021 corporate initiative charges of $1.1 million due to collection of a previously reserved receivable. Excluding the reversal in corporate initiative charges in the prior year SG&A expenses would have increased $4.3 million primarily from the following factors: an increase in payroll related expense of $5.6 million; higher marketing expenses of $2.4 million; an increase of $1.7 million in professional service fees primarily to support enhancement to the Company's commercial and administrative systems; and an increase in sales commissions of $0.5 million. Increased SG&A expenses were partially offset by a decrease in performance-based compensation of $7.6 million.

U.S. Watch and Accessory Brands Operating (Loss)/Income

In the United States locations of the Watch and Accessory Brands segment, for the twelve months ended January 31, 2023, the Company recorded an operating loss of $3.0 million, which includes unallocated corporate expenses of $37.0 million. For the twelve months ended January 31, 2022, the Company recorded operating income of $9.6 million in the United States locations of the Watch and Accessory Brands segment which included unallocated corporate expenses of $38.7 million. The change to operating loss from operating income was the result of lower gross profit of $9.2 million, combined with an increase in SG&A expenses of $3.4 million when compared to the prior year. The decrease in gross profit of $9.2 million was primarily the result of a decrease in net sales, partially offset by a higher gross margin percentage primarily due to a favorable impact of sales mix. Prior year SG&A expenses included a reversal in certain fiscal 2021 corporate initiative charges of $0.1 million due to a change in estimate. Excluding the reversal in corporate initiative charges in the prior year, SG&A expenses would have increased $3.3 million primarily from the following factors: an increase in payroll related expense of $3.8 million; an increase of $2.8 million in professional service fees primarily to support enhancement to the Company's

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commercial and administrative systems; and higher marketing expenses of $1.4 million. The increase in SG&A expenses were partially offset by a decrease in performance-based compensation of $6.2 million.

International Watch and Accessory Brands Operating Income

In the International locations of the Watch and Accessory Brands segment, for the twelve months ended January 31, 2023, the Company recorded operating income of $98.1 million, which includes $81.0 million of certain intercompany profits related to the Company’s International supply chain operations. For the twelve months ended January 31, 2022, the Company recorded an operating income of $76.0 million in the International locations of the Watch and Accessory Brands segment which included $80.5 million of certain intercompany profits related to the Company’s supply chain operations. The increase in operating income was the result of an increase in gross profit of $24.2 million, partially offset by higher SG&A expenses of $2.1 million. The increase in gross profit of $24.2 million was primarily the result of higher net sales, combined with a higher gross margin percentage primarily due to a favorable sales mix. Prior year SG&A expenses included a reversal in certain fiscal 2021 corporate initiative charges of $1.0 million primarily due to collection of a previously reserved receivable. Excluding the reversal in corporate initiative charges in the prior year SG&A expenses would have increased $1.1 million primarily due to the following factors: an increase in payroll related expense of $1.8 million; higher marketing expenses of $1.0 million; and an increase in sales commissions of $0.4 million. Increased SG&A expenses were partially offset by a decrease in performance-based compensation of $1.4 million and a decrease of $1.1 million in professional service fees.

Company Stores Operating Income

The Company recorded operating income of $25.3 million and $31.9 million in the Company Stores segment for fiscal 2023 and 2022, respectively. The decrease in operating income of $6.6 million was primarily related to a $6.5 million increase in SG&A expenses and a $0.1 million decrease in gross profit mainly due to a lower gross margin percentage. The increase in SG&A expenses was primarily due to an increase of $2.9 million in payroll related expenses; an increase in marketing expenses of $2.3 million; and an increase in rent and rent related of $1.2 million due to the opening of new company stores. As of January 31, 2023, and 2022, the Company operated 55 and 51 retail outlet locations, respectively.

Other Non-Operating Income

The Company recorded other income of $2.1 million due to interest income and the non-service components of the Company's Swiss pension plan for fiscal 2023.

The Company recorded other income of $0.5 million primarily due to the final settlement related to a sale of a building in an international location in the prior year and the non-service components of the Company’s Swiss pension plan for fiscal 2022.

Interest Expense

Interest expense was $0.5 million for fiscal 2023 as compared to $0.7 million for fiscal 2022. The decrease was due to no borrowings under the Company’s revolving credit facility during fiscal 2023, partially offset by higher unused credit line fees during fiscal 2023 as compared to fiscal 2022.

Income Taxes

The Company recorded an income tax provision of $24.9 million and $24.8 million for fiscal 2023 and 2022, respectively.

The effective tax rate for fiscal 2023 was 20.4% and differed from the U.S. statutory tax rate of 21.0% primarily due to foreign profits being taxed in lower taxing jurisdictions and the release of certain foreign valuation allowances, partially offset by U.S. state and local taxes, net of the federal benefit. The effective tax rate for fiscal 2022 was 21.1% and differed from the U.S. statutory tax rate of 21.0% primarily due to U.S. state and local taxes, net of the federal benefit, partially offset by the CARES Act NOL Carryback Provision and related tax effects and foreign profits being taxed in lower taxing jurisdictions.

Net Income Attributable to Movado Group, Inc.

The Company recorded net income attributable to Movado Group, Inc. of $94.5 million and $91.6 million for fiscal 2023 and 2022, respectively.

LIQUIDITY AND CAPITAL RESOURCES

At January 31, 2023 and January 31, 2022, the Company had $251.6 million and $277.1 million, respectively, of cash and cash equivalents. Of this total, $114.0 million and $197.4 million, respectively, consisted of cash and cash equivalents at the Company’s foreign subsidiaries.

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The Company believes that based on the Company’s current expectations, cash flows from operations and its credit lines and cash on-hand, the Company has adequate funds to support its operating, capital and debt service requirements and expects to maintain compliance with its debt covenants for the next twelve months subsequent to the issuance of the accompanying Consolidated Financial Statements.

At January 31, 2023 the Company had working capital of $424.8 million as compared to $402.4 million at January 31, 2022. The increase in working capital was primarily the result of an increase in inventories and a decrease in accounts payable, partially offset by a decrease in cash. The Company defines working capital as the difference between current assets and current liabilities.

The Company had $54.3 million of cash provided by operating activities for fiscal 2023 as compared to $130.8 million for fiscal 2022. Cash provided by operating activities for fiscal 2023 included net income of $97.0 million, positively adjusted by $20.3 million related to non-cash items. Cash used in operating activities for fiscal 2023 was impacted by a $28.9 million increase in investment in inventories primarily due to timing of receipts, a decrease of $13.7 million in accounts payable primarily due to timing of payments and a decrease in accrued payroll of $7.7 million primarily as a result of payments of fiscal year 2022 performance-based compensation, net of current year accrual. Cash provided by operating activities in fiscal 2022 was impacted by an increase in accounts payable of $18.3 million primarily as a result of timing of payments, a decrease in income taxes receivable of $17.1 million due to a receipt of a U.S. federal income tax refund and an increase in accrued payroll and benefits of $7.3 million primarily due to an increase in performance-based compensation, partially offset by an increase in trade receivable of $18.6 million and inventories of $15.4 million.

Cash used in investing was $10.6 million for fiscal 2023 as compared to $7.9 million for fiscal 2022. The cash used in fiscal 2023 was primarily related to capital expenditures of $7.1 million primarily due to the Company’s opening of new stores and new computer software and $3.3 million of long-term investments.

The Company expects that capital expenditures in fiscal 2024 will be approximately $10.0 million as compared to $7.1 million in fiscal 2023. The capital spending will be primarily for projects in the ordinary course of business including facilities improvements, shop-in-shops, website development, computer hardware and software and tooling costs. The Company has the ability to manage its capital expenditures on discretionary projects.

Cash used by financing activities was $65.3 million for fiscal 2023 as compared to $66.6 million for fiscal 2022. The cash used in fiscal 2023 included $31.4 million in stock repurchased in the open market, $31.4 million in dividends paid and $1.1 million in shares repurchased as a result of the surrender of shares in connection with the vesting of certain stock awards, offset by $1.6 million received in connection with stock options exercised. Cash used in financing activities for fiscal 2022 included $22.6 million in stock repurchased in the open market and $22.0 million in dividends paid ($2.3 million of which had been declared in January 2021) and $21.1 million net repayment of bank borrowings.

On October 12, 2018, the Company, together with Movado Group Delaware Holdings Corporation, Movado Retail Group, Inc. and Movado LLC (together with the Company, the “U.S. Borrowers”), each a wholly owned domestic subsidiary of the Company, and Movado Watch Company S.A. and MGI Luxury Group S.A., each a wholly owned Swiss subsidiary of the Company, entered into an Amended and Restated Credit Agreement (as subsequently amended, the “Credit Agreement”) with the lenders party thereto and Bank of America, N.A. as administrative agent (in such capacity, the “Agent”). As a result of the merger of Movado Watch Company S.A. into MGI Luxury Group S.A. in July 2022, MGI Luxury Group S.A. (subsequently renamed MGI Luxury Group GmbH as a result of the conversion of its corporate form) became the sole Swiss subsidiary of the Company party to the Credit Agreement (in such capacity, the "Swiss Borrower" and, together with the U.S. Borrowers, the "Borrowers"). The Credit Agreement provides for a $100.0 million senior secured revolving credit facility (the “Facility”) and has a maturity date of October 28, 2026. The Facility includes a $15.0 million letter of credit subfacility, a $25.0 million swingline subfacility and a $75.0 million sublimit for borrowings by the Swiss Borrower, with provisions for uncommitted increases to the Facility of up to $50.0 million in the aggregate subject to customary terms and conditions. The Credit Agreement contains affirmative and negative covenants binding on the Company and its subsidiaries that are customary for credit facilities of this type, including, but not limited to, restrictions and limitations on the incurrence of debt and liens, dispositions of assets, capital expenditures, dividends and other payments in respect of equity interests, the making of loans and equity investments, mergers, consolidations, liquidations and dissolutions, and transactions with affiliates (in each case, subject to various exceptions).

The borrowings under the Facility are joint and several obligations of the Borrowers and are also cross-guaranteed by each Borrower, except that the Swiss Borrower is not liable for, nor does it guarantee, the obligations of the U.S. Borrowers. In addition, the Borrowers' obligations under the Facility are secured by first priority liens, subject to permitted liens, on substantially all of the U.S. Borrowers' assets other than certain excluded assets. The Swiss Borrower does not provide collateral to secure the obligations under the Facility.

Borrowings under the Credit Agreement bear interest at rates generally based on either the Term Secured Overnight Financing Rate ("SOFR") as administered by the Federal Reserve Bank of New York or a specified base rate, as selected periodically by the Company. The SOFR-based loans bear interest at SOFR plus a spread ranging from 1.00% to 1.75% per annum and the base rate loans bear interest at the base rate plus a spread ranging from 0% to 0.75% per annum, with the spread in each case being based on the Company’s consolidated leverage ratio (as defined in the Credit Agreement). As of January 31, 2023, the Company’s spreads were 1.00% over

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SOFR and 0.00% over the base rate. As of January 31, 2022, the Company’s spreads were 1.00% over LIBOR and 0.00% over the base rate.

As of January 31, 2023, and January 31, 2022, there were no amounts in loans outstanding under the Facility for either period. Availability under the Facility was reduced by the aggregate amount of letters of credit outstanding, issued in connection with retail and operating facility leases to various landlords and for Canadian payroll to the Royal Bank of Canada, totaling approximately $0.3 million at both January 31, 2023 and January 31, 2022. At January 31, 2023, the letters of credit have expiration dates through May 31, 2023. As of January 31, 2023, and January 31, 2022, availability under the Facility was $99.7 million for both periods. For additional information regarding the Facility, see Note 9 – Debt and Lines of Credit to the Consolidated Financial Statements.

The Company had weighted average borrowings under the facility of zero and $4.8 million during fiscal 2023 and fiscal 2022, respectively, with a weighted average interest rate of 2.8% during fiscal 2022.

A Swiss subsidiary of the Company maintains unsecured lines of credit with a Swiss bank that are subject to repayment upon demand. As of January 31, 2023, and 2022, these lines of credit totaled 6.5 million Swiss Francs for both periods, with a dollar equivalent of $7.1 million and $7.0 million, respectively. As of January 31, 2023, and 2022, there were no borrowings against these lines. As of January 31, 2023 and 2022, two European banks had guaranteed obligations to third parties on behalf of two of the Company’s foreign subsidiaries in the dollar equivalent of $1.2 million for both periods, in various foreign currencies, of which $0.6 million for both periods was a restricted deposit as it relates to lease agreements.

Cash paid for interest, including unused commitments fees, was $0.3 million and $0.4 million during fiscal 2023 and 2022, respectively.

From time to time the Company may make minority investments in growth companies in the consumer products sector and other sectors relevant to its business, including certain of the Company's suppliers and customers, as well as in venture capital funds that invest in companies in media, entertainment, information technology and technology-related fields and in digital assets. During fiscal 2022, the Company committed to invest up to $21.5 million in such investments. The Company funded approximately $2.0 million of these commitments in fiscal 2022 and an additional $3.3 million in fiscal 2023 and may be called upon to satisfy capital calls in respect of the remaining $16.2 million in such commitments at any time during a period generally ending ten years after the first capital call in respect of a given commitment.

The Company paid cash dividends of $0.35 per share, or $7.9 million, during the three months ended April 30, 2022; $0.35 per share, or $7.9 million, during the three months ended July 31, 2022; $0.35 per share, or $7.8 million, during the three months ended October 31, 2022; and $0.35 per share, or $7.8 million, during the three months ended January 31, 2023. The Company paid cash dividends of $0.20 per share, or $4.6 million, during the three months ended April 30, 2021; $0.20 per share, or $4.7 million, during the three months ended July 31, 2021; $0.20 per share, or $4.6 million, during the three months ended October 31, 2021; and $0.25 per share, or $5.7 million, during the three months ended January 31, 2022. In addition, on March 23, 2023, the Company declared a special cash dividend of $1.00 per share as well as a regular cash dividend of $0.35 per share, in each case payable on April 19, 2023, to shareholders of record on April 5, 2023.

Although the Company currently expects to continue to declare cash dividends in the future, the decision of whether to declare any future cash dividend, including the amount of any such dividend and the establishment of record and payment dates, will be determined, in each quarter, by the Board of Directors, in its sole discretion.

On March 25, 2021, the Board approved a share repurchase program under which the Company was authorized to purchase up to $25.0 million of its outstanding common stock through September 30, 2022, depending on market conditions, share price and other factors. On November 23, 2021, the Board approved a share repurchase program under which the Company is authorized to purchase up to an additional $50.0 million of its outstanding common stock through November 23, 2024, depending on market conditions, share price and other factors. Under both share repurchase programs, the Company is permitted to purchase shares of its common stock from time to time through open market purchases, repurchase plans, block trades or otherwise. During fiscal 2023, the Company repurchased a total of 898,956 shares of its common stock under the March 25, 2021 share repurchase program and November 23, 2021 share repurchase program at a total cost of $31.4 million, or an average of $34.94 per share. At January 31, 2023, zero remains available for purchase under the Company’s March 25, 2021 repurchase program and $21.0 million remains available for purchase under the Company's

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November 23, 2021 repurchase program. During fiscal 2022, the Company repurchased a total of 686,559 shares of its common stock under the March 25, 2021 share repurchase program at a total cost of $22.6 million, or an average of $32.92 per share.

The Company has various contractual obligations as part of its ordinary course of business. The Company's obligations include operating lease obligations (see Note 13- Leases), licensing agreements (see Note 12 - Commitments and Contingencies), purchase obligations (see Note 12 - Commitments and Contingencies) and transition tax obligation (see Note 12 - Commitments and Contingencies).

Accounting Changes and Recent Accounting Pronouncements

See Note 3 to the accompanying audited consolidated financial statements for a description of recent accounting pronouncements which may impact the consolidated financial statements in future reporting periods.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

GENERAL

Net Sales

The Company operates and manages its business in two principal business segments: Watch and Accessory Brands and Company Stores. The Company also operates in two geographic locations: United States and International.

The Company divides its watch and accessory business into two principal categories: the owned brands category and the licensed brands category. The owned brands category consists of the Movado®, Concord®, Ebel®, Olivia Burton® and MVMT® brands. Products in the licensed brands category include the following brands manufactured and distributed under license agreements with the respective brand owners: Coach®, Tommy Hilfiger®, Hugo Boss®, Lacoste®, Calvin Klein® and Scuderia Ferrari®.

The primary factors that influence annual sales are general economic conditions in the Company’s U.S. and international markets, new product introductions, the level and effectiveness of advertising and marketing expenditures and product pricing decisions.

52.7% of the Company’s total sales are from international markets (see Note 20 to the Consolidated Financial Statements), and therefore reported sales made in those markets are affected by foreign exchange rates. The Company’s international sales are primarily billed in local currencies (predominantly Euros, British Pounds and Swiss Francs) and translated to U.S. dollars at average exchange rates for financial reporting purposes.

The Company divides its business into two major geographic locations: United States operations, and International, which includes the results of all other non-U.S. Company operations. The allocation of geographic revenue is based upon the location of the customer. The Company’s International operations in Europe, the Middle East, the Americas (excluding the United States), and Asia account for 33.9%, 7.8%, 6.5% and 4.5%, respectively, of the Company’s total net sales for fiscal 2022. A vast majority of the Company’s tangible International assets are owned by the Company’s Swiss and Hong Kong subsidiaries.

The Company’s business is seasonal. There are two major selling seasons in the Company’s markets: the spring season, which includes school graduations and several holidays; and, most importantly, the Christmas and holiday season. Major selling seasons in certain international markets center on significant local holidays that occur in late winter or early spring. The Company’s net sales historically have been higher during the second half of the fiscal year. The second half of each fiscal year accounted for 57.9% and 68.8% of the Company’s net sales for the fiscal years ended January 31, 2022 and 2021, respectively.

The Company’s retail operations consist of 47 retail outlet locations in the United States and four locations in Canada.

The significant factors that influence annual sales volumes in the Company’s retail operations are similar to those that influence U.S. wholesale sales. In addition, most of the Company’s retail outlet locations are near vacation destinations and, therefore, the seasonality of these stores is driven by the peak tourist seasons associated with these locations.

In December 2019, COVID-19 emerged and subsequently spread worldwide. The World Health Organization declared COVID-19 a pandemic in March 2020, resulting in federal, state and local governments and other authorities mandating various restrictions, including travel restrictions, quarantines and other social distancing requirements. The Company’s operating results for the fiscal year ended January 31, 2021 were materially impacted by the COVID-19 pandemic. See “The COVID-19 pandemic has materially affected how we and our customers and suppliers operate, and the duration and extent to which COVID-19, new strains or variants, or other public health threats and epidemics will impact our future results of operations and overall financial performance remains uncertain” under Item 1A. Risk Factors, above.

Gross Margins

The Company’s overall gross margins are primarily affected by four major factors: channel and product sales mix, product pricing strategy, manufacturing costs and fluctuation in foreign currency exchange rates, in particular the relationship between the U.S. dollar and the Swiss Franc, British Pound and the Euro. Gross margins for the Company may not be comparable to those of other companies, since some companies include all the costs related to their distribution networks in cost of sales whereas the Company does not include the costs associated with its warehousing and distribution facilities nor the occupancy costs for the Company Stores segment in the cost of sales line item. Those costs are included in selling, general and administrative expenses.

Gross margins vary among the brands included in the Company’s portfolio and also among watch models within each brand. Watches in the Company’s owned brands category generally earn higher gross margin percentages than watches in the licensed brands category. The difference in gross margin percentages within the licensed brands category is primarily due to the impact of royalty payments made

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on the licensed brands. Gross margins in the Company’s e-commerce business generally earn higher gross margin percentages than those of the traditional wholesale business. Gross margins in the Company’s outlet business are affected by the mix of product sold and may exceed those of the wholesale business since the Company earns margins on its outlet store sales from manufacture to point of sale to the consumer.

All of the Company’s brands compete with a number of other brands not only on styling but also on wholesale and retail price. The Company’s ability to improve margins through price increases is therefore, to some extent, constrained by competitors’ actions.

Cost of sales of the Company’s products consists primarily of costs for raw materials, component costs, royalties, depreciation, amortization, assembly costs, shipping to customers, design costs and unit overhead costs associated with the Company’s supply chain operations predominately in Switzerland and Asia. The Company’s supply chain operations consist of logistics management of assembly operations and product sourcing predominately in Switzerland and Asia and minor assembly in Switzerland. The Swiss watch movements used in the manufacture of Movado, Ebel and Concord watches are purchased from three suppliers, one of which is a wholly-owned subsidiary of one of the Company’s competitors. That competitive supplier announced in February 2021 that it will no longer sell mechanical Swiss movements to third parties, although it continues to sell Swiss quartz movements. As a result of this development, the Company currently sources all of its mechanical Swiss movements from a single supplier. Although mechanical movements are only used in a relatively small number of the Company’s watch styles, the elimination of a source of supply could make it more difficult for the Company to satisfy its requirements for mechanical movements. Through productivity improvement efforts, the Company has controlled the level of overhead costs and maintained flexibility in its cost structure by outsourcing a significant portion of its component and assembly requirements.

Since a significant amount of the Company’s product costs are incurred in Swiss Francs, fluctuations in the U.S. dollar/Swiss Franc exchange rate can impact the Company’s cost of goods sold and, therefore, its gross margins. The Company reduces its exposure to the Swiss Franc exchange rate risk through a hedging program. Under the hedging program, the Company manages most of its foreign currency exposures on a consolidated basis, which allows it to net certain exposures and take advantage of natural offsets. In the event these exposures do not offset, the Company has the ability to hedge its Swiss Franc purchases using a combination of forward contracts and purchased currency options. The Company’s hedging program mitigated the impact of the exchange rate fluctuations on product costs and gross margins for fiscal years 2022 and 2021.

Selling, General and Administrative (“SG&A”) Expenses

The Company’s SG&A expenses consist primarily of marketing, selling, distribution, general and administrative expenses.

Marketing expenditures are based principally on overall strategic considerations relative to maintaining or increasing market share in markets that management considers to be crucial to the Company’s continued success as well as on general economic conditions in the various markets around the world in which the Company sells its products. Marketing expenses include salaries, various forms of media advertising, digital advertising (including social media), customer acquisition costs and co-operative advertising with customers and distributors and other point of sale marketing and promotion spending.

Selling expenses consist primarily of salaries, sales commissions, sales force travel and related expenses, credit card fees, depreciation and amortization, expenses associated with the Company’s annual worldwide customer conference and other industry trade shows and operating costs incurred in connection with the Company’s retail business. Sales commissions vary with overall sales levels. Retail selling expenses consist primarily of payroll related and store occupancy costs.

Distribution expenses consist primarily of costs of running distribution centers and customer service and include salaries, rental and other occupancy costs, security, depreciation and amortization of furniture and leasehold improvements and shipping supplies.

General and administrative expenses consist primarily of salaries and other employee compensation including performance-based compensation, employee benefit plan costs, office rent, management information systems costs, professional fees, bad debts, depreciation and amortization of furniture, computer software, leasehold improvements, amortization of finite lived intangible assets, patent and trademark expenses and various other general corporate expenses.

Impairment of Goodwill and Intangible Assets

As a result of the economic conditions caused by the response to the COVID-19 pandemic, the Company performed a quantitative assessment of its goodwill and long-lived intangible assets at April 30, 2020. The Company recorded a goodwill impairment of $133.7 million related to the Company’s Watch and Accessory Brands reporting unit, as the carrying value of goodwill exceeded the fair value at April 30, 2020. The Company also recorded a $22.2 million impairment charge related to MVMT’s trade name and customer relationships as the carrying amount of these long-lived intangible assets exceeded the fair value.

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Other Non-Operating Income

The Company recorded other non-operating income of $0.2 million due to the final settlement related to a sale of a building in an international location in the prior year period for the fiscal year ended January 31, 2022.

The Company recorded a gain on sale of a non-operating asset of $1.3 million related to a sale of a building in an international location for the fiscal year ended January 31, 2021.

Based on updated revenue and EBITDA (as defined in the acquisition agreement) performance expectations during the earn-out period for MVMT, the Company recorded a non-cash gain on remeasurement of the contingent consideration of $15.4 million for the fiscal year ended January 31, 2020. As the remeasurement is not a direct benefit realized from operating the MVMT business, the Company has recorded the change in contingent consideration within non-operating income.

Interest Expense

To the extent it borrows, the Company records interest expense on its revolving credit facility. Additionally, interest expense includes the amortization of deferred financing costs, and unused commitment fees associated with the Company’s revolving credit facility.

Income Taxes

The Company follows the asset and liability method of accounting for income taxes as prescribed under the Accounting Standards Codification guidance for Income Taxes (“ASC Topic 740”). ASC Topic 740 requires the Company to recognize deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts and tax bases of existing assets and liabilities.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The Company’s consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States and those significant policies are more fully described in Note 1 to the Company’s consolidated financial statements. The preparation of these financial statements and the application of certain critical accounting policies require management to make judgments based on estimates and assumptions that affect the information reported. On an on-going basis, management evaluates its estimates and judgments, including those related to sales discounts and markdowns, product returns, bad debt, inventories, income taxes, warranty obligations, useful lives of property, plant and equipment, impairments, stock-based compensation and contingencies and litigation. Management bases its estimates and judgments about the carrying values of assets and liabilities that are not readily apparent from other sources on historical experience, contractual commitments and on various other factors that are believed to be reasonable under the circumstances. Actual results could differ from these estimates. Management believes the following are the critical accounting policies requiring significant judgments and estimates used in the preparation of its consolidated financial statements.

Revenue Recognition

In the wholesale channel, revenue is recognized and recorded when a contract is in place, obligations under the terms of a contract with the customer are satisfied and control is transferred to the customer. Such revenue is measured as the ultimate amount of consideration the Company expects to receive in exchange for transferring goods including variable consideration. The Company considers transfer of control passes to the wholesale customer upon shipment or upon receipt depending on the agreement with the customer and shipping terms. Control passes to outlet store customers at the time of sale and to substantially all e-commerce upon shipment. Prior to January 1, 2021, the requirement for recognizing revenue for e-commerce was met upon delivery to the customer. Factors considered in the transfer of control include the right to payment, transfer of legal title, physical possession and customer acceptance of the goods and whether the significant risks and rewards for the goods belong with the customer. The Company records estimates of variable consideration, which includes sales returns, markdowns, volume-based programs and sales and cash discount allowances as a reduction of revenue in the same period that the sales are recorded. These estimates are based upon the expected value method considering all reasonably available information including historical analysis, customer agreements and/or currently known factors that arise in the normal course of business. Returns, discounts and allowances have historically been within the Company’s expectations and the provisions established. The future provisional rates may differ from those experienced in the past. Taxes imposed by governmental authorities on the Company's revenue-producing activities with customers, such as sales taxes and value added taxes, are excluded from net sales.

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The Company’s sale of smart watches contains multiple performance obligations. The Company allocates revenue to each performance obligation using the relative standalone selling price method. The Company determines the standalone selling prices based on the prices charged to customers. Amounts allocated to the delivered smart watch collections and the related essential software are recognized at the time of sale. The Company’s smart watch collections have been available in limited quantities and in limited distribution, and, as a result, the amounts related to cloud service and app updates were immaterial to all periods presented and thereby recognized at time of sale.

The Company has considered each transaction to sell goods as separate and distinct, with no additional promises made. The Company uses the understanding of what the customer expects to receive as the final product to determine whether goods or services should be combined and accounted for as a single performance obligation. The Company does not incur significant costs to obtain or fulfill its contracts.

Goodwill

At the time of an acquisition, in accordance with applicable guidance, the Company records all acquired net assets at their estimated fair values. These estimated fair values are based on management’s assessments and independent third-party appraisals. The excess of the purchase consideration plus the fair value of any noncontrolling interest in the acquired company over the aggregate estimated fair values of the acquired net assets, including any contingent consideration, is recorded as goodwill.

Goodwill is not amortized but is assessed for impairment at least annually on November 1st. Under applicable guidance, the Company generally performs its annual goodwill impairment analysis using a qualitative approach to determine whether it is more likely than not that the fair value of goodwill is less than its carrying value. If, based on the results of the qualitative assessment, it is concluded that it is more likely than not that the fair value of goodwill is less than its carrying value, a quantitative test is performed.

The quantitative impairment test is performed to measure the amount of impairment loss, if any. The quantitative impairment test identifies the existence of potential impairment by comparing the fair value of each reporting unit with its carrying value, including goodwill. If a reporting unit’s carrying amount exceeds its fair value, the Company will record an impairment charge, as an operating expense item, based on that difference. The impairment charge will be limited to the amount of goodwill allocated to that reporting unit.

Determination of the fair value of a reporting unit and the fair value of individual assets and liabilities of a reporting unit is based on management’s assessment, including the consideration of independent third-party appraisals when necessary. Furthermore, this determination is subjective in nature and involves the use of significant estimates and assumptions. These estimates and assumptions could have a significant impact on whether or not an impairment charge is recognized and the amount of any such charge. Estimates of fair value are primarily determined using discounted cash flows, market comparisons, and recent transactions. These approaches use significant estimates and assumptions, including projected future cash flows, discount rates, growth rates, and determination of appropriate market comparisons.

The Company performs its annual impairment assessment of goodwill at the beginning of the fourth quarter of each fiscal year. The Company determined that there was no impairment in fiscal 2020. During the three months ended April 30, 2020, in light of the COVID-19 pandemic that resulted in the closing of the Company’s stores and of the vast majority of the stores of the Company’s wholesale customers (resulting in a decrease in revenues and gross margin), a decrease in customer spending and the recent decline in the Company’s market capitalization, the Company concluded that a triggering event had occurred during the first quarter, resulting in the need to perform a quantitative interim impairment assessment over the Company’s Olivia Burton, MVMT and Company Stores’ long-lived assets as well as the Watch and Accessory Brands reporting unit.

After adjusting the carrying value of MVMT’s intangible assets, the Company completed an interim quantitative impairment test of goodwill as of April 30, 2020 in which the Company compared the fair value of the Watch and Accessory Brands reporting unit to its respective carrying value. An impairment test of goodwill was not performed for the Company Stores reporting unit as there was no goodwill at this reporting unit. The fair value estimate for the Watches and Accessory reporting unit was based on the income and market approaches. The discounted cash flow method under the income approach involves estimating the cash flows in a discrete forecast period and a terminal value based on the Gordon Growth Model and discounting at a rate of return that reflects the relative risk of the cash flows. The market approach involves applying valuation multiples to the operating performance of the Watch and Accessory Brands reporting unit derived from comparable publicly traded companies based on the relative historical and projected operations of the reporting unit.

The key estimates and assumptions used in the discounted cash flows model included the Company’s discount rate, revenue growth rates, EBIT margins and long-term growth rate. The Company’s assumptions were based on the actual historical performance of the reporting units and took into account the recent severe and continued weakening of operating results as well as the anticipated rate of recovery, and implied risk premiums based on market prices of the Company’s common stock as of the assessment date. The significant estimates in the market approach model included identifying similar companies with comparable business factors such as size, growth,

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profitability, risk and return on investment and assessing comparable revenue and earnings multiples in estimating the fair value of the reporting unit. The excess of the Watch and Accessory Brands unit’s carrying value over the estimate of the fair value was recorded in the Watch and Accessory Brands segment as the goodwill impairment charge in the first quarter of 2021, totaling $133.7 million which resulted in zero goodwill remaining.

Intangibles

Intangible assets consist primarily of trade names, customer relationships and trademarks. In accordance with applicable guidance, the Company estimates and records the fair value of purchased intangible assets at the time of their acquisition. The fair values of these intangible assets are estimated based on independent third-party appraisals. Finite-lived intangible assets are amortized over their respective estimated useful lives, which range from three to ten years, and are evaluated for impairment periodically and whenever events or changes in circumstances indicate that their related carrying values may not be fully recoverable. Estimates of fair value for finite-lived intangible assets are primarily determined using discounted cash flows analysis of such assets, with consideration of market comparisons and recent transactions. This approach uses significant estimates and assumptions, including projected future cash flows, discount rates and growth rates. The Company determined that there was no impairment in fiscal 2022.

During the three months ended April 30, 2020, in light of the COVID-19 pandemic that resulted in the closing of the Company’s stores and of the vast majority of the stores of the Company’s wholesale customers (resulting in a decrease in revenues and gross margin), a decrease in customer spending and the recent decline in the Company’s market capitalization, the Company concluded that a triggering event had occurred during the first quarter, resulting in the need to perform a quantitative interim impairment assessment over the Company’s Olivia Burton, MVMT and Company Stores’ long-lived assets as well as the Watch and Accessory Brands reporting unit.

The Company performed recoverability tests for the long-lived assets of MVMT, Olivia Burton and the Company Stores as of April 30, 2020. The Company concluded that the carrying amounts of the long-lived assets of Olivia Burton and the Company Stores were recoverable, while the long-lived assets of MVMT may not be recoverable. Utilizing a royalty rate to determine discounted projected future cash flows in the valuation of MVMT’s trade name and a discounted cash flow method for the valuation of MVMT’s customer relationships, the Company concluded that the fair values of MVMT’s tradenames and customer relationships did not exceed their carrying values. As a result, the Company recorded impairment charges in the Watch and Accessory Brands segment totaling $22.2 million in the first quarter of fiscal 2021, decreasing MVMT’s trade name to $2.4 million and MVMT’s customer relationships to zero.

Allowance for Doubtful Accounts

In the first quarter of 2021, the Company adopted ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (ASU 2016-13). As a result of adoption, the Company replaced its methodology in determining the allowance for doubtful accounts which was based on an analysis of the aging of accounts receivable, assessments of collectability based on historical trends, the financial condition of the Company’s customers and an evaluation of economic conditions with a methodology that reflects expected credit losses and requires the use of a forward-looking expected credit loss rate for its trade accounts receivables. The adoption had no material impact on the Company’s Consolidated Financial Statements.

Inventories

The Company values its inventory at the lower of cost or net realizable value. Cost is determined using the average cost method. The Company performs reviews of its on-hand inventory to determine amounts, if any, of inventory that is deemed discontinued, excess, or unsaleable. Inventory classified as discontinued, together with the related component parts that can be assembled into saleable finished goods, is sold primarily through the Company’s retail outlet locations. The Company retains adequate levels of component parts to facilitate both the manufacturing of its watches as well as the after-sales service of its watches for an extended period of time after the discontinuance of the manufacturing of such watches. The adjustment to reduce the value of component parts below their cost to their net realizable value is based on the timing of when a component part is no longer associated with a watch that is being manufactured as well as the significant assumption related to the anticipated utilization of component parts for after-sales service.

Long-Lived Assets

The Company periodically reviews the estimated useful lives of its depreciable assets based on factors including historical experience, the expected beneficial service period of the asset, the quality and durability of the asset and the Company’s maintenance policy including periodic upgrades. Changes in useful lives are made on a prospective basis unless factors indicate the carrying amounts of the assets may not be recoverable and an impairment is necessary.

The Company performs an impairment review of its long-lived assets once events or changes in circumstances indicate, in management’s judgment, that the carrying value of such assets may not be recoverable. When such a determination has been made, management compares the carrying value of the asset groups with their estimated future undiscounted cash flows. If it is determined that an

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impairment has occurred, the fair value of the asset group is determined and compared to its carrying value. The excess of the carrying value over the fair value, if any, is recognized as a loss during that period. The impairment is calculated as the difference between asset carrying values and their estimated fair values. Other than as it relates to intangibles, as described above, no impairment charge was recorded in fiscal 2022 or in fiscal 2021, respectively.

Warranties

All watches sold by the Company come with limited warranties covering the movement against defects in material and workmanship for periods ranging from two to three years from the date of purchase. In addition, the warranty period is five years for the gold plating on certain Movado watch cases and bracelets. The Company records an estimate for future warranty costs based on historical repair costs. Warranty costs have historically been within the Company’s expectations and the provisions established. If such costs were to substantially exceed estimates, they could have an adverse effect on the Company’s operating results.

Stock-Based Compensation

The Company utilizes the Black-Scholes option-pricing model which requires that certain assumptions be made to calculate the fair value of each option at the grant date. The expected life of stock option grants is determined using historical data and represents the time period during which the stock option is expected to be outstanding until it is exercised. The risk-free interest rate is based on the U.S. treasury note interest rate in effect on the date of grant for the expected life of the stock option. The expected stock price volatility is derived from historical volatility and calculated based on the estimated term structure of the stock option grant. The expected dividend yield is calculated using the Company’s expected average of annualized dividend yields and applied over the expected term of the option. Management monitors stock option exercises and employee termination patterns to estimate forfeitures rates within the valuation model. Separate groups of employees that have similar historical exercise behavior are considered separately for valuation purposes.

In addition to stock options, the Company may also grant stock awards to employees and directors. The stock awards are generally in the form of time-vesting restricted stock unit awards (pursuant to which unrestricted shares of Common Stock are issued to the grantee when the award vests) or performance-based awards (under which vesting occurs only if one or more predetermined financial goals are achieved within the relevant performance period); both are subject to the participant’s continued employment (or board service) with the Company through such vesting date. Stock awards generally are cliff-vested after three years from the date of grant (one year in the case of directors’ awards). The fair value of stock awards is generally equal to the closing price of the Company’s publicly-traded common stock on the grant date.

Compensation expense for all awards is accrued based on the estimated number of instruments for which the requisite service is expected to be rendered. This estimate is reflected in the period the stock option and stock awards are either granted or canceled. Expense related to stock options and stock awards compensation is recognized on a straight-line basis over the vesting term and only if the performance condition is probable of being achieved.

Pension Benefit Obligation

The Company sponsors a plan in Switzerland. The pension expense and obligation are developed from actuarial valuations. Two critical assumptions in determining pension expense and obligations are discount rate and expected long-term return on plan assets. The Company evaluates these assumptions annually. Other assumptions reflect demographic factors such as retirements, mortality and turnover and are evaluated periodically and updated to reflect actual experience. Actual results may differ from actuarial assumptions. The discount rate represents the market rate for high-quality AAA and AA-rated corporate bonds with durations corresponding to the expected durations of the benefit obligations and service time and is used to calculate the present value of the expected future cash flows for benefit obligations under the pension plan. A decrease in the discount rate increases the present value of pension benefit obligations. The discount rate used to determine the Company’s benefit obligation at January 31, 2022 is 0%. A 25-basis point increase in the discount rate would decrease the present value of pension obligation by approximately $0.5 million at January 31, 2022. The Company considers the current and expected asset allocations of the pension plan, as well as historical and expected long-term rates of return on those types of plan assets, in determining the expected long-term return on plan assets. A 25 basis point decrease in the expected long-term return on plan assets would not have resulted in a material impact on the Company’s pension expense for fiscal 2022.

Income Taxes

The Company, under ASC Topic 740, follows the asset and liability method of accounting for income taxes under which deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax laws and tax rates, in each jurisdiction where the Company operates, and applied to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities due to a change in tax rates

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is recognized in income in the period that includes the enactment date. In addition, the amounts of any future tax benefits are reduced by a valuation allowance to the extent such benefits are not expected to be realized on a more-likely-than-not basis. The Company calculates estimated income taxes in each of the jurisdictions in which it operates. This process involves estimating actual current tax expense along with assessing temporary differences resulting from differing treatment of items for both book and tax purposes.

The Company follows guidance for accounting for uncertainty in income taxes. This guidance clarifies the accounting for uncertainty in income taxes recognized in a company’s financial statements and prescribes a recognition threshold and measurement standard for the financial statement recognition and measurement of an income tax position taken or expected to be taken in a tax return. This guidance also provides guidance for de-recognition, classification, interest and penalties, accounting in interim periods, disclosures and transitions.

The Company elected to account for the tax on Global Intangible Low-Taxed Income (“GILTI”) as a period cost and therefore has not recorded deferred taxes related to GILTI.

RECENT DEVELOPMENTS AND INITIATIVES

COVID-19

The COVID-19 pandemic and related public health measures materially impacted the Company’s operating results for the fiscal year ended January 31, 2021 and continue to materially affect how the Company and its customers and suppliers operate their businesses. Various containment and mitigation measures that have at times been imposed by governmental and other authorities around the world (such as quarantines and other social distancing requirements) have adversely affected sales of our products, given that those sales are heavily dependent on customer traffic in traditional retail stores, such as those of our wholesale partners, and our Company stores. Such measures have also adversely impacted our supply chain and resulted in late deliveries. In addition, during the 2021 fiscal year and continuing through fiscal 2022, the Company has implemented remote work policies and employed additional safety measures for on-site work. These policies and measures have caused strain for, and may have adversely impacted the productivity of, certain employees.

Although the COVID-19 pandemic's adverse impact on the Company has significantly diminished in recent quarters, the full magnitude of the effects on the Company’s business is difficult to predict at this time, and the pandemic is expected to continue to impact the Company’s results of operations for the foreseeable future. In addition to unpredictable regional resurgences of COVID-19 cases, which often result in the reimposition or tightening of containment and mitigation measures, the ongoing economic impacts and health concerns associated with the pandemic will likely continue to affect supply chains, shipping operations, consumer behavior, spending levels, shopping preferences and tourism.

Fiscal 2021 Impairments

During the three months ended April 30, 2020, in light of the COVID-19 pandemic that resulted in the closing of the Company’s stores and of the vast majority of the stores of the Company’s wholesale customers (resulting in a decrease in revenues and gross margin), a decrease in customer spending and the recent decline in global equity markets, the Company concluded that a triggering event had occurred during the first quarter of fiscal 2021, resulting in the need to perform a quantitative interim impairment assessment over the Company’s Olivia Burton, MVMT and Company Stores’ long-lived assets as well as the Watch and Accessory Brands reporting unit.

The Company made revisions to its internal forecasts, resulting in a reduction in both current and future expected cash flows, due to the COVID-19 pandemic and the uncertain business environment. As a result, during the first quarter of fiscal 2021, the Company recorded impairment charges related to goodwill of $133.7 million and intangible assets related to MVMT’s tradename and customer relationships of $22.2 million.

Russia's Invasion of Ukraine

On February 24, 2022, Russia launched a comprehensive invasion of Ukraine. The invasion and the subsequent economic sanctions imposed by some countries may negatively impact the Company’s revenue to the extent the conflict and the sanctions significantly impact the economic conditions in or our ability to sell products to customers in the affected region. In response to the invasion, the Company decided in March 2022 to suspend all sales to Russia and Belarus. Sales to these two countries are immaterial to the Company’s results of operations. In addition, the conflict could have broader implications on economies outside the region, such as the global inflationary impact of a potential boycott of Russian oil and gas by other countries.

RESULTS OF OPERATIONS

The following is a discussion of the results of operations for fiscal 2022 compared to fiscal 2021 along with a discussion of the changes in financial condition during fiscal 2022. For a discussion of our results of operations in fiscal year 2021 compared to fiscal year 2020,

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please see “Results of Operations” in Item 7 (Management’s Discussion and Analysis of Financial Condition and Results of Operations) of our Annual Report on Form 10-K for the fiscal year ended January 31, 2021, filed with the SEC on March 25, 2021.

In light of the COVID-19 pandemic, the Company’s results of operations for fiscal 2022 may not be directly comparable to results for fiscal 2021 or prior fiscal years and may not be indicative of the results that we will experience in fiscal 2023. See “Recent Developments and Initiatives” above. See also “The COVID-19 pandemic has materially affected how we and our customers and suppliers operate, and the duration and extent to which COVID-19, new strains or variants, or other public health threats and epidemics will impact our future results of operations and overall financial performance remains uncertain” under Item 1A. Risk Factors, above.

The following are net sales by business segment and geographic location (in thousands):

The following are net sales by category (in thousands):

The following table presents the Company’s results of operations expressed as a percentage of net sales for the fiscal years indicated:

Fiscal 2022 Compared to Fiscal 2021

Net Sales

Net sales in fiscal 2022 were $732.4 million, representing a $226.0 million or 44.6% increase above the prior year. This increase is primarily as a result of the partial recovery from the ongoing COVID-19 pandemic and increased volumes resulting from higher demand. For fiscal 2022, fluctuations in foreign currency exchange rates positively impacted net sales by $9.2 million when compared to the prior year.

Watch and Accessory Brands Net Sales

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Net sales in fiscal 2022 in the Watch and Accessory Brands segment were $626.2 million, an increase above the prior year period of $178.9 million, or 40.0%. The increase in net sales was primarily due to the partial recovery from the ongoing COVID-19 pandemic and increased volumes resulting from higher demand with growth in the Company's wholesale customers and in online retail, both in the Company's owned and wholesale customers' e-commerce websites. Prior period net sales were negatively impacted by closures and restrictions affecting the stores of the Company's wholesale customers during a portion of the period due to the COVID-19 pandemic. Some of these restrictions continued into fiscal 2022. There were increases in net sales in both the United States and International locations of the Watch and Accessory Brands segment.

United States Watch and Accessory Brands Net Sales

Net sales in fiscal 2022 in the United States locations of the Watch and Accessory Brands segment were $244.2 million, above the prior year period by $86.3 million, or 54.6%, resulting from net sales increases across all brands in both the owned and licensed brand categories primarily due to the partial recovery from the ongoing COVID-19 pandemic and increased volumes resulting from higher demand with growth in the Company's wholesale customers and in online retail, both in the Company's owned and wholesale customers' e-commerce websites. The net sales recorded in the owned brands category increased by $68.5 million, or 55.6%, and net sales recorded in the licensed brand category increased $17.1 million, or 54.5%.

International Watch and Accessory Brands Net Sales

Net sales in fiscal 2022 in the International locations of the Watch and Accessory Brands segment were $382.0 million, above the prior year by $92.6 million, or 32.0%, which included fluctuations in foreign currency exchange rates which favorably impacted net sales by $9.2 million when compared to the prior year. The increase in net sales was across most brands in the owned brand category and all brands across the licensed brand category primarily due to the partial recovery from the ongoing COVID-19 pandemic and increased volumes resulting from higher demand with growth in the Company's wholesale customers and in online retail, both in the Company's owned and wholesale customers' e-commerce websites. The net sales increase recorded in the owned brands category was $3.3 million, or 6.0% and is due to sales increases in most regions. The net sales increase in the licensed brands category was $88.9 million, or 38.5%, due to net sales increases across all regions.

Company Stores Net Sales

Net sales in fiscal 2022 in the Company Stores segment were $106.2 million, $47.1 million or 79.8% above the prior year period. The net sales increase is primarily the result of all of the Company's retail stores being open during the period as compared to the closure of the Company’s retail stores during part of the prior year period in response to the COVID-19 pandemic, lessened restrictions on the Company's retail stores during the period as compared to the prior year period, increased volumes resulting from higher demand, the opening of four new retail outlet stores and the growth of the Company's online outlet store at www.movadocompanystore.com. As of January 31, 2022 and 2021, the Company operated 51 and 47 retail outlet locations, respectively.

Gross Profit

Gross profit for fiscal 2022 was $419.1 million or 57.2% of net sales as compared to $270.5 million or 53.4% of net sales in the prior year. The increase in gross profit of $148.6 million was primarily due to higher net sales combined with a higher gross margin percentage. The increase in gross margin percentage of approximately 380 basis points for fiscal 2022 resulted primarily from a favorable impact of sales mix of approximately 280 basis points, increased leveraging of certain fixed costs as a result of higher net sales of approximately 60 basis points, a positive impact of fluctuations in foreign exchange rates of approximately 30 basis points and the non-recurrence of a prior year charge related to an increase in inventory reserves in response to the COVID-19 pandemic of approximately 20 basis points, partially offset by an approximately 10 basis point impact due to increased shipping costs. The favorable impact of sales mix is mainly due to an increase in direct-to-consumer sales channels, which produces higher margins, and an increase in net sales of brands with higher gross margins in the owned brands category.

Selling, General and Administrative (“SG&A”)

SG&A expenses in fiscal 2022 were $301.6 million, representing an increase from the prior year of $44.9 million, or 17.5%. The prior year included corporate initiative charges primarily in response to the COVID-19 pandemic of $11.9 million consisting of $8.3 million in severance and payroll related, $1.5 million in the write-off of unrefunded trade show deposits, $1.2 million in other restructuring charges and $0.9 million in additional accounts receivable reserves. The current year includes a reversal in corporate initiative charges due to a $1.1 million change in estimate primarily impacting the accounts receivable reserve due to collection of a previously reserved receivable. Excluding these corporate initiative charges and reversals for both periods, SG&A expenses would have increased $57.9 million primarily from the following factors: higher marketing expenses of $32.0 million; an increase in performance-based compensation of $9.2 million; an increase in payroll related expenses of $8.6 million primarily due to the absence of the furloughing of employees and temporary salary reductions that occurred in the prior year period in response to the COVID-19 pandemic; an increase in credit card fees and sales commissions of $3.4 million due to higher sales in the current year; an increase in consulting and recruiting charges of $1.4 million; an increase in rent and rent-related charges of $1.3 million primarily due to the opening of new company stores

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and an increase of $1.2 million in donations primarily to the Movado Group Foundation. For the year ended January 31, 2022, fluctuations in foreign currency rates related to the foreign subsidiaries increased SG&A expenses by $2.0 million when compared to the prior year.

Impairment of Goodwill and Intangible Assets

As a result of the economic conditions caused by the response to the COVID-19 pandemic, the Company performed a quantitative assessment of its goodwill and long-lived intangible assets at April 30, 2020. The Company recorded a goodwill impairment of $133.7 million in fiscal 2021 related to the Company’s Watch and Accessory Brands reporting unit as the carrying value of goodwill exceeded the fair value at April 30, 2020. The Company also recorded a $22.2 million impairment charge in fiscal 2021 related to MVMT’s trade name and customer relationships as the carrying amount of these long-lived intangible assets exceeded the fair value. The Company did not record any similar impairment charges in fiscal 2022.

Watch and Accessory Brands Operating Income/(Loss)

For fiscal 2022 the Company recorded operating income of $85.6 million in the Watch and Accessory Brands segment which includes $38.7 million of unallocated corporate expenses as well as $80.5 million of certain intercompany profits related to the Company’s supply chain operations. For fiscal 2021, the Company recorded an operating loss of $152.7 million in the Watch and Accessory Brands segment, which included goodwill and intangible asset impairment charges of $133.7 million and $22.2 million, respectively. Without these charges, for the twelve months ended January 31, 2021, the Company would have generated operating income of $3.2 million which included $29.1 million of unallocated corporate expenses as well as $63.0 million of certain intercompany profits related to the Company’s supply chain operations. In addition to the absence of asset impairments in fiscal 2022, the increase in operating income was the result of an increase in gross profit of $115.4 million, which included corporate initiatives costs in the prior year period of $0.7 million comprising an increase in inventory reserves, partially offset by an increase in SG&A expenses of $33.0 million when compared to the prior year. The increase in gross profit was primarily the result of higher net sales and also a higher gross margin percentage primarily due to a favorable change in sales mix partially offset by increased shipping costs. The favorable impact of sales mix is mainly due to an increase in direct-to-consumer sales channels, which produces higher margins, and an increase in net sales of brands with higher gross margins in the owned brands category. The SG&A expenses for the prior year period included corporate initiatives charges primarily in response to the COVID-19 pandemic of $11.9 million consisting of $8.3 million in severance and payroll related charges, a $1.5 million write-off of unrefunded trade show deposits, $1.2 million in other restructuring charges and $0.9 million in additional accounts receivable reserves. The current year SG&A expenses include a reversal in certain fiscal 2021 corporate initiatives charges due to a change in estimate of $1.1 million primarily impacting the accounts receivable reserve due to collection of a previously reserved receivable. Excluding these corporate initiative charges and reversals for both periods, SG&A expense would have increased $46.0 million primarily due to the following factors: higher marketing expenses of $27.3 million; an increase in performance-based compensation of $8.7 million; an increase in payroll related expenses of $5.9 million primarily due to the absence of the furloughing of employees and temporary salary reductions that occurred in the prior year period in response to the COVID-19 pandemic; an increase in credit card fees and sales commissions of $1.7 million due to higher sales in the current year; an increase in consulting and recruiting charges of $1.4 million; and an increase of $1.2 million in donations primarily to the Movado Group Foundation. For the twelve months ended January 31, 2022, fluctuations in foreign currency exchange rates positively impacted the Watch and Accessory Brands segment operating income by $1.7 million when compared to the prior year.

U.S. Watch and Accessory Brands Operating Income/(Loss)

In the United States locations of the Watch and Accessory Brands segment, for the twelve months ended January 31, 2022, the Company recorded operating income of $9.6 million, which includes unallocated corporate expenses of $38.7 million. For the twelve months ended January 31, 2021 the Company recorded an operating loss of $138.4 million in the United States locations of the Watch and Accessory Brands segment which included goodwill and intangible asset impairment charges of $77.5 million and $22.2 million, respectively. Without these impairment charges, for the twelve months ended January 31, 2021, operating loss would have been $38.7 million, which included unallocated corporate expenses of $29.1 million. In addition to these assets impairments in the prior year, the increase to operating income from operating loss was the result of higher gross profit of $66.2 million, which included corporate initiative costs in the prior year of $0.7 million comprising an increase in inventory reserves, partially offset by an increase in SG&A expenses of $17.9 million when compared to the prior year. The increase in gross profit of $66.2 million was due to higher net sales, combined with a higher gross margin percentage primarily from a favorable impact of sales mix. The favorable impact of sales mix is mainly due to an increase in direct-to-consumer sales channels, which produces higher margins, and an increase in net sales of brands with higher gross margins in the owned brands category. The SG&A expenses for the prior year included $7.3 million of corporate initiatives charges primarily in response to the COVID-19 pandemic and primarily consisting of $6.3 million in severance and payroll related charges and $1.0 million in other restructuring charges. The current year SG&A expenses include a reversal in certain fiscal 2021 corporate initiatives charges due to a change in estimate of $0.1 million. Excluding these corporate initiative charges and reversals from both periods, SG&A expense would have increased $25.3 million due to the following factors: higher marketing expenses of $14.6 million; an increase in performance-based compensation of $7.3 million; an increase in payroll related expenses of $2.9 million primarily due to the absence of the furloughing of employees and temporary salary reductions that occurred in the prior year period in response to the COVID-19

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pandemic; an increase of $1.2 million in donations primarily to the Movado Group Foundation; and an increase in credit card fees of $0.9 million due to higher sales in the current year.

International Watch and Accessory Brands Operating Income/(Loss)

In the International locations of the Watch and Accessory Brands segment, for the twelve months ended January 31, 2022 the Company recorded operating income of $76.0 million, which includes $80.5 million of certain intercompany profits related to the Company’s International supply chain operations. For the twelve months ended January 31, 2021 the Company recorded an operating loss of $14.3 million in the International locations of the Watch and Accessory Brands segment which included goodwill impairment charges of $56.2 million. Without this impairment charge, for the twelve months ended January 31, 2021, the Company would have generated operating income of $41.9 million, which included $63.0 million of certain intercompany profits related to the Company’s supply chain operations. In addition to the goodwill impairment charge, the increase in operating income was primarily related to higher gross profit of $49.2 million, partially offset by higher SG&A expenses of $15.1 million. The increase in gross profit of $49.2 million was primarily due to higher net sales. The SG&A expenses for the prior year included $4.6 million of corporate initiatives charges primarily in response to the COVID-19 pandemic consisting of $2.0 million in severance and payroll related charges, a $1.5 million write-off of unrefunded trade show deposits, $0.9 million in additional accounts receivable reserves and $0.2 million in other restructuring charges. The current year SG&A expenses include a partial reversal of certain fiscal 2021 corporate initiative charges due to a change in estimate of $1.0 million primarily impacting the accounts receivable reserve due to collection of a previously reserved receivable. Excluding these corporate initiative charges and reversals from both periods, SG&A expense would have increased $20.7 million primarily due to the following factors: higher marketing expenses of $12.7 million; an increase in payroll related expenses of $3.0 million primarily due to the absence of the furloughing of employees and temporary salary reductions that occurred in the prior year period in response to the COVID-19 pandemic; an increase in consulting and recruiting charges of $2.2 million; an increase in performance-based compensation of $1.4 million; and an increase in sales commissions of $0.8 million due to higher sales in the current year. Fluctuation in foreign currency exchange rates positively impacted operating income by $1.7 million when compared to the prior year.

Company Stores Operating Income

The Company recorded operating income of $31.9 million and $10.5 million in the Company Stores segment for fiscal 2022 and 2021, respectively. The improvement in operating income of $21.4 million was primarily related to higher gross profit of $33.2 million mainly due to higher sales and a higher gross margin percentage, partially offset by a $11.8 million increase in SG&A expenses. The increase in SG&A expenses was primarily due to higher marketing expenses of $4.7 million; an increase in payroll related expenses of $2.7 million primarily due to company stores being open throughout the period (as compared to the significant closures during the prior year); an increase in credit card fees and sales commissions of $1.7 million due to higher sales in the current year as compared to the prior year; an increase in rent and rent-related expenses of $1.3 million due to the opening of new company stores; and an increase in performance-based compensation of $0.5 million. As of January 31, 2022, and 2021, the Company operated 51 and 47 retail outlet locations, respectively.

Other Non-Operating Income

The Company recorded other income of $0.5 million primarily due to the final settlement related to a sale of a building in an international location in the prior year and the non-service components of the Company’s Swiss pension plan for fiscal 2022.

The Company recorded a gain on the sale of a non-operating asset of $1.3 million related to a sale of a building in an international location for fiscal 2021.

The Company recorded other income of $0.4 million primarily due to the non-service components of the Company’s Swiss pension plan for fiscal 2021.

Interest Expense

Interest expense was $0.7 million for fiscal 2022 as compared to $2.0 million for fiscal 2021. The decrease was primarily due to lower weighted average borrowings outstanding under the Company’s revolving credit facility, partially offset by a higher weighted average interest rate and higher unused credit line fees during fiscal 2022 as compared to fiscal 2021.

Income Taxes

The Company recorded an income tax provision of $24.8 million and an income tax benefit of $31.2 million for fiscal 2022 and 2021, respectively.

The effective tax rate for fiscal 2022 was 21.1% and differed from the U.S. statutory tax rate of 21.0% primarily due to U.S. state and local taxes, net of the federal benefit, partially offset by the CARES Act NOL Carryback Provision and related tax effects and foreign

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profits being taxed in lower taxing jurisdictions. The effective tax rate for fiscal 2021 was 21.9% and differed from the U.S. statutory tax rate of 21.0% primarily due to the CARES Act NOL Carryback Provision and related tax effects, and U.S. state net operating loss carryforwards generated in fiscal 2021, partially offset by impairments of the portion of goodwill of the Watch and Accessory Brands reporting unit which is not tax deductible.

Net Income/(Loss) Attributable to Movado Group, Inc.

The Company recorded net income attributable to Movado Group, Inc. of $91.6 million and net loss attributable to Movado Group, Inc. of $111.5 million for fiscal 2022 and 2021, respectively.

LIQUIDITY AND CAPITAL RESOURCES

At January 31, 2022 and January 31, 2021, the Company had $277.1 million and $223.8 million, respectively, of cash and cash equivalents. Of this total, $197.4 million and $150.9 million, respectively, consisted of cash and cash equivalents at the Company’s foreign subsidiaries.

During fiscal 2021 the Company’s cash generated from operations was negatively impacted due to the COVID-19 pandemic. During fiscal 2021, the Company responded to the pandemic by taking actions to enhance its financial liquidity and flexibility, including minimizing non-essential operating expenses and capital expenditures, applying for available government payroll subsidies, and temporarily suspending the Company’s share repurchase program and regular quarterly dividends. The Company also committed to a restructuring plan during fiscal 2021. Although the COVID-19 pandemic is expected to continue to impact the Company’s results of operations for the foreseeable future, the pandemic’s adverse impact on the Company has significantly diminished in recent quarters, and the Company believes that based on the Company’s current expectations, cash flows from operations and its credit lines and cash on-hand, the Company has adequate funds to support its operating, capital and debt service requirements and expects to maintain compliance with its debt covenants for the next twelve months subsequent to the issuance of the accompanying Consolidated Financial Statements.

At January 31, 2022 the Company had working capital of $402.4 million as compared to $374.0 million at January 31, 2021. The increase in working capital was primarily the result of an increase in cash of $53.3 million and an increase in accounts receivable resulting primarily from higher net sales, partially offset by an increase in accounts payable. The Company defines working capital as the difference between current assets and current liabilities.

The Company had $130.8 million of cash provided by operating activities for fiscal 2022 as compared to $68.4 million for fiscal 2021. Cash provided by operating activities for fiscal 2022 included net income of $92.6 million, positively adjusted by $20.8 million related to non-cash items. Cash provided by operating activities for fiscal 2022 was impacted by an increase in accounts payable of $18.3 million primarily as a result of timing of payments, a decrease in income taxes receivable of $17.1 million due to a receipt of a U.S. federal income tax refund and an increase in accrued payroll and benefits of $7.3 million primarily due to an increase in accrued performance-based compensation. Cash used in operating activities in fiscal 2022 was impacted by an increase in trade receivables of $18.6 million as a result of higher net sales and an increase in investment in inventories of $15.4 million primarily to support sales growth.

Cash used in investing was $7.9 million for fiscal 2022 as compared to $1.9 million for fiscal 2021. The cash used in fiscal 2022 was primarily related to capital expenditures of $5.7 million primarily due to the Company’s opening of four new stores (two in Canada) and website platform upgrades and $2.0 million of long-term investments. The prior year included proceeds from a sale of a non-operating asset in Switzerland of $1.3 million.

The Company expects that capital expenditures in fiscal 2023 will be approximately $10.0 million as compared to $5.7 million in fiscal 2022. The capital spending will be primarily for projects in the ordinary course of business including facilities improvements, shop-in-shops, website development, computer hardware and software and tooling costs. The Company has the ability to manage its capital expenditures on discretionary projects.

Cash used by financing activities was $66.6 million for fiscal 2022 as compared to $34.4 million for fiscal 2021. The cash used in fiscal 2022 included $22.6 million in stock repurchased in the open market, $22.0 million in dividends paid ($2.3 million of which had been declared in January 2021) repayment of $21.1 million of bank borrowings and $3.1 million in shares repurchased as a result of the surrender of shares in connection with the vesting of certain stock awards and options, partially offset by $3.4 million received in connection with stock options exercised. Cash used in financing activities for fiscal 2021 included net repayment of bank borrowings of $33.6 million.

On October 12, 2018, the Company, together with Movado Group Delaware Holdings Corporation, Movado Retail Group, Inc. and Movado LLC (together with the Company, the “U.S. Borrowers”), each a wholly owned domestic subsidiary of the Company, and Movado Watch Company S.A. and MGI Luxury Group S.A. (collectively, the “Swiss Borrowers” and, together with the U.S. Borrowers, the “Borrowers”), each a wholly owned Swiss subsidiary of the Company, entered into an Amended and Restated Credit Agreement

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(the “Credit Agreement”) with the lenders party thereto and Bank of America, N.A. as administrative agent (in such capacity, the “Agent”). The Credit Agreement amended and restated the Company’s prior credit agreement dated as of January 30, 2015 and extended the maturity of the $100.0 million senior secured revolving credit facility (the “Facility”) provided thereunder to October 12, 2023. The Facility includes a $15.0 million letter of credit subfacility, a $25.0 million swingline subfacility and a $75.0 million sublimit for borrowings by the Swiss Borrowers, with provisions for uncommitted increases to the Facility of up to $50.0 million in the aggregate subject to customary terms and conditions.

On June 5, 2020, the Company and its lenders entered into an amendment (the “Second Amendment”) to the Credit Agreement effective as of April 30, 2020. Among other things, the Second Amendment provided for temporary relief with respect to the financial maintenance covenants in the Credit Agreement starting April 30, 2020 while also temporarily tightening certain covenants and temporarily increasing the interest rate and commitment fee. These temporary changes to the Credit Agreement ended as a result of the Company’s achievement of certain financial milestones as of and for the periods ending January 31, 2021. In addition, the Second Amendment increased the LIBOR floor for loans under the Credit Agreement from 0% to 1.00% and reduced the minimum EBITDA financial covenant level to $35.0 million starting with the four-quarter period ending July 31, 2021.

Effective October 29, 2021, the Company and its lenders entered into an additional amendment (the "Third Amendment") to the Credit Agreement. Among other things, the Third Amendment extends the maturity of the Facility to October 28, 2026; reinstates the 0% LIBOR floor; reduces the commitment fee at certain leverage ratio levels; allows the Company to net up to $25 million of unrestricted cash and cash equivalents held in U.S. accounts from total debt for purposes of determining the leverage ratio for financial covenant and other purposes; and increases the Company's general basket for making investments under the Credit Agreement's operating covenants. The foregoing summary of the Third Amendment is qualified by reference to the full text of the amendment, which is attached as Exhibit 4.1 to the Company's quarterly report on Form 10-Q for the quarter ended October 31, 2021 and incorporated herein by reference.

As of January 31, 2022, and January 31, 2021, there was zero and $21.2 million (of which $10 million was denominated in Swiss Francs), respectively, in loans outstanding under the Facility. Availability under the Facility was reduced by the aggregate number of letters of credit outstanding, issued in connection with retail and operating facility leases to various landlords and for Canadian payroll to the Royal Bank of Canada, totaling approximately $0.3 million at both January 31, 2022 and January 31, 2021. At January 31, 2022, the letters of credit have expiration dates through May 31, 2022. As of January 31, 2022, and January 31, 2021, availability under the Facility was $99.7 million and $78.5 million, respectively. For additional information regarding the Facility, see Note 9 – Debt and Lines of Credit to the Consolidated Financial Statements.

The Company had weighted average borrowings under the facility of $4.8 million and $53.1 million, with a weighted average interest rate of 2.79% and 2.59% during fiscal 2022 and 2021, respectively.

A Swiss subsidiary of the Company maintains unsecured lines of credit with an unspecified maturity with a Swiss bank. As of January 31, 2022, and 2021, these lines of credit totaled 6.5 million Swiss Francs for both periods, with a dollar equivalent of $7.0 million and $7.3 million, respectively. As of January 31, 2022, and 2021, there were no borrowings against these lines. As of January 31, 2022, and 2021, two European banks had guaranteed obligations to third parties on behalf of two of the Company’s foreign subsidiaries in the dollar equivalent of $1.2 million and $1.3 million, respectively, in various foreign currencies, of which $0.6 million, in both periods, was a restricted deposit as it relates to lease agreements.

Cash paid for interest, including unused commitments fees, was $0.4 million and $1.7 million during fiscal 2022 and 2021, respectively.

From time to time the Company may make minority investments in growth companies in the consumer products sector and other sectors relevant to its business, including certain of the Company's suppliers and customers, as well as in venture capital funds that invest in companies in media, entertainment, information technology and technology-related fields and in digital assets. During fiscal 2022, the Company committed to invest up to $21.5 million in such investments. The Company funded approximately $2.0 million of these commitments in fiscal 2022 and may be called upon to satisfy capital calls in respect of the remaining $19.5 million in such commitments at any time during a period generally ending ten years after the first capital call in respect of a given commitment.

On January 11, 2021, the Company’s Board of Directors declared a cash dividend of $0.10 per share, which was paid on February 5, 2021 in the amount of $2.3 million, to shareholders of record on January 21, 2021. The Company paid additional cash dividends of $0.20 per share or $4.6 million during the three months ended April 30, 2021, $0.20 per share or $4.7 million during the three months ended July 31, 2021, $0.20 per share or $4.6 million during the three months ended October 31, 2021 and $0.25 per share or $5.7 million during the three months ended January 31, 2022. The Company did not pay cash dividends during fiscal 2021. Although the Company currently expects to continue to declare cash dividends in the future, the decision of whether to declare any future cash dividend, including the amount of any such dividend and the establishment of record and payment dates, will be determined, in each quarter, by the Board of Directors, in its sole discretion.

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On March 25, 2021, the Board approved a share repurchase program under which the Company is authorized to purchase up to $25.0 million of its outstanding common stock through September 30, 2022, depending on market conditions, share price and other factors. On November 23, 2021, the Board approved a share repurchase program under which the Company is authorized to purchase up to an additional $50.0 million of its outstanding common stock through November 23, 2024, depending on market conditions, share price and other factors. Under both share repurchase programs, the Company is permitted to purchase shares of its common stock from time to time through open market purchases, repurchase plans, block trades or otherwise. During fiscal 2022, the Company repurchased a total of 686,559 shares of its common stock under the March 25, 2021 share repurchase program at a total cost of $22.6 million, or an average of $32.92 per share. At January 31, 2022, $2.4 million remains available for purchase under the Company’s March 25, 2021 repurchase program and all $50.0 million remains available for purchase under the Company's November 23, 2021 repurchase program. During fiscal 2021, the Company did not repurchase any shares of its common stock.

CONTRACTUAL OBLIGATIONS

Payments due by period (in thousands):

(1)
Includes store operating and finance leases, which generally provide for payment of direct operating costs in addition to rent. These obligation amounts only include future minimum lease payments and exclude direct operating costs.

(2)
The Company had outstanding purchase obligations with suppliers at the end of fiscal 2022 for raw materials, finished watches and packaging in the normal course of business. These purchase obligation amounts do not represent total anticipated purchases but represent only amounts to be paid for items required to be purchased under agreements that are enforceable, legally binding and specify minimum quantity, price and term.

(3)
Other long-term obligations primarily consist of minimum commitments related to the Company’s license agreements and endorsement agreements with brand ambassadors, and also include service agreements. The Company sources, distributes, advertises and sells watches pursuant to its exclusive license agreements with unaffiliated licensors. Royalty amounts are generally based on a stipulated percentage of revenues, although most of these agreements contain provisions for the payment of minimum annual royalty amounts. The license agreements have various terms, and some have renewal options, provided that minimum sales levels are achieved. Additionally, the license agreements require the Company to pay minimum annual advertising amounts.

(4)
The Transition Tax obligation is due to the enactment of the 2017 Tax Act and will be paid in installments over eight years, with the first payment having been made in fiscal 2019.

Liabilities for unrecognized income tax benefits are excluded from the table above as the Company is unable to reasonably predict the ultimate amount or timing of a settlement of such liabilities. See Note 14– Income Taxes for more information.

Long-term liabilities associated with the Company’s defined benefit plan in Switzerland are excluded from the table above due to the uncertainty of the timing of these cash disbursements. The amount and timing of cash funding related to these benefit plans will generally depend on local regulatory requirements, various economic assumptions and Company contributions.

Management’s estimate of contributions the Company will make to its Swiss pension plan for the fiscal year ending 2023 is approximately $1.2 million. In addition, total benefit payments to be paid to participants in the Swiss pension plan for the fiscal year ending 2023 from the Company’s plan are estimated to be approximately $0.3 million.

Accounting Changes and Recent Accounting Pronouncements

See Note 3 to the accompanying audited consolidated financial statements for a description of recent accounting pronouncements which may impact the consolidated financial statements in future reporting periods.

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