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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
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[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the Quarterly Period Ended October 31, 2004

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 1-16497

MOVADO GROUP, INC.
(Exact Name of Registrant as Specified in its Charter)



New York 13-2595932
(State or Other Jurisdiction (IRS Employer
of Incorporation or Organization) Identification No.)

650 From Road, Paramus, New Jersey 07652
(Address of Principal Executive Offices) (Zip Code)


(201) 267-8000
(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for that past 90 days. Yes [X] No [ ]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [X] No [ ]

The number of shares outstanding of the registrant's common stock and class
A common stock as of November 30, 2004 were 17,960,940 and 6,801,812,
respectively.

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MOVADO GROUP, INC.

Index to Quarterly Report on Form 10-Q
October 31, 2004



Page
----

Part I Financial Information (Unaudited)

Item 1. Consolidated Balance Sheets at October 31, 2004, January 31, 2004 and
October 31, 2003 3

Consolidated Statements of Income for the three months and nine months
ended October 31, 2004 and 2003 4

Consolidated Statements of Cash Flows for the nine months ended October
31, 2004 and 2003 5

Notes to Consolidated Financial Statements 6

Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations 14

Item 3. Quantitative and Qualitative Disclosure about Market Risks 20

Item 4. Controls and Procedures 21

Part II Other Information

Item 1. Legal Proceedings 22

Item 4. Submission of Matters to a Vote of Security Holders 22

Item 6. Exhibits 22

Signature 23


2


PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements

MOVADO GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share amounts)
(Unaudited)



October 31, January 31, October 31,
2004 2004 2003
----------- ----------- -----------

ASSETS

Current assets:
Cash and cash equivalents $ 35,870 $ 82,083 $ 60,957
Trade receivables, net 137,861 88,800 120,706
Inventories, net 192,811 121,678 123,074
Other 40,359 26,693 20,341
--------- --------- ---------
Total current assets 406,901 319,254 325,078

Property, plant and equipment, net 50,105 42,112 40,744
Other 41,641 29,601 29,052
--------- --------- ---------
Total assets $ 498,647 $ 390,967 $ 394,874
========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
Loans payable to banks $ 16,300 $ - $ 22,000
Current portion of long-term debt 5,000 10,000 5,000
Accounts payable 41,928 23,631 22,115
Accrued liabilities 47,180 25,781 31,084
Current taxes payable 14,830 12,150 12,680
Deferred taxes payable 6,081 5,961 5,188
--------- --------- ---------
Total current liabilities 131,319 77,523 98,067

Long-term debt 45,000 25,000 30,000
Deferred and non-current income taxes 3,291 2,282 2,406
Other liabilities 12,826 11,449 10,518
--------- --------- ---------
Total liabilities 192,436 116,254 140,991
--------- --------- ---------

Shareholders' equity:
Preferred Stock, $0.01 par value,
5,000,000 shares authorized; no shares issued - - -
Common Stock, $0.01 par value,
100,000,000 shares authorized; 22,031,474, 21,723,262 and
20,856,616 shares issued and outstanding, respectively 220 217 209
Class A Common Stock, $0.01 par value,
30,000,000 shares authorized; 6,803,161, 6,801,812 and 68 68 68
6,801,812 shares issued and outstanding, respectively
Capital in excess of par value 92,754 89,349 77,499
Retained earnings 208,771 192,601 187,164
Accumulated other comprehensive income 46,836 34,473 21,113
Treasury Stock, 4,092,588, 4,081,182 and 3,453,262
shares, respectively, at cost (42,438) (41,995) (32,170)
--------- --------- ---------
Total shareholders' equity 306,211 274,713 253,883
--------- --------- ---------
Total liabilities and shareholders' equity $ 498,647 $ 390,967 $ 394,874
========= ========= =========


See Notes to Consolidated Financial Statements

3


MOVADO GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
(Unaudited)



Three Months Ended October 31, Nine Months Ended October 31,
------------------------------ -----------------------------
2004 2003 2004 2003
---- ---- ---- ----

Net sales $127,023 $100,767 $298,998 $237,482
Cost of sales 49,882 39,428 120,494 92,464
-------- -------- -------- --------

Gross profit 77,141 61,339 178,504 145,018
Selling, general and administrative 61,157 46,584 152,065 119,478
-------- -------- -------- --------

Operating income 15,984 14,755 26,439 25,540
Income from litigation settlement, net - - 1,444 -
Net interest expense 872 764 2,380 2,372

Income before income taxes 15,112 13,991 25,503 23,168
Provision for income taxes 3,778 3,917 6,376 6,487
-------- -------- -------- --------

Net income $ 11,334 $ 10,074 $ 19,127 $ 16,681
======== ======== ======== ========

Earnings per share:
Basic $ 0.46 $ 0.42 $ 0.78 $ 0.69
======== ======== ======== ========
Diluted $ 0.44 $ 0.40 $ 0.75 $ 0.67
======== ======== ======== ========

Weighted average shares outstanding:
Basic 24,756 24,193 24,646 24,030
======== ======== ======== ========
Diluted 25,621 25,257 25,497 25,007
======== ======== ======== ========


See Notes to Consolidated Financial Statements

4


MOVADO GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)



Nine Months Ended October 31,
-----------------------------
2004 2003
-------- --------

Cash flows from operating activities:
Net income $ 19,127 $ 16,681
Adjustments to reconcile net income to net cash (used in)/provided by
operating activities:
Depreciation and amortization 8,601 7,074
Deferred income taxes - 175
Provision for losses on accounts receivable 723 1,129
Provision for losses on inventory 215 500
Changes in assets and liabilities:
Trade receivables (37,760) (26,509)
Inventories (30,242) (10,490)
Other current assets (3,031) 11,712
Accounts payable 14,130 (817)
Accrued liabilities 9,157 8,551
Current taxes payable 2,630 1,224
Other non-current assets (1,402) (543)
Other non-current liabilities (31) 2,576
-------- --------
Net cash (used in)/provided by operating activities (17,883) 11,263
-------- --------

Cash flows from investing activities:
Capital expenditures (10,906) (7,295)
Investment in Ebel (43,525) -
Trademarks (321) (536)
-------- --------
Net cash used in investing activities (54,752) (7,831)
-------- --------

Cash flows from financing activities:
Net proceeds from bank borrowings 26,113 22,000
Stock options exercised & other 2,963 1,064
Dividends paid (2,957) (1,804)
-------- --------
Net cash provided by financing activities 26,119 21,260
-------- --------

Effect of exchange rate changes on cash and cash equivalents 303 (2,100)
-------- --------

Net (decrease) increase in cash and cash equivalents (46,213) 22,592

Cash and cash equivalents at beginning of period 82,083 38,365
-------- --------

Cash and cash equivalents at end of period $ 35,870 $ 60,957
======== ========

Supplemental Disclosure:
Fair value of assets acquired $ 71,629
Less: liabilities assumed (26,603)
--------
Cash paid for the transaction 45,026
Less: cash acquired (1,340)
Less: accrued deal costs (161)
--------
Net cash paid for transaction $ 43,525
========


See Notes to Consolidated Financial Statements

5


MOVADO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements have been prepared
by Movado Group, Inc. (the "Company") in a manner consistent with that used in
the preparation of the financial statements included in the Company's fiscal
2004 Annual Report filed on Form 10-K. In the opinion of management, the
accompanying financial statements reflect all adjustments, consisting of only
normal and recurring adjustments, necessary for a fair presentation of the
financial position and results of operations for the periods presented. These
consolidated financial statements should be read in conjunction with the
aforementioned annual report. Operating results for the interim periods
presented are not necessarily indicative of the results that may be expected for
the full year.

NOTE 1 - RECLASSIFICATION

Certain reclassifications were made to prior years' financial statement amounts
and related note disclosures to conform to the fiscal 2005 presentation.

NOTE 2 - ACQUISITION

On December 22, 2003, the Company entered into an agreement to acquire Ebel S.A.
and the worldwide business related to the Ebel brand (collectively "Ebel") from
LVMH Moet Hennessy Louis Vuitton ("LVMH"). On March 1, 2004, the Company
completed the acquisition of Ebel with the exception of the payment for the
acquired Ebel business in Germany, which was completed July 30, 2004. The Ebel
brand, one of the world's premier luxury watch brands, was established in La
Chaux-de-Fonds, Switzerland in 1911. The Company acquired Ebel to revitalize and
re-build the brand and to expand its global market share.

Under the terms of the agreement, the Company acquired all of the outstanding
common stock of Ebel S.A. and the related worldwide businesses in exchange for:

- 51.6 million Swiss francs in cash; and

- the assumption of a short-term mortgage payable of 6.6 million Swiss
francs.

Under the purchase method of accounting, the Company recorded an aggregate
purchase price of approximately $45.0 million, which consisted of approximately
$40.6 million in cash and $4.4 million in deal costs and other incurred
liabilities, which primarily consisted of legal, accounting, investment banking
and financial advisory services fees.

In accordance with Statement of Financial Accounting Standards No. 141,
"Business Combinations," ("SFAS 141"), the Company allocated the purchase price
to the tangible assets, intangible assets, and liabilities acquired based on
their estimated fair values. The fair value assigned to tangible and intangible
assets acquired was based on an independent appraisal. The fair value of assets
acquired and liabilities assumed exceeds the purchase price. That excess has
been allocated as a pro rata reduction of the amounts that otherwise would have
been assigned to all of the acquired assets except for certain specific types of
assets as set forth in SFAS 141. The pro forma adjustments were based upon an
independent assessment of appraised values. The assessment is now complete. In
accordance with Statement of Financial Accounting Standards No. 142, "Goodwill
and Other Intangible Assets" ("SFAS 142"), goodwill and purchased intangibles
with indefinite lives are not amortized but will be reviewed annually for
impairment. Purchased intangibles with finite lives are amortized on a
straight-line basis over their respective estimated useful lives.

6


In accordance with Emerging Issues Task Force No. 95-3 ("EITF 95-3"),
"Recognition of Liabilities in Connection with a Purchase Business Combination",
the Company recognized costs associated with exiting an activity of an acquired
company and involuntary termination of employees of an acquired company as
liabilities assumed in a purchase business combination and included the
liabilities in the allocation of the acquisition cost. The liability recognized
in connection with the acquisition of Ebel was comprised of approximately $2.4
million for employee severance, $0.2 million for lease terminations, $1.7
million for exit costs related to certain promotional and purchase contracts and
$0.4 million of other liabilities. For the nine months ended October 31, 2004,
payments against employee severance, exit costs and other liabilities amounted
to $1.1 million, $1.0 million and $0.3 million, respectively. The employee
severance, and the payments against employee severance, are entirely related to
the Ebel business in Europe. The Company expects these liabilities to be paid
out by April 30, 2005. There are no further adjustments related to the
abovementioned accruals.

As part of the acquisition, the Company recorded deferred tax assets resulting
from Ebel's net operating loss carry forwards amounting to approximately 181.0
million Swiss francs. The Company established a full valuation allowance on the
deferred tax assets. However, if the deferred tax assets are subsequently
recognized, the recognition of the tax benefit will be applied to reduce the
carrying value of acquired intangible assets to zero, prior to being recognized
as a reduction of income tax expense. The total purchase price has been
allocated as follows (in thousands):



Cash $ 1,340
Accounts receivable 16,369
Property, plant and equipment 4,556
Inventories 35,834
Intangible assets 9,129
Other current assets 4,401
-------
Total assets acquired 71,629

Current liabilities 16,149
Short-term commitments and contingencies 5,269
Mortgage payable 5,185
-------
Total purchase price $45,026
=======


In allocating the purchase price, the Company considered, among other factors,
its intention for future use of the acquired assets, analyses of historical
financial performance and estimates of future performance of Ebel's products.
Included in the other current assets are certain assets held for sale which
currently approximate $1.5 million and are expected to be disposed of within the
next 12 months.

7


The fair value of intangible assets was primarily based on the income approach
and cost approach. The discount rates used were 16% for customer lists and 21%
for trade names and trademarks. These discount rates were determined after
consideration of the industry's cost of capital which is equal to the weighted
average, after-tax cost of equity and debt. The identifiable intangible assets
purchased in the Ebel acquisition consisted of the following (in thousands):



Gross Useful
Identifiable Intangible Assets Value Life
- ------------------------------ ----- ----

Trade names and trademarks $8,343 Indefinite
Customer list 786 5 years
------
Total $9,129
======


Amortization expense for the next four years and thereafter for intangibles with
finite lives is as follows (in thousands):



Estimated
Amortization
For the Year Ended Expense
- ------------------ -------

January 31, 2005 $144
January 31, 2006 157
January 31, 2007 157
January 31, 2008 and thereafter 328
----
$786
====


Pro Forma Financial Information

The unaudited financial information in the table below summarizes the combined
results of operations of the Company and Ebel, on a pro forma basis, as though
the acquisition had been completed as of the beginning of each period presented.
This pro forma financial information is presented for informational purposes
only and is not necessarily indicative of the results of operations that would
have been achieved had the acquisition taken place at the beginning of each nine
month and three month period presented. The unaudited pro forma condensed
combined statements of income for the nine months and three months ended October
31, 2004 combines the historical results for the Company for the nine months and
three months ended October 31, 2004 and the historical results for Ebel for the
period preceding the acquisition of February 1 through February 29, 2004. The
unaudited pro forma condensed combined statements of income for the nine months
and three months ended October 31, 2003 combines the historical results for the
Company for the nine months and three months ended October 31, 2003, and the
historical results for Ebel for the nine months and three months ended October
31, 2003. The following amounts are in thousands, except per share amounts:



Nine Months Ended Three Months Ended
October 31, October 31,
------------------- --------------------
2004 2003 2004 2003
---- ---- ---- ----

Revenues $ 300,367 $ 286,267 $ 127,023 $ 119,310
Net income $ 17,052 $ 9,229 $ 11,334 $ 9,193
Basic income per share $ 0.69 $ 0.38 $ 0.46 $ 0.38
Diluted income per share $ 0.67 $ 0.37 $ 0.44 $ 0.36


8


NOTE 3 - STOCK OPTION PLAN

The Company applies Accounting Principles Board Opinion No. 25 and related
Interpretations in accounting for its stock option plans. No compensation cost
has been recognized for any stock options granted under the Company's stock
option plans because the quoted market price of the Common Stock at the grant
date was not in excess of the amount an employee must pay to acquire the Common
Stock. Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting
for Stock-Based Compensation," issued by the Financial Accounting Standards
Board ("FASB"), prescribes a method to record compensation cost for stock-based
employee compensation plans at fair value. The Company utilizes the
Black-Scholes option-pricing model for determining the fair value of the
stock-based compensation. Pro forma disclosures as if the Company had adopted
the recognition requirements under SFAS No. 123 for the nine months and three
months ended October 31, 2004 and 2003, respectively, are presented below.



Nine Months Ended Three Months Ended
October 31, October 31,
-------------------------- --------------------------
(In thousands, except per share data) 2004 2003 2004 2003
---------- ---------- ---------- ----------

Net income as reported: $ 19,127 $ 16,681 $ 11,334 $ 10,074
Fair value based compensation
expense, net of taxes 3,015 2,706 210 1,167
---------- ---------- ---------- ----------
Pro forma net income $ 16,112 $ 13,975 $ 11,124 $ 8,907
========== ========== ========== ==========

Basic earnings per share:
As reported $ 0.78 $ 0.69 $ 0.46 $ 0.42
Pro forma under SFAS No. 123 $ 0.65 $ 0.58 $ 0.45 $ 0.37

Diluted earnings per share:
As reported $ 0.75 $ 0.67 $ 0.44 $ 0.40
Pro forma under SFAS No. 123 $ 0.63 $ 0.56 $ 0.43 $ 0.35


NOTE 4 - COMPREHENSIVE INCOME

The components of comprehensive income for the nine months and three months
ended October 31, 2004 and 2003 are as follows (in thousands):



Nine Months Ended Three Months Ended
October 31, October 31,
---------------------- ----------------------
2004 2003 2004 2003
-------- -------- -------- --------

Net income $ 19,127 $ 16,681 $ 11,334 $ 10,074
Net unrealized gain on investments, net of tax 46 202 26 56
Effective portion of unrealized gain / (loss) on
hedging contracts, net of tax 907 (2,722) 3,181 (726)
Foreign currency translation adjustment 11,410 4,247 13,981 4,817
-------- -------- -------- --------
Total comprehensive income $ 31,490 $ 18,408 $ 28,522 $ 14,221
======== ======== ======== ========


9


NOTE 5 - SEGMENT INFORMATION

The Company conducts its business primarily in two operating segments: Wholesale
and Retail. The Company's Wholesale segment includes the designing,
manufacturing and distribution of quality watches. The Retail segment includes
the Movado Boutiques and outlet stores.

The Company divides its business into two major geographic segments: Domestic,
which includes the results of the Company's North American, Caribbean and Tommy
Hilfiger South American operations, and International, which includes the
results of all other Company operations. The Company's International operations
are principally conducted in Europe, the Middle East and Asia. The Company's
International assets are substantially located in Europe.

Operating Segment Data for the Nine Months Ended October 31, 2004 and 2003 (in
thousands):



Net Sales Operating Income (Loss)
------------------- -----------------------
2004 2003 2004 2003
-------- -------- -------- --------

Wholesale $252,418 $200,026 $ 30,811 $ 28,026
Retail 46,580 37,456 (4,372) (2,486)
-------- -------- -------- --------
Consolidated total $298,998 $237,482 $ 26,439 $ 25,540
======== ======== ======== ========


Operating Segment Data for the Three Months Ended October 31, 2004 and 2003 (In
thousands):



Net Sales Operating Income (Loss)
------------------- -----------------------
2004 2003 2004 2003
-------- -------- -------- --------

Wholesale $110,818 $ 87,877 $ 18,096 $ 15,799
Retail 16,205 12,890 (2,112) (1,044)
-------- -------- -------- --------
Consolidated total $127,023 $100,767 $ 15,984 $ 14,755
======== ======== ======== ========


Geographic Segment Data for the Nine Months Ended October 31, 2004 and 2003 (In
thousands):



Net Sales Operating Income
------------------- -----------------------
2004 2003 2004 2003
-------- -------- -------- --------

Domestic $235,697 $206,657 $ 11,962 $ 7,150
International 63,301 30,825 14,477 18,390
-------- -------- -------- --------
Consolidated total $298,998 $237,482 $ 26,439 $ 25,540
======== ======== ======== ========


10


Geographic Segment Data for the Three Months Ended October 31, 2004 and 2003 (In
thousands):



Net Sales Operating Income
------------------- -----------------------
2004 2003 2004 2003
-------- -------- -------- --------

Domestic $ 99,211 $ 87,558 $ 6,861 $ 5,703
International 27,812 13,209 9,123 9,052
-------- -------- -------- --------
Consolidated total $127,023 $100,767 $ 15,984 $ 14,755
======== ======== ======== ========


Domestic and International net sales are net of intercompany sales of $186.3
million and $156.0 million for the nine months ended October 31, 2004 and
October 31, 2003, respectively.

Domestic and International net sales are net of intercompany sales of $70.4
million and $61.2 million for the three months ended October 31, 2004 and
October 31, 2003, respectively.



Total Assets
---------------------------------------------------
October 31, January 31, October 31,
2004 2004 2003
---- ---- ----

Domestic $183,543 $128,112 $150,174
International 315,104 262,855 244,700
-------- -------- --------
Consolidated total $498,647 $390,967 $394,874
======== ======== ========


NOTE 6 - EXECUTIVE RETIREMENT PLAN

The Company has a number of employee benefit plans covering substantially all
employees. Certain eligible executives of the Company have elected to defer a
portion of their compensation on a pre-tax basis under a defined contribution,
supplemental executive retirement plan (SERP) sponsored by the Company. The SERP
was adopted effective June 1, 1995, and provides eligible executives with
supplemental pension benefits in addition to amounts received under the
Company's other retirement plans. The Company makes a matching contribution
which vests equally over five years. For the nine months ended October 31, 2004
and 2003, the Company recorded an expense related to the SERP of $0.4 million
for each period. For the three months ended October 31, 2004 and 2003, the
Company recorded an expense related to the SERP of $0.2 million and $0.1
million, respectively.

11


NOTE 7 - INVENTORIES

Inventories consist of the following (in thousands):



October 31, January 31, October 31,
2004 2004 2003
--------- --------- ---------

Finished goods $ 122,031 $ 78,490 $ 81,660
Component parts 118,430 43,335 40,476
Work-in-process 8,462 2,261 4,628
--------- --------- ---------
248,923 124,086 126,764
Less: inventories reserve (56,112) (2,408) (3,690)
--------- --------- ---------
$ 192,811 $ 121,678 $ 123,074
========= ========= =========


The increase in all inventory categories, including the inventory reserve,
as of October 31, 2004, includes the acquired net assets of Ebel.

NOTE 8 - EARNINGS PER SHARE

The Company presents net income per share on a basic and diluted basis. Basic
earnings per share is computed using weighted-average shares outstanding during
the period. Diluted earnings per share is computed using the weighted-average
number of shares outstanding adjusted for dilutive common stock equivalents.

The weighted-average number of shares outstanding for basic earnings per share
were 24,646,000 and 24,030,000 for the nine months ended October 31, 2004 and
2003, respectively. For diluted earnings per share, these amounts were increased
by 851,000 and 977,000 for the nine months ended October 31, 2004 and 2003,
respectively, due to potentially dilutive common stock equivalents issuable
under the Company's stock option plans and restricted stock grants.

The weighted-average number of shares outstanding for basic earnings per share
were 24,756,000 and 24,193,000 for the three months ended October 31, 2004 and
2003, respectively. For diluted earnings per share, these amounts were increased
by 865,000 and 1,064,000 for the three months ended October 31, 2004 and 2003,
respectively, due to potentially dilutive common stock equivalents issuable
under the Company's stock option plans and restricted stock grants.

NOTE 9 - STOCK DIVIDEND

On June 17, 2004, the Company's shareholders approved an amendment to its
articles of incorporation providing for an increase in the authorized shares of
common stock and Class A common stock to 100 million shares and 30 million
shares, respectively. Subsequently, on June 25, 2004, the Company distributed a
stock dividend of one newly issued share of common stock and one newly issued
share of Class A common stock for each then outstanding share of common stock
and of Class A common stock, respectively, to shareholders of record as of June
11, 2004.

12


NOTE 10 - LITIGATION SETTLEMENT

On July 28, 2004, a settlement was reached in a lawsuit the Company filed
against Swiss Army Brands, Inc. and two individuals in November 2001. In the
lawsuit, the Company alleged that Swiss Army Brands and the other defendants
tortiously interfered with its business by soliciting a number of the Company's
sales employees. As a result of the settlement, the Company recorded a pre-tax
gain of $1.4 million in the quarter ended July 31, 2004. This consisted of a
gross settlement of $1.9 million partially offset by direct costs related to the
litigation of $0.5 million.

NOTE 11 - SENIOR NOTES

The Company entered into a Note Purchase and Private Shelf Agreement, dated as
of March 21, 2001 which was subsequently amended as of March 31, 2004 (the
"Purchase Agreement"), with Prudential Insurance Company of America
("Prudential") and certain affiliates of Prudential (together with Prudential,
the "Purchasers"). The Purchase Agreement permits the Company to issue senior
promissory notes for purchase by the Purchasers, in an aggregate principal
amount of up to $40.0 million, until March 21, 2007.

On October 8, 2004, the Company issued, pursuant to the Purchase Agreement,
4.79% Senior Series A-2004 Notes due 2011 (the "Senior Notes"), in an aggregate
principal amount of $20.0 million, which will mature on October 8, 2011.
Proceeds of the Senior Notes will be used by the Company for capital
expenditures, repayment of certain of its debt obligations and general corporate
purposes. The Senior Notes are senior, unsecured obligations and rank equally in
right of payment with all of the Company's existing and future unsecured and
unsubordinated indebtedness. The Company's payment obligations under the Senior
Notes are guaranteed fully and unconditionally by Movado Retail Group, Inc.
(successor in interest to SwissAm, Inc.) and Movado LLC, each of which is a
subsidiary of Movado Group, Inc.

NOTE 12 - RECENTLY ISSUED ACCOUNTING STANDARDS

In November 2004, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 151, "Inventory Costs", an amendment of ARB
No. 43, Chapter 4 ("SFAS 151"). The amendments made by SFAS 151 will
improve financial reporting by clarifying that abnormal amounts of idle facility
expense, freight, handling costs, and wasted materials (spoilage) should be
recognized as current-period charges and by requiring the allocation of fixed
production overheads to inventory based on the normal capacity of the production
facilities. The guidance is effective for inventory costs incurred during fiscal
years beginning after June 15, 2005, and is not expected to have a significant
impact on the Company's consolidated financial position, results of operations
or cash flows.

NOTE 13 - AMERICAN JOBS CREATION ACT OF 2004

The United States Congress passed the American Jobs Creation Act of 2004 (the
"Act"), which the President signed into law on October 22, 2004. Key provisions
of the Act include a temporary incentive for U.S. multinational corporations to
repatriate foreign earnings, a domestic manufacturing deduction and
international tax reforms designed to improve the global competitiveness of U.S.
businesses. Accordingly, in accordance with Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes," the Company will reflect the
effects of the Act, if any, in the period that decisions are made with respect
to this Act. The Company is still evaluating the impact of the Act on the
Company and accordingly, has not yet determined its impact on the effective tax
rate and on the deferred tax assets and liabilities.

13


Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations

Forward-Looking Statements

Statements in this quarterly report on Form 10-Q, including, without limitation,
statements under this Item 2, "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and elsewhere in this report, as well as
statements in future filings by the Company with the Securities and Exchange
Commission ("SEC"), in the Company's press releases and oral statements made by
or with the approval of an authorized executive officer of the Company, which
are not historical in nature, are intended to be, and are hereby identified as,
"forward-looking statements" for purposes of the safe harbor provided by the
Private Securities Litigation Reform Act of 1995. These statements are based on
current expectations, estimates, forecasts and projections about the Company,
its future performance, the industry in which the Company operates and
management's assumptions. Words such as "expects," "anticipates," "targets,"
"goals," "projects," "intends," "plans," "believes," "seeks," "estimates,"
"may," "will," "should" and variations of such words and similar expressions are
also intended to identify such forward-looking statements. The Company cautions
readers that forward-looking statements include, without limitation, those
relating to the Company's future business prospects, projected operating or
financial results, revenues, working capital, liquidity, capital needs, plans
for future operations, expectations regarding capital expenditures and operating
expenses, effective tax rates, margins, interest costs, and income as well as
assumptions relating to the foregoing. Forward-looking statements are subject to
certain risks and uncertainties, some of which cannot be predicted or
quantified. Actual results and future events could differ materially from those
indicated in the forward-looking statements, due to several important factors
herein identified, among others, and other risks and factors identified from
time to time in the Company's reports filed with the SEC including, without
limitation, the following: general economic and business conditions which may
impact disposable income of consumers in the United States and the other
significant markets where the Company's products are sold, general uncertainty
related to possible terrorist attacks and the impact on consumer spending,
changes in consumer preferences and popularity of particular designs, new
product development and introduction, competitive products and pricing,
seasonality, availability of alternative sources of supply in the case of the
loss of any significant supplier, the loss of significant customers, the
Company's dependence on key employees and officers, the ability to successfully
integrate the operations of acquired businesses without disruption to other
business activities, the continuation of licensing arrangements with third
parties, ability to secure and protect trademarks, patents and other
intellectual property rights, ability to lease new stores on suitable terms in
desired markets and to complete construction on a timely basis, continued
availability to the Company of financing and credit on favorable terms, business
disruptions, disease, general risks associated with doing business outside the
United States including, without limitation, import duties, tariffs, quotas,
political and economic stability, and success of hedging strategies with respect
to currency exchange rate fluctuations.

Critical Accounting Policies and Estimates

In accordance with Statement of Financial Accounting Standards No. 142,
"Goodwill and Other Intangible Assets" ("SFAS 142"), goodwill and purchased
intangibles with indefinite lives are not amortized but will be reviewed
annually for impairment. Purchased intangibles with finite lives are amortized
on a straight-line basis over their respective estimated useful lives.

There have been no material changes in the Company's Critical Accounting
Policies and Estimates, as disclosed in its Annual Report on Form 10-K for the
fiscal year ended January 31, 2004.

14


Results of operations for the three months ended October 31, 2004 as compared to
the three months ended October 31, 2003.

Net Sales: Comparative net sales by business segment were as follows (in
thousands):



Three Months Ended
October 31,
---------------------
2004 2003
-------- --------

Wholesale:
Domestic $ 83,006 $ 74,669
International 27,812 13,207
Retail 16,205 12,891
-------- --------
Net Sales $127,023 $100,767
======== ========


Net sales increased by $26.3 million or 26.1% for the three months ended October
31, 2004 as compared to the three months ended October 31, 2003. Sales in the
wholesale segment increased 26.1% to $110.8 million versus $87.9 million in the
prior year. All brands were above prior year with Tommy Hilfiger up over 50% and
ESQ up over 20%. Sales in the domestic wholesale business were $83.0 million or
11.2% above prior year sales of $74.7 million. Tommy Hilfiger and ESQ
experienced a double digit percentage increase from the prior year, and Movado
and Concord experienced single digit percentage increases from the prior year.
Positive retailer response to new model introductions was a key factor in the
brand growth.

Sales in the international wholesale business were $27.8 million or 110.6% above
prior year. Sales increases were recorded in Tommy Hilfiger due to retail growth
in existing markets as well as expansions into new markets in Europe and Asia.
In Coach, strong sales in Japan and in the duty free business contributed to a
40.5% year over year improvement. Concord and Movado sales were above prior year
sales by a double digit percentage increase.

Sales in the retail segment rose 25.7% to $16.2 million. The increase was driven
by a 12.8% comparable store sales increase in the Movado Boutiques. In addition,
sales increases were recorded in the Movado Boutiques as a result of the opening
of 12 new stores. The outlet business was 10.3% above last year for the quarter.

Gross Profit. The gross profit for the three months ended October 31, 2004 was
$77.1 million or 60.7% of net sales as compared to $61.3 million or 60.9% of net
sales for the three months ended October 31, 2003. The increase in gross profit
of $15.8 million is the result of the higher sales volume. The decrease in the
gross profit as a percentage of sales is primarily the result of brand and
product mix.

Selling, General and Administrative. Selling, general and administrative
expenses for the three months ended October 31, 2004 were $61.2 million or 48.1%
of net sales as compared to $46.6 million or 46.2% of net sales for the three
months ended October 31, 2003. The increase reflects planned investments in
support of Ebel, investments in support of the global expansion of Tommy
Hilfiger, increased costs to support other growth initiatives including the
development of the Movado brand in China, increased costs in the retail segment,
primarily the result of opening 12 new Movado Boutiques, higher compensation
costs and increased fees including costs related to Sarbanes-Oxley
certifications.

15


Interest Expense. Net interest expense for the three months ended October 31,
2004 increased by 14.1% to $0.9 million as compared to $0.8 million for the
three months ended October 31, 2003. The increase is due to higher average
borrowings for the quarter which is attributable to cash required to pay for the
all cash acquisition of Ebel in addition to cash required for working capital to
support the sales growth. The average debt for the quarter increased 30.0% from
prior year to $63.3 million, reflecting cash required to pay for the all cash
acquisition of Ebel in addition to cash required for working capital to fund the
sales growth.

Income Taxes. The Company recorded a tax expense of $3.8 million and $3.9
million for the three months ended October 31, 2004 and 2003, respectively.
Taxes were recorded at a 25.0% and 28.0% rate as of October 31, 2004 and 2003,
respectively.

Results of operations for the nine months ended October 31, 2004 as compared to
the nine months ended October 31, 2003.

Net Sales: Comparative net sales by business segment were as follows (in
thousands):



Nine Months Ended
October 31,
---------------------
2004 2003
-------- --------

Wholesale:
Domestic $189,117 $169,199
International 63,301 30,827
Retail 46,580 37,456
-------- --------
Net Sales $298,998 $237,482
======== ========


Net sales increased by $61.5 million or 25.9% for the nine months ended October
31, 2004 as compared to the nine months ended October 31, 2003. Sales in the
wholesale segment increased 26.2% to $252.4 million versus $200.0 million in the
prior year. With sales of $189.1 million, the domestic wholesale business was
$19.9 million or 11.8% above prior year sales of $169.2 million. The increase
was driven by higher sales in Tommy Hilfiger as a result of added distribution
as well as positive sell through at retail. ESQ experienced a double digit
percentage increase from the prior year, Concord and Coach experienced high
single digit percentage increases and Movado experienced a low single digit
percentage increase.

Sales in the international wholesale business were $63.3 million or 105.3% above
the prior year period. Sales were significantly stronger in Asia which had been
negatively impacted by SARS in the prior year and in the Coach Duty Free
business. All brands recorded double digit percentage increases with Tommy
Hilfiger more than doubling year over year.

For the nine months ended October 31, 2004, sales in the retail segment rose
24.4% to $46.6 million. The increase was driven by a 16.7% comparable store
sales increase in the Movado Boutiques. In addition, sales increases were
recorded in the Movado Boutiques as a result of the opening of 12 new stores.
Sales in the outlet business increased 7.1% above last year for the comparable
nine months.

16


Gross Profit. Gross profit for the nine months ended October 31, 2004 was $178.5
million or 59.7% of net sales as compared to $145.0 million or 61.1% of net
sales for the nine months ended October 31, 2003. The increase in gross profit
of $33.5 million is the result of the higher sales volume. The decrease in the
gross profit as a percentage of sales is the result of changes in brand and
product mix.

Selling, General and Administrative. Selling, general and administrative
expenses for the nine months ended October 31, 2004 were $152.1 million or 50.9%
of net sales as compared to $119.5 million or 50.3% of net sales for the nine
months ended October 31, 2003. Increased expenses were a result of planned
investments in support of Ebel, investments in support of the global expansion
of Tommy Hilfiger, increased costs to support other growth initiatives
including the development of the Movado brand in China, increased costs in the
retail segment primarily the result of opening 12 new Movado Boutiques, the weak
U.S. dollar and the currency translation effect of the Swiss and Canadian costs,
higher compensation costs and increased fees including costs related to
Sarbanes-Oxley certifications.

Interest Expense. Net interest expense for the nine months ended October 31,
2004 and 2003 was $2.4 million. The average debt increased 14.1% to $56.7
million from prior year of $49.7 million, reflecting the cash required to pay
for the all cash acquisition of Ebel in addition to cash required for working
capital to fund the volume growth.

Litigation Settlement. The company recognized income for the six months ended
July 31, 2004 from a litigation settlement with Swiss Army Brands, Inc. in the
net amount of $1.4 million. This consisted of a gross settlement of $1.9 million
partially offset by direct costs related to the litigation of $0.5 million.
After accounting for fees and taxes associated with the settlement, second
quarter net income increased by $0.8 million, or $0.03 per diluted share.

Income Taxes. The Company recorded a tax expense of $6.4 million and $6.5
million for the nine months ended October 31, 2004 and 2003, respectively. Taxes
were recorded at a 25.0% and 28.0% rate for October 31, 2004 and 2003,
respectively.

LIQUIDITY AND FINANCIAL POSITION

Cash used in operating activities amounted to $17.9 million for the nine months
ended October 31, 2004 as compared to cash provided by operating activities
amounted to $11.3 million for the nine months ended October 31, 2003. The
increase in the use of cash from the prior year of $29.2 million is primarily
attributed to the impact of the volume growth on accounts receivable, the net
effect of higher inventory purchases and the related accounts payable and the
net effect of the cash used in the Company's hedging activities. This was
partially offset by the favorable effect of the higher net income and related
expense accruals.

Cash used in investing activities amounted to $54.8 million and $7.8 million for
the nine months ended October 31, 2004 and 2003, respectively, and was primarily
due to the Ebel acquisition and capital expenditures. For the nine months ended
October 31, 2004, cash was used for the all cash acquisition of Ebel as well as
for capital expenditures primarily for the build out of the new retail stores as
well as remodeling existing stores and the expansion of office space in the
Corporate Headquarters in Paramus, New Jersey. Cash used for the nine months
ended October 31, 2003 was for capital expenditures primarily for the build out
of new retail stores as well as normal ongoing systems hardware and software
investments.

Cash provided by financing activities amounted to $26.1 million and $21.3
million for the nine months ended October 31, 2004 and 2003, respectively, and
was the result of seasonal short-term bank borrowings in each period.


17

At October 31, 2004, the Company had three series of Senior Notes outstanding.
Senior Notes due January 31, 2005, with a remaining principal amount due of $5.0
million, were originally issued in a private placement completed in fiscal 1994.
These notes have required annual principal payments of $5.0 million since
January 1998 and bear interest of 6.56% per annum. During fiscal 1999, the
Company issued $25.0 million of Series A Senior Notes under a Note Purchase and
Private Shelf Agreement dated November 30, 1998. These notes bear interest of
6.90% per annum, mature on October 30, 2010 and are subject to annual repayments
of $5.0 million commencing October 31, 2006.

As of March 21, 2004, the Company amended its Note Purchase and Private Shelf
Agreement, originally dated March 21, 2001, to expire on March 21, 2007. This
agreement allows for the issuance, for up to three years after the date thereof,
of senior promissory notes in the aggregate principal amount of up to $40.0
million with maturities up to 12 years from their original date of issuance. On
October 8, 2004, the Company issued, pursuant to the Purchase Agreement, 4.79%
Senior Series A-2004 Notes due 2011 (the "Senior Notes"), in an aggregate
principal amount of $20.0 million, which will mature on October 8, 2011.
Proceeds of the Senior Notes will be used by the Company for capital
expenditures, repayment of certain of its debt obligations and general corporate
purposes. As of October 31, 2004, $20.0 million was issued and outstanding.

On June 17, 2003, the Company completed the renewal of its revolving credit line
with its bank group. The agreement provides for a three year $75.0 million
unsecured revolving line of credit and $15.0 million of uncommitted working
capital lines. The line of credit expires on June 17, 2006. At October 31, 2004,
the Company had $16.3 million of outstanding borrowings under its bank lines as
compared to $22.0 million at October 31, 2003. In addition, one bank in the
domestic bank group issued five irrevocable standby letters of credit for retail
and operating facility leases to various landlords and Canadian payroll to the
Royal Bank of Canada totaling $0.6 million with expiration dates through June
30, 2005.

A Swiss subsidiary of the Company maintains unsecured lines of credit with an
unspecified length of time with a Swiss bank. Available credit under these lines
totaled 8.0 million Swiss francs, with dollar equivalents of approximately $6.7
million and $6.0 million at October 31, 2004 and 2003, respectively, of which a
maximum of $5.0 million may be drawn under the terms of the Company's revolving
credit line with its bank group. As of October 31, 2004, the Swiss bank has
guaranteed the Company's Swiss subsidiary's obligations to certain Swiss third
parties in the amount of approximately $2.2 million in various foreign
currencies. As of October 31, 2004, there are no borrowings against these lines.

Under a series of share repurchase authorizations approved by the Board of
Directors, the Company has maintained a discretionary share buy-back program.
There were no purchases during fiscal 2003 under the repurchase program and
there have been no repurchases for the nine months ended October 31, 2004.

During the nine months ended October 31, 2004, treasury shares increased by
9,581 as the result of cashless exercises of stock options for 61,067 shares of
stock.

The Company paid dividends per share of $0.04 for the first, second and third
quarters, or approximately $3.0 million for the nine months ended October 31,
2004, and $0.015 per share for the first quarter, $0.03 per share for the second
and third quarters, or approximately $1.8 million for the nine months ended
October 31, 2003.

Cash and cash equivalents at October 31, 2004 amounted to $35.9 million compared
to $61.0 million at October 31, 2003. The decrease in cash relates to the net
impact of the payment for the all cash acquisition of Ebel, the severance and
restructuring costs associated with Ebel's Swiss operations and the funding of
the Ebel business year-to-date, as well as additional cash required to fund the
Company's working capital needs for volume growth.

18

RECENTLY ISSUED ACCOUNTING STANDARDS

In November 2004, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 151, "Inventory Costs", an amendment of ARB
No. 43, Chapter 4 ("SFAS 151"). The amendments made by SFAS 151 will
improve financial reporting by clarifying that abnormal amounts of idle facility
expense, freight, handling costs, and wasted materials (spoilage) should be
recognized as current-period charges and by requiring the allocation of fixed
production overheads to inventory based on the normal capacity of the production
facilities. The guidance is effective for inventory costs incurred during fiscal
years beginning after June 15, 2005, and is not expected to have a significant
impact on the Company's consolidated financial position, results of operations
or cash flows.



19





Item 3. Quantitative and Qualitative Disclosure about Market Risks

Foreign Currency and Commodity Price Risks

The majority of the Company's purchases are denominated in Swiss francs. The
Company reduces its exposure to the Swiss franc exchange rate risk through a
hedging program. Under the hedging program, the Company purchases various
derivatives, predominantly forward and option contracts. Changes in derivative
fair values will either be recognized in earnings as offsets to the changes in
fair value of related hedged assets, liabilities and firm commitments or, for
forecasted transactions, deferred and recorded as a component of other
shareholders' equity until the hedged transactions occur and are recognized in
earnings. The ineffective portion of a hedging derivative's change in fair value
will be immediately recognized in earnings. If the Company did not engage in a
hedging program, any change in the Swiss franc currency rate would have an equal
effect on the entities' cost of sales. The Company purchases gold for the
production of certain watches. The Company purchases gold derivatives under its
hedging program and treats the changes in fair value on these derivatives in the
same manner as the changes in fair value in its Swiss franc derivatives.

The Company also hedges its Swiss franc denominated investment in its
wholly-owned Swiss subsidiaries using purchase options under certain
limitations. These hedges are treated as net investment hedges under SFAS No.
133. Under SFAS No. 133, the change in fair value of these instruments is
recognized in accumulated other comprehensive income to offset the change in the
value of the net investment being hedged.

The following presents fair value and maturities of the Company's foreign
currency derivatives outstanding as of October 31, 2004 (in millions):



October 31, 2004
Fair Value Maturities
---------- ----------

Forward exchange contracts $ 5.5 2004-2005
Purchased foreign currency options 8.2 2004-2005
---------
$ 13.7
=========


The Company's international trade business for the nine months ended October 31,
2004 accounts for 21.2% of the Company's sales in various currencies. The
international operations are denominated in local currency and fluctuations in
these currency rates may have an impact on the Company's sales, cost of sales,
operating expenses and net income.

Interest Rate Risk

As of October 31, 2004, the Company had $16.3 million in short-term bank debt
obligations with variable interest rates based on LIBOR plus an applicable loan
spread. The Company does not hedge these interest rate risks. The Company also
has $50.0 million Senior Note debt bearing fixed interest rates per annum. The
difference between the market based interest rates available at October 31, 2004
and the fixed rates in the Senior Notes were unfavorable to the Company.

20


Item 4. Controls and Procedures

The Company, under the supervision and with the participation of its management,
including the Chief Executive Officer and the Chief Financial Officer, evaluated
the effectiveness of the design and operation of the Company's "disclosure
controls and procedures" (as defined in Rule 13a-15(e) under the Securities
Exchange Act) as of the end of the period covered by this report. Based on that
evaluation, the Chief Executive Officer and the Chief Financial Officer
concluded that the Company's disclosure controls and procedures are effective in
making known to them, in a timely manner, material information relating to the
Company and the Company's consolidated subsidiaries required to be disclosed in
the Company's reports filed or submitted under the Exchange Act.

There has been no change in the Company's internal control over financial
reporting during the quarter ended October 31, 2004, that has materially
affected, or is reasonably likely to materially affect, the Company's internal
control over financial reporting.

It should be noted that while the Company's Chief Executive Officer and Chief
Financial Officer believe that the Company's disclosure controls and procedures
provide reasonable assurance that they are effective, they do not expect that
the Company's disclosure controls and procedures or internal control over
financial reporting will prevent all errors and fraud. A control system, no
matter how well conceived or operated, can provide only reasonable, not
absolute, assurance that the objectives of the control system are met.

21


PART II - OTHER INFORMATION

Item 1. Legal Proceedings

None

Item 4. Submission of Matters to a Vote of Security Holders

None

Item 6. Exhibits

(a) Exhibits

10.1 Amendment dated October 29, 2004 to the Credit Agreement dated as of
June 17, 2003, between the Registrant, MGI Luxury Group S.A.
(formerly known as Concord Watch Company S.A.), Movado Watch Company
SA, each of the lenders signatory to such Credit Agreement and
JPMorgan Chase Bank .

10.2 Employment Agreement dated August 27, 2004 between the Registrant
and Mr. Eugene Karpovich.*

10.3 Employment Agreement dated August 27, 2004 between the Registrant
and Mr. Frank Kimick.*

10.4 Employment Agreement dated August 27, 2004 between the Registrant
and Mr. Timothy F. Michno.*

31.1 Certification of the Chief Executive Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.

31.2 Certification of the Chief Financial Officer pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.

32.1 Certification of Principal Chief Executive Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.

32.2 Certification of Principal Chief Financial Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.

* Constitutes a compensatory plan or arrangement

22


SIGNATURE

Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

MOVADO GROUP, INC.
(Registrant)

Dated: December 10, 2004 By: /s/ Eugene J. Karpovich
-----------------------
Eugene J. Karpovich
Senior Vice President and
Chief Financial Officer
(Chief Financial Officer and
Principal Accounting Officer)
(Duly Authorized Officer)

23