MOVADO GROUP INC (Form: 10-Q, Received: 11/23/2021 09:51:38)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended October 31, 2021


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 1-16497

MOVADO GROUP, INC.

(Exact Name of Registrant as Specified in its Charter)


New York		13-2595932
(State or Other Jurisdiction of Incorporation or Organization)		(IRS Employer Identification No.)

650 From Road, Ste. 375 Paramus, New Jersey		07652-3556
(Address of Principal Executive Offices)		(Zip Code)

(201) 267-8000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.01 per share

MOV

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for that past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,’’ “accelerated filer,’’ “smaller reporting company,’’ and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☐	Accelerated filer	☒	Non-accelerated filer	☐
Smaller reporting company	☐	Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares outstanding of the registrant’s Common Stock and Class A Common Stock as of November 18, 2021 were 16,377,425 and 6,536,960 respectively.

MOVADO GROUP, INC.

Index to Quarterly Report on Form 10-Q

October 31, 2021


			Page
Part I	Financial Information (Unaudited)
	Item 1.	Consolidated Balance Sheets at October 31, 2021, January 31, 2021 and October 31, 2020	3
		Consolidated Statements of Operations for the three and nine months ended October 31, 2021 and October 31, 2020	4
		Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended October 31, 2021 and October 31, 2020	5
		Consolidated Statements of Cash Flows for the nine months ended October 31, 2021 and October 31, 2020	6
		Notes to Consolidated Financial Statements	7
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	35
	Item 4.	Controls and Procedures	35
Part II	Other Information
	Item 1.	Legal Proceedings	37
	Item 1A.	Risk Factors	37
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37
	Item 6.	Exhibits	39
Signature			40

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

MOVADO GROUP, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

(Unaudited)


	October 31,			January 31,			October 31,
	2021			2021			2020
ASSETS
Current assets:
Cash and cash equivalents	$	201,814		$	223,811		$	163,218
Trade receivables, net		136,373			76,931			103,506
Inventories		170,714			152,580			176,841
Other current assets		20,151			23,479			24,014
Income taxes receivable		7,099			24,850			4,014
Total current assets		536,151			501,651			471,593
Property, plant and equipment, net		19,365			22,349			24,002
Operating lease right-of-use assets		68,669			76,070			77,932
Deferred and non-current income taxes		41,687			42,507			54,748
Other intangibles, net		14,511			17,081			17,123
Other non-current assets		60,634			59,599			56,380
Total assets	$	741,017		$	719,257		$	701,778
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	29,473		$	28,187		$	35,562
Accrued liabilities		69,975			51,124			59,612
Accrued payroll and benefits		19,798			18,047			12,693
Current operating lease liabilities		13,853			15,861			14,210
Income taxes payable		11,936			14,452			11,275
Total current liabilities		145,035			127,671			133,352
Loans payable to bank		—			21,230			37,266
Deferred and non-current income taxes payable		20,354			21,895			20,893
Non-current operating lease liabilities		62,853			68,412			71,658
Other non-current liabilities		53,212			50,115			45,179
Total liabilities		281,454			289,323			308,348
Commitments and contingencies (Note 11)
Redeemable noncontrolling interest		2,445			2,600			2,772
Equity:
Preferred Stock, $0.01 par value, 5,000,000 shares authorized; no shares issued		—			—			—
Common Stock, $0.01 par value, 100,000,000 shares authorized; 28,478,373, 28,078,241 and 28,077,806 shares issued and outstanding, respectively		284			281			281
Class A Common Stock, $0.01 par value, 30,000,000 shares authorized; 6,536,960, 6,610,509 and 6,608,548 shares issued and outstanding, respectively		65			65			65
Capital in excess of par value		220,294			214,043			212,730
Retained earnings		387,959			341,641			313,696
Accumulated other comprehensive income		87,730			92,540			85,879
Treasury Stock, 12,095,713, 11,492,591 and 11,492,591 shares, respectively, at cost		(241,983	)		(223,306	)		(223,306	)
Total Movado Group, Inc. shareholders' equity		454,349			425,264			389,345
Noncontrolling interest		2,769			2,070			1,313
Total equity		457,118			427,334			390,658
Total liabilities, redeemable noncontrolling interest and equity	$	741,017		$	719,257		$	701,778

See Notes to Consolidated Financial Statements

MOVADO GROUP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)


	Three Months Ended October 31,						Nine Months Ended October 31,
	2021			2020			2021			2020
Net sales	$	217,746		$	169,863		$	526,418		$	328,067
Cost of sales		92,172			77,410			228,189			158,365
Gross profit		125,574			92,453			298,229			169,702
Selling, general and administrative		84,171			69,386			218,937			181,795
Impairment of goodwill and intangible assets (Note 6)		—			—			—			155,919
Total operating expenses		84,171			69,386			218,937			337,714
Operating income/(loss)		41,403			23,067			79,292			(168,012	)
Non-operating income/(expense):
Other income		86			8			443			31
Gain on sale of a non-operating asset		—			—			—			1,317
Interest expense		(133	)		(608	)		(582	)		(1,469	)
Income/(loss) before income taxes		41,356			22,467			79,153			(168,133	)
Provision/(benefit) for income taxes (Note 12)		9,561			7,524			18,206			(26,365	)
Net income/(loss)		31,795			14,943			60,947			(141,768	)
Less: Net income attributable to noncontrolling interests		390			118			723			15
Net income/(loss) attributable to Movado Group, Inc.	$	31,405		$	14,825		$	60,224		$	(141,783	)

Basic income/(loss) per share:
Weighted basic average shares outstanding		23,095			23,285			23,248			23,223
Net income/(loss) per share attributable to Movado Group, Inc.	$	1.36		$	0.64		$	2.59		$	(6.11	)

Diluted income/(loss) per share:
Weighted diluted average shares outstanding		23,600			23,375			23,679			23,223
Net income/(loss) per share attributable to Movado Group, Inc.	$	1.33		$	0.63		$	2.54		$	(6.11	)

See Notes to Consolidated Financial Statements

MOVADO GROUP, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

(Unaudited)


	Three Months Ended October 31,						Nine Months Ended October 31,
	2021			2020			2021			2020
Net income/(loss)	$	31,795		$	14,943		$	60,947		$	(141,768	)
Other comprehensive income/(loss):
Net unrealized gain/(loss) on investments, net of tax provision/(benefit) of $5, $1, $13 and $(10), respectively		14			1			39			(31	)
Amortization of prior service cost, net of tax provision of $4, $4, $12 and $12, respectively		14			14			43			42
Foreign currency translation adjustments		(2,784	)		(245	)		(4,892	)		818
Total other comprehensive (loss)/income, net of taxes		(2,756	)		(230	)		(4,810	)		829
Less:
Comprehensive income/(loss) attributable to noncontrolling interests:
Net income		390			118			723			15
Foreign currency translation adjustments		(11	)		(58	)		(179	)		198
Total comprehensive income/(loss) attributable to noncontrolling interests	$	379		$	60		$	544		$	213
Total comprehensive income/(loss) attributable to Movado Group, Inc.	$	28,660		$	14,653		$	55,593		$	(141,152	)

See Notes to Consolidated Financial Statements

MOVADO GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


	Nine Months Ended October 31,
	2021			2020
Cash flows from operating activities:
Net income/(loss) attributable to Movado Group, Inc.	$	60,224		$	(141,783	)
Adjustments to reconcile net (loss)/income to net cash used in operating activities:
Impairment of goodwill and intangible assets		—			155,919
Non-cash corporate initiatives		—			6,685
Gain on sale of a non-operating asset		—			(1,317	)
Depreciation and amortization		9,401			10,546
Transactional (gains)/losses		(277	)		231
Provision for inventories and accounts receivable		3,557			2,066
Deferred income taxes		909			(31,536	)
Stock-based compensation		3,965			3,848
Other		957			306
Changes in assets and liabilities:
Trade receivables		(62,393	)		(26,835	)
Inventories		(23,755	)		(7,073	)
Other current assets		4,962			(821	)
Accounts payable		2,033			40
Accrued liabilities		22,581			15,929
Accrued payroll and benefits		1,866			6,124
Income taxes receivable		17,216			—
Income taxes payable		(3,479	)		516
Other non-current assets		637			(347	)
Other non-current liabilities		290			796
Net cash provided by/(used in) operating activities		38,694			(6,706	)
Cash flows from investing activities:
Capital expenditures		(3,637	)		(2,428	)
Long-term investments		(1,100	)		—
Proceeds from sale of a non-operating asset		—			1,317
Trademarks and other intangibles		(193	)		(118	)
Net cash used in investing activities		(4,930	)		(1,229	)
Cash flows from financing activities:
Repayment of bank borrowings		(21,140	)		(47,699	)
Proceeds from bank borrowings		—			30,879
Stock repurchase		(17,023	)		—
Dividends paid		(16,226	)		—
Stock awards and options exercised and other changes		496			(497	)
Debt issuance cost		(99	)		(300	)
Net cash used in financing activities		(53,992	)		(17,617	)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash		(1,786	)		2,926
Net decrease in cash, cash equivalents and restricted cash		(22,014	)		(22,626	)
Cash, cash equivalents, and restricted cash at beginning of year		224,423			186,438
Cash, cash equivalents, and restricted cash at end of period	$	202,409		$	163,812

Reconciliation of cash, cash equivalents, and restricted cash:
Cash and cash equivalents	$	201,814		$	163,218
Restricted cash included in other non-current assets		595			594
Cash, cash equivalents, and restricted cash	$	202,409		$	163,812

See Notes to Consolidated Financial Statements

MOVADO GROUP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 – BASIS OF PRESENTATION

The accompanying interim unaudited Consolidated Financial Statements have been prepared by Movado Group, Inc. (the “Company”), in a manner consistent with that used in the preparation of the annual audited Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, 2021 (the “2021 Annual Report on Form 10-K”). The unaudited Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America, which require the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the unaudited Consolidated Financial Statements and the reported amounts of revenues and expenses during the periods reported. Actual results could differ from those estimates. In the opinion of management, the accompanying unaudited Consolidated Financial Statements reflect all adjustments, consisting of only normal and recurring adjustments, necessary for a fair statement of the financial position and results of operations for the periods presented. The consolidated balance sheet data at January 31, 2021 is derived from the audited annual financial statements, which are included in the Company’s 2021 Annual Report on Form 10-K and should be read in connection with these interim unaudited financial statements. Operating results for the interim periods presented are not necessarily indicative of the results that may be expected for the full year.

NOTE 2 – IMPACT OF THE COVID-19 PANDEMIC

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. In response to the pandemic, in the first quarter of fiscal 2021 government authorities began to mandate various restrictions, including travel restrictions, quarantines and other social distancing requirements. In mid-March 2020, the Company and the majority of the Company’s wholesale customers temporarily closed all of their retail stores due to health concerns associated with COVID-19. The impact of these closures was partially offset by strong growth in e-commerce sales, by both the Company and many of its retail customers. During fiscal 2021, the Company further 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 (the “Restructuring Plan”) on June 29, 2020 (see Note 5 – Restructuring Provision for further discussion). Although the Company reopened all of its retail stores during the second quarter of fiscal 2021 and most of the Company’s brick and mortar wholesale customers have reopened the vast majority of their retail locations as well, the discretionary consumer goods segment remains challenged at brick-and-mortar retail locations in many regions and supply chains and shipping operations continue to be impacted by the pandemic. In addition, during the 2021 fiscal year and continuing through the third quarter of 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 full magnitude of the effects on the Company’s business is difficult to predict at this time, the COVID-19 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. Nevertheless, 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 these financial statements.

The Company evaluates its long-lived assets, operating lease right of use assets, goodwill and intangible assets for indicators of impairment at least annually in the fourth quarter of each fiscal year or whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. Given the substantial reduction in the Company’s sales and the reduced cash flow projections as a result of closures of the Company’s retail stores and those of its wholesale customers due to the COVID-19 pandemic, as well as the significant decline in the Company’s market capitalization, the Company determined that a triggering event occurred during the first quarter of fiscal 2021 and that an impairment assessment was warranted for goodwill and intangible assets. This analysis resulted in impairment charges related to goodwill of $133.7 million and intangible assets of $22.2 million in the first quarter of fiscal 2021. See Note 6 – Goodwill and Intangible Assets – for a further discussion of these impairments.

NOTE 3 – RECENT ACCOUNTING PRONOUNCEMENTS

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting”. This guidance provides practical expedients for contract modifications and certain hedging relationships associated with the transition from reference rates that are expected to be discontinued. This guidance is applicable for the Company’s borrowing instruments, which use LIBOR as a reference rate, and is effective immediately, but is only available through December 31, 2022. The Company is evaluating the optional expedients and exceptions in the guidance and while transition from LIBOR could have an adverse impact on the market for or value of any LIBOR-linked securities, loans, derivatives or other financial instruments or extensions held by or due, the Company does not expect such nor the adoption of this standard to have a material impact on its Consolidated Financial Statements.

NOTE 4 – EARNINGS PER SHARE AND CASH DIVIDENDS

The Company presents net income/(loss) attributable to Movado Group, Inc. after adjusting for noncontrolling interests, as applicable, per share on a basic and diluted basis. Basic earnings per share is computed using weighted-average shares outstanding during the period. Diluted earnings per share is computed using the weighted-average number of shares outstanding adjusted for dilutive common stock equivalents.

The number of shares used in calculating basic and diluted earnings (loss) per share is as follows (in thousands):


	Three Months Ended October 31,				Nine Months Ended October 31,
	2021		2020		2021		2020
Weighted average common shares outstanding:
Basic		23,095		23,285		23,248		23,223
Effect of dilutive securities:
Stock awards and options to purchase shares of common stock		505		90		431		—
Diluted		23,600		23,375		23,679		23,223

For the three months ended October 31, 2021 and 2020, approximately 269,000 and 889,000, respectively, of potentially dilutive common stock equivalents were excluded from the computation of diluted earnings per share because their effect would have been antidilutive. For the nine months ended October 31, 2021 and 2020, approximately 406,000 and 815,000, respectively, of potentially dilutive common stock equivalents were excluded from the computation of diluted earnings per share because their effect would have been antidilutive. For the nine months ended October 31, 2020, the Company also had approximately 80,000 stock options outstanding that could potentially dilute earnings per share in future periods that were excluded from the computation of diluted EPS because their effect would have been anti-dilutive given the net loss during the period.

On August 26, 2021, the Company declared a quarterly cash dividend of $0.20 per share payable on September 22, 2021, to shareholders of record on September 8, 2021. The total dividend of $4.6 million was paid on September 22, 2021. On May 27, 2021, the Company declared a quarterly cash dividend of $0.20 per share payable on June 23, 2021, to shareholders of record on June 9, 2021. The total dividend of $4.7 million was paid on June 23, 2021. On March 25, 2021, the Company declared a quarterly cash dividend of $0.20 per share payable on April 21, 2021, to shareholders of record on April 7, 2021. The total dividend of $4.6 million was paid on April 21, 2021. In addition, the Company paid a cash dividend on February 5, 2021 in the amount of $2.3 million to shareholders of record on January 21, 2021 of $0.10 per share. During the first, second and third quarters of fiscal 2021 the Company did not declare quarterly cash dividends.

NOTE 5 – RESTRUCTURING PROVISION

On June 29, 2020, the Company committed to a Restructuring Plan as part of the Company’s corporate initiatives to reduce operating expenses and adjust cash flows in light of the ongoing economic challenges resulting from the COVID-19 pandemic and its impact on the Company’s business. The Restructuring Plan was completed during the second quarter of fiscal 2021, although cash severance will be paid over time and such payments continue in the current fiscal year. Of the total $12.6 million provision recorded in fiscal 2021, $8.3 million has been paid out through the third quarter of fiscal 2022 ($6.7 million of which was paid out during fiscal 2021), approximately $0.8 million is expected to result in cash payments during the remainder of the current fiscal year and fiscal 2023 with the remaining $1.3 million resulting in non-cash use ($2.1 million had been used in fiscal 2021). The Company expects annual savings in the range of $14 million to $16 million in respect of severance and employee-related initiatives and property-related initiatives (the latter being contained within Other in the table below).

A summary rollforward of the provision related to the Company’s corporate initiatives, including the provision associated with the Restructuring Plan, is as follows for the nine months ended October 31, 2021 (in thousands):


	Balance January 31, 2021		Provision		Non-Cash Use			Cash Payments			Balance October 31, 2021
Restructuring Plan:
Severance and Employee Related (1)	$	2,378	$	—	$	—		$	(1,580	)	$	798
Other (2)		51		—		(36	)		(9	)		6
Other Corporate Initiatives:
Severance and Employee Related		—		—		—			—			—
Inventory (3)		407		—		(45	)		—			362
Accounts receivable (4)		926		—		—			—			926
Other (2)		19		—		—			(18	)		1
Total	$	3,781	$	—	$	(81	)	$	(1,607	)	$	2,093


	Balance January 31, 2020		Provision		Non-Cash Use			Cash Payments			Balance October 31, 2020
Restructuring Plan:
Severance and Employee Related	$	—	$	7,110	$	—		$	(3,944	)	$	3,166
Other (2)		—		1,033		(315	)		(651	)		67
Other Corporate Initiatives:
Severance and Employee Related		—		936		—			(936	)		—
Inventory (3)		—		3,507		(250	)		—			3,257
Accounts receivable (4)		—		1,075		—			—			1,075
Other		—		1,728		(1,518	)		(182	)		28
Total	$	—	$	15,389	$	(2,083	)	$	(5,713	)	$	7,593

The following amounts are included in the Consolidated Balance Sheet at October 31, 2021:

(1)

$0.4 million included in Accrued payroll and benefits and $0.4 million included in Capital in excess of par value.

(2)

Balance included in Accrued liabilities.

(3)

Reserve included in Inventories.

(4)

Reserve included in Trade receivables, net.

At October 31, 2020, included in Other is approximately a $1.5 million write-off related to unrefunded deposits for a canceled global customer event.

The corporate initiative costs by operating segment are as follows:


	For the Three Months Ended October 31, 2020 Provision		For the Nine Months Ended October 31, 2020 Provision
Watch and Accessory Brands:
United States	$	594	$	11,929
International		187		3,460
Total Watch and Accessory Brands		781		15,389
Total Company Stores		—		—
Total Consolidated	$	781	$	15,389

Cost of sales	$	43	$	3,551
Selling, general and administrative		738		11,838
Total	$	781	$	15,389

There was no provision for restructuring during the first, second and third quarters of fiscal 2022.

NOTE 6 – GOODWILL AND INTANGIBLE ASSETS

The Company performs its annual impairment assessment of goodwill as well as brand intangibles at the beginning of the fourth quarter of each fiscal year or if an event occurs that would more likely than not reduce the fair value below its carrying amount.

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 decline in the Company’s market capitalization, 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 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.

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, 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.

There were no triggering events during the first nine months of fiscal 2022.

The changes in the carrying amount of other intangible assets during the nine months ended October 31, 2021 are as follows (in thousands):


	Trade names			Customer relationships			Other (1)			Total
Weighted Average Amortization Period (in years)	10			6			10
Balance at January 31, 2021	$	10,860		$	5,168		$	1,053		$	17,081
Additions		—			—			193			193
Amortization		(1,233	)		(1,274	)		(192	)		(2,699	)
Foreign exchange impact		11			(58	)		(17	)		(64	)
Balance at October 31, 2021	$	9,638		$	3,836		$	1,037		$	14,511

(1) Other includes fees paid related to trademarks.

Amortization expense for intangible assets was $0.9 million for both the three months ended October 31, 2021 and 2020, respectively, and $2.7 million and $3.0 million for the nine months ended October 31, 2021 and 2020, respectively.

NOTE 7 – INVENTORIES

Inventories consisted of the following (in thousands):


	October 31, 2021		January 31, 2021		October 31, 2020
Finished goods	$	129,131	$	107,246	$	130,515
Component parts		38,996		40,735		42,438
Work-in-process		2,587		4,599		3,888
	$	170,714	$	152,580	$	176,841

NOTE 8 – DEBT AND LINES OF CREDIT

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 (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 29, 2026; reinstates the 0% LIBOR floor; reduces the commitment fee at certain leverage ratios; allows the Company to net up to $25 million of cash and cash equivalents held in U.S. accounts from total debt for purposes of determining compliance with the leverage ratio financial covenant; and increases the Company's general basket for making investments under the Credit Agreement's operating covenants.

As of October 31, 2021, and October 31, 2020, there was zero and $37.3 million (of which all but $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 October 31, 2021 and October 31, 2020. At October 31, 2021, the letters of credit have expiration dates through May 31, 2022. As of October 31, 2021, and October 31, 2020, availability under the Facility was $99.7 million and $62.4 million, respectively.

The Company had weighted average borrowings under the Facility of zero and $44.5 million during the three months ended October 31, 2021 and 2020, respectively, with a weighted average interest rate of 3.75% during the three months ended October 31, 2020. The Company had weighted average borrowings under the Facility of $6.5 million and $60.5 million during the nine months ended October 31, 2021 and 2020, respectively, with a weighted average interest rate of 2.79% and 2.37% during the nine months ended October 31, 2021 and 2020, respectively.

A Swiss subsidiary of the Company maintains unsecured lines of credit with an unspecified maturity with a Swiss bank. As of October 31, 2021, and 2020, these lines of credit totaled 6.5 million Swiss Francs for both periods, with a dollar equivalent of $7.1 million for both periods. As of October 31, 2021, and 2020, there were no borrowings against these lines. As of October 31, 2021 and 2020, 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 for both periods, 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 $1.3 million for the nine-month period ended October 31, 2021 and October 31, 2020, respectively.

NOTE 9 – DERIVATIVE FINANCIAL INSTRUMENTS

As of October 31, 2021, the Company’s entire net forward contracts hedging portfolio consisted of 15.7 million Chinese Yuan equivalent, 20.0 million Swiss Francs equivalent, 19.8 million U.S. dollars equivalent, 25.6 million Euros equivalent and 6.9 million British Pounds equivalent with various expiry dates ranging through April 22, 2022. These forward contracts are not designated as qualified hedges in accordance with ASC 815, Derivatives and Hedging, and, therefore, changes in the fair value of these derivatives are recognized in earnings in the period they arise. Net gains or losses related to these forward contracts are included in cost of sales and selling and general and administrative expenses in the Consolidated Statements of Operations. The cash flows related to these foreign currency contracts are classified in operating activities.

See Note 10 – Fair Value Measurements for fair value and presentation in the Consolidated Balance Sheets for derivatives.

For the quarter ended October 31, 2021, the Company did not have any cash flow hedges.

NOTE 10 – FAIR VALUE MEASUREMENTS

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Accounting guidance establishes a fair value hierarchy which prioritizes the inputs used in measuring fair value into three broad levels as follows:



Level 1 – Quoted prices in active markets for identical assets or liabilities.



Level 2 – Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly.



Level 3 – Unobservable inputs based on the Company’s assumptions.

The guidance requires the use of observable market data if such data is available without undue cost and effort.

The following tables present the fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of October 31, 2021 and 2020 and January 31, 2021 (in thousands):


		Fair Value at October 31, 2021
	Balance Sheet Location	Level 1		Level 2		Level 3		Total
Assets:
Available-for-sale securities	Other current assets	$	235	$	—	$	—	$	235
Short-term investment	Other current assets		168		—		—		168
SERP assets - employer	Other non-current assets		882		—		—		882
SERP assets - employee	Other non-current assets		47,886		—		—		47,886
Defined benefit plan assets	Other non-current liabilities		—		—		28,655		28,655
Hedge derivatives	Other current assets		—		26		—		26
Total		$	49,171	$	26	$	28,655	$	77,852
Liabilities:
SERP liabilities - employee	Other non-current liabilities	$	47,886	$	—	$	—	$	47,886
Hedge derivatives	Accrued liabilities		—		74		—		74
Total		$	47,886	$	74	$	—	$	47,960


		Fair Value at January 31, 2021
	Balance Sheet Location	Level 1		Level 2		Level 3		Total
Assets:
Available-for-sale securities	Other current assets	$	184	$	—	$	—	$	184
Short-term investment	Other current assets		162		—		—		162
SERP assets - employer	Other non-current assets		605		—		—		605
SERP assets - employee	Other non-current assets		46,673		—		—		46,673
Defined benefit plan assets	Other non-current liabilities		—		—		25,837		25,837
Total		$	47,624	$	—	$	25,837	$	73,461
Liabilities:
SERP liabilities - employee	Other non-current liabilities	$	46,673	$	—	$	—	$	46,673
Hedge derivatives	Accrued liabilities		—		13		—		13
Total		$	46,673	$	13	$	—	$	46,686


		Fair Value at October 31, 2020
	Balance Sheet Location	Level 1		Level 2		Level 3		Total
Assets:
Available-for-sale securities	Other current assets	$	143	$	—	$	—	$	143
Short-term investment	Other current assets		156		—		—		156
SERP assets - employer	Other non-current assets		1,020		—		—		1,020
SERP assets - employee	Other non-current assets		42,040		—		—		42,040
Defined benefit plan assets	Other non-current liabilities		—		—		25,206		25,206
Total		$	43,359	$	—	$	25,206	$	68,565
Liabilities:
SERP liabilities - employee	Other non-current liabilities	$	42,040	$	—	$	—	$	42,040
Hedge derivatives	Accrued liabilities		—		12		—		12
Total		$	42,040	$	12	$	—	$	42,052

The fair values of the Company’s available-for-sale securities are based on quoted market prices. The fair value of the short-term investment, which is a guaranteed investment certificate, is based on its purchase price plus one half of a percent calculated annually. The assets related to the Company’s defined contribution supplemental executive retirement plan (“SERP”) consist of both employer (employee unvested) and employee assets which are invested in investment funds with fair values calculated based on quoted market prices. The SERP liability represents the Company’s liability to the employees in the plan for their vested balances. The hedge derivatives are entered into by the Company principally to reduce its exposure to Swiss Franc and Euro exchange rate risks. Fair values of the Company’s hedge derivatives are calculated based on quoted foreign exchange rates and quoted interest rates. The carrying amount of debt approximated fair value as of January 31, 2021, and October 31, 2020, due to the availability and floating rate for similar instruments.

The Company sponsors a defined benefit pension plan in Switzerland. The plan covers certain international employees and is based on years of service and compensation on a career-average pay basis. The assets within the plan are classified as a Level 3 asset within the fair value hierarchy and consist of an investment in pooled assets and include separate employee accounts that are invested in equity securities, debt securities and real estate. The values of the separate accounts invested are based on values provided by the administrator of the funds that cannot be readily derived from or corroborated by observable market data. The value of the assets is part of the funded status of the defined benefit plan and included in other non-current liabilities in the consolidated balance sheets at October 31, 2021, January 31, 2021 and October 31, 2020.

There were no transfers between any levels of the fair value hierarchy for any of the Company’s fair value measurements.

See Note 6 – Goodwill and Intangible Assets for a discussion on the Company’s impairment charges taken in fiscal year 2021 for certain of its nonfinancial assets measured at fair value on a nonrecurring basis due to a change in circumstances that triggered an interim impairment test, and the valuation techniques used to measure the fair value. The most significant unobservable inputs (Level 3) used to estimate the fair values of the Company’s Watch and Accessory Brands unit’s goodwill and MVMT’s intangible assets are discount rates, which was 17.5% for both.

Investments Without Readily Determinable Fair Values

NOTE 11 – COMMITMENTS AND CONTINGENCIES

The Company has minimum commitments related to the Company’s license agreements and endorsement agreements with brand ambassadors. The Company sources, distributes, advertises and sells watches pursuant to its exclusive license agreements with unaffiliated licensors. Royalty amounts under the license agreements 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.

The Company believes that income tax reserves are adequate; however, amounts asserted by taxing authorities could be greater or less than amounts accrued and reflected in the consolidated balance sheet. Accordingly, the Company could record adjustments to the amounts for federal, state, and foreign liabilities in the future as the Company revises estimates or settles or otherwise resolves the underlying matters. In the ordinary course of business, the Company may take new positions that could increase or decrease unrecognized tax benefits in future periods.

In December 2016, U.S. Customs and Border Protection (“U.S. Customs”) issued an audit report concerning the methodology used by the Company to allocate the cost of certain watch styles imported into the U.S. among the component parts of those watches for tariff purposes. The report disputes the reasonableness of the Company’s historical allocation formulas and proposes an alternative methodology that would imply $5.1 million in underpaid duties over the five-year period covered by the statute of limitations, plus possible penalties and interest. The Company believes that U.S. Customs’ alternative duty methodology and estimate are not consistent with the Company’s facts and circumstances and is disputing U.S. Customs’ position. Since February 2017, the Company has been providing U.S. Customs with supplemental analyses and information in response to U.S. Customs’ information requests. Most recently, the Company received summonses from U.S. Customs in December 2020 requesting additional information regarding component part costs and the Company’s procedures for allocating the value of imported watches among the component parts. The Company responded to these summonses in January 2021. Although the Company disagrees with U.S. Customs’ position and believes that the information it has provided supports the reasonableness of its historical allocation formulas, it cannot predict with any certainty the outcome of this matter. The Company intends to continue to work with U.S. Customs to reach a mutually satisfactory resolution.

The purchase consideration for the MVMT business included two future contingent payments that combined could total up to $100 million. Based on updated revenue and EBITDA (as defined in the acquisition agreement) performance expectations during the earn-out period for MVMT, the Company remeasured the contingent consideration to zero at January 31, 2020.

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 such companies. During the second quarter of fiscal 2022, the Company committed to invest up to $1,000,000 in a venture capital fund that makes investments in securities of portfolio companies whose primary business focus is accelerating innovation in retail and consumer goods. The Company satisfied $600,000 in capital calls in respect of this commitment during the third quarter of fiscal 2022. In addition, during the third quarter of fiscal 2022, the Company committed to invest up to $10,000,000 in two related venture capital and venture growth funds that make investments in equity and equity-oriented securities of privately held companies in media, entertainment, information technology and technology-related fields, as well as in digital assets. The Company may be called upon to satisfy capital calls in respect of this commitment at any time during a period generally ending ten years after the first capital call, which may be made at any time.

Starting in July 2018, the Trump administration announced a series of lists covering thousands of categories of Chinese origin products subject to potential U.S. special tariffs, including watches. U.S. Customs subsequently issued various rulings regarding, among other things, the application of the special tariffs to China-sourced components of watches containing non-Chinese movements. A U.S. Customs ruling effective August 1, 2021 holds that the special tariff does not apply to China-sourced watch cases that are imported as part of a watch containing a non-Chinese movement. Pending greater clarity on the retroactive effect of this ruling, for the time being the Company continues to maintain an accrual for Chinese watch case imports prior to August 1, 2021.

The Company is involved in legal proceedings and claims from time to time, in the ordinary course of its business. Legal reserves are recorded in accordance with the accounting guidance for contingencies. Contingencies are inherently unpredictable and it is possible that results of operations, balance sheets or cash flows could be materially and adversely affected in any particular period by unfavorable developments in, or resolution or disposition of, such matters. For those legal proceedings and claims for which the Company believes that it is probable that a reasonably estimable loss may result, the Company records a reserve for the potential loss. For proceedings and claims where the Company believes it is reasonably possible that a loss may result that is materially in excess of amounts accrued for the matter, the Company either discloses an estimate of such possible loss or range of loss or includes a statement that such an estimate cannot be made. As of October 31, 2021, the Company is party to legal proceedings and contingencies, the resolution of which is not expected to materially affect its financial condition, future results of operations beyond the amounts accrued, or cash flows.

NOTE 12 – INCOME TAXES

On March 27, 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) which provided economic relief to assist American families and companies during the COVID-19 global pandemic. The CARES Act allowed U.S. net operating losses generated in fiscal 2019, 2020, and 2021 to be carried back up to five years to prior taxable years with a U.S. statutory tax rate of 35.0% and to offset 100% of regular taxable income in such years (the “CARES Act NOL Carryback Provision”). The Company generated a U.S. net operating loss in fiscal 2021 which was carried back to prior taxable years.

The Company recorded an income tax provision of $9.6 million and $7.5 million for the three months ended October 31, 2021 and 2020, respectively.

The effective tax rate was 23.1% and 33.5% for the three months ended October 31, 2021 and 2020, respectively. The significant components of the effective tax rate changed primarily due to the U.S. tax on Global Intangible Low-Taxed Income with no related tax credits and excess tax deficiencies related to stock-based compensation, both of which were recognized in the prior year, partially offset by changes in jurisdictional earnings.

The Company recorded an income tax provision of $18.2 million and an income tax benefit of $26.4 million for the nine months ended October 31, 2021 and 2020, respectively.

The effective tax rate was 23.0% and 15.7% for the nine months ended October 31, 2021 and 2020, respectively. The significant components of the effective tax rate changed primarily due to prior year impairments of the portion of goodwill of the Watch and Accessory Brands reporting unit which is not tax deductible and the recording of valuation allowances on certain foreign deferred tax assets in the current year, partially offset by the CARES Act NOL Carryback Provision in the prior year.

At October 31, 2021, the Company had no deferred tax liability for the undistributed foreign earnings of approximately $272.4 million because the Company intends to permanently reinvest such earnings in its foreign operations. It is not practicable to estimate the tax liability related to a future distribution of these permanently reinvested foreign earnings.

NOTE 13 – EQUITY

The components of equity for the nine months ended October 31, 2021 and 2020 are as follows (in thousands):


			Movado Group, Inc. Shareholders' Equity
	Preferred Stock		Common Stock (1)		Class A Common Stock (2)		Capital in Excess of Par Value			Retained Earnings			Accumulated Other Comprehensive Income			Treasury Stock			Noncontrolling Interest			Total Movado Group, Inc. Shareholders' Equity			Redeemable Noncontrolling Interest
Balance, January 31, 2021	$	—	$	281	$	65	$	214,043		$	341,641		$	92,540		$	(223,306	)	$	2,070		$	427,334		$	2,600
Net income/(loss) attributable to Movado Group, Inc.											60,224									735			60,959			(12	)
Dividends ($0.60 per share)											(13,906	)											(13,906	)
Stock options exercised				3				2,147									(1,654	)					496
Stock repurchase																	(17,023	)					(17,023	)
Supplemental executive retirement plan								139															139
Stock-based compensation expense								3,965															3,965
Net unrealized gain on investments, net of tax provision of $13														39									39
Amortization of prior service cost, net of tax provision of $12														43									43
Foreign currency translation adjustment (3)														(4,892	)					(36	)		(4,928	)		(143	)
Balance, October 31, 2021	$	—	$	284	$	65	$	220,294		$	387,959		$	87,730		$	(241,983	)	$	2,769		$	457,118		$	2,445

	Preferred Stock		Common Stock (1)		Class A Common Stock (2)		Capital in Excess of Par Value			Retained Earnings			Accumulated Other Comprehensive Income			Treasury Stock			Noncontrolling Interest			Total Movado Group, Inc. Shareholders' Equity			Redeemable Noncontrolling Interest
Balance, January 31, 2020	$	—	$	279	$	65	$	208,473		$	455,479		$	85,050		$	(222,809	)	$	707		$	527,244		$	3,165
Net (loss)/income attributable to Movado Group, Inc.											(141,783	)								571			(141,212	)		(556	)
Stock options exercised				2				(2	)								(497	)					(497	)
Supplemental executive retirement plan								69															69
Stock-based compensation expense (4)								4,190															4,190
Net unrealized loss on investments, net of tax benefit of $10														(31	)								(31	)
Amortization of prior service cost, net of tax provision of $12														42									42
Foreign currency translation adjustment (3)														818						35			853			163
Balance, October 31, 2020	$	—	$	281	$	65	$	212,730		$	313,696		$	85,879		$	(223,306	)	$	1,313		$	390,658		$	2,772

(1)

Each share of common stock is entitled to one vote per share on all matters submitted to a vote of the shareholders.

(2)

Each share of class A common stock is entitled to 10 votes per share on all matters submitted to a vote of the shareholders. Each holder of class A common stock is entitled to convert, at any time, any and all of such shares into the same number of shares of common stock. Each share of class A common stock is converted automatically into common stock in the event that the beneficial or record ownership of such shares of class A common stock is transferred to any person, except to certain family members or affiliated persons deemed “permitted transferees” pursuant to the Company’s Restated Certificate of Incorporation, as amended. The class A common stock is not publicly traded, and consequently, there is currently no established public trading market for these shares.

(3)

The currency translation adjustment is not adjusted for income taxes to the extent that it relates to permanent investments of earnings in international subsidiaries.

(4)

Includes $0.4 million related to the Restructuring Plan of the corporate initiatives.

NOTE 14 – TREASURY STOCK

During the nine months ended October 31, 2021, the Company repurchased a total of 548,402 shares of its common stock under the March 25, 2021 share repurchase program at a total cost of $17.0 million, or an average of $31.04 per share. During the nine months ended October 31, 2020, the Company did not repurchase shares of its common stock.

At October 31, 2021, $8.0 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.

There were 54,720 and 49,283 shares of common stock repurchased during the nine months ended October 31, 2021 and 2020, respectively, as a result of the surrender of shares in connection with the vesting of certain stock awards. At the election of an employee, shares having an aggregate value on the vesting date equal to the employee’s withholding tax obligation may be surrendered to the Company.

NOTE 15 – ACCUMULATED OTHER COMPREHENSIVE INCOME

The accumulated balances at October 31, 2021 and 2020, and January 31, 2021, related to each component of accumulated other comprehensive income (loss) are as follows (in thousands):


	October 31, 2021			January 31, 2021			October 31, 2020
Foreign currency translation adjustments	$	88,274		$	93,166		$	86,163
Available-for-sale securities		163			124			93
Unrecognized prior service cost related to defined benefit pension plan		(301	)		(344	)		(325	)
Net actuarial loss related to defined benefit pension plan		(406	)		(406	)		(52	)
Total accumulated other comprehensive income	$	87,730		$	92,540		$	85,879

NOTE 16 – REVENUE

Disaggregation of Revenue

The following table presents the Company’s net sales disaggregated by customer type. Sales and usage-based taxes are excluded from net sales (in thousands):


	For the Three Months Ended October 31,				For the Nine Months Ended October 31,
Customer Type	2021		2020		2021		2020
Wholesale	$	178,988	$	135,605	$	404,106	$	248,977
Direct to consumer		37,612		33,508		119,447		77,500
After-sales service		1,146		750		2,865		1,590
Net Sales	$	217,746	$	169,863	$	526,418	$	328,067

The Company’s revenue from contracts with customers is recognized at a point in time. The Company’s net sales disaggregated by geography are based on the location of the Company’s customer (see Note 18 – Segment and Geographic Information).

Wholesale Revenue

The Company’s wholesale revenue consists primarily of revenues from independent distributors, department stores, chain stores, independent jewelry stores and third-party e-commerce retailers. The Company recognizes and records its revenue when obligations under the terms of a contract with the customer are satisfied, and control is transferred to the customer. Transfer of control passes to wholesale customers upon shipment or upon receipt depending on the agreement with the customer and shipping terms. Wholesale revenue is measured as the amount of consideration the Company ultimately expects to receive in exchange for transferring goods. Wholesale revenue is included entirely within the Watch and Accessory Brands segment (see Note 18 – Segment and Geographic Information), consistent with how management makes decisions regarding the allocation of resources and performance measurement.

Direct to Consumer Revenue

The Company’s direct to consumer revenue primarily consists of revenues from the Company’s outlet stores, the Company’s owned e-commerce websites, concession stores and consumer repairs. The Company recognizes and records its revenue when obligations under the terms of a contract with the customer are satisfied, and control is transferred to the customer. 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 requirements for recognizing revenue for all e-commerce were met upon delivery to the customer. Direct to Consumer revenue is included in either the Watch and Accessory Brands segment or Company Stores Segment based on how the Company makes decisions about the allocation of resources and performance measurement. Revenue derived from outlet stores and related e-commerce is included within the Company Stores Segment. Other Direct to Consumer revenue (i.e., revenue derived from other Company-owned e-commerce websites, concession stores and consumer repairs) is included within the Watch and Accessory Brands segment. (See Note 18 – Segment and Geographic Information).

After-Sales Service

All watches sold by the Company come with limited warranties covering the movement against defects in materials and workmanship.

The Company’s after-sales service revenues consists of out of warranty service provided to customers and authorized third party repair centers, and sale of watch parts. The Company recognizes and records its revenue when obligations under the terms of a contract with the customer are satisfied and control is transferred to the customer. After-sales service revenue is measured as the amount of consideration the Company ultimately expects to receive in exchange for transferring goods. Revenue from after sales service, including consumer repairs, is included entirely within the Watch and Accessory Brands segment, consistent with how management makes decisions about the allocation of resources and performance measurement.

NOTE 17 – STOCK-BASED COMPENSATION

Under the Company’s Employee Stock Option Plan, as amended and restated as of April 4, 2013 (the “Plan”), the Compensation Committee of the Board of Directors, which consists of three of the Company’s non-employee directors, has the authority to grant participants incentive stock options, nonqualified stock options, restricted stock, stock appreciation rights and stock awards, for up to 11,000,000 shares of common stock.

Stock Options:

Stock options granted to participants under the plan generally become exercisable after three years and remain exercisable until the tenth anniversary of the date of grant. All stock options granted under the Plan have an exercise price equal to or greater than the fair market value of the Company’s common stock on the grant date.

The table below presents the weighted average assumptions used with the Black-Scholes option-pricing model for the calculation of the fair value of stock options granted during the nine months ended October 31, 2021 and October 31, 2020.


	Nine Months Ended October 31, 2021			Nine Months Ended October 31, 2020
Expected volatility		51.61	%		50.79	%
Expected life in years		6.0			6.0
Risk-free interest rates		0.89	%		0.34	%
Dividend rate		2.90	%		4.29	%
Weighted average fair value per option at date of grant	$	10.23		$	3.87

The fair value of the stock options, less expected forfeitures, is amortized on a straight-line basis over the vesting term. Total compensation expense for stock option grants recognized during the three months ended October 31, 2021 and 2020 was $0.4 million and $0.1 million, respectively. Total compensation expense for stock option grants recognized during the nine months ended October 31, 2021 and 2020 was $1.1 million and $0.2 million, respectively. As of October 31, 2021, there was $3.0 million of unrecognized compensation cost related to unvested stock options. These costs are expected to be recognized over a weighted-average period of 2.2 years. Total consideration received for stock option exercises during the nine months ended October 31, 2021 and 2020 was $2.1 million (offset by $1.7 million of shares repurchased as a result of the surrender of shares in connection with the vesting of certain stock awards), and zero, respectively.

The following table summarizes the Company’s stock options activity during the first nine months of fiscal 2022:


	Outstanding Options			Weighted Average Exercise Price per Option		Option Price Per Share		Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value $(000)
Options outstanding at January 31, 2021 (561,110 options exercisable)		1,111,110		$	21.90	$12.42-$42.12			6.9	$	2,975
Granted		201,875		$	27.62	$	27.62
Exercised		(88,191	)	$	24.38	$16.87-$30.36
Cancelled		—
Options outstanding at October 31, 2021		1,224,794		$	22.66	$12.42-$42.12			6.8	$	13,602
Exercisable at October 31, 2021		484,919		$	28.86				3.3	$	2,726
Expected to vest at October 31, 2021		678,324		$	18.47				9.0	$	10,058

The fair value of stock options exercised during the first nine months of fiscal 2022 was $0.9 million and the intrinsic value was $0.8 million. There were no stock options exercised during the first nine months of fiscal 2021.

Stock Awards:

Under the Plan, the Company can also grant stock awards to employees and directors. For the three months ended October 31, 2021 and 2020, compensation expense for stock awards was $0.8 million and $1.0 million, respectively. For the nine months ended October 31, 2021 and 2020, compensation expense for stock awards was $2.9 million and $4.0 million (of which $0.4 million is included in the Restructuring Plan of the corporate initiatives), respectively. As of October 31, 2021, there was $3.8 million of unrecognized compensation cost related to unvested stock awards. These costs are expected to be recognized over a weighted-average period of 1.9 years.

The following table summarizes the Company’s stock awards activity during the first nine months of fiscal 2022:


	Number of Stock Award Units			Weighted- Average Grant Date Fair Value		Weighted- Average Remaining Contractual Term (years)	Aggregate Intrinsic Value $(000's)
Units outstanding at January 31, 2021		415,994		$	29.17
Units granted		129,497		$	27.82
Units vested		(230,928	)	$	31.66
Units forfeited		(5,521	)	$	29.55
Units outstanding at October 31, 2021		309,042		$	26.74	1.9	$	10,291

Outstanding stock awards can be classified as either time-based stock awards or performance-based stock awards. Time-based stock awards vest over time subject to continued employment. Performance-based stock awards vest over time subject both to continued employment and to the achievement of corporate financial performance goals. Upon the vesting of a stock award, shares are issued from the pool of authorized shares. For performance-based stock awards, the number of shares issued related to the performance units granted can vary from 0% to 150% of the target number of underlying stock award units, depending on the extent of the achievement of

predetermined financial goals. The total fair value of stock award units that vested during the first nine months of fiscal 2022 was $7.3 million. The number of shares issued related to the remaining stock awards are established at grant date.

NOTE 18 – SEGMENT AND GEOGRAPHIC INFORMATION

The Company conducts its business in two operating segments: Watch and Accessory Brands and Company Stores. The Company’s Watch and Accessory Brands segment includes the designing, manufacturing and distribution of watches and, to a lesser extent, jewelry and other accessories, of owned and licensed brands, in addition to revenue generated from after-sales service activities and shipping. The Company Stores segment includes the Company’s retail outlet business. The Chief Executive Officer of the Company is the chief operating decision maker (“CODM”) and regularly reviews operating results for each of the two operating segments to assess performance and makes operating decisions about the allocation of the Company’s resources.

The Company divides its business into two major geographic locations: United States operations and International, which includes the results of all 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 accounted for 39.8%, 7.6%, 5.6% and 4.4%, respectively, of the Company’s total net sales for the three months ended October 31, 2021. For the three months ended October 31, 2020, the Company’s International operations in Europe, the Middle East, the Americas (excluding the United States) and Asia accounted for 41.9%, 6.6%, 6.5% and 6.4%, respectively, of the Company’s total net sales. The Company’s International operations in Europe, the Middle East, the Americas (excluding the United States) and Asia accounted for 34.9%, 8.0%, 6.0% and 4.7%, respectively, of the Company’s total net sales for the nine months ended October 31, 2021. For the nine months ended October 31, 2020, the Company’s International operations in Europe, the Middle East, Asia and the Americas (excluding the United States) accounted for 40.4%, 7.3%, 7.0% and 6.0%, respectively, of the Company’s total net sales.

Operating Segment Data for the Three Months Ended October 31, 2021 and 2020 (in thousands):


	Net Sales
	2021		2020
Watch and Accessory Brands:
Owned brands category	$	69,433	$	55,774
Licensed brands category		122,098		95,576
After-sales service and all other		2,795		758
Total Watch and Accessory Brands		194,326		152,108
Company Stores		23,420		17,755
Consolidated total	$	217,746	$	169,863


	Operating Income (3)(5)
	2021		2020
Watch and Accessory Brands	$	34,854	$	19,810
Company Stores		6,549		3,257
Consolidated total	$	41,403	$	23,067

Operating Segment Data as of and for the Nine Months Ended October 31, 2021 and 2020 (in thousands):


	Net Sales
	2021		2020
Watch and Accessory Brands:
Owned brands category	$	178,706	$	112,757
Licensed brands category		273,801		177,674
After-sales service and all other		4,277		3,152
Total Watch and Accessory Brands		456,784		293,583
Company Stores		69,634		34,484
Consolidated total	$	526,418	$	328,067


	Operating Income/(Loss) (3)(4)(5)
	2021		2020
Watch and Accessory Brands	$	59,357	$	(169,756	)
Company Stores		19,935		1,744
Consolidated total	$	79,292	$	(168,012	)


	Total Assets
	October 31, 2021		January 31, 2021		October 31, 2020
Watch and Accessory Brands	$	679,112	$	659,681	$	640,652
Company Stores		61,905		59,576		61,126
Consolidated total	$	741,017	$	719,257	$	701,778

Geographic Location Data for the Three Months Ended October 31, 2021 and 2020 (in thousands):


	Net Sales				Operating Income/(Loss) (3)(5)
	2021		2020		2021		2020
United States (1)	$	92,783	$	65,485	$	6,996	$	(6,684	)
International (2)		124,963		104,378		34,407		29,751
Consolidated total	$	217,746	$	169,863	$	41,403	$	23,067

United States and International net sales are net of intercompany sales of $118.7 million and $100.5 million for the three months ended October 31, 2021 and 2020, respectively.

Geographic Location Data as of and for the Nine Months Ended October 31, 2021 and 2020 (in thousands):


	Net Sales				Operating Income/(Loss) (3)(4)(5)
	2021		2020		2021		2020
United States (1)	$	244,163	$	128,785	$	16,575	$	(140,993	)
International (2)		282,255		199,282		62,717		(27,019	)
Consolidated total	$	526,418	$	328,067	$	79,292	$	(168,012	)

United States and International net sales are net of intercompany sales of $279.1 million and $172.4 million for the nine months ended October 31, 2021 and 2020, respectively.

(1)

The United States operating income/(loss) included $21.6 million and $16.3 million of unallocated corporate expenses for the three months ended October 31, 2021 and 2020, respectively. The United States operating income/(loss) included $43.5 million and $28.4 million of unallocated corporate expenses for the nine months ended October 31, 2021 and 2020, respectively.

(2)

The International operating income included $28.9 million and $23.0 million of certain intercompany profits related to the Company’s supply chain operations for the three months ended October 31, 2021 and 2020, respectively. The International operating income/(loss) included $59.7 million and $45.3 million of certain intercompany profits related to the Company’s supply chain operations for the nine months ended October 31, 2021 and 2020, respectively.

(3)

For the three months ended October 31, 2021 and 2020, and for the nine months ended October 31, 2021 and 2020, in the United States locations of the Watch and Accessory Brands segment, operating income/(loss) included a charge of $0.1 million, $0.5 million, $0.3 million and $1.5 million, respectively, related to the amortization of intangible assets and the MVMT brand's deferred compensation. In addition, in the International locations of the Watch and Accessory Brands segment for the three months ended October 31, 2021 and 2020, and for the nine months ended October 31, 2021 and 2020, operating income/(loss) included a charge of $0.7 million, $0.6 million, $2.1 and $2.0 million, respectively, related to the amortization of acquired intangible assets as a result of the Company’s acquisition of the Olivia Burton brand.

(4)

For the nine months ended October 31, 2020, in the United States locations of the Watch and Accessory Brands segment, operating loss included a charge of $99.7 million, related to the impairment of goodwill and intangible assets associated with the MVMT brand. In addition, in the International locations of the Watch and Accessory Brands segment, for the nine months ended October 31, 2020, operating loss included a charge of $56.2 million related to the impairment of goodwill associated with the Olivia Burton brand and City Time Joint Venture.

(5)

For the three months ended October 2020, in the United States locations and the International locations of the Watch and Accessory Brands segment, operating (loss)/income included a charge of $0.6 million and $0.2 million, respectively, related to the corporate initiatives that the Company took in response to the impact on its business due to the COVID-19 pandemic. For the nine months ended October 2020, in the United States locations and the International locations of the Watch and Accessory Brands segment, operating loss included a charge of $11.9 million and $3.5 million, respectively, related to the corporate initiatives that the Company took in response to the impact on its business due to the COVID-19 pandemic.


	Total Assets
	October 31, 2021		January 31, 2021		October 31, 2020
United States	$	370,185	$	352,517	$	300,351
International		370,832		366,740		401,427
Consolidated total	$	741,017	$	719,257	$	701,778


	Property, Plant and Equipment, Net
	October 31, 2021		January 31, 2021		October 31, 2020
United States	$	12,836	$	14,792	$	15,884
International		6,529		7,557		8,118
Consolidated total	$	19,365	$	22,349	$	24,002

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

FORWARD-LOOKING STATEMENTS

Statements in this Quarterly Report on Form 10-Q, including, without limitation, statements under Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this report, as well as statements in future filings by the Company with the Securities and Exchange Commission (the “SEC”), in the Company’s press releases and oral statements made by or with the approval of an authorized executive officer of the Company, which are not historical in nature, are intended to be, and are hereby identified as, “forward-looking statements” for purposes of the safe harbor provided by the Private Securities Litigation Reform Act of 1995. These statements are based on current expectations, estimates, forecasts and projections about the Company, its future performance, the industry in which the Company operates and management’s assumptions. Words such as “expects”, “anticipates”, “targets”, “goals”, “projects”, “intends”, “plans”, “believes”, “seeks”, “estimates”, “may”, “will”, “should” and variations of such words and similar expressions are also intended to identify such forward-looking statements. The Company cautions readers that forward-looking statements include, without limitation, those relating to the Company’s future business prospects, projected operating or financial results, revenues, working capital, liquidity, capital needs, inventory levels, plans for future operations, expectations regarding capital expenditures, operating efficiency initiatives and other items, cost savings initiatives, and operating expenses, effective tax rates, margins, interest costs, and income as well as assumptions relating to the foregoing. Forward-looking statements are subject to certain risks and uncertainties, some of which cannot be predicted or quantified. Actual results and future events could differ materially from those indicated in the forward-looking statements, due to several important factors herein identified, among others, and other risks and factors identified from time to time in the Company’s reports filed with the SEC, including, without limitation, the following: general economic and business conditions which may impact disposable income of consumers in the United States and the other significant markets (including Europe) where the Company’s products are sold; uncertainty regarding such economic and business conditions, including inflation and tightness in the labor market; trends in consumer debt levels and bad debt write-offs; general uncertainty related to possible terrorist attacks, natural disasters, pandemics, including the effect of the COVID-19 pandemic and other diseases on travel and traffic in the Company’s retail stores and the stores of its wholesale customers; supply disruptions, delivery delays and increased shipping costs as a result of the COVID-19 pandemic and power outages in China; adverse impact on the Company’s wholesale customers and customer traffic in the Company’s stores as a result of increased uncertainty and economic disruption caused by the COVID-19 pandemic; uncertainty relating to the availability and efficacy of vaccines and treatments for COVID-19; the impact of the United Kingdom’s exit from the European Union; defaults on or downgrades of sovereign debt and the impact of any of those events on consumer spending; changes in consumer preferences and popularity of particular designs, new product development and introduction; decrease in mall traffic and increase in e-commerce; the ability of the Company to successfully implement its business strategies, competitive products and pricing, including price increases to offset increased costs; the impact of “smart” watches and other wearable tech products on the traditional watch market; seasonality; availability of alternative sources of supply in the case of the loss of any significant supplier or any supplier’s inability to fulfill the Company’s orders; the loss of or curtailed sales to significant customers; the Company’s dependence on key employees and officers; the ability to successfully integrate the operations of acquired businesses without disruption to other business activities; the possible impairment of acquired intangible assets including goodwill if the carrying value of any reporting unit were to exceed its fair value; risks associated with the Company's minority investments in early-stage growth companies and venture capital funds that invest in such companies; volatility in reported earnings resulting from changes in the estimated fair value of contingent acquisition consideration; the continuation of the Company’s major warehouse and distribution centers; the continuation of licensing arrangements with third parties; losses possible from pending or future litigation and administrative proceedings; the ability to secure and protect trademarks, patents and other intellectual property rights; the ability to lease new stores on suitable terms in desired markets and to complete construction on a timely basis; the ability of the Company to successfully manage its expenses on a continuing basis; information systems failure or breaches of network security; complex and quickly-evolving regulations regarding privacy and data protection; the continued availability to the Company of financing and credit on favorable terms; business disruptions; and general risks associated with doing business outside the United States including, without limitation, import duties, tariffs (including retaliatory tariffs), quotas, political and economic stability, changes to existing laws or regulations, and success of hedging strategies with respect to currency exchange rate fluctuations.

These risks and uncertainties, along with the risk factors discussed under Item 1A. “Risk Factors” in the Company’s 2021 Annual Report on Form 10-K, should be considered in evaluating any forward-looking statements contained in this report or incorporated by reference herein. All forward-looking statements speak only as of the date of this report or, in the case of any document incorporated by reference, the date of that document. All subsequent written and oral forward-looking statements attributable to the Company or any person acting on its behalf are qualified by the cautionary statements in this section. The Company undertakes no obligation to update or publicly release any revisions to forward-looking statements to reflect events, circumstances or changes in expectations after the date of this report.

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 and contained in the Company's 2021 Annual Report on Form 10-K and are incorporated by reference herein. 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.

Critical accounting policies are those that are most important to the portrayal of the Company’s financial condition and the results of operations and require management’s most difficult, subjective and complex judgments as a result of the need to make estimates about the effect of matters that are inherently uncertain. As of October 31, 2021, there have been no material changes to any of the Company’s critical accounting policies except the Company accounts for its equity securities without readily determinable fair values at cost, less impairment, plus/minus subsequent observable price changes, and performs an assessment each quarter to determine whether or not a triggering event has occurred that results in changes in fair value. These investments were not material to the Company's consolidated financial statements ($1.1 million) and are included in Other non-current assets in the accompanying consolidated balance sheets.

Overview

The Company conducts its business in two operating segments: Watch and Accessory Brands and Company Stores. The Company’s Watch and Accessory Brands segment includes the designing, manufacturing and distribution of watches and, to a lesser extent, jewelry and other accessories, of owned and licensed brands, in addition to revenue generated from after-sales service activities and shipping. The Company Stores segment includes the Company’s retail outlet business in the United States and Canada. The Company also operates in two major geographic locations: United States and International, the latter of which includes the results of all non-U.S. Company operations.

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 SCUDERIA FERRARI®.

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.

Recent Developments and Initiatives

COVID-19

be impacted by the pandemic. In addition, during the 2021 fiscal year and continuing through the third quarter of 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.

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.

Results of Operations Overview

The following is a discussion of the results of operations for the three and nine months ended October 31, 2021 compared to the three and nine months ended October 31, 2020, along with a discussion of the changes in financial condition during the first nine months of fiscal 2022. The Company’s results of operations for the first nine months of fiscal 2022 should not be deemed indicative of the results that the Company will experience for the full year of fiscal 2022. See “Recent Developments and Initiatives” above. See also “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended January 31, 2021 filed with the Securities and Exchange Commission on March 25, 2021.

Results of operations for the three months ended October 31, 2021 as compared to the three months ended October 31, 2020

Net Sales: Comparative net sales by business segment were as follows (in thousands):


	Three Months Ended October 31,
	2021		2020
Watch and Accessory Brands:
United States	$	70,752	$	48,403
International		123,574		103,705
Total Watch and Accessory Brands		194,326		152,108
Company Stores:
United States		22,031		17,082
International		1,389		673
Total Company Stores		23,420		17,755
Net Sales	$	217,746	$	169,863

Comparative net sales by categories were as follows (in thousands):


	Three Months Ended October 31,
	2021		2020
Watch and Accessory Brands:
Owned brands category	$	69,433	$	55,774
Licensed brands category		122,098		95,576
After-sales service and all other		2,795		758
Total Watch and Accessory Brands		194,326		152,108
Company Stores		23,420		17,755
Net Sales	$	217,746	$	169,863

Net Sales

Net sales for the three months ended October 31, 2021 were $217.7 million, $47.9 million or 28.2% above the prior year period. For the three months ended October 31, 2021, fluctuations in foreign currency exchange rates positively impacted net sales by $2.5 million when compared to the prior year period.

Watch and Accessory Brands Net Sales

Net sales for the three months ended October 31, 2021 in the Watch and Accessory Brands segment were $194.3 million, above the prior year period by $42.2 million, or 27.8%. The increase in net sales was primarily due to increased volumes resulting from higher demand with growth in the Company's wholesale customers, growth in online retailers, both in the Company’s owned and wholesale customers’ e-commerce websites, and to a lesser extent, limited price increases. Prior period net sales were negatively impacted by restrictions affecting some stores of the Company’s wholesale customers during a portion of the period due to the COVID-19 pandemic. Some of these restrictions have 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 for the three months ended October 31, 2021 in the United States locations of the Watch and Accessory Brands segment were $70.7 million, above the prior year period by $22.3 million, or 46.2%, resulting from net sales increases across most brands in both the owned and licensed brand categories. The net sales recorded in the owned brands category increased by $16.1 million, or 43.1%, and net sales recorded in the licensed brand category increased $4.7 million, or 41.9%.

International Watch and Accessory Brands Net Sales

Net sales for the three months ended October 31, 2021 in the International locations of the Watch and Accessory Brands segment were $123.6 million, above the prior year by $19.9 million, or 19.2%, which included fluctuations in foreign currency exchange rates which favorably impacted net sales by $2.5 million when compared to the prior year period. The increase in net sales was across all brands in the licensed brand category, partially offset by a decrease in the owned brands category across most brands. The net sales increase recorded in the licensed brands category was $21.9 million, or 25.9% and is due to sales increases in all regions. The net sales decrease in the owned brands category was $2.4 million, or 13.0%, primarily due to net sales decreases in Asia, Europe and the Middle East.

Company Stores Net Sales

Net sales for the three months ended October 31, 2021 in the Company Stores segment were $23.4 million, $5.7 million or 31.9% above the prior year period. The net sales increase is primarily the result of increased traffic in the Company's retail stores, the addition of three new store openings and MCS.com. As of October 31, 2021 and 2020, the Company operated 50 and 47 retail outlet locations, respectively.

Gross Profit

Gross profit for the three months ended October 31, 2021 was $125.6 million or 57.7% of net sales as compared to $92.5 million or 54.4% of net sales in the prior year period. The increase in gross profit of $33.1 million was primarily due to higher net sales combined with a higher gross margin percentage. The increase in the gross margin percentage of approximately 330 basis points for the three months ended October 31, 2021 resulted primarily from a favorable impact of sales mix of approximately 320 basis points and increased

leveraging of certain fixed costs as a result of higher sales of approximately 20 basis points, partially offset by an approximately 10 basis point impact due to increased shipping costs.

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

SG&A expenses for the three months ended October 31, 2021 were $84.2 million, representing an increase from the prior year period of $14.8 million, or 21.3%. The prior year period included corporate initiative charges primarily in response to the COVID-19 pandemic of $0.7 million consisting of $0.6 million in other restructuring charges and $0.1 million in severance and payroll related. Excluding these charges SG&A expenses would have increased $15.5 million primarily from higher marketing expenses of $7.6 million; an increase in performance-based compensation of $3.7 million; an increase in consulting charges of $1.6 million; an increase in payroll related expenses of $1.2 million primarily due to government subsidies received in the prior year period in response to the COVID-19 pandemic and an increase in credit card fees and sales commissions of $0.6 million due to higher sales in the current year period. For the three months ended October 31, 2021, fluctuations in foreign currency rates related to the foreign subsidiaries negatively impacted SG&A expenses by $0.5 million when compared to the prior year period.

Watch and Accessory Brands Operating Income

For the three months ended October 31, 2021, the Company recorded operating income of $34.9 million in the Watch and Accessory Brands segment which includes $21.6 million of unallocated corporate expenses as well as $28.9 million of certain intercompany profits related to the Company’s supply chain operations. For the three months ended October 31, 2020, the Company recorded operating income of $19.8 million in the Watch and Accessory Brands segment which included $16.3 million of unallocated corporate expenses as well as $23.0 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 $27.6 million, partially offset by an increase in SG&A expenses of $12.5 million when compared to the prior year period. The increase in gross profit was primarily the result of higher net sales and also reflected a higher gross margin percentage primarily due to a favorable change in sales mix partially offset by increased shipping costs. The SG&A expenses for the prior year period included corporate initiatives charges primarily in response to the COVID-19 pandemic of $0.7 million consisting of $0.6 million in other restructuring charges and $0.1 million in severance and payroll related. Without these charges SG&A expense would have increased $13.2 million. The underlying increase in SG&A expenses of $13.2 million resulted primarily from higher marketing expenses of $6.6 million; an increase in performance-based compensation of $3.6 million; an increase in consulting charges of $1.6 million; and an increase in payroll related expenses of $1.0 million primarily due to government subsidies received in the prior year period in response to the COVID-19 pandemic. For the three months ended October 31, 2021, fluctuations in foreign currency exchange rates positively impacted the Watch and Accessory Brands segment operating income by $0.4 million when compared to the prior year period.

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

In the United States locations of the Watch and Accessory Brands segment, for the three months ended October 31, 2021, the Company recorded operating income of $0.8 million which includes unallocated corporate expenses of $21.6 million. For the three months ended October 31, 2020 the Company recorded an operating loss of $9.8 million in the United States locations of the Watch and Accessory Brands segment which included unallocated corporate expenses of $16.3 million. The improvement in operating income was the result of higher gross profit of $16.6 million, partially offset by an increase in SG&A expenses of $6.0 million when compared to the prior year period. The increase in gross profit of $16.6 million was due to higher net sales, combined with a higher gross margin percentage. The SG&A expenses for the prior year period included corporate initiatives charges primarily in response to the COVID-19 pandemic consisting of $0.6 million in other restructuring charges. Without these charges SG&A expense would have increased $6.6 million. The underlying increase in SG&A expenses of $6.6 million resulted primarily from higher marketing expenses of $4.1 million and an increase in performance-based compensation of $2.7 million.

International Watch and Accessory Brands Operating Income

In the International locations of the Watch and Accessory Brands segment, for the three months ended October 31, 2021, the Company recorded operating income of $34.1 million which includes $28.9 million of certain intercompany profits related to the Company’s International supply chain operations. For the three months ended October 31, 2020 the Company recorded operating income of $29.6 million in the International locations of the Watch and Accessory Brands segment which included $23.0 million of certain intercompany profits related to the Company’s supply chain operations. The increase in operating income was primarily related to a higher gross profit of $11.0 million, partially offset with higher SG&A expenses of $6.5 million. The increase in gross profit of $11.0 million was due to higher net sales partially offset with a slightly lower margin percentage. The SG&A expenses for the prior year period included corporate initiatives charges primarily in response to the COVID-19 pandemic of $0.1 million in severance and payroll related. Without these charges SG&A expense would have increased $6.6 million. The underlying increase in SG&A expenses of $6.6 million resulted primarily from higher marketing expenses of $2.5 million; an increase of consulting charges of $1.4 million; an increase in payroll related expenses of $1.3 million primarily due to government subsidies received in the prior year period in response to the COVID-19 pandemic; and an increase in performance-based compensation of $0.9 million. Fluctuation in foreign currency exchange rates positively impacted operating income by $0.4 million when compared to the prior year period.

Company Stores Operating Income

The Company recorded operating income of $6.5 million and $3.2 million in the Company Stores segment for the three months ended October 31, 2021 and 2020, respectively. The increase in operating income of $3.3 million was primarily related to higher gross profit of $5.5 million mainly due to higher net sales and a higher gross margin percentage partially due to reduced promotions, partially offset by a $2.2 million increase in SG&A expenses. The increase in SG&A expenses was primarily due to higher marketing expenses of $1.0 million; an increase in rent and rent related of $0.3 million due to the opening of new company stores; an increase in credit card fees and sales commissions of $0.3 million due to higher sales in the current year period as compared to the prior year period; and an increase of $0.2 million in payroll related and performance-based compensation expense. As of October 31, 2021, and 2020, the Company operated 50 and 47 retail outlet locations, respectively.

Other Non-Operating Income

The Company recorded other income of $0.1 million primarily due to the non-service components of the Company’s Swiss pension plan for the three months ended October 31, 2021.

Interest Expense

Interest expense was $0.1 million and $0.6 million for the three months ended October 31, 2021 and 2020, respectively. The decrease was primarily due to no borrowings under the Company’s revolving credit facility during the current year period partially offset by higher unused credit line fees during the three months ended October 31, 2021 as compared to the three months ended October 31, 2020.

Income Taxes

The Company recorded an income tax provision of $9.6 million and $7.5 million for the three months ended October 31, 2021 and 2020, respectively.

Net Income Attributable to Movado Group, Inc.

The Company recorded net income attributable to Movado Group, Inc. of $31.4 million and $14.8 million for the three months ended October 31, 2021 and 2020, respectively.

Results of operations for the nine months ended October 31, 2021 as compared to the nine months ended October 31, 2020

Net Sales: Comparative net sales by business segment were as follows (in thousands):


	Nine Months Ended October 31,
	2021		2020
Watch and Accessory Brands:
United States	$	177,307	$	95,605
International		279,477		197,978
Total Watch and Accessory Brands		456,784		293,583
Company Stores:
United States		66,856		33,180
International		2,778		1,304
Total Company Stores		69,634		34,484
Net Sales	$	526,418	$	328,067

Comparative net sales by categories were as follows (in thousands):


	Nine Months Ended October 31,
	2021		2020
Watch and Accessory Brands:
Owned brands category	$	178,706	$	112,757
Licensed brands category		273,801		177,674
After-sales service and all other		4,277		3,152
Total Watch and Accessory Brands		456,784		293,583
Company Stores		69,634		34,484
Net Sales	$	526,418	$	328,067

Net Sales

Net sales for the nine months ended October 31, 2021 were $526.4 million, $198.4 million or 60.5% above the prior year period. This increase is primarily as a result of the partial recovery from the ongoing COVID-19 pandemic. For the nine months ended October 31, 2021, fluctuations in foreign currency exchange rates positively impacted net sales by $12.1 million when compared to the prior year period.

Watch and Accessory Brands Net Sales

Net sales for the nine months ended October 31, 2021 in the Watch and Accessory Brands segment were $456.8 million, above the prior year period by $163.2 million, or 55.6%. The increase in net sales was primarily due to increased volumes resulting from higher demand with growth in the Company's wholesale customers and growth in online retailers, both in the Company’s owned and wholesale customers’ e-commerce websites, due to the partial recovery from the ongoing COVID-19 pandemic. 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 have 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 for the nine months ended October 31, 2021 in the United States locations of the Watch and Accessory Brands segment were $177.3 million, above the prior year period by $81.7 million, or 85.5%, 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. The net sales recorded in the owned brands category increased by $63.4 million, or 86.0%, and net sales recorded in the licensed brand category increased $17.2 million, or 82.5%.

International Watch and Accessory Brands Net Sales

Net sales for the nine months ended October 31, 2021 in the International locations of the Watch and Accessory Brands segment were $279.5 million, above the prior year by $81.5 million, or 41.2%, which included fluctuations in foreign currency exchange rates which favorably impacted net sales by $12.1 million when compared to the prior year period. The increase in net sales was across most brands in both the owned and licensed brand categories primarily due to the partial recovery from the ongoing COVID-19 pandemic. The net sales increase recorded in the owned brands category was $2.5 million, or 6.5% and is due to sales increases in most regions. The net sales increase in the licensed brands category was $79.0 million, or 50.3%, due to net sales increases across all regions.

Company Stores Net Sales

Net sales for the nine months ended October 31, 2021 in the Company Stores segment were $69.6 million, $35.2 million or 101.9% 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 same period in the prior year and the addition of three new store openings. As of October 31, 2021 and 2020, the Company operated 50 and 47 retail outlet locations, respectively.

Gross Profit

Gross profit for the nine months ended October 31, 2021 was $298.2 million or 56.7% of net sales as compared to $169.7 million or 51.7% of net sales in the prior year period. The increase in gross profit of $128.5 million was primarily due to higher net sales combined with a higher gross margin percentage. The increase in the gross margin percentage of approximately 500 basis points for the nine months ended October 31, 2021 resulted primarily from a favorable impact of sales mix of approximately 320 basis points, the non-recurrence of a prior year charge related to an increase in inventory reserves in response to the COVID-19 pandemic of approximately 110 basis points, increased leveraging of certain fixed costs as a result of higher sales of approximately 40 basis points and a positive impact of fluctuations in foreign exchange rates of approximately 40 basis points, partially offset by an approximately 10 basis point impact due to increased shipping costs.

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

SG&A expenses for the nine months ended October 31, 2021 were $218.9 million, representing an increase from the prior year period of $37.1 million, or 20.4%. The prior year period included corporate initiative charges primarily in response to the COVID-19 pandemic of $11.8 million consisting of $8.0 million in severance and payroll related, $1.5 million in write-off of unrefunded trade show deposits, $1.2 million in other restructuring charges and $1.1 million in additional accounts receivable reserves. Excluding these charges SG&A expenses would have increased $48.9 million primarily from higher marketing expenses of $26.1 million; an increase in performance-based compensation of $10.3 million; an increase in payroll related expenses of $6.9 million primarily due to the non-reoccurrence of the furloughing of employees and temporary salary reductions during a portion of the prior year period in response to the COVID-19 pandemic; an increase in credit card fees and sales commissions of $2.7 million due to higher sales in the current year period; and an increase in consulting and recruiting charges of $2.1 million. The increase in SG&A was partially offset by a decrease of $0.8 million in customer and sales promotions. For the nine months ended October 31, 2021, fluctuations in foreign currency rates related to the foreign subsidiaries negatively impacted SG&A expenses by $2.2 million when compared to the prior year period.

Impairment of Goodwill and Intangible Assets

As a result of the economic conditions caused by the response to COVID-19, 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.

Watch and Accessory Brands Operating Income/(Loss)

For the nine months ended October 31, 2021 the Company recorded operating income of $59.4 million in the Watch and Accessory Brands segment which includes $43.5 million of unallocated corporate expenses as well as $59.7 million of certain intercompany profits related to the Company’s supply chain operations. For the nine months ended October 31, 2020, the Company recorded an operating loss of $169.8 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 nine months ended October 31, 2020, operating loss would have been $13.9 million which included $28.4 million of unallocated corporate expenses as well as $45.3 million of certain intercompany profits related to the Company’s supply chain operations. In addition to the asset impairments in the prior year period, the increase in operating income was the result of an increase in gross profit of $102.3 million, which included corporate initiatives costs in the prior year period of $3.5 million comprising an increase in inventory reserves, partially offset by an increase in SG&A expenses of $29.0 million when compared to the prior year period. 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 SG&A expenses for the prior year period included corporate initiatives charges primarily in response to the COVID-19 pandemic of $11.8 million consisting of $8.0 million in severance and payroll related, $1.5 million in write-off of unrefunded trade show deposits, $1.2 million in other restructuring charges and $1.1 million in additional accounts receivable reserves. Without these charges SG&A expense would have increased $40.8 million. The underlying increase in SG&A expenses of $40.8 million resulted primarily from higher marketing expenses of $23.3 million; an increase in performance-based compensation of $9.7 million; an increase in payroll related expenses of $4.7 million primarily due to the non-reoccurrence of the furloughing of employees and temporary salary reductions during a portion of the prior year period in response to the COVID-19 pandemic; an increase in consulting and recruiting charges of $2.1 million; and an increase in credit card fees and sales commissions of $1.7 million due to higher sales in the current year period. The

increase in SG&A expense was partially offset by a decrease of $0.7 million in customer and sales promotions. For the nine months ended October 31, 2021, fluctuations in foreign currency exchange rates positively impacted the Watch and Accessory Brands segment operating income by $3.0 million when compared to the prior year period.

U.S. Watch and Accessory Brands Operating Loss

In the United States locations of the Watch and Accessory Brands segment, for the nine months ended October 31, 2021, the Company recorded an operating loss of $2.7 million, which includes unallocated corporate expenses of $43.5 million. For the nine months ended October 31, 2020 the Company recorded an operating loss of $142.6 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 charges, for the nine months ended October 31, 2020, operating loss would have been $42.9 million, which included unallocated corporate expenses of $28.4 million. In addition to these assets impairments in the prior year period, the decrease in operating loss was the result of higher gross profit of $58.5 million, which included corporate initiative costs in the prior year period of $3.5 million comprising an increase in inventory reserves, partially offset by an increase in SG&A expenses of $18.3 million when compared to the prior year period. The increase in gross profit of $58.5 million was due to higher net sales, combined with a higher gross margin percentage. The SG&A expenses for the prior year period included corporate initiatives charges primarily in response to the COVID-19 pandemic of $8.4 million primarily consisting of $6.3 million in severance and payroll related, $1.1 million in additional accounts receivable reserves and $1.0 million in other restructuring charges. Without these charges SG&A expense would have increased $26.7 million. The underlying increase in SG&A expenses of $26.7 million resulted primarily from higher marketing expenses of $14.0 million; an increase in performance-based compensation of $8.8 million; an increase in payroll related expenses of $2.6 million primarily due to the non-reoccurrence of the furloughing of employees and temporary salary reductions during a portion of the prior year period in response to the COVID-19 pandemic; an increase in credit card fees and sales commission of $0.7 million due to higher sales in the current year period; and an increase in consulting and recruiting charges of $0.3 million.

International Watch and Accessory Brands Operating Income/(Loss)

In the International locations of the Watch and Accessory Brands segment, for the nine months ended October 31, 2021 the Company recorded operating income of $62.1 million, which includes $59.7 million of certain intercompany profits related to the Company’s International supply chain operations. For the nine months ended October 31, 2020 the Company recorded an operating loss of $27.2 million in the International locations of the Watch and Accessory Brands segment which included goodwill impairment charges of $56.2 million. Without this charge, for the nine months ended October 31, 2020, the Company would have generated operating income of $29.0 million, which included $45.3 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 $43.8 million, partially offset by higher SG&A expenses of $10.7 million. The increase in gross profit of $43.8 million was due to higher net sales partially offset with a slightly lower gross margin percentage. The SG&A expenses for the prior year period included corporate initiatives charges primarily in response to the COVID-19 pandemic of $3.4 million consisting of $1.7 million in severance and payroll related, $1.5 million in write-off of unrefunded trade show deposits and $0.2 million in other restructuring charges. Without these charges SG&A expense would have increased $14.1 million. The underlying increase in SG&A expenses of $14.1 million resulted primarily from higher marketing expenses of $9.3 million; an increase in payroll related expenses of $2.1 million primarily due to the non-reoccurrence of the furloughing of employees and temporary salary reductions during a portion of the prior year period in response to the COVID-19 pandemic; an increase in consulting and recruiting charges of $1.8 million; an increase in sales commissions and credit card fees of $1.0 million due to higher sales in the current year period; and an increase in performance-based compensation of $0.9 million. The increase in SG&A expenses was partially offset by a decrease of $0.7 million in customer and sales promotions. Fluctuation in foreign currency exchange rates positively impacted operating income by $3.0 million when compared to the prior year period.

Company Stores Operating Income

The Company recorded operating income of $19.9 million and $1.7 million in the Company Stores segment for the nine months ended October 31, 2021 and 2020, respectively. The improvement in operating income of $18.2 million was primarily related to higher gross profit of $26.3 million mainly due to higher net sales and a higher gross margin percentage, partially offset by a $8.1 million increase in SG&A expenses. The increase in SG&A expenses was primarily due to higher marketing expenses of $2.8 million; an increase in payroll related expenses of $2.2 million primarily due to company stores being open throughout the period (as compared to the significant closures during the prior year period); an increase in credit card fees and sales commissions of $1.1 million due to higher sales in the current year period as compared to the prior year period, an increase in rent and rent related of $0.7 million due to the opening of new

company stores; and an increase in performance-based compensation of $0.6 million. As of October 31, 2021, and 2020, the Company operated 50 and 47 retail outlet locations, respectively.

Other Non-Operating Income

The Company recorded other income of $0.4 million primarily due to the final settlement related to a sale of a building in an international location in the prior year period and the non-service components of the Company’s Swiss pension plan for the nine months ended October 31, 2021.

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 nine months ended October 31, 2020.

Interest Expense

Interest expense was $0.6 million and $1.5 million for the nine months ended October 31, 2021 and 2020, respectively. 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 the nine months ended October 31, 2021 as compared to the nine months ended October 31, 2020.

Income Taxes

The Company recorded an income tax provision of $18.2 million and an income tax benefit of $26.4 million for the nine months ended October 31, 2021 and 2020, respectively.

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

The Company recorded net income attributable to Movado Group, Inc. of $60.2 million and net loss attributable to Movado Group, Inc. of $141.8 million for the nine months ended October 31, 2021 and 2020, respectively.

LIQUIDITY AND CAPITAL RESOURCES

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 the Restructuring Plan. 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 unaudited Consolidated Financial Statements.

At October 31, 2021 the Company had working capital of $391.1 million as compared to $338.2 million at October 31, 2020. The increase in working capital was primarily the result of an increase in cash of $38.6 million and an increase in accounts receivable resulting primarily from higher sales partially offset by an increase in accrued liabilities. The Company defines working capital as the difference between current assets and current liabilities.

The Company had $38.7 million of cash provided by operating activities for the nine months ended October 31, 2021 as compared to $6.7 million of cash used in operating activities for the nine months ended October 31, 2020. Cash provided by operating activities for the nine months ended October 31, 2021 included net income attributable to the Movado Group, Inc. of $60.2 million, positively adjusted by $18.5 million related to non-cash items. Cash provided by operating activities for the nine months ended October 31, 2021 included an increase in accrued liabilities of $22.6 million primarily due to timing of payments and a decrease in income taxes receivable of $17.2 million due to a receipt of a U.S. federal income tax refund. Cash used in operating activities included an increase in trade receivables of $62.4 million as a result of higher sales, an increase in investment in inventories of $23.8 million primarily to support sales growth and a decrease in income taxes payable of $3.5 million primarily due to the timing of payments.

Cash used in investing was $4.9 million for the nine months ended October 31, 2021 as compared to $1.2 million for the nine months ended October 31, 2020. The cash used in the nine months ended October 31, 2021 was primarily related to capital expenditures of $3.6 million primarily due to the Company’s opening of three new stores (two in Canada), website platform upgrades and the construction of shop-in-shops at some of the Company’s wholesale customers and $1.1 million of long-term investments. The prior year period included proceeds from a sale of a non-operating asset in Switzerland of $1.3 million.

Cash used by financing activities was $54.0 million for the nine months ended October 31, 2021 as compared to cash used by financing activities of $17.6 million for the nine months ended October 31, 2020. The cash used in the nine months ended October 31, 2021 included repayment of bank borrowings of $21.1 million, $17.0 million in stock repurchased in the open market, $16.2 million in dividends paid ($2.3 million of which had been declared in January 2021) and $1.7 million of shares repurchased as a result of the surrender of shares in connection with the vesting of certain stock awards, partially offset by $2.2 million received in connection with stock options exercised. Cash used in financing activities for the nine months ended October 31, 2020 included net repayment of bank borrowings of $16.8 million.

The Company had weighted average borrowings under the Facility of zero and $44.5 million during the three months ended October 31, 2021 and 2020, respectively, with a weighted average interest rate of 3.75% during the three months ended October 31, 2020. The Company had weighted average borrowings under the Facility of $6.5 million and $60.5 million, with a weighted average interest rate of 2.79% and 2.37%, during the nine months ended October 31, 2021 and 2020, respectively.

Cash paid for interest, including unused commitments fees, was $0.4 million and $1.3 million for the nine-month period ended October 31, 2021 and October 31, 2020, respectively.

On January 11, 2021, with the consent of its bank group, 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 and $0.20 per share or $4.6 million during the three months ended October 31, 2021. The Company did not pay cash dividends during the nine months ended October 31, 2020. 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 August 29, 2017, 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 from time to time. This authorization expired on August 29, 2020. 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 the nine months ended October 31, 2021, the Company repurchased a total of 548,402 shares of its common stock under the March 25, 2021 share repurchase program at a total cost of $17.0 million, or an average of $31.04 per share. At October 31, 2021, $8.0 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 the nine months ended October 31, 2020, the Company did not repurchase any shares of its common stock.

Off-Balance Sheet Arrangements

The Company does not have off-balance sheet financing or unconsolidated special-purpose entities.

Accounting Changes and Recent Accounting Pronouncements

See Note 3- Recent Accounting Pronouncements to the accompanying unaudited Consolidated Financial Statements for a description of certain accounting changes and recent accounting pronouncements which may impact the Company’s Consolidated Financial Statements in future reporting periods.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Foreign Currency Exchange Rate Risk

The Company’s primary market risk exposure relates to foreign currency exchange risk (see Note 9 – Derivative Financial Instruments to the Consolidated Financial Statements). A significant portion of the Company’s purchases are denominated in Swiss Francs and, to a lesser extent, the Japanese Yen. The Company also sells to third-party customers in a variety of foreign currencies, most notably the Euro, Swiss Franc and the British Pound. The Company reduces its exposure to the Swiss Franc, Euro, British Pound, Chinese Yuan and Japanese Yen 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. The earnings impact is mostly offset by the effects of currency movements on the underlying hedged transactions. To the extent that the Company does not engage in a hedging program, any change in the Swiss Franc, Euro, British Pound, Chinese Yuan and Japanese Yen exchange rates to local currency would have an equal effect on the Company’s earnings.

From time to time the Company uses forward exchange contracts, which do not meet the requirements of qualified hedges, to offset its exposure to certain foreign currency receivables and liabilities. These forward contracts are not designated as qualified hedges and, therefore, changes in the fair value of these derivatives are recognized in earnings in the period they arise, thereby offsetting the current earnings effect resulting from the revaluation of the related foreign currency receivables and liabilities.

As of October 31, 2021, the Company’s entire net forward contracts hedging portfolio consisted of 15.7 million Chinese Yuan equivalent, 20.0 million Swiss Francs equivalent, 19.8 million U.S. dollars equivalent, 25.6 million Euros equivalent and 6.9 million British Pounds equivalent with various expiry dates ranging through April 22, 2022, compared to a portfolio of 21.6 million Chinese Yuan equivalent, 6.0 million Swiss Francs equivalent, 20.0 million U.S. dollars equivalent, 24.0 million Euros equivalent and 5.6 million British Pounds equivalent with various expiry dates ranging through January 12, 2021, as of October 31, 2020. If the Company were to settle its Swiss Franc forward contracts at October 31, 2021, the net result would be an immaterial loss. As of October 31, 2021, the Company’s British Pound, Chinese Yuan, US Dollar and Euro forward contracts had no gain or loss. The Company had no cash flow hedges as of October 31, 2021 and October 31, 2020, respectively.

Commodity Risk

The Company considers its exposure to fluctuations in commodity prices to be primarily related to gold used in the manufacturing of the Company’s watches. Under its hedging program, the Company can purchase various commodity derivative instruments, primarily futures contracts. When held, these derivatives are documented as qualified cash flow hedges, and the resulting gains and losses on these derivative instruments are first reflected in other comprehensive income, and later reclassified into earnings, partially offset by the effects of gold market price changes on the underlying actual gold purchases. The Company did not hold any future contracts in its gold hedge portfolio as of October 31, 2021 and 2020, thus, any changes in the gold purchase price will have an equal effect on the Company’s cost of sales.

Debt and Interest Rate Risk

Floating rate debt at October 31, 2021 and 2020 totaled zero and $37.3 million (25 million in Swiss francs and $10 million), respectively. During the nine months ended October 31, 2021, the Company had weighted average borrowings of $6.5 million with a weighted average interest rate of 2.79%. The Company does not hedge these interest rate risks. Based on the average floating rate debt outstanding during the nine months ended October 31, 2021, a one-percent increase or decrease in the average interest rate during the period would have resulted in a change to interest expense of approximately $48,000 for the nine months ended October 31, 2021.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company’s disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives. However, it should be noted that a control system, no matter how well conceived or operated, can only provide reasonable, not absolute, assurance that its objectives will be met and may not prevent all errors or instances of fraud.

The Company, under the supervision and with the participation of its management, including the Chief Executive Officer and the Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures, as such terms are defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective at a reasonable assurance level as of the end of the period covered by this report.

Changes in Internal Control Over Financial Reporting

There have been no changes in the Company’s internal control over financial reporting during the three months ended October 31, 2021, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

In December 2016, U.S. Customs and Border Protection (“U.S. Customs”) issued an audit report concerning the methodology used by the Company to allocate the cost of certain watch styles imported into the U.S. among the component parts of those watches for tariff purposes. The report disputes the reasonableness of the Company’s historical allocation formulas and proposes an alternative methodology that would imply $5.1 million in underpaid duties over the five-year period covered by the statute of limitations, plus possible penalties and interest. The Company believes that U.S. Customs’ alternative duty methodology and estimate are not consistent with the Company’s facts and circumstances and is disputing U.S. Customs’ position. Since February 2017, the Company has been providing U.S. Customs with supplemental analyses and information in response to U.S. Customs’ information requests. Most recently, the Company received summonses from U.S. Customs in December 2020 requesting additional information regarding component parts costs and the Company’s procedures for allocating the value of imported watches among the component parts. The Company responded to these summonses in January 2021. Although the Company disagrees with U.S. Customs’ position and believes that the information it has provided supports the reasonableness of its historical allocation formulas, it cannot predict with any certainty the outcome of this matter. The Company intends to continue to work with U.S. Customs to reach a mutually-satisfactory resolution.

In addition to the above matters, the Company is involved in other legal proceedings and contingencies, the resolution of which is not expected to materially affect its financial condition, future results of operations, or cash flows.

Item 1A. Risk Factors

As of October 31, 2021, there have been no material changes to any of the risk factors previously reported in the Company’s 2021 Annual Report on Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

On August 29, 2017, 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 from time to time. This authorization expired on August 29, 2020. 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 the three months ended October 31, 2021, the Company repurchased a total of 214,402 shares of its common stock under the March 25, 2021 share repurchase program at a total cost of $7.0 million, or an average of $32.87 per share.

At the election of an employee, upon the vesting of a stock award or the exercise of a stock option, shares of common stock having an aggregate value on the vesting of the award or the exercise date of the option, as the case may be, equal to the employee’s withholding tax obligation may be surrendered to the Company by netting them from the vested shares issued. Similarly, shares having an aggregate value equal to the exercise price of an option may be tendered to the Company in payment of the option exercise price and netted from the shares of common stock issued upon the option exercise. There were no shares repurchased during the three months ended October 31, 2021 as a result of the surrender of shares of common stock in connection with the vesting of certain restricted stock awards and stock options.

The following table summarizes information about the Company’s purchases for the three months ended October 31, 2021 of equity securities that are registered by the Company pursuant to Section 12 of the Securities Exchange Act of 1934, as amended:

Issuer Repurchase of Equity Securities


Period	Total Number of Shares Purchased		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Amount that May Yet Be Purchased Under the Plans or Programs
August 1, 2021 – August 31, 2021		41,115	$	31.34		41,115	$	13,735,857
September 1, 2021 – September 30, 2021		100,885		33.43		100,885		10,363,028
October 1, 2021 – October 31, 2021		72,402		32.95		72,402		7,977,391
Total		214,402	$	32.87		214,402	$	7,977,391

Item 6. Exhibits



4.1		Third Amendment, dated October 28, 2021, to the Amended and Restated Credit Agreement, dated as of October 12, 2018, among the Company, certain U.S. and Swiss subsidiaries thereof, the lenders party thereto and Bank of America, N.A. as administrative agent.

10.1		Second Amendment dated August 25, 2021 to the Amended and Restated License Agreement with Tapestry, Inc. Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed August 31, 2021.

10.2		Amendment # 3 dated October 13, 2021 to the License Agreement between Movado Group, Inc. and Ferrari S.p.A. Incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed October 19, 2021.

31.1		Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101		The following financial information from Movado Group, Inc.’s Quarterly Report on Form 10-Q for the quarter ended October 31, 2021 filed with the SEC, formatted in Inline Extensible Business Reporting Language (iXBRL): (i) the Consolidated Balance Sheets; (ii) the Consolidated Statements of Operations; (iii) the Consolidated Statements of Comprehensive Income; (iv) the Consolidated Statements of Cash Flows; and (v) the Notes to the Consolidated Financial Statements. XBRL Instance Document – the XBRL Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL Document.

104		Cover Page Interactive Data File, formatted in Inline Extensible Business Reporting Language (iXBRL).

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		MOVADO GROUP, INC.
		(Registrant)

Dated: November 23, 2021	By:	/s/ Sallie A. DeMarsilis
		Sallie A. DeMarsilis Executive Vice President, Chief Operating Officer, Chief Financial Officer and Principal Accounting Officer

EXHIBIT 4.1

AMENDMENT NO. 3 TO CREDIT AGREEMENT

This AMENDMENT NO. 3 TO CREDIT AGREEMENT (this “Amendment”), dated as of October 28, 2021 (the “Amendment Date”), is made by and among Movado Group, Inc., a New York corporation (“Parent”), Movado Group Delaware Holdings Corporation, a Delaware corporation, Movado LLC, a Delaware limited liability company, Movado Retail Group, Inc., a New Jersey corporation, MGI Luxury Group S.A., a company organized and existing under the laws of Switzerland, Movado Watch Company SA, a company organized and existing under the laws of Switzerland (collectively, with Parent, the “Borrowers”), MGI Luxury Group, B.V., a private company with limited liability incorporated under the laws of the Netherlands (“MGI BV”), Movado Group Nederland B.V., a private company with limited liability incorporated under the laws of the Netherlands (“Nederland BV” and, together with MGI BV, the “Guarantors” and, collectively with the Borrowers, the “Loan Parties”), the Lenders party hereto and Bank of America, N.A., in its capacity as administrative agent (in such capacity, the “Administrative Agent”) under that certain Amended and Restated Credit Agreement, dated as of October 12, 2018 (as amended, modified, extended, restated, replaced, or supplemented from time to time and in effect immediately prior to this Amendment, the “Existing Credit Agreement”, and as amended pursuant hereto and as further amended, modified, extended, restated, replaced, or supplemented from time to time, the “Credit Agreement”), by and among the Borrowers, the Guarantors, the Lenders, and the Administrative Agent. Capitalized terms used and not defined herein shall have the meanings ascribed to such terms in the Credit Agreement.

WHEREAS, the Borrowers have requested that the Administrative Agent and the Lenders make certain amendments to the Credit Agreement, including, but not limited to, extending the Maturity Date to October 28, 2026 and, subject to the terms and conditions herein, the Administrative Agent and the Lenders have agreed to such amendments, on the terms provided herein, to be effective as of the Amendment Date; and

WHEREAS, the Loan Parties, the Administrative Agent and the Lenders each acknowledge that the terms of this Amendment constitute a modification to, and not a novation or extinguishment of, the Credit Agreement and the other Loan Documents and except as expressly modified herein, all terms, conditions, rights and obligations as set out in the Loan Documents are hereby reaffirmed and shall otherwise remain in full force and effect as originally written and agreed.

NOW, THEREFORE, in consideration of the foregoing premises, which are confirmed by the parties hereto as a true, correct and substantive part of this Amendment, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

Amendments to Existing Credit Agreement.

(a)

Effective on and as of the Amendment Date, the Existing Credit Agreement (excluding the schedules and exhibits thereto, which shall remain in full force and effect, except as specifically referenced in this Section 1) is hereby amended as set forth in Exhibit A attached hereto (i) to delete the stricken text (indicated textually in the same manner as the following example: stricken text) and (ii) to insert the double underlined text (indicated textually in the same manner as the following example: double-underlined text).

(b)

Schedule 1.01(b) to the Credit Agreement is hereby amended and restated as set forth on Annex 1 attached hereto.

Conditions to Effectiveness. This Amendment shall become effective as of the Amendment Date, provided that each of the following conditions to effectiveness shall have been satisfied in each case in form and substance acceptable to the Administrative Agent:

(a)

Amendment. The Administrative Agent shall have received a counterpart signature page to this Amendment duly executed and delivered by each of the Loan Parties and each of the Lenders.

(b)

Officer’s Certificate. The Administrative Agent shall have received an Officer’s Certificate dated the Amendment Date, certifying as to (i) the Organization Documents of each Loan Party (which, to the extent filed with a Governmental Authority, shall be certified as of a recent date by such Governmental Authority), or in lieu thereof a certification from each Loan Party that its Organization Documents have not changed from those previously delivered to the Administrative Agent, (ii) the resolutions of the governing body of each Loan Party (including, with respect to a Swiss Loan Party, (a) a copy of minutes of a meeting (or of a circular resolution) of the board of directors of such Swiss Loan Party approving the Loan Documents to which it is a party and (b) a copy of minutes of a meeting of the general meeting of shareholders of such Swiss Loan Party approving the Loan Documents to which it is a party), (iii) the good standing, existence or its equivalent of each Loan Party and (iv) of the incumbency (including specimen signatures) of the Responsible Officers of each Loan Party.

(c)

Legal Opinions of Counsel. The Administrative Agent shall have received an opinion or opinions (including, local counsel opinions and an inhouse counsel opinion) of counsel for the Loan Parties, dated the Amendment Date and addressed to the Administrative Agent and the Lenders, in form and substance reasonably acceptable to the Administrative Agent.

(d)

Projections. The Administrative Agent and the Lenders shall have received copies of a set of projections including the projected financial performance of the Parent and its Subsidiaries through the Maturity Date prepared in good faith based upon assumptions believed to be reasonable at the time prepared and at the time provided, each in form and substance reasonably satisfactory to each of them.

(e)

Perfection Certificate; Information Certificate; Lien Searches. The Administrative Agent shall have received, in form and substance reasonably satisfactory to the Administrative Agent (i) a completed Perfection Certificate for each Domestic Loan Party and a completed Information Certificate for each Swiss Borrower, (ii) searches of UCC filings in the jurisdiction of incorporation or formation, as applicable, of each Domestic Loan Party and each other jurisdiction deemed reasonably appropriate by the Administrative Agent, copies of the financing statements on file in such jurisdictions and evidence that no Liens exist other than Permitted Liens, (iii) tax lien, judgment and bankruptcy searches in such jurisdictions as are deemed reasonably appropriate by the Administrative Agent and (iv) any filing and recordation necessary or desirable, in the Administrative Agent’s sole discretion, to perfect the Administrative Agent’s security interest in the Collateral.

(f)

Liability, Casualty, Property and Business Interruption Insurance. The Administrative Agent shall have received copies of certificates of insurance, declaration pages and endorsements of insurance requested by the Administrative Agent evidencing liability, casualty, property, terrorism and business interruption insurance meeting the requirements set forth herein or in the Collateral Documents or as required by the Administrative Agent.

(g)

Solvency Certificate. The Administrative Agent shall have received a Solvency Certificate signed by a Responsible Officer of Parent as to the financial condition, solvency and

related matters of the Parent and its Subsidiaries, after giving effect to this Amendment and the other transactions contemplated hereby.

(h)

Financial Condition Certificate. The Administrative Agent shall have received a certificate or certificates executed by a Responsible Officer of the Parent as of the Amendment Date, (i) as to certain financial matters, substantially in the form of Exhibit N and (ii) certifying that the conditions precedent set forth in paragraph (i), (j), (k) and (l) of this Section 2 are satisfied.

(i)

Material Adverse Effect. There shall not have occurred since January 31, 2021 any event or condition that has had or could be reasonably expected, either individually or in the aggregate, to have a Material Adverse Effect.

(j)

No Litigation. There are no actions, suits, proceedings, claims or disputes pending or, to the knowledge of the Loan Parties after reasonably diligent investigation, threatened, at law, in equity, in arbitration or before any Governmental Authority, by or against any Loan Party or any Subsidiary or against any of their properties or revenues that either individually or in the aggregate could reasonably be expected to have a Material Adverse Effect except for the Watch Tariff Matter.

(k)

Consents. The Administrative Agent shall have received evidence that all members, boards of directors, governmental, shareholder and material third party consents and approvals necessary in connection with the execution and delivery by any Loan Party of this Amendment and the other Loan Documents have been obtained and are in full force and effect

(l)

Existing Indebtedness of the Loan Parties. The Administrative Agent and the Lenders shall be satisfied that there is no outstanding Indebtedness for borrowed money of any Borrower and any of their Subsidiaries (other than Indebtedness permitted to exist pursuant to Section 7.02 of the Credit Agreement).

(m)

Fees and Expenses. The Administrative Agent and the Lenders shall have received all fees and expenses (including the fees and expenses of counsel (including any local counsel) for the Administrative Agent invoiced at least one Business Day prior to the Amendment Date), if any, owing pursuant to the Loan Documents, including the payment to (i) the Administrative Agent and Arranger, for their respective accounts, in Dollars, the fees specified in that certain Fee letter dated September 27, 2021 (the “Bank of America Fee Letter”), between the Parent, Bank of America, N.A. and Arranger and (ii) PNC Capital Markets, LLC, the fees specified in that certain Fee letter dated October 20, 2021 (the “PNC Fee Letter” and, together with the Bank of America Fee Letter, the “Third Amendment Fee Letter”), among PNC Bank, National Association, PNC Capital Markets LLC and the Parent.

(n)

Due Diligence. The Lenders shall have completed a due diligence investigation of the Borrowers and its Subsidiaries in scope, and with results, satisfactory to the Lenders, including, without limitation, U.S. Department of Treasury Office of Foreign Assets Control, Foreign Corrupt Practices Act (“FCPA”) and “know your customer” due diligence.

(o)

Licensing Requirements. The Administrative Agent, Swingline Lender and L/C Issuer and each Lender shall have obtained all applicable licenses, consents, permits and approvals as deemed necessary by such Lender in order to execute and perform the transactions contemplated by the Loan Documents.

(p)

KYC Information.

(i)

Upon the request of any Lender made at least ten (10) days prior to the Amendment Date, the Borrowers shall have provided to such Lender, and such Lender shall be reasonably satisfied with, the documentation and other information so requested in connection with applicable “know your customer” and anti-money-laundering rules and regulations, including, without limitation, the PATRIOT Act, in each case at least three (3) Business Days prior to the Amendment Date.

(ii)

At least three (3) Business Days prior to the Amendment Date, any Borrower that qualifies as a “legal entity customer” under the Beneficial Ownership Regulation shall deliver, to any requesting Lender, a Beneficial Ownership Certification in relation to such Borrower.

(q)

Other Documents; Additional Information. All other documents, additional information and materials provided for herein or which the Administrative Agent or any other Lender may reasonably request or require.

Representations and Warranties. Each of the Loan Parties represents and warrants to the Lenders and the Administrative Agent that:

(a)

The execution, delivery and performance of this Amendment and the transactions contemplated hereby have been duly authorized by all necessary corporate or other organizational action by the Guarantors and the Borrowers, as applicable, and do not and will not (i) contravene the terms of any of such Person’s Organization Documents or (ii) conflict with or result in any breach or contravention of, or the creation of any Lien under, or require any payment to be made under (A) any Contractual Obligation to which such Person is a party or affecting such Person or the properties of such Person or any of its Subsidiaries, except for any conflict, breach or contravention that, either individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect, or (B) any order, injunction, writ or decree of any Governmental Authority or any arbitral award to which such Person or its property is subject; or (iii) violate any Law in any material respect;

(b)

Each of this Amendment, the Credit Agreement, the Third Amendment Fee Letter and the other Loan Documents have been duly executed and delivered by each Loan Party that is party thereto, as applicable and constitutes a legal, valid and binding obligation of such Loan Party, enforceable against each Loan Party that is party thereto in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium or other laws affecting creditors’ rights generally and subject to general principals of equity;

(c)

No approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any Governmental Authority or any other Person is necessary or required in connection with (i) the execution, delivery or performance by, or enforcement against, any Loan Party of this Amendment, the Third Amendment Fee Letter or any other Loan Document, (ii) the grant by any Loan Party of the Liens granted by it pursuant to the Loan Documents, (iii) the perfection or maintenance of the Liens created under the Loan Documents (including the first priority nature thereof) or (iv) the exercise by the Administrative Agent or any Lender of its rights under the Credit Agreement or the Loan Documents or the remedies in respect of the Collateral pursuant to the Loan Documents, other than (A) authorizations, approvals, actions, notices and filings which have been duly obtained and (B) filings to perfect the Liens created by the Loan Documents;

(d)

Before and after giving effect to this Amendment, the representations and warranties made by each Loan Party contained in Article II of the Credit Agreement, Article V of the Credit Agreement and each other Loan Document are (i) with respect to representations and warranties that contain a materiality qualification, true and correct on and as of the date hereof and (ii) with respect to representations and warranties that do not contain a materiality qualification, true and correct in all material respects as of the date hereof (except that the representations and warranties contained in Sections 5.05(a) and (b) of the Credit Agreement shall be deemed to refer to the most recent statements furnished pursuant to Sections 6.01(a) and

(b) of the Credit Agreement, respectively), except, in each case, for such representations and warranties that relate solely to an earlier date shall be true and correct as of such earlier date (or with respect to such representations and warranties that do not contain a materiality qualification, be true and correct in all material respects as of such earlier date); and

(e) Before and after giving effect to this Amendment, no Default or Event of Default under the Credit Agreement shall have occurred and be continuing.

No Waiver; Reservation of Rights. This Amendment shall not, by implication or otherwise, constitute a waiver of any Default or Event of Default or limit, impair, constitute a waiver of or otherwise affect any rights or remedies of the Administrative Agent or the Lenders under the Credit Agreement or the other Loan Documents, nor alter, modify, amend or in any way affect any of the terms, obligations or covenants contained in the Credit Agreement or the Loan Documents, all of which shall continue in full force and effect, except to the extent expressly amended in Section 2 hereof. The Loan Parties hereby acknowledge that the Administrative Agent and the Lenders have not made any agreement or commitment to modify the Loan Documents other than as expressly set forth herein, and nothing in this Amendment shall be construed to imply any willingness on the part of the Administrative Agent or the Lenders to grant any future consent or waiver of any of the terms and conditions of the Credit Agreement or the other Loan Documents. The Lender Parties hereby reserve all rights and remedies available to them under the Loan Documents and applicable law.

Ratification, etc. Except as expressly amended hereby, the Credit Agreement and all other Loan Documents are hereby ratified and confirmed in all respects and shall continue in full force and effect. This Amendment and the Credit Agreement shall hereafter be read and construed together as a single document, and all references in the Credit Agreement, any other agreements or instruments related to the Credit Agreement shall hereafter refer to the Credit Agreement as amended by this Amendment. The Loan Parties, the Agent and the Lenders agree that the guarantees, the liens, assignments and security interests created by the Loan Documents, except to the extent previously released, shall continue and carry forward until the occurrence of the Facility Termination Date. The Loan Parties further agree that such guarantees, liens, assignments and security interests are hereby ratified and affirmed as valid and subsisting against the property described in the Loan Documents and that this Amendment shall in no manner vitiate, affect or impair the Loan Documents (except as expressly modified in this Agreement) and that such guarantees, liens, assignments, and security interests shall not in any manner be waived, released, altered or modified. Each Guarantor hereby reaffirms its guarantee contained in Article X of the Credit Agreement of the prompt payment of the Guaranteed Obligations in full when due, and acknowledges and agrees that such guarantee is and shall remain in full force and effect after giving effect to this Amendment. The Loan Parties acknowledge and agree that the Obligations include, and the Borrowers owe to Administrative Agent and Lenders, all of Administrative Agent and the Lenders’ reasonable expenses, costs and fees, including reasonable attorneys’ fees actually incurred in the enforcement of the Loan Documents and drafting and negotiation of this Amendment to the extent set forth in Section 11.04 of the Credit Agreement. The Loan Parties acknowledge and agree that, as of the Amendment Date, there are no offsets, defenses or claims against any part of the obligations under the Loan Documents The execution of this Amendment shall not operate as a novation, or waiver of any right, power or remedy of the Administrative Agent, the L/C Issuer, the Lenders or Secured Parties, or

waiver of any provision of any of the Loan Documents. The Loan Parties agree and acknowledge that this Amendment shall be deemed a Loan Document. All references in the Loan Documents to the Credit Agreement shall be deemed to be references to the Credit Agreement, as amended by this Amendment.

Waiver and Release. The Loan Parties warrant and represent to the Administrative Agent and the Lenders that the loans evidenced by the Loan Documents are not subject to any credits, charges, claims, or rights of offset or deduction of any kind or character whatsoever and, as a material part of the consideration for the Agent and the Lenders entering into this Agreement, each Loan Party agrees as follows (the “Release Provision”):

(a)

EACH LOAN PARTY HEREBY RELEASES AND FOREVER DISCHARGES THE ADMINISTRATIVE AGENT AND THE LENDERS AND EACH OF THEIR PREDECESSORS, SUCCESSORS, ASSIGNS, OFFICERS, MANAGERS, DIRECTORS, MEMBERS, SHAREHOLDERS, EMPLOYEES, AGENTS, ATTORNEYS, REPRESENTATIVES, PARENT CORPORATIONS, SUBSIDIARIES, AND AFFILIATES (HEREINAFTER ALL OF THE ABOVE COLLECTIVELY REFERRED TO AS “RELEASED PARTIES”) JOINTLY AND SEVERALLY FROM ANY AND ALL CLAIMS, COUNTERCLAIMS, DEMANDS, DAMAGES, DEBTS, AGREEMENTS, COVENANTS, SUITS, CONTRACTS, OBLIGATIONS, LIABILITIES, ACCOUNTS, OFFSETS, RIGHTS, ACTIONS, AND CAUSES OF ACTION OF ANY NATURE WHATSOEVER OCCURRING PRIOR TO THE DATE HEREOF AND ARISING OUT OF OR RELATED TO THE LOAN DOCUMENTS, INCLUDING, WITHOUT LIMITATION, ALL CLAIMS, DEMANDS, AND CAUSES OF ACTION FOR CONTRIBUTION AND INDEMNITY, WHETHER ARISING AT LAW OR IN EQUITY, PRESENTLY POSSESSED, WHETHER KNOWN OR UNKNOWN, WHETHER LIABILITY BE DIRECT OR INDIRECT, LIQUIDATED OR UNLIQUIDATED, PRESENTLY ACCRUED, WHETHER ABSOLUTE OR CONTINGENT, FORESEEN OR UNFORESEEN, AND WHETHER OR NOT HERETOFORE ASSERTED, SPECIFICALLY EXCLUDING, HOWEVER, CLAIMS ARISING FROM THE GROSS NEGLIGENCE AND/OR WILLFUL MISCONDUCT OF ANY OF THE RELEASED PARTIES, AS DETERMINED BY A COURT OF COMPETENT JURISDICTION (“CLAIMS”), WHICH SUCH LOAN PARTY MAY HAVE OR CLAIM TO HAVE AGAINST ANY RELEASED PARTIES.

(b)

Each Loan Party agrees not to sue any Released Parties or in any way assist any other Person in suing any Released Parties with respect to any Claim released herein. The Release Provision may be pleaded as a full and complete defense to, and may be used as the basis for an injunction against, any action, suit, or other proceeding which may be instituted, prosecuted, or attempted in breach of the release contained herein.

(c)

Each Loan Party acknowledges, warrants, and represents to Released Parties that:

(i)

Each Loan Party has read and understands the effect of the Release Provision. Each Loan Party has had the assistance of independent counsel of its own choice, or has had the opportunity to retain such independent counsel, in reviewing, discussing, and considering all the terms of the Release Provision; and if counsel was retained, counsel for each Loan Party has read and considered the Release Provision and advised each Loan Party to execute the same. Before execution of this Agreement, each Loan Party has had adequate opportunity to make whatever investigation or inquiry it may deem necessary or desirable in connection with the subject matter of the Release Provision.

(ii)

No Loan Party is acting in reliance on any representation, understanding, or agreement not expressly set forth herein. Each Loan Party acknowledges that the Released Parties have not made any representation with respect to the Release Provision except as expressly set forth herein.

(iii)

Each Loan Party has executed this Agreement and the Release Provision thereof as its free and voluntary act, without any duress, coercion, or undue influence exerted by or on behalf of any Person.

(iv)

Each Loan Party is the sole owner of the Claims released by the Release Provision, and no Loan Party has heretofore conveyed or assigned any interest in any such Claims to any other Person.

(d)

Each Loan Party understands that the Release Provision was a material consideration in the agreement of the Administrative Agent and the Lenders to enter into this Agreement.

(e)

It is the express intent of the Loan Parties that the release and discharge set forth in the Release Provision be construed as broadly as possible in favor of the Released Parties so as to foreclose forever the assertion by each Loan Party of any Claims released hereby against Released Parties.

(f)

If any term, provision, covenant, or condition of the Release Provision is held by a court of competent jurisdiction to be invalid, illegal, or unenforceable, the remainder of the provisions shall remain in full force and effect

Counterparts; Governing Law. This Amendment may, if agreed by the Administrative Agent, be in the form of an Electronic Record and may be executed using Electronic Signatures (including, without limitation, facsimile and .pdf) and shall be considered an original, and shall have the same legal effect, validity and enforceability as a paper record. This Amendment may be executed in as many counterparts as necessary or convenient, including both paper and electronic counterparts, but all such counterparts are one and the same Amendment. For the avoidance of doubt, the authorization under this paragraph may include, without limitation, use or acceptance by the Administrative Agent of a manually signed paper Communication which has been converted into electronic form (such as scanned into PDF format), or an electronically signed Communication converted into another format, for transmission, delivery and/or retention. Notwithstanding anything contained herein to the contrary, the Administrative Agent is under no obligation to accept an Electronic Signature in any form or in any format unless expressly agreed to by the Bank pursuant to procedures approved by it; provided, further, without limiting the foregoing, (a) to the extent the Bank has agreed to accept such Electronic Signature, the Bank shall be entitled to rely on any such Electronic Signature without further verification and (b) upon the request of the Bank any Electronic Signature shall be promptly followed by a manually executed, original counterpart. For purposes hereof, “Electronic Record” and “Electronic Signature” shall have the meanings assigned to them, respectively, by 15 USC §7006, as it may be amended from time to time. THIS AMENDMENT SHALL BE GOVERNED BY AND INTERPRETED AND DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

Post-Closing Covenants. Promptly and in any event within thirty (30) days after the Amendment Date (or such later date as may be agreed to in writing by the Administrative Agent in its sole discretion), the Loan Parties hereby covenant and agree to deliver to the Administrative Agent endorsements of insurance requested by the Administrative Agent evidencing liability, casualty, property, terrorism and business interruption insurance meeting the requirements set forth herein or in the Collateral Documents or as required by the Administrative Agent. Any failure by the Loan Parties to deliver or

cause to be delivered to the Administrative Agent any of such documents or to take or cause to be taken any such actions within such required period set forth in this Section 8 will, upon written notice by the Administrative Agent to the Loan Parties, constitute an Event of Default under the Credit Agreement.

THIS AMENDMENT, THE CREDIT AGREEMENT AS AMENDED BY THIS AMENDMENT, AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT AMONG THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.

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IN WITNESS WHEREOF, intending to be legally bound, the parties hereto have duly executed this Amendment No. 3 to Credit Agreement as of the day and year first above written.

BORROWERS: MOVADO GROUP, INC.