Movado Exits Retail

Jun 01, 2010

By Tom Ryan

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.

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?

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8 Comments on "Movado Exits Retail"

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Gene Hoffman
Gene Hoffman
11 years 11 months ago

Movado experimented. Generated $30 million in sales. Lost money. Learned what it couldn’t do well by itself with its great brands. Movado was “Coach”ed by that process and a lesson was learned. Now Movado is merely trying to find the best of what can come next for its proprietary brands.

Nikki Baird
Nikki Baird
11 years 11 months ago
It’s always fascinating to me to see non-retailers who decide to enter the retailing business. The margins are never as good in retail as they are in whatever the other business is–though, in Movado’s case, there should be at least some profit. It comes down to two things: getting the right model, and going in with a specific set of goals. Funny thing is, retail is not as easy as it looks. Even experienced retailers find that they have to innovate their model–either the size of the format, the assortment mix, the labor mix–for different markets. One size does not fit all. If you have not created a business plan that allows for that kind of evolution or tweaking, then yeah, you’ll be shuttering stores and abandoning the plan. But the goals part is even trickier for non-retailers to navigate. What do you want out of your retail endeavor? I know some clothing manufacturers who use their stores to justify their assortment offering to retailers like Macy’s–getting them to buy a deeper, “riskier” assortment than… Read more »
Paula Rosenblum
11 years 11 months ago

Always follow the money.

Watches and jewelry turn really, really slowly. Not sure about Movado, but Rolex turns about .9 times a year. So…being in the retail jewelry business is all about managing working capital. Why fund your own stores when you can have retailers fund your business for you?

The Movado brand remains strong one way or another…stores were just an anchor around their feet. There’s only one Tiffany.

Bill Emerson
Bill Emerson
11 years 11 months ago

Another example of the old adage about “it always looks easy until you try to do it yourself.” Wholesalers keep learning this lesson by opening retail outlets which, with a very few exceptions, have been unsuccessful. Retailers keep learning this lesson by attempting to develop their own in-house brands, with an equally grim success record.

Roger Saunders
11 years 11 months ago

Every business has to pose that difficult question that Peter Drucker challenged organizations to do on a periodic basis: “What do we START, STOP, SUSTAIN?”

Every manufacturer/retailer presses to “sustain” momentum. A good number of innovators step up and “start” something new. Few can take the necessary action to effectively “stop” the losing propositions–arguably, the most difficult thing to do is to “call our baby ugly.”

Kudos to Movado for taking the necessary action. They build a great product. And, now they can better focus their attention on the “sustain and start” steps that strengthen their position.

Mel Kleiman
11 years 11 months ago

A couple of great lessons here that all of us need to keep remembering.

1. Learn to keep asking why are we doing this?
2. Is this the best use of our resources?
3. What is our core business and is this activity distracting us from doing what we do best?
4. Can we do something else that will give us a great long-term return on our investment?

Dan Belling
Dan Belling
11 years 11 months ago

Most manufacturers entering the retail market never intend to make significant profits, much in the same way that major national retailers open shop in places like Times Square. Sometimes it is more about marketing, branding impressions and a way to exhibit new products that may never have exposure without that level of control.

So with Movado, they will in fact lose something in the exit, unless they feel that they have solid partnerships with distributors willing to promote a Movado brand.

Ed Rosenbaum
11 years 11 months ago

Movado gave it a good try. It did not work. So pack up the stores and move on with the more profitable segment. Usually the non-profit piece of the business takes more of management’s time trying to find ways to make it profitable. Now that Movado has stood up and said “this is not working,” they can devote more time to finding ways of making the profitable piece more profitable. Good decision.


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