Movado Group Inc., the Swiss watchmaker and jeweler, last week announced plans to close its money-losing retail division by the end of June. Its 27 full-price stores will be closed so the company can focus on its wholesale business selling its namesake brand as well as licensed brands such as Coach, Tommy Hilfiger and Juicy Couture to retailers such as Zales, Saks, Neiman Marcus and independent jewelers.
"While the boutiques offered valuable opportunity to enhance our Movado brand and test new product concepts, they have never been profitable," said Richard Cote, executive vice president and chief operating officer, on a conference call last week. Movado will continue to sell its brands directly to consumers through its 31 outlet stores and will keep the Movado Boutique located in New York's Rockefeller Center open as a flagship store.
The stores debuted in 1998 as part of an effort to tout the more-than-century-old name as a broader, lifestyle brand. The stores helped Movado stretch beyond watches to sell fine jewelry, clocks, pens, leather goods and tabletop accessories. Last fall, Movado officials said that despite the segment's losses, "Our boutiques provide us an exclusive and proprietary opportunity to feature Movado jewelry and we believe this really sets our store apart."
But the retail division was losing an average of $10 million a year and expected to lose $7 million in fiscal 2011. The stores, averaging 2,200 square feet, are too big to be profitable in the current economic environment, Mr. Cote said.
Closing the boutiques will lower annual revenue by $30 million, but will help Movado return to profitability, the company said.
Discussion Questions: What lessons are there to take from Movado's exit from retailing? How important are vendor-operated stores for marketing and testing purposes? Will Movado be at a decided disadvantage to its competitors that operate stores?