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On April 11, 2025, in a filing with the United States Securities and Exchange Commission, Movado revealed that in late January 2025, the Company became aware of allegations of misconduct within the Dubai branch (the “Dubai Branch”) of the Company’s Swiss subsidiary, MGI Luxury Group Sárl, related to sales to certain customers in the Middle East, India & Asia Pacific region (the “Affected Region”). Based on a subsequent investigation, the Company determined that “the former managing director of the Dubai Branch, who oversaw the Affected Region, as well as certain employees under his direction, took actions that resulted in an overstatement of sales, premature recognition of sales, and underreporting of credit notes (e.g., sales discounts) owed to customers in the Affected Region. These actions included the use of a third-party warehouse unknown to the Company’s management to facilitate the premature recognition of sales, and the falsification of documents to circumvent internal controls. The conduct occurred over a period of approximately five years (beginning with the Company’s fiscal year ended January 31, 2021). The Company has terminated the now former managing director of the Dubai Branch.” Further, the Company revealed that “its historical consolidated financial statements for the fiscal years ended January 31, 2024, 2023 and 2022, and the interim periods within fiscal years 2025 and 2024 (the “Affected Periods”), require restatement to properly record the extent and timing of sales earned and credits issued during the relevant time period. Additionally, the restated interim periods of fiscal 2025 reflect a reduction in operating expenses as a result of the reversal of certain accruals due to the lower adjusted operating results.” Finally, Movado stated that “management identified a material weakness in internal control over financial reporting, wherein the Company’s risk assessment process did not properly assess the risks associated with the lack of functional segregation of duties in the Company’s Dubai Branch.”
Following this news, Movado’s stock price fell over 1% on the same day.