A securities class action was recently filed on the behalf of Movado Group, Inc. shareholders.
Movado Group, Inc. is a luxury watchmaker founded in 1983 and based in Switzerland. The firm, considered a leading producer of these timepieces, offers a portfolio of licensed brands including Lacoste and Scuderia Ferrari watches.
"They allegedly violated the Securities Exchange Act of 1934."
Securities class action filing
On Feb. 4, 2015, Robbins Geller Rudman & Dowd LLP announced it had filed a lawsuit representing purchasers of the company's common stock between March 26, 2014, and Nov. 13, 2014. These dates represent the class period.
The legal action, brought forth in the U.S. District Court for the District of New Jersey, claimed that the company, as well as some of its directors and officers, issued materially false and misleading statements during the class period. By doing so, they allegedly violated the Securities Exchange Act of 1934.
The securities class action claimed that the allegedly false and misleading communications promoted the strong growth expectations and attractive business potential of both the company's Movado brand and its portfolio of other brands.
In addition, the suit alleged that the defendants made an effort to improve the standing of the Movado brand by displaying it in the shelf space that was reserved for other brands, and then misled investors about this move.
"Company shares reached artificially high prices during the class period."
Further, the securities class action claimed company shares reached artificially high prices during the class period, increasing to as much as $46.39 each, which enabled the company's CEO and chairman to sell more than $8.6 million of these securities for inflated prices.
Reduced preliminary financial results
On Nov. 14, 2014, the company announced preliminary third-quarter financial results, and gave its fiscal year 2015 outlook a downward revision. Several executives commented on the situation. More specifically, the luxury watchmaker indicated that it expected net sales to total $188.6 million during the fiscal third quarter. This figure fell short of the $218.32 million analyst estimate.
The company also projected that earnings would come in between $0.86 and $0.87 per share for the period, far less than analyst forecasts of $1.13 per share. Further, the luxury watchmaker revealed that during the period, various brands – including Lacoste, Movado and Scuderia Ferrari – had not done as well as the company had anticipated.
Lowered 2015 guidance
Due to all the aforementioned factors, Movado revealed it was cutting its guidance for the 2015 fiscal year. While the company had affirmed repeatedly during the class period that it predicted sales and operating income would grow by 11 percent and 19 percent, respectively, the luxury watchmaker reduced its projection for sales growth to 1 to 2 percent and estimated operating profit would drop 7 to 10 percent from fiscal year 2014.
"I am disappointed in our third quarter performance and our expectations for this trend to continue into the fourth quarter, which combined has caused us to reduce guidance for the full year," said Grinberg.
While the company's CEO and chairman expressed his displeasure, the lawsuit alleges markets had a stronger reaction, pushing Movado shares down almost 32 percent to $26.25 each. Robbins Geller has indicated that it filed the legal action in an effort to recover damages on the behalf of all investors who bought the company's common stock during the class period.
The law firm has indicated that if investors want to serve as lead plaintiff, they have until no later than 60 days following the announcement of the securities class action's filing to move the court.