Annual Report for Fiscal Year Ending January 31, 2026 (Form 10-K)

Management's Discussion and Analysis of Financial Condition and Results of Operations

GENERAL

Net Sales

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

The Company divides its watch and accessory business into two principal categories: the owned brands category and the licensed brands category. The owned brands category consists of the Movado®, Concord®, EBEL®, Olivia Burton® and MVMT® brands. Products in the licensed brands category include the following brands manufactured and distributed under license agreements with the respective brand owners: Coach®, Tommy Hilfiger®, Hugo Boss®, Lacoste®, Calvin Klein® and, beginning spring 2027, Kate Spade New York®.

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

56.7% of the Company's total sales are from international markets (see Note 18 to the Consolidated Financial Statements), and therefore reported sales made in those markets are affected by foreign exchange rates. The Company's international sales are primarily billed in local currencies (predominantly Euros, British Pounds and Swiss Francs) and translated to U.S. dollars at average exchange rates for financial reporting purposes. The Company reduces its exposure to exchange rate risk through a hedging program.

The Company divides its business into two major geographic locations: United States operations, and International, which includes the results of all other non-U.S. Company operations. The allocation of geographic revenue is based upon the location of the customer. The Company's International operations in Europe, the Americas (excluding the United States), Asia and the Middle East accounted for 34.1%, 9.7%, 7.0% and 5.9%, respectively, of the Company's total net sales for fiscal 2026. A vast majority of the Company's tangible International assets are owned by the Company's Swiss and Hong Kong subsidiaries.

The Company's business is seasonal. There are two major selling seasons in the Company's markets: the spring season, which includes school graduations and several holidays and, most importantly, the Christmas and holiday season. Major selling seasons in certain international markets center on significant local holidays that occur in late winter or early spring. The Company's net sales historically have been higher during the second half of the fiscal year. The second half of each fiscal year accounted for 56.3% and 55.4% of the Company's net sales for the fiscal years ended January 31, 2026 and 2025, respectively.

The Company's retail operations consist of 53 retail outlet locations in the United States and four locations in Canada.

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

Gross Margins

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

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

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

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

Since a significant amount of the Company's product costs are incurred in Swiss Francs, fluctuations in the U.S. dollar/Swiss Franc exchange rate can impact the Company's cost of goods sold and, therefore, its gross margins. The Company reduces its exposure to the Swiss Franc exchange rate risk through a hedging program. Under the hedging program, the Company manages most of its foreign currency exposures on a consolidated basis, which allows it to net certain exposures and take advantage of natural offsets. In the event these exposures do not offset, the Company has the ability to hedge its Swiss Franc purchases using a combination of forward contracts and purchased currency options. The Company's hedging program mitigated the impact of the exchange rate fluctuations on product costs and gross margins for fiscal years 2026 and 2025.

Selling, General and Administrative ("SG&A") Expenses

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

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

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

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

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

Other Non-Operating Income, net

Other non-operating income, net consist primarily of interest income and the non-service components of the Company's Swiss pension plan. In addition, for the fiscal year ended January 31, 2026, the Company recorded a $0.4 million impairment related to one of its investments in a venture capital fund in which the Company has a limited partnership interest. The write-down was a result of a decline in the fair value of the investment primarily attributable to a deterioration in the financial condition and operating performance of certain of the underlying portfolio companies within the fund that was determined to be other than temporary. Also, for the fiscal year ended January 31, 2024, the Company recorded a $0.5 million impairment related to an equity investment in a consumer products company that sold its business and assets in which the Company expects to receive little or no return on its investment.

Interest Expense

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

Income Taxes

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

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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

Revenue Recognition

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

Inventories

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

Long-Lived Assets

Intangible assets consist primarily of trade names, customer relationships and trademarks. In accordance with applicable guidance, the Company estimates and records the fair value of purchased intangible assets at the time of their acquisition. The fair values of these intangible assets are estimated at the time of acquisition based on independent third-party appraisals. Finite-lived intangible assets are amortized over their respective estimated useful lives, typically ten years, and are evaluated for impairment whenever events or changes in circumstances indicate that their related carrying values may not be fully recoverable. The Company determined that there was no impairment in fiscal 2026, fiscal 2025 or in fiscal 2024.

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

The Company performs an impairment review of its long-lived assets once events or changes in circumstances indicate, in management's judgment, that the carrying value of such assets may not be recoverable. When such a determination has been made, management compares the carrying value of the asset groups with their estimated future undiscounted cash flows. If it is determined that an impairment has occurred, the fair value of the asset group is determined and compared to its carrying value. The excess of the carrying value over the fair value, if any, is recognized as a loss during that period. The impairment is calculated as the difference between asset carrying values and their estimated fair values. No impairment charge was recorded in fiscal 2026, fiscal 2025 or fiscal 2024.

Stock-Based Compensation

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

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

Income Taxes

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

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

RECENT DEVELOPMENTS AND INITIATIVES

Tariffs

The United States has imposed, and may in the future impose, additional tariffs and other trade restrictions on imported goods. These measures increase the Company's product and input costs, disrupt sourcing and logistics, require pricing adjustments that may reduce demand, and adversely affect margins and operating performance. Because the United States is the Company's single largest market, increases in duties applicable to products imported into the United States could have a disproportionate impact on the Company's results of operations.

The majority of the Company's products are sourced from Switzerland, Japan, and China. For U.S. customs purposes, the Company's Swiss watches are classified as products of Switzerland. Watches produced in the Far East generally consist of watch heads that originate in Japan and bands that originate in China. In addition, most of the Company's jewelry and packaging is of Chinese origin.

Since February 2020, the Company's U.S. imports of Chinese-origin watch bands and jewelry have been subject to a special incremental tariff of 7.5% under Section 301 of the Trade Act of 1974, and imports of Chinese-origin packaging have been subject to a 25% Section 301 tariff.

In calendar year 2025, the United States imposed additional "reciprocal" and other tariffs under the International Emergency Economic Powers Act ("IEEPA"). The U.S. Supreme Court subsequently ruled that those IEEPA-based tariffs were unlawful. However, uncertainty remains regarding the timing, scope and administrative process for obtaining refunds of tariffs previously paid, as well as the potential financial statement impact of any refunds or denials thereof.

The Company incurred $12.7 million of IEEPA tariffs in fiscal year 2026. Of this amount, $9.6 million was recognized in cost of sales in the Company's Consolidated Statements of Operations, and $3.1 million was capitalized as a component of inventory in the Company's Consolidated Balance Sheets at January 31, 2026. Of the total tariffs incurred, $8.7 million was paid in fiscal year 2026, with the remaining amount recorded as an accrued liability at January 31, 2026.

The Company has not recognized a receivable related to potential tariff refunds, as realization remains uncertain. The ultimate resolution of this matter could have a positive material impact on the Company's results of operations, financial position, and cash flows in future periods.

Following the Supreme Court's decision, the Trump Administration replaced the IEEPA-based tariffs with tariffs imposed under Section 122 of the Trade Act of 1974. As of the date of this Annual Report, Section 122 tariffs impose an incremental 10% ad valorem duty on covered imports, and the Administration has announced its intent to increase this rate to 15%. Section 122 tariffs expire after 150 days absent Congressional approval; however, the Administration has announced plans to conduct investigations into trade practices in order to enable the imposition of tariffs under other statutory authorities. As a result, there can be no assurance that tariff levels will decrease when Section 122 authority expires, or that new or higher duties will not be imposed.

In response to tariff increases, the Company may seek to raise prices, which could reduce demand and result in loss of customers, or may over time attempt to shift sourcing or manufacturing to other countries or suppliers. Such actions may require significant time and expense, cause supply disruption, and increase operational complexity. In addition, further U.S. trade actions could lead to retaliatory tariffs or other measures by China or other countries, potentially resulting in broader trade conflicts that further disrupt supply chains and demand.

Cost-Savings Initiative

During fiscal year 2025, in light of the ongoing challenging consumer-spending environment, the Company committed to a cost-savings initiative to reduce operating expenses through headcount reductions, bringing them more in line with sales. As a result of this initiative, during fiscal year 2025, the Company recorded $4.6 million in accruals for severance and employee-related charges and early lease termination charges and an additional $1.5 million was recorded in accruals for severance and employee-related charges during fiscal year 2026. Of the total amount recorded, $1.3 million was paid related to severance and employee related charges during fiscal year 2025, and $3.5 million paid related to severance and employee-related charges and $0.5 million of early lease termination related fees and costs were paid/utilized during fiscal year 2026, with the balance expected to be paid during the remainder of fiscal year 2027. The Company expects go-forward annual savings from the cost-savings initiatives of approximately $10.0 million.

One Big Beautiful Bill Act

On July 4, 2025, the One Big Beautiful Bill Act ("OBBBA") was signed into law by President Trump. The OBBBA includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. The OBBBA did not have a material impact on the Company's Consolidated Financial Statements for fiscal 2026. The Company will continue to evaluate and monitor potential impacts on future periods and does not expect the OBBBA to have a material impact on its Consolidated Financial Statements.

RESULTS OF OPERATIONS

The following is a discussion of the results of operations for fiscal 2026 compared to fiscal 2025 along with a discussion of the changes in financial condition during fiscal 2026. For a discussion of our results of operations in fiscal year 2025 compared to fiscal year 2024, please see "Results of Operations" in Item 7 (Management's Discussion and Analysis of Financial Condition and Results of Operations) of our Annual Report on Form 10-K for the fiscal year ended January 31, 2025, filed with the SEC on April 16, 2025.

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

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

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

Fiscal 2026 Compared to Fiscal 2025

Net Sales

Net sales for fiscal 2026 were $671.3 million, representing a $17.9 million or 2.7% increase from the prior year. For fiscal 2026, fluctuations in foreign currency exchange rates positively impacted net sales by $11.6 million when compared to the prior year. Excluding this $11.6 million impact, net sales would have increased by 1.0% as compared to the prior year.

Watch and Accessory Brands Net Sales

Net sales for fiscal 2026 in the Watch and Accessory Brands segment were $568.3 million, above the prior year by $11.9 million, or 2.1%. The increase in net sales was primarily due to the positive impact of fluctuations in foreign exchange rates and increased volumes resulting from higher demand in the Company's wholesale customers, with an increase in net sales recorded in the licensed brands category of $26.2 million, or 7.2%, partially offset by a decrease in net sales recorded in the owned brands category of $11.1 million, or 6.1%.

United States Watch and Accessory Brands Net Sales

Net sales for fiscal 2026 in the United States locations of the Watch and Accessory Brands segment were $193.2 million, above the prior year by $6.7 million, or 3.6%, resulting primarily from increased volumes resulting from higher demand in the Company's wholesale customers. The net sales recorded in the licensed brands category increased $10.9 million, or 22.3%, partially offset by a decrease in net sales recorded in the owned brands category of $4.1 million, or 3.1%.

International Watch and Accessory Brands Net Sales

Net sales for fiscal 2026 in the International locations of the Watch and Accessory Brands segment were $375.1 million, above the prior year by $5.2 million, or 1.4%, which included fluctuations in foreign currency exchange rates that positively impacted net sales by $11.6 million when compared to the prior year. The increase in net sales was primarily due to the positive impact of fluctuations in foreign exchange rates and increased volumes resulting from higher demand in the licensed brands category in the Company's wholesale customers, partially offset by lower demand in the owned brands category in the Company's wholesale customers. The net sales increase recorded in the licensed brands category was $15.2 million, or 4.8%, primarily due to net sales increases in Europe and the Americas (excluding the United States), partially offset by net sales decreases in Asia and the Middle East. The net sales decrease recorded in the owned brands category was $7.0 million, or 14.1%, primarily due to net sales decreases in the Middle East, Asia and Europe, partially offset by a net sales increase in the Americas (excluding the United States).

Company Stores Net Sales

Net sales for fiscal 2026 in the Company Stores segment were $103.0 million, $6.1 million or 6.2% above the prior year. The net sales increase was primarily due to increased volumes mainly due to higher foot traffic in the Company's stores, a new store opening and an increase in sales from the Company's online outlet store at www.movadocompanystore.com. As of January 31, 2026 and 2025, the Company operated 57 and 56 retail outlet locations, respectively.

Gross Profit

Gross profit for fiscal 2026 was $363.6 million or 54.2% of net sales as compared to $353.1 million or 54.0% of net sales in the prior year. The increase in gross profit of $10.5 million was due to higher net sales combined with a higher gross margin percentage. The increase in the gross margin percentage of approximately 20 basis points for fiscal 2026 reflected a favorable sales mix (approximately 180 basis points) and the increased leveraging of certain reduced costs over higher sales (approximately 40 basis points), partially offset by the negative impact due to increased U.S. tariffs (approximately 150 basis points), a negative impact of fluctuations in foreign exchange rates (approximately 40 basis points) and higher shipping costs (approximately 10 basis points).

Selling, General and Administrative ("SG&A")

SG&A expenses for fiscal 2026 were $333.8 million, representing an increase from the prior year of $0.6 million, or 0.2%. The increase in SG&A expenses was primarily due to (i) an increase in performance-based compensation of $12.0 million, (ii) a $3.6 million increase in foreign exchange losses mainly due to a highly volatile foreign currency environment, (iii) a $1.2 million increase in accounts receivable reserve, (iv) an increase in costs of $1.1 million related to the internal investigation of allegations of misconduct within the Dubai branch of the Company's Swiss subsidiary that resulted in a restatement of previously issued financial statements, (v) a $0.9 million increase in donations primarily to the Movado Group Foundation, (vi) a $0.8 million increase in professional service fees, and (vii) an increase of $0.7 million in rent-related expenses due to a new store opening. These increases were partially offset by lower marketing expenses of $14.1 million, a decrease in payroll-related expense of $5.7 million (which included a decrease of $3.1 million related to the cost-savings initiative, mainly due to a decrease in severance costs, discussed under "Recent Developments and Initiatives") and a decrease in information technology-related charges of $0.8 million. For the year ended January 31, 2026, fluctuations in foreign currency rates related to the foreign subsidiaries unfavorably impacted SG&A expenses by $9.7 million when compared to the prior year period.

Watch and Accessory Brands Operating Income

For fiscal 2026, the Company recorded operating income of $15.0 million in the Watch and Accessory Brands segment which includes $37.7 million of unallocated corporate expenses as well as $66.4 million of certain intercompany profits related to the Company's supply chain operations. For fiscal 2025, the Company recorded operating income of $7.7 million in the Watch and Accessory Brands segment which included $30.0 million of unallocated corporate expenses as well as $67.0 million of certain intercompany profits related to the Company's supply chain operations. The $7.3 million increase in operating income was the result of an increase in gross profit of $6.7 million, combined with lower SG&A expenses of $0.6 million when compared to the prior year period. The increase in gross profit was the result of higher net sales while the gross margin percentage was unchanged primarily due to a favorable impact of sales mix and the increased leveraging of certain reduced costs over higher sales, offset by increased U.S. tariffs, a negative impact of fluctuations in foreign exchange rates and higher shipping costs. The decrease in SG&A expenses was primarily due to (i) lower marketing expenses of $14.2 million, (ii) a decrease in payroll-related expense of $5.7 million (which included a decrease of $3.1 million related to the cost-savings initiative mainly due to a decrease in severance costs) and (iii) a decrease in information technology-related charges of $0.8

million. These decreases were partially offset by an increase in performance-based compensation of $11.7 million, a $3.6 million increase in foreign exchange losses mainly due to a highly volatile foreign currency environment, a $1.2 million increase in accounts receivable reserve, an increase in costs of $1.1 million related to the internal investigation of allegations of misconduct within the Dubai branch, an increase in donations primarily to the Movado Group Foundation of $0.9 million and a $0.8 million increase in professional service fees.

U.S. Watch and Accessory Brands Operating Loss

In the United States locations of the Watch and Accessory Brands segment, for the twelve months ended January 31, 2026, the Company recorded an operating loss of $44.0 million which includes unallocated corporate expenses of $37.7 million. For the twelve months ended January 31, 2025 the Company recorded an operating loss of $40.1 million in the United States locations of the Watch and Accessory Brands segment which included unallocated corporate expenses of $30.0 million. The increase in operating loss was the result of a decrease in gross profit of $6.5 million partially offset by a decrease in SG&A expenses of $2.6 million when compared to the prior year period. The decrease in gross profit of $6.5 million was the result of higher net sales offset by a lower gross margin percentage primarily due to increased U.S. tariffs and the negative impact of fluctuations in foreign exchange rates, partially offset by the increased leveraging of certain reduced costs over higher sales. The decrease in SG&A expenses was primarily due to (i) a $7.6 million decrease in marketing expenses, (ii) a decrease in payroll-related expense of $3.5 million (which included a decrease of $1.6 million related to the cost-savings initiative mainly due to a decrease in severance costs) and (iii) a decrease in information technology-related charges of $2.6 million. These decreases were partially offset by an increase in performance-based compensation of $8.6 million, a $0.9 million increase in donations primarily to the Movado Group Foundation, a $0.7 million increase in accounts receivable reserve, an increase in costs of $0.7 million related to the internal investigation of allegations of misconduct within the Dubai branch and a $0.6 million increase in professional service fees.

International Watch and Accessory Brands Operating Income

In the International locations of the Watch and Accessory Brands segment, for the twelve months ended January 31, 2026, the Company recorded operating income of $59.0 million which includes $66.4 million of certain intercompany profits related to the Company's International supply chain operations. For the twelve months ended January 31, 2025, the Company recorded operating income of $47.8 million in the International locations of the Watch and Accessory Brands segment which included $67.0 million of certain intercompany profits related to the Company's supply chain operations. The increase in operating income was the result of a higher gross profit of $13.2 million partially offset by higher SG&A expenses of $2.0 million. The increase in gross profit of $13.2 million was primarily the result of higher sales and a higher gross margin percentage primarily due to a favorable impact of sales mix, the increased leveraging of certain reduced costs over higher sales and the positive impact of fluctuations in foreign exchange rates. The increase in SG&A expenses was primarily due to (i) a $3.6 million increase in foreign exchange losses mainly due to a highly volatile foreign currency environment, (ii) an increase in performance-based compensation of $3.1 million, (iii) an increase in information-technology related charges of $1.8 million, (iv) a $0.5 million increase in accounts receivable reserve, and (v) an increase in costs of $0.4 million related to the internal investigation of allegations of misconduct within the Dubai branch. These increases were partially offset by lower marketing expenses of $6.6 million and a decrease in payroll-related expense of $2.2 million (which included a decrease of $1.5 million related to the cost-savings initiative, mainly due to a decrease in severance costs).

Company Stores Operating Income

The Company recorded operating income of $14.8 million and $12.3 million in the Company Stores segment for fiscal 2026 and 2025, respectively. The increase in operating income of $2.5 million was primarily related to an increase in gross profit of $3.7 million mainly due to higher sales, partially offset by higher SG&A expenses of $1.2 million primarily due to an increase in rent-related expenses of $0.7 million due to a new store opening and an increase in performance-based compensation of $0.3 million. As of January 31, 2026, and 2025, the Company Stores segment operated 57 and 56 retail outlet locations, respectively.

Other Non-Operating Income, net

The Company recorded other income, net of $5.0 million for the twelve months ended January 31, 2026, primarily due to interest income, partially offset by a non-cash impairment charge of $0.4 million related to one of its investments in a venture capital fund in which the Company has a limited partnership interest. The write-down was a result of a decline in the fair value of the investment

primarily attributable to a deterioration in the financial condition and operating performance of certain of the underlying portfolio companies within the fund that was determined to be other than temporary.

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

Interest Expense

Interest expense was $0.5 million primarily due to the payment of unused commitment fees for both fiscal 2026 and 2025. There were no borrowings under the Company's revolving credit facility during fiscal 2026 and 2025.

Income Taxes

The Company recorded an income tax provision of $7.5 million and $7.4 million for fiscal 2026 and 2025, respectively.

The effective tax rate for fiscal 2026 was 21.8% and differed from the U.S. statutory tax rate of 21.0% primarily due to nondeductible items, partially offset by the deduction of Foreign-Derived Intangible Income and foreign profits being taxed in lower taxing jurisdictions. The effective tax rate for fiscal 2025 was 27.9% and differed from the U.S. statutory tax rate of 21.0% primarily due to the tax consequences of a foreign currency gain related to an extraordinary intercompany dividend and an increase in valuation allowances against certain foreign losses, partially offset by foreign profits being taxed in lower taxing jurisdictions.

Net Income Attributable to Movado Group, Inc.

The Company recorded net income attributable to Movado Group, Inc. of $26.6 million and $18.4 million for fiscal 2026 and 2025, respectively.

LIQUIDITY AND CAPITAL RESOURCES

At January 31, 2026 and January 31, 2025, the Company had $230.5 million and $208.5 million, respectively, of cash and cash equivalents. Of this total, $136.2 million and $83.3 million, respectively, consisted of cash and cash equivalents at the Company's foreign subsidiaries.

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

At January 31, 2026 the Company had working capital of $404.2 million as compared to $377.0 million at January 31, 2025. The increase in working capital was primarily the result of an increase in cash and trade receivables, net and a decrease in accounts payable, partially offset by an increase in accrued liabilities and accrued payroll and benefits. The Company defines working capital as the difference between current assets and current liabilities.

Net cash provided by operating activities was $57.9 million for fiscal 2026, compared to net cash used in operating activities of $1.5 million for fiscal 2025, an increase of approximately $59.4 million. The increase was primarily driven by favorable changes in working capital and a $7.7 million increase in net income.

The most significant favorable changes in working capital items were:

These favorable impacts were partially offset by:

Cash used in investing was $8.1 million for fiscal 2026 as compared to $13.7 million for fiscal 2025. The cash used in fiscal 2026 was primarily related to capital expenditures of $4.5 million mainly due to expenditures related to Company stores, shop-in-shops and computer hardware and software costs and $3.4 million of long-term investments. Cash used in investing activities for fiscal 2025 included $8.0 million of capital expenditures and $5.7 million of long-term investments.

The Company expects that capital expenditures in fiscal 2027 will be approximately $9.0 million as compared to $4.5 million in fiscal 2026. The capital spending will be primarily for projects in the ordinary course of business including facilities improvements, shop-in-shops, website development, computer hardware and software and tooling costs. The Company has the ability to manage its capital expenditures on discretionary projects.

Cash used in financing activities was $36.3 million for fiscal 2026 as compared to $35.4 million for fiscal 2025. The cash used in fiscal 2026 included $31.1 million in dividends paid, $3.9 million in stock repurchased in the open market, $0.5 million of shares repurchased as a result of the surrender of shares by employees in connection with the vesting of certain stock awards and $1.4 million paid for the distribution of noncontrolling interest earnings, partially offset by $0.5 million received in connection with stock options exercised. Cash used in financing activities in fiscal 2025 included $31.1 million in dividends paid, $2.6 million in stock repurchased in the open market, $1.2 million of shares repurchased as a result of the surrender of shares by employees in connection with the vesting of certain stock awards and $0.6 million paid for the distribution of noncontrolling interest earnings.

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

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

As of both January 31, 2026, and January 31, 2025, there were no amounts of loans outstanding under the Facility. Availability under the Facility was reduced by the aggregate amount of letters of credit outstanding, issued in connection with retail and operating facility leases to various landlords and for Canadian payroll to the Royal Bank of Canada, totaling approximately $0.3 million at both January 31, 2026, and January 31, 2025. At January 31, 2026, the letters of credit have expiration dates through June 1, 2026. As of both January 31, 2026, and January 31, 2025, availability under the Facility was $99.7 million. For additional information regarding the Facility, see Note 7 - Debt and Lines of Credit to the Consolidated Financial Statements.

The Company had weighted average borrowings under the Facility of zero during both fiscal 2026 and fiscal 2025, respectively.

Borrowings under the Credit Agreement bear interest at rates generally based on either the Term Secured Overnight Financing Rate ("SOFR") as administered by the Federal Reserve Bank of New York or a specified base rate, as selected periodically by the Company. The SOFR-based loans bear interest at SOFR plus a spread ranging from 1.00% to 1.75% per annum and the base rate loans bear interest at the base rate plus a spread ranging from 0% to 0.75% per annum, with the spread in each case being based on the Company's consolidated leverage ratio (as defined in the Credit Agreement). As of both January 31, 2026, and 2025, the Company's spreads were 1.00% over SOFR and 0% over the base rate.

The Company's Swiss subsidiary maintains unsecured lines of credit with a Swiss bank that are subject to repayment upon demand. As of January 31, 2026, and 2025, these lines of credit totaled 6.5 million Swiss Francs for both periods, with a dollar equivalent of $8.4 million and $7.1 million, respectively. As of January 31, 2026, and 2025, there were no borrowings against these lines. As of January 31, 2026, and 2025, two European banks had guaranteed obligations to third parties on behalf of two of the Company's foreign subsidiaries in the dollar equivalent of $1.6 million and $1.3 million, respectively, in various foreign currencies, of which $0.8 million and $0.7 million, respectively, was a restricted deposit as it relates to lease agreements.

Cash paid for interest, including unused commitments fees, was $0.3 million during both fiscal 2026 and 2025, respectively.

From time to time the Company may make minority investments in growth companies in the consumer products sector and other sectors relevant to its business, including certain of the Company's suppliers and customers, as well as in venture capital funds that invest in companies in media, entertainment, information technology and technology-related fields and in digital assets. During fiscal 2022, the Company committed to invest up to $21.5 million in such investments. The Company funded approximately $14.1 million of these commitments through fiscal 2025 and an additional $3.4 million during fiscal 2026 and may be called upon to satisfy capital calls in respect of the remaining $4.0 million in such commitments at any time during a period generally ending ten years after the first capital call in respect of a given commitment. During the three-month period ended July 31, 2025, the Company recorded a non-cash impairment charge of $0.4 million related to one of its investments in a venture capital fund in which the Company has a limited partnership interest. The write-down was a result of a decline in the fair value of the investment primarily attributable to a deterioration in the financial condition and operating performance of certain of the underlying portfolio companies within the fund that was determined to be other than temporary. The Company will continue to regularly evaluate the carrying value of its investments.

During fiscal 2026, the Company declared and paid four separate cash dividends of $0.35 per share aggregating to $31.1 million. During fiscal 2025, the Company declared and paid four separate cash dividends of $0.35 per share aggregating to $31.1 million. Although the Company currently expects to continue to declare cash dividends in the future, the decision of whether to declare any future cash dividend, including the amount of any such dividend and the establishment of record and payment dates, will be determined, in each quarter, by the Board of Directors, in its sole discretion.

On November 23, 2021, the Board approved a share repurchase program under which the Company was authorized to purchase up to $50.0 million of its outstanding common stock through November 23, 2024, depending on market conditions, share price and other factors. On December 5, 2024, the Board approved a new share repurchase program under which the Company is authorized to purchase up to $50.0 million of its outstanding common stock through December 5, 2027, depending on market conditions, share price and other factors. These repurchases may be made through open market purchases, repurchase plans, block trades or otherwise. During fiscal 2026, the Company repurchased a total of 208,000 shares of its common stock under the December 5, 2024 share repurchase program at a total cost of $3.9 million, or an average of $18.75 per share. During fiscal 2025, the Company repurchased a total of 120,000 shares of its common stock under the November 23, 2021 share repurchase program at a total cost of $2.6 million, or an average of $21.90 per share. At January 31, 2026, $46.1 million remains available for purchase under the Company's December 5, 2024 repurchase program.

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

Accounting Changes and Recent Accounting Pronouncements

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