Movado to revise financial statements following ‘misconduct’ in Dubai

Movado Group recently announced that it will be restating its financial results from the past five years due to issues arising at its Dubai subsidiary. The company filed an 8-K report with the Securities and Exchange Commission, revealing that misconduct had occurred at its Swiss subsidiary, MGI Luxury Group Sárl, centered around sales to specific clients in the Middle East, India, and the Asia Pacific region.

Upon discovering these allegations, Movado took swift action, hiring external legal counsel to conduct an investigation into the matter. The probe unearthed that the former managing director of the Dubai branch, along with some employees under his supervision, had inflated sales figures, recognized sales prematurely, and misrepresented credit notes due to clients in these regions. In some instances, there was unauthorized use of a third-party warehouse and fabrication of documents to circumvent internal controls.

It was determined that these misleading practices had been ongoing for a period of five years, starting from the end of the fiscal year in 2021. After consultations with its management team and accounting firm, PricewaterhouseCoopers, Movado’s Board of Directors Audit Committee concluded that the financial information from this period could no longer be relied upon. Consequently, the financial statements for the fiscal years from 2022 to 2025 and the corresponding interim periods need to be restated to reflect the accurate sales data and credit issued during this timeframe.

Movado shared that the irregularities in financial reporting did not impact its cash flows or adherence to the terms of its credit agreement. The internal investigation uncovered a significant “material weakness” in their financial controls, particularly related to inadequate segregation of duties within the Dubai branch. As a result, Movado acknowledged the deficiencies in its internal reporting systems and pledged to rectify the situation to prevent any inappropriate influence on its financial reporting.

The company will release its official financial results for the fourth quarter on April 16, following the preliminary announcement. This incident follows a challenging period for Movado, with declining sales in the third quarter and a new campaign featuring celebrity endorsements. However, this development underscores the importance of robust financial controls and integrity in corporate governance to safeguard against financial improprieties. As Movado moves forward with the restatement of its financial results, it aims to restore trust and transparency in its reporting processes.