Movado's IEEPA Windfall Masks a Deeper Pivot to Profitable Growth

The watchmaker rides a 340bps gross-margin expansion and a resurgent category, but quietly drops its annual outlook to focus on execution.

MOV · Earnings Call · 2026-08-26

A Quarter of Tariff Tailwinds

Movado Group's second-quarter results were a study in contrasts. On one hand, the company delivered its best gross margin in years, thanks to a $3.2 million IEEPA duty refund and a favorable inventory mix; on the other, it flagged that the benefit is temporary and that it is pivoting to a more qualitative form of guidance. Sales rose 4.9% to $169.8 million, and adjusted operating profit more than doubled to $15.1 million. As Efraim Grinberg put it, “We were very pleased with our results for the quarter and the first half of the year. We continue to see momentum across our business and strength in consumer demand despite the ongoing challenges related to the conflict in the Middle East” — Efraim Grinberg, Chairman and Chief Executive Officer · 2026-08-26. The momentum is real, but the tailwind is not. The IEEPA duty refund is a perfect example of how the tariff saga has become a global narrative. In the same week that companies across industries are talking about tariff refunds, Movado collected $3.2 million and expects another $6.8 million. "This quarter, we received $3.2 million of IEEPA duty refunds, which favorably increased our gross margin by 190 basis points," CFO Sallie DeMarsilis noted on the call. Excluding those refunds, gross margin still expanded 340 basis points to 57.5%, driven by channel mix and pricing. The IEEPA duty windfall is a nice bonus, but the underlying improvement is structural—a point the company was careful to emphasize.

The Strategic Pivot: Dropping the Annual Outlook

Perhaps the most telling change came in the company's approach to guidance. After years of providing an annual outlook, Movado has decided to discontinue it, opting for a more qualitative stance. As Efraim explained,

Going forward, we remain committed to providing transparency and meaningful insight into our business, our markets and the trends we are seeing. At the same time, we have decided to discontinue providing an annual outlook.
Efraim Grinberg, Chairman and Chief Executive Officer · 2026-08-26

Instead, they offered only a mid-single-digit top-line growth expectation for the remainder of the fiscal year and a second-half gross margin range of 55% to 56%. This shift suggests management is confident in the long-term trajectory but wants to avoid quarterly noise—a common theme among companies that believe they are on the cusp of a durable cycle. The move also aligns with a broader pattern we've seen in prior quarters. In May, when asked about margin sustainability, Efraim said, “We would expect based on the balance of the year, to generate higher gross margin than last year, but not at this level.” — Efraim Grinberg, Chairman and Chief Executive Officer · 2026-05-27 That cautious tone has now morphed into a formal retreat from full-year numbers. The annual outlook is gone, but the execution targets remain.

Why It Matters: A Category Resurgence

The real story is not the refund—it's the category. Movado has been talking about the return of the fashion watch for several quarters, and the evidence is mounting. "We're seeing some real momentum in the category on—particularly in the United States and then markets like Mexico and Brazil and India, where younger consumers are coming back pretty seriously into traditional watches," Efraim said on the call. “We're seeing some real momentum in the category on—particularly in the United States and then markets like Mexico and Brazil and India, where younger consumers are coming back pretty seriously into traditional watches” — Efraim Grinberg, Chairman and Chief Executive Officer · 2026-08-26. This is not just a blip; it's a demographic shift. The company's product innovation—smaller cases, distinctive shapes, and a focus on average selling price—is directly aimed at this new cohort. The launch of Kate Spade watches next fiscal year adds another growth vector. The gross margin expansion is the financial proof. Excluding refunds, the 340 basis point improvement came from higher price points and a better mix, not from cost cuts. This is a sustainable strategy, and the company's balance sheet—$212 million in cash, no debt—provides the firepower to invest. As we see across the market, watch category momentum is building, and Movado is positioned as one of the few pure-play names with scale. Gross margin improved to 57.5% ex-refunds, up 340bps year-over-year, the highest level in a decade, driven by pricing and mix. And the company is not just relying on tariffs; it is also benefiting from its own operational discipline. The prior focus on smaller watches is paying off, as executives noted in earlier calls: “So I think -- and we have both what we call mini watches, and we have micro watches though, which are smaller mini watches for us are watches from like 23 to 28 millimeters.” — Efraim Grinberg, Chairman and Chief Executive Officer · 2025-08-28 That obsession with trends is now showing up in the numbers. The bottom line: Movado is trading near a 52-week high, with revenue accelerating and margins expanding. The decision to drop the annual outlook could be seen as a lack of visibility, but given the company's track record of beating expectations, it's more likely a sign of confidence. As the fashion watch renaissance continues, this small-cap luxury name is a compelling way to play it—provided the IEEPA refunds don't mask the underlying strength.