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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,’’ “accelerated filer,’’ “smaller reporting company,’’ and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares outstanding of the registrant’s Common Stock and Class A Common Stock as of August ~~22, 2019~~21, 2020 were ~~16,411,773~~16,572,681 and ~~6,587,956,~~6,608,548, respectively.

	July 31,			January 31,			July 31,			July 31,			January 31,			July 31,
	2019			2019			2018			2020			2020			2019
ASSETS
Current assets:
Cash and cash equivalents	$	134,890		$	189,911		$	175,583		$	170,195		$	185,872		$	134,890
Trade receivables, net		93,699			84,026			83,818			60,128			78,388			93,699
Inventories		200,953			165,311			171,417			173,374			171,406			200,953
Other current assets		32,113			28,898			37,852			29,856			28,888			32,113
Total current assets		461,655			468,146			468,670			433,553			464,554			461,655
Property, plant and equipment, net		28,248			26,067			24,533			25,888			29,238			28,248
Operating lease right-of-use assets		91,119			—			—			82,169			89,523			91,119
Deferred and non-current income taxes		24,621			24,503			8,074			59,747			25,403			24,621
Goodwill		131,936			136,033			55,744			—			136,366			131,936
Other intangibles, net		43,995			48,183			19,976			18,071			42,359			43,995
Other non-current assets		59,057			56,769			50,251			60,261			59,865			59,057
Total assets	$	840,631		$	759,701		$	627,248		$	679,689		$	847,308		$	840,631
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	50,281		$	38,650		$	34,578		$	29,929		$	35,488		$	50,281
Accrued liabilities		43,874			44,429			41,597			45,509			44,210			43,874
Accrued payroll and benefits		7,333			18,773			8,457			12,431			6,302			7,333
Current operating lease liabilities		14,609			—			—			14,766			15,083			14,609
Income taxes payable		10,800			10,831			5,996			6,774			8,217			10,800
Total current liabilities		126,897			112,683			90,628			109,409			109,300			126,897
Loans payable to bank		50,300			50,280			—			48,341			51,910			50,300
Deferred and non-current income taxes payable		26,593			29,242			29,718			20,743			25,419			26,593
Non-current operating lease liabilities		82,972			—			—			75,376			81,877			82,972
Other non-current liabilities		50,025			67,120			43,548			48,124			48,393			50,025
Total liabilities		336,787			259,325			163,894			301,993			316,899			336,787
Commitments and contingencies (Note 9)
Commitments and contingencies (Note 12)
Redeemable noncontrolling interest		3,540			3,721			—			3,037			3,165			3,540
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; 27,853,680, 27,701,742 and 27,643,809 shares issued and outstanding, respectively		279			277			276
Class A Common Stock, $0.01 par value, 30,000,000 shares authorized; 6,587,956, 6,586,780 and 6,623,030 shares issued and outstanding, respectively		65			65			66
Preferred Stock, $0.01 par value, 5,000,000 shares authorized; 0 shares issued											—			—			—
Common Stock, $0.01 par value, 100,000,000 shares authorized; 28,063,179, 27,859,328 and 27,853,680 shares issued and outstanding, respectively											281			279			279
Class A Common Stock, $0.01 par value, 30,000,000 shares authorized; 6,608,548, 6,603,645 and 6,587,956 shares issued and outstanding, respectively											65			65			65
Capital in excess of par value		205,117			201,814			198,246			211,628			208,473			205,117
Retained earnings		443,414			431,180			396,041			298,871			455,479			443,414
Accumulated other comprehensive income		74,206			80,507			80,402			86,109			85,050			74,206
Treasury Stock, 11,442,021, 11,268,492 and 11,117,050 shares, respectively, at cost		(222,777	)		(217,188	)		(211,677	)
Treasury Stock, 11,490,610, 11,443,308 and 11,442,021 shares, respectively, at cost											(223,283	)		(222,809	)		(222,777	)
Total Movado Group, Inc. shareholders' equity		500,304			496,655			463,354			373,671			526,537			500,304
Noncontrolling interest											988			707			—
Total equity											374,659			527,244			500,304
Total liabilities, redeemable noncontrolling interest and equity	$	840,631		$	759,701		$	627,248		$	679,689		$	847,308		$	840,631

	Three Months Ended July 31,						Six Months Ended July 31,						Three Months Ended July 31,						Six Months Ended July 31,
	2019			2018			2019			2018			2020			2019			2020			2019
Net sales	$	157,816		$	144,093		$	304,365		$	271,242		$	88,538		$	157,816		$	158,204		$	304,365
Cost of sales		72,477			66,259			140,153			125,884			43,182			72,477			80,955			140,153
Gross profit		85,339			77,834			164,212			145,358			45,356			85,339			77,249			164,212
Selling, general and administrative		76,563			64,974			150,462			124,359			54,272			76,563			112,409			150,462
Operating income		8,776			12,860			13,750			20,999
Impairment of goodwill and intangible assets (Note 7)														—			—			155,919			—
Total operating expenses														54,272			76,563			268,328			150,462
Operating (loss)/income														(8,916	)		8,776			(191,079	)		13,750
Non-operating income/(expense):
Change in contingent consideration (Note 8)		13,627			—			13,627			—
Gain on sale of a non-operating asset														1,317			—			1,317			—
Change in contingent consideration (Note 11)														—			13,627			—			13,627
Interest expense		(225	)		(162	)		(449	)		(384	)		(590	)		(225	)		(861	)		(449	)
Interest income		24			57			45			114			8			24			23			45
Income before income taxes		22,202			12,755			26,973			20,729
Provision for income taxes (Note 11)		4,741			3,615			5,588			3,474
Net income		17,461			9,140			21,385			17,255
(Loss)/income before income taxes														(8,181	)		22,202			(190,600	)		26,973
(Benefit)/provision for income taxes (Note 13)														(1,559	)		4,741			(33,889	)		5,588
Net (loss)/income														(6,622	)		17,461			(156,711	)		21,385
Less: Net loss attributable to noncontrolling interests		(44	)		—			(45	)		—			(7	)		(44	)		(103	)		(45	)
Net income attributable to Movado Group, Inc.	$	17,505		$	9,140		$	21,430		$	17,255
Net (loss)/income attributable to Movado Group, Inc.													$	(6,615	)	$	17,505		$	(156,608	)	$	21,430

Basic income per share:
Basic (loss)/income per share:
Weighted basic average shares outstanding		23,138			23,245			23,127			23,172			23,240			23,138			23,191			23,127
Net income per share attributable to Movado Group, Inc.	$	0.76		$	0.39		$	0.93		$	0.74
Net (loss)/income per share attributable to Movado Group, Inc.													$	(0.28	)	$	0.76		$	(6.75	)	$	0.93

Diluted income per share:
Diluted (loss)/income per share:
Weighted diluted average shares outstanding		23,292			23,712			23,370			23,585			23,240			23,292			23,191			23,370
Net income per share attributable to Movado Group, Inc.	$	0.75		$	0.39		$	0.92		$	0.73
Net (loss)/income per share attributable to Movado Group, Inc.													$	(0.28	)	$	0.75		$	(6.75	)	$	0.92

Three Months Ended July 31,

Six Months Ended July 31,

2019

2018

2019

2018

Net income
$
17,461

$
9,140

$
21,385

$
17,255

Other comprehensive income/(loss):

Net unrealized gain on investments, net of tax provision of $2,
   $14, $3 and $19, respectively

7

50

8

64

Net change in effective portion of hedging contracts, net of tax
   provision (benefit) of $5 and $(20), respectively

—

23

—

(104
)
Amortization of prior service cost, net of tax provision of $3 and
   $7, respectively

13

—

26

—

Foreign currency translation adjustments

(2,151
)

(4,675
)

(6,335
)

(19,901
)
Total other comprehensive loss, net of taxes

(2,131
)

(4,602
)

(6,301
)

(19,941
)
Less:

Comprehensive income/(loss) attributable to noncontrolling
   interest:

Net loss

(44
)

—

(45
)

—

Foreign currency translation adjustments

(52
)

—

(136
)

—

Total comprehensive loss attributable to noncontrolling interest
$
(96
)

—

$
(181
)

—

Total comprehensive income/(loss) attributable to Movado
   Group, Inc.
$
15,426

$
4,538

$
15,265

$
(2,686
)

	Three Months Ended July 31,						Six Months Ended July 31,
	2020			2019			2020			2019
Net (loss)/income	$	(6,622	)	$	17,461		$	(156,711	)	$	21,385
Other comprehensive income/(loss):
Net unrealized gain/(loss) on investments, net of tax provision/(benefit) of $2, $2, $(11) and $3, respectively		6			7			(32	)		8
Amortization of prior service cost, net of tax provision of $4, $3, $8 and $7, respectively		15			13			28			26
Foreign currency translation adjustments		9,014			(2,151	)		1,063			(6,335	)
Total other comprehensive income/(loss), net of taxes		9,035			(2,131	)		1,059			(6,301	)
Less:
Comprehensive income/(loss) attributable to noncontrolling interests:
Net loss		(7	)		(44	)		(103	)		(45	)
Foreign currency translation adjustments		320			(52	)		256			(136	)
Total comprehensive income/(loss) attributable to noncontrolling interests	$	313		$	(96	)	$	153		$	(181	)
Total comprehensive income/(loss) attributable to Movado Group, Inc.	$	2,100		$	15,426		$	(155,805	)	$	15,265

	Six Months Ended July 31,						Six Months Ended July 31,
	2019			2018			2020			2019
Cash flows from operating activities:
Net income attributable to Movado Group, Inc.	$	21,430		$	17,255
Adjustments to reconcile net income to net cash (used in)/provided by operating activities:
Net (loss)/income attributable to Movado Group, Inc.							$	(156,608	)	$	21,430
Adjustments to reconcile net (loss)/income to net cash used in operating activities:
Impairment of goodwill and intangible assets								155,919			—
Non-cash corporate initiatives								6,608			—
Change in contingent consideration		(13,627	)		—			-			(13,627	)
Gain on sale of a non-operating asset								(1,317	)		—
Depreciation and amortization		7,937			6,495			7,200			7,937
Transactional losses		443			287
Transactional losses/(gains)								237			443
Provision for inventories and accounts receivable		1,285			1,113			1,148			1,285
Deferred income taxes		(2,415	)		(2,363	)		(36,721	)		(2,415	)
Stock-based compensation		3,082			2,823			2,727			3,082
Other		(106	)		—			93			(106	)
Changes in assets and liabilities:
Trade receivables		(11,198	)		(4,253	)		16,847			(11,198	)
Inventories		(37,479	)		(25,415	)		(1,505	)		(37,479	)
Other current assets		(3,689	)		(9,558	)		(2,415	)		(3,689	)
Accounts payable		12,811			10,955			(5,662	)		12,811
Accrued liabilities		447			8,613			664			447
Accrued payroll and benefits		(11,370	)		(6,479	)		5,846			(11,370	)
Income taxes payable		77			4,074			(4,145	)		77
Other non-current assets		(666	)		(1,319	)		(845	)		(666	)
Other non-current liabilities		444			1,903			553			444
Net cash (used in)/provided by operating activities		(32,594	)		4,131
Net cash used in operating activities								(11,376	)		(32,594	)
Cash flows from investing activities:
Capital expenditures		(6,948	)		(5,060	)		(1,891	)		(6,948	)
Proceeds from sale of a non-operating asset								1,317			—
Trademarks and other intangibles		(99	)		(217	)		(51	)		(99	)
Net cash used in investing activities		(7,047	)		(5,277	)		(625	)		(7,047	)
Cash flows from financing activities:
Repayments of bank borrowings		—			(25,000	)
Repayment of bank borrowings								(36,772	)		—
Proceeds from bank borrowings								30,879			—
Stock awards and options exercised and other changes		(1,234	)		4,825			(474	)		(1,234	)
Stock repurchase		(4,199	)		(2,057	)		—			(4,199	)
Dividends paid		(9,196	)		(9,229	)		—			(9,196	)
Debt issuance cost								(300	)		—
Net cash used in financing activities		(14,629	)		(31,461	)		(6,667	)		(14,629	)
Effect of exchange rate changes on cash, cash equivalents, and restricted cash		(751	)		(6,621	)		3,022			(751	)
Net decrease in cash, cash equivalents and restricted cash		(55,021	)		(39,228	)		(15,646	)		(55,021	)
Cash, cash equivalents, and restricted cash at beginning of year		190,459			215,411			186,438			190,459
Cash, cash equivalents, and restricted cash at end of period	$	135,438		$	176,183		$	170,792		$	135,438

Reconciliation of cash, cash equivalents, and restricted cash:
Cash and cash equivalents	$	134,890		$	175,583		$	170,195		$	134,890
Restricted cash included in other non-current assets		548			600			597			548
Cash, cash equivalents, and restricted cash	$	135,438		$	176,183		$	170,792		$	135,438

The accompanying interim unaudited ~~consolidated financial statements~~Consolidated Financial Statements have been prepared by Movado Group, Inc. (the “Company”), in a manner consistent with that used in the preparation of the annual audited ~~consolidated financial statements~~Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended January 31, ~~2019~~2020 (the ~~“2019~~“2020 Annual Report on Form 10-K”). The unaudited ~~consolidated financial statements~~Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America, which require the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the unaudited ~~consolidated financial statements~~Consolidated Financial Statements and the reported amounts of revenues and expenses during the periods reported. Actual results could differ from those estimates. In the opinion of management, the accompanying unaudited ~~consolidated financial statements~~Consolidated Financial Statements reflect all adjustments, consisting of only normal and recurring adjustments, necessary for a fair statement of the financial position and results of operations for the periods presented. The consolidated balance sheet data at January 31, ~~2019~~2020 is derived from the audited annual financial statements, which are included in the Company’s ~~2019~~2020 Annual Report on Form 10-K and should be read in connection with these interim unaudited financial statements. Operating results for the interim periods presented are not necessarily indicative of the results that may be expected for the full year.

In December 2019, COVID-19 emerged and subsequently spread worldwide. The World Health Organization declared COVID-19 a pandemic in March 2020, resulting in federal, state and local governments and other authorities mandating various restrictions, including travel restrictions, quarantines and other social distancing requirements. As a result of the outbreak, in mid-March 2020, the Company and the majority of the Company’s wholesale customers temporarily closed all of their retail stores due to health concerns associated with COVID-19. Although the Company reopened all of its retail stores during the second quarter and most of the Company’s brick and mortar wholesale customers have reopened the majority of their retail locations as well, the discretionary consumer goods segment remains highly challenged at brick and mortar retail locations worldwide.

The Company entered this period of uncertainty with a healthy liquidity position, and it took actions to enhance its financial liquidity and flexibility, including minimizing all non-essential operating expenses (including marketing, travel and consulting services), reevaluating all capital expenditures, furloughing approximately 80% of the Company’s North American workforce during March through June and temporarily reducing the work-rate of international employees while applying for available government payroll subsidies in accordance with local government guidelines and programs, suspending the Company’s share repurchase program and regular quarterly dividends, reducing salaries and suspending Board of Director fees from April through June 2020, amending license agreements to reduce its royalty obligations in fiscal 2021 and negotiating rent deferrals or other arrangements in respect of its rent obligations for its Company Stores and certain other leases. As a precautionary measure, the Company borrowed an additional $30.9 million under its revolving credit facility in March 2020 and amended its revolving credit facility to modify some of its financial covenants (see Note 9 – Debt and Lines of Credit). During the second quarter of fiscal 2021, the Company repaid $36.8 million under its revolving credit facility.

As part of the Company’s efforts to continue to reduce operating expenses and adjust cash flows in light of the ongoing economic challenges resulting from the COVID-19 pandemic, the Company committed to a restructuring plan (the “Restructuring Plan”) on June 29, 2020 (see Note 6 – Restructuring Provision for further discussion).

The Company evaluates its long-lived assets, operating lease right of use assets, goodwill and intangible assets for indicators of impairment at least annually in the fourth quarter of each fiscal year or whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. Given the substantial reduction in the Company’s sales and the reduced cash flow projections as a result of closures of the Company’s retail stores and its wholesale customers due to the COVID-19 pandemic, as well as the significant decline in the Company’s market capitalization, the Company determined that a triggering event occurred during the first quarter of fiscal 2021 and that an impairment assessment was warranted for goodwill and intangible assets. This analysis resulted in impairment charges related to goodwill of $133.7 million and intangible assets of $22.2 million in the first quarter of fiscal 2021. See Note 7 – Goodwill and Intangible Assets – for a further discussion of these impairments.

Although the full magnitude of the effects on the Company’s business is difficult to predict at this time, the COVID-19 pandemic has had, and for the foreseeable future is expected to continue to have, a material impact on the Company’s business, financial condition, results of operations and cash flows. Even if government restrictions continue to gradually ease and the trend toward the reopening of retail stores continues without any major setbacks due to containment and mitigation measures or otherwise, the ongoing economic impacts and health concerns associated with the pandemic will likely continue to affect consumer behavior, spending levels, shopping preferences and tourism. Nevertheless, 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 these financial statements.

In March 2020, the FASB issued ASU 2020-03, “Codification Improvements to Financial Instruments”, which makes improvements to financial instruments guidance, including the current expected credit losses guidance. The adoption of the new guidance was not material to the Consolidated Financial Statements.

In March 2020, the FASB issued ASU 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting”. This guidance provides practical expedients for contract modifications and certain hedging relationships associated with the transition from reference rates that are expected to be discontinued. This guidance is applicable for the Company’s borrowing instruments, which use LIBOR as a reference rate, and is effective immediately, but is only available through December 31, 2022. The Company is currently evaluating the impact of the adoption of this standard on its Consolidated Financial Statements.

In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes”. ASU 2019-12 simplifies the accounting for income taxes by removing certain exceptions to general principles in “Income Taxes (Topic 740)”. It also clarifies and amends existing guidance to improve consistent application. The guidance is effective for fiscal years beginning after December 15, 2020. The Company early adopted this standard effective February 1, 2020. The provision of ASU 2019-12 which has the most significant impact on the Company is the removal of a limitation on the tax benefit recognized on pre-tax losses during interim periods which exceed the expected loss for the fiscal year. The Company’s income tax benefit for the six months ended July 31, 2020 includes an income tax benefit of$6.2 million as a result of early adoption in the first quarter of fiscal 2021.

In August 2018, the FASB issued ASU 2018-13, “Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement”, which modifies the disclosure requirements in ASC 820, Fair Value Measurement. This guidance is effective for fiscal years beginning after December 15, 2019, which will be the Company’s first quarter of fiscal 2021, with early adoption permitted. The Company is currently evaluating the impact of the adoption of this standard.

In June 2018, the FASB issued ASU 2018-07, which simplifies the accounting for share-based payments granted to nonemployees for goods and services. Under the ASU, most of the guidance on such payments to nonemployees would be aligned with the requirements for share-based payments granted to employees. The Company adopted ASU ~~2018-07~~2018-13 during the first quarter of fiscal ~~2020.~~2021. The adoption of this guidance did not have an impact on the Company’s ~~consolidated financial statements.~~Consolidated Financial Statements.

In August 2017, the FASB issued ASU 2017-12. ASU 2017-12 amends and simplifies hedge accounting guidance in order to enable entities to better portray the economics of their risk management activities. The Company adopted ASU 2017-12 on February 1, 2019, the first day of fiscal 2020. The adoption of the standard did not have an impact on the Company's consolidated results of operations.

The Company adopted ASU 2016-02, “Leases”, on February 1, 2019, the first day of fiscal 2020, using the modified retrospective approach and accordingly the Company recognized a cumulative effect adjustment in the first quarter of fiscal 2020, rather than restating any prior periods. The Company has elected to use the package of practical expedients permitted under the transition guidance, which does not require reassessment of prior conclusions related to contracts containing a lease, lease classification and initial direct costs for any expired or existing leases. The transition practical expedient allows Companies to recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption rather than the earliest period presented. The adoption did not result in any adjustments to the opening balance of retained earnings.

Adoption of ASU 2016-02 resulted in recording right-of-use lease assets of $97.0 million which were reduced to $91.1 million as a result of $5.9 million of previously recorded deferred rent liabilities and tenant allowances, and lease liabilities of $97.0 million as of February 1, 2019. The standard did not have a material impact on the Company's consolidated results of operations or cash flows. See Note 10 – ~~Leases for additional lease disclosures.~~

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” and subsequently issued additional guidance that modified ASU 2016-13. This standard introduces a forward-looking approach, based on expected losses, to estimate credit losses on certain types of financial instruments, including trade receivables. The estimate of expected credit losses ~~will require~~requires entities to incorporate considerations of historical information, current information and reasonable and supportable forecasts. This may result in the earlier recognition of allowance for losses. ~~This guidance is effective for fiscal years beginning after December 15, 2019, which will be the Company’s first quarter of fiscal 2021, with early adoption permitted.~~ The Company ~~is currently evaluating the impact of the~~adopted ASU 2016-13 on February 1, 2020. The adoption of this standard did not have a material impact on the Company’s Consolidated Financial Statements. Results for reporting periods as of February 1, 2020 are presented under the new standard, while prior results continue to be reported under the previous standard.

The Company presents net ~~income~~income/(loss) attributable to Movado Group, Inc. after adjusting for ~~redeemable~~ noncontrolling ~~interest,~~interests, as applicable, 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 number of shares used in calculating basic and diluted earnings (loss) per share is as follows (in thousands):

For the three months ended July 31, 2020 and 2019, ~~and 2018,~~ approximately 960,000 and410,000, ~~and zero,~~ respectively, of potentially dilutive common stock equivalents were excluded from the computation of diluted earnings per share because their effect would have been antidilutive. For the six months ended July 31, ~~2019~~2020 and ~~2018,~~2019, approximately ~~222,000~~921,000 and ~~92,000,~~222,000, respectively, of potentially dilutive common stock equivalents were excluded from the computation of diluted earnings per share because their effect would have been antidilutive. For the three and six months ended July 31, 2020, the Company also had approximately 41,000 and 84,000 stock options outstanding, respectively, that could potentially dilute earnings per share in future periods that were excluded from the computation of diluted EPS because their effect would have been anti-dilutive given the net loss during the periods.

During the first and second quarters of fiscal 2021, the Company did not declare quarterly cash dividends. The Company declared quarterly cash dividends of $0.20 in both the first and second quarters of fiscal year 2020, representing $9.2 million in total dividends. Of this amount, $4.6 million was paid on June 25, 2019 and $4.6 million was paid on April 24, 2019. The Company declared quarterly cash dividends of $0.20 in both the first and second quarters of fiscal year 2019, representing $9.2 million in total dividends. Of this amount, $4.6 million was paid on June 25, 2018 and $4.6 million was paid on April 25, 2018.

On November 22, 2019, the Company entered into an agreement and formed a joint venture with GDL Accessories PTY Ltd. (“GDL”), an Australian based company which distributed the Company’s products in Australia and New Zealand. The agreement established a joint venture, MGDL Distribution Pty Ltd (“MGDL”), and set out the terms in which both parties will govern their relationship as shareholders of MGDL, and the terms on which the joint venture will be managed.

The joint venture was formed to more cost effectively market and distribute Movado products to customers in Australia and in New Zealand.

The Company contributed 0.9 million Australian dollars (equivalent to approximately $0.6 million US dollars) to the joint venture and is a 51% interest holder. The Company controls all of the significant participating rights of the joint venture. As the Company controls all of the significant participating rights of the joint venture and is the majority interest holder in MGDL, the assets, liabilities and results of operations of the joint venture are consolidated and included in the Company’s Consolidated Financial Statements since the date of acquisition within the Watch and Accessory Brands segment. GDL’s interest is reflected in Net income attributable to noncontrolling interest in the Consolidated Statements of Operations and Noncontrolling interest in the Consolidated Balance Sheets. As of July 31, 2020, all amounts in the Consolidated Financial Statements related to MGDL were immaterial.

On December 3, 2018, the Company acquired 51% of City Time Distribucion, ~~S.L.~~S.L.U (“City Time”), the Company’s distributor in Spain, and simultaneously signed a joint venture agreement. The purchase price was 4.2 million Euros or(equivalent to approximately $4.8 million US dollars), net of cash acquired, and was funded with cash on hand. The results of City Time have been included in the ~~consolidated financial statements~~Company’s Consolidated Financial Statements since the date of acquisition within ~~the International location of~~ the Watch and Accessory Brands segment. Of the total purchase consideration, there were no material amounts allocated to assets acquired and liabilities assumed.

Pursuant to the joint venture agreement, the noncontrolling interest holder has the right to sell its interest in City Time to the Company on two specific dates in the future. The noncontrolling interest is not redeemable until such dates. The Company will adjust the carrying value of the redeemable interest to the redemption amount assuming it was redeemable at the balance sheet date. At July 31, ~~2019,~~2020, the Company concluded that ~~the~~no remeasurement adjustment ~~is immaterial.~~was needed. If the noncontrolling interest holder does not exercise its right to sell its interest in City Time to the Company, the Company nevertheless has the option to purchase the noncontrolling interest holder’s interest on each of the same two dates and at the same price as would have applied if the noncontrolling interest holder had exercised its sale option.

On October 1, 2018, the Company acquired MVMT Watches, Inc., owner of the MVMT brand, for an initial payment of $100.0 million and ~~two~~2 future contingent payments that combined could total up to an additional $100.0 million before tax benefits. The exact amount of the future payments will be determined by MVMT's future financial performance with no minimum required future payment. After giving effect to the closing adjustments, the purchase price was $108.4 million, net of cash acquired of $3.8 million. The ~~acquisition was funded with cash~~Company recorded goodwill (as of October 1, 2018) of $77.5 million based on ~~hand and adds a new brand with significant global growth potential to~~ the ~~Company’s portfolio.~~

~~The results of~~amount by which the ~~MVMT brand have been included in the consolidated financial statements since the date of acquisition within the U.S. and International locations of the Watch and Accessory Brands segment.~~

The acquisition was accounted for in accordance with FASB Topic ASC 805-Business Combinations, which requires that the total cost of an acquisition be allocated to the tangible and intangible assets acquired and liabilities assumed based upon their respective fair values at the date of acquisition.

~~The following table summarizes~~purchase price exceeded the fair value of the net assets ~~acquired and liabilities assumed as~~acquired. As the structure of the ~~October 1, 2018~~ acquisition ~~date (in thousands):~~

~~Inventories (as~~allowed for a step up in basis for tax purposes, the full amount of ~~October 1, 2018) included a step-up adjustment of $0.7 million, which was amortized~~goodwill is deductible for federal income tax purposes over 5 months. The components of Trade name and other intangibles (as of October 1, 2018) included a trade name of $24.7 million (amortized over 10 years), and customer relationships of $4.2 million (amortized over 10 years).15 years.

The acquisition agreement ~~also includes~~included a contingent consideration arrangement based on the MVMT brand achieving certain revenue and EBITDA (as defined in the acquisition agreement) targets. In connection therewith, the Company recorded a non-current liability of $16.5 million as of the date of acquisition to reflect the estimated fair value of the contingent purchase price. $14.5 million was allocated to purchase price and $2.0 million to deferred compensation expense based on future employee service requirements.

The estimated fair value of the contingent consideration was determined using a Monte Carlo simulation that includes key assumptions regarding MVMT’s projected financial performance during the earn-out period (through 2023), volatilities, estimated discount rates, risk-free interest rate, and correlation. ~~Each reporting period after the acquisition, the Company remeasures the fair value of the~~Based on changes in projected financial performance, the contingent purchase price liability and will record increases or decreases in the fair value of the liability in its Consolidated Statements of Operations. Changes in fair value will result from changes in actual and projected financial performance, discount rates, volatilities, and the other key assumptions. The inputs and assumptions are not observable in the market but reflect the assumptions the Company believes would be made by a market participant. The possible outcomes for the contingent consideration range from $0 to $100 million on an undiscounted basis. ~~As a result, changes in the estimated fair value of the contingent consideration over time may result in significant volatility in the Company’s reported earnings.~~

~~As of the~~had been remeasured at July 31, 2019 ~~remeasurement date, the contingent purchase price liability has been remeasured~~ to $1.9 ~~million.~~million and to 0 at January 31, 2020. Of the ~~$15.0~~$16.9 million (including interest accretion) decrease in the liability, ~~$13.6~~$15.4 million iswas included in non-operating income (portion of contingent consideration allocated to purchase price) in the Consolidated Statements of Operations for the ~~three and six months~~year ended ~~July~~January 31, ~~2019,~~2020, and $0.5 million and ~~$0.9~~$1.0 million ~~are~~were reflected as a reduction of deferred compensation (portion of contingent consideration allocated to deferred compensation based on future service requirements) within other current assets and other non-current assets, respectively, in the Consolidated Balance Sheets.

In connection with the remeasurement of the contingent consideration during the ~~quarter~~fiscal year ended ~~July~~January 31, ~~2019,~~2020, the Company assessed the undiscounted cash flows associated with the long-lived assets pertaining to MVMT. Current estimates ~~indicate~~at that time indicated that carrying amounts ~~are~~were expected to be recovered. ~~Management considers~~The undiscounted cash flows related to the MVMT long-lived assets as of January 31, 2020 exceeded the carrying value by approximately 33%. See Note 7 – Goodwill and Intangible Assets for impairment of MVMT’s long-lived assets as of July 31, 2020.

On June 29, 2020, the Company committed to a Restructuring Plan as part of the Company’s corporate initiatives to reducing operating expenses and adjusting cash flows in light of the ongoing economic challenges resulting from the COVID-19 pandemic and its ~~estimates~~impact on the Company’s business. The Restructuring Plan has been substantially completed during the second quarter of the Company’s current fiscal year, although cash severance will be paid over time and such payments are expected to ~~be reasonable, however, actual results could differ from these estimates. Refer~~continue into the next fiscal year. Of the total provision incurred, approximately $8.0 million is expected to ~~Note 8~~result in cash expenditures with the remaining $6.6 million resulting in non-cash use. The Company expects annual savings in the range of $14 million to $16 million as it relates to severance, employee related and properties (contained within Other in table below).

A summary rollforward of the provision related to the Company’s corporate initiatives, including the provision associated with the Restructuring Plan, is as follows for ~~further discussion~~the three months ended July 31, 2020 (in thousands):

A summary rollforward of ~~fair value measurements.~~the provision related to the Company’s corporate initiatives, including the provision associated with the Restructuring Plan, is as follows for the six months ended July 31, 2020 (in thousands):

The following amounts are included in the Consolidated Balance Sheet at July 31, 2020:

Included in Other is approximately a $1.5 million write-off related to unrefunded deposits for a canceled global customer event.

The Company performs its annual impairment assessment of goodwill as well as brand intangibles at the beginning of the fourth quarter of each fiscal year or if an event occurs that would more likely than not reduce the fair value below its carrying amount.

During the three months ended April 30, 2020, in light of the COVID-19 pandemic that resulted in the closing of the Company’s stores and of the vast majority of the stores of the Company’s wholesale customers (resulting in a decrease in revenues and gross margin), a decrease in customer spending and the recent decline in the Company’s market capitalization, the Company concluded that a triggering event had occurred during the first quarter, resulting in the need to perform a quantitative interim impairment assessment over the Company’s Olivia Burton, MVMT and Company Stores’ long-lived assets as well as the Watch and Accessory Brands reporting unit.

The Company performed recoverability tests for the long-lived assets of MVMT, Olivia Burton and the Company Stores as of April 30, 2020. The Company concluded that the carrying amounts of the long-lived assets of Olivia Burton and the Company Stores were recoverable, while the long-lived assets of MVMT may not be recoverable. Utilizing a royalty rate to determine discounted projected future cash flows in the valuation of MVMT’s trade name and a discounted cash flow method for the valuation of MVMT’s customer relationships, the Company concluded that the fair values of MVMT’s tradenames and customer relationships did not exceed their carrying values. As a result, the Company recorded impairment charges in the Watch and Accessory Brands segment totaling $22.2 million in the first quarter of fiscal 2021, decreasing MVMT’s trade name to $2.4 million and MVMT’s customer relationships to 0.

After adjusting the carrying value of MVMT’s intangible assets, the Company completed an interim quantitative impairment test of goodwill ~~(as~~as of ~~October 1, 2018) of $77.5 million based on the amount by~~April 30, 2020 in which the ~~purchase price exceeded~~Company compared the fair value of the ~~net assets acquired. As~~Watch and Accessory Brands reporting unit to its respective carrying value. An impairment test of goodwill was not performed for the ~~structure~~Company Stores reporting unit as there was 0 goodwill at this reporting unit. The fair value estimate for the Watches and Accessory reporting unit was based on the income and market approaches. The discounted cash flow method under the income approach involves estimating the cash flows in a discrete forecast period and a terminal value based on the Gordon Growth Model and discounting at a rate of return that reflects the relative risk of the ~~acquisition allowed for a step up in basis for tax purposes,~~cash flows. The market approach involves applying valuation multiples to the ~~full amount~~operating performance of ~~goodwill is deductible for federal income tax purposes over 15 years.~~

~~The following table provides~~ the ~~Company’s unaudited pro forma net sales, net income~~Watch and ~~net income per basic~~Accessory Brands reporting unit derived from comparable publicly traded companies based on the relative historical and ~~diluted common share as if the results of~~projected operations of the ~~MVMT brand had been included~~reporting unit.

The key estimates used in the discounted cash flows model included the Company’s ~~operations commencing on February 1, 2018,~~weighted average cost of capital and projected cash flows, notably revenue growth rates and margin assumptions. The Company’s assumptions were based on ~~available information relating to operations~~the actual historical performance of the ~~MVMT brand. This pro forma information is not necessarily indicative either~~reporting units and took into account the recent severe and continued weakening of operating results as well as the anticipated rate of recovery, and implied risk premiums based on market prices of the ~~combined results of operations that actually would have been realized by the Company had the MVMT brand acquisition been consummated at the beginning~~Company’s common stock as of the ~~period for which~~assessment date. The significant estimates in the ~~pro forma information is presented, or~~market approach model included identifying similar companies with comparable business factors such as size, growth, profitability, risk and return on investment and assessing comparable revenue and earnings multiples in estimating the fair value of ~~future results.~~the reporting unit. The excess of the Watch and Accessory Brands unit’s carrying value over the estimate of the fair value was recorded in the Watch and Accessory Brands segment as the goodwillimpairment charge in the first quarter of 2021, totaling $133.7 million.

The changes in the carrying amount of other intangible assets during the six months ended July 31, ~~2019~~2020 are as follows (in thousands):

Amortization expense for intangible assets was $0.8 million and$1.5 ~~million and $0.8~~ million for the three months ended July 31, 2020 and 2019, respectively,and ~~2018 respectively,~~$2.1 million and $3.1 ~~million and $1.7~~ million for the six months ended July 31, 2020 and 2019, ~~and 2018,~~ respectively.

On October 12, 2018, the Company, together with Movado Group Delaware Holdings Corporation, Movado Retail Group, Inc. and Movado LLC (together with the Company, the “U.S. Borrowers”), each a wholly owned domestic subsidiary of the Company, and Movado Watch Company S.A. and MGI Luxury Group S.A. (collectively, the “Swiss Borrowers” and, together with the U.S. Borrowers, the “Borrowers”), each a wholly owned Swiss subsidiary of the Company, entered into an Amended and Restated Credit Agreement (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 amends and restates the Company’s prior credit agreement dated as of January 30, 2015 (the “Prior Credit Agreement”) and extends the maturity of the $100.0 million senior secured revolving credit facility (the “Facility”) provided thereunder to October 12, 2023. 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 Borrowers, with provisions for uncommitted increases to the Facility of up to $50.0 million in the aggregate subject to customary terms and conditions.

On June 5, 2020, the Company and its lenders entered into an amendment (the “Second Amendment”) to the Credit Agreement effective as of April 30, 2020. Among other things, the Second Amendment provides for the following temporary relief with respect to the financial maintenance covenants in the Credit Agreement from April 30, 2020 through the date on which the Company delivers a compliance certificate in respect of the period ended July 31, 2021 (or earlier if the Company demonstrates satisfaction of certain earnings and leverage milestones) (the “Suspension Period”): (i) the maximum consolidated leverage ratio is increased from 2.50 to 1.0 to 2.75 to 1.0 for the four quarter period ended April 30, 2020 and suspended thereafter until the end of the Suspension Period when it resumes at 2.50 to 1.0 and (ii) the minimum EBITDA covenant levels are reduced. In addition, the Second Amendment provides that (i) through April 30, 2021, the Company is required to maintain minimum liquidity (comprised of unrestricted cash and cash equivalents and unutilized commitments under the Credit Agreement) of $100.0 million, (ii) during the Suspension Period, certain covenants, including covenants related to dividends, share repurchases, debt incurrence, investments and capital expenditures, have been tightened and (iii) during the Suspension Period, the interest rate for borrowings under the Credit Agreement is increased to LIBOR plus 2.75% per annum and the commitment fee in respect of the unutilized commitments is increased to 0.45% per annum. In addition, the Second Amendment permanently increased the LIBOR floor for loans under the Credit Agreement from 0% to 1.00% and permanently reduced the minimum EBITDA financial covenant level to $35.0 million starting with the four-quarter period ending July 31, 2021.

As of July 31, ~~2019,~~2020, and July 31, ~~2018,~~2019, there ~~were~~was 35.0 million and 50.0 million in Swiss ~~francs~~Francs, respectively (with a dollar equivalent of $38.3 million and $50.3 ~~million) and~~ million, respectively)~~zero~~, ~~respectively,~~in addition to $10.0 million as of July 31, 2020, in loans outstanding under the Facility. Availability under the Facility was reduced by the aggregate number 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 July 31, ~~2019~~2020 and July 31, ~~2018.~~2019. At July 31, ~~2019,~~2020, the letters of credit have expiration dates through June 1, ~~2020.~~2021. As of July 31, ~~2019,~~2020, and July 31, ~~2018,~~2019, availability under the Facility was $51.4 million and $49.4 million, ~~and $99.7 million,~~ respectively.

The Company had weighted average borrowings under the facility of ~~$50.2~~$71.5 million and ~~zero~~$50.2 million during the three months ended July 31, ~~2019~~2020 and ~~2018,~~2019, respectively, with a weighted average interest rate of 2.60% and 1.00% during the three months ended July 31, ~~2019.~~ 2020 and 2019, respectively. The Company had weighted average borrowings under the facility of ~~$50.0~~$68.6 million and ~~$3.7~~$50.0 million, with a weighted average interest rate of ~~1.00%~~1.92% and ~~3.07%,~~1.00% during the six months ended July 31, ~~2019~~2020 and ~~2018,~~2019, respectively.

A Swiss subsidiary of the Company maintains unsecured lines of credit with an unspecified maturity with a Swiss bank. As of July 31, ~~2019,~~2020, and ~~2018,~~2019, these lines of credit totaled 6.5 million Swiss ~~francs~~Francs for both periods, with a dollar equivalent of ~~$6.5~~$7.1 million and ~~$6.6~~$6.5 million, respectively. As of July 31, ~~2019,~~2020, and ~~2018,~~2019, there were no0 borrowings against these lines. As of July 31, 2020, and 2019, ~~and 2018, two~~2 European banks had guaranteed obligations to third parties on behalf of ~~two~~2 of the Company’s foreign subsidiaries in the dollar equivalent of $1.3 million and $1.2 million, ~~for both periods,~~respectively, in various foreign currencies, of which ~~$0.5~~$0.6 million and ~~$0.6~~$0.5 million, respectively, was a restricted deposit as it relates to lease agreements.

Cash paid for interest, including unused commitments fees, was $0.8 million and $0.3 million for ~~both periods~~the six-month period ended July 31, ~~2019~~2020 and July 31, ~~2018.~~2019, respectively.

As of July 31, ~~2019,~~2020, the Company’s entire net forward contracts hedging portfolio consisted of ~~53.0~~46.1 million Chinese Yuan equivalent, ~~33.0~~4.0 million Swiss ~~francs~~Francs equivalent, ~~29.0~~9.7 million US dollars equivalent, ~~23.1~~22.2 million Euros equivalent and ~~1.1~~1.3 million British Pounds equivalent with various expiry dates ranging through ~~January 15,~~September 10, 2020. These forward contracts are not designated as qualified hedges in accordance with ASC 815, Derivatives and Hedging, and, therefore, changes in the fair value of these derivatives are recognized in earnings in the period they arise. Net gains or losses related to these forward contracts are included in ~~Selling,~~cost of sales and selling and general and administrative expenses in the Consolidated Statements of Operations. The cash flows related to these foreign currency contracts are classified toin operating activities.

See Note 811 – Fair Value Measurements for fair value and presentation in the Consolidated Balance Sheets for derivatives.

For the quarter ended July 31, ~~2019,~~2020, the Company did ~~not~~0t have any cash flow hedges.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Accounting guidance establishes a fair value hierarchy which prioritizes the inputs used in measuring fair value into three broad levels as follows:

The guidance requires the use of observable market data if such data is available without undue cost and effort.

The following tables present the fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of July 31, ~~2019~~2020 and ~~2018~~2019 and January 31, ~~2019~~2020 (in thousands):

		Fair Value at January 31, 2019									Fair Value at July 31, 2020
	Balance Sheet Location	Level 1		Level 2		Level 3		Total		Balance Sheet Location	Level 1		Level 2		Level 3		Total
Assets:
Available-for-sale securities	Other current assets	$	177	$	—	$	—	$	177	Other current assets	$	141	$	—	$	—	$	141
Short-term investment	Other current assets		155		—		—		155	Other current assets		155		—		—		155
SERP assets - employer	Other non-current assets		860		—		—		860	Other non-current assets		935		—		—		935
SERP assets - employee	Other non-current assets		38,170		—		—		38,170	Other non-current assets		45,043		—		—		45,043
Defined benefit plan assets	Other non-current liabilities		—		—		33,223		33,223	Other non-current liabilities		—		—		25,907		25,907
Hedge derivatives	Other current assets		—		22		—		22	Other current assets		—		228		—		228
Total		$	39,362	$	22	$	33,223	$	72,607		$	46,274	$	228	$	25,907	$	72,409
Liabilities:
SERP liabilities - employee	Other non-current liabilities	$	38,170	$	—	$	—	$	38,170	Other non-current liabilities	$	45,043	$	—	$	—	$	45,043
Hedge derivatives	Accrued liabilities		—		156		—	$	156
Contingent consideration	Other non-current liabilities		—		—		16,718		16,718
Total		$	38,170	$	156	$	16,718	$	55,044		$	45,043	$	—	$	—	$	45,043

The fair values of the Company’s available-for-sale securities are based on quoted prices. The fair value of the short-term investment, which is a guaranteed investment certificate, is based on its purchase price plus one half of a percent calculated annually. The assets related to the Company’s defined contribution supplemental executive retirement plan (“SERP”) consist of both employer (employee unvested) and employee assets which are invested in investment funds with fair values calculated based on quoted market prices. The SERP liability represents the Company’s liability to the employees in the plan for their vested balances. The hedge derivatives are entered into by the Company principally to reduce its exposure to Swiss ~~franc~~Franc and Euro exchange rate risks. Fair values of the Company’s hedge derivatives are calculated based on quoted foreign exchange rates and quoted interest rates. The carrying amount of debt approximated fair value as of July 31, ~~2019,~~2020, January 31, 2020, and ~~January~~July 31, 2019, due to the availability and floating rate for similar instruments.

The Company sponsors a defined benefit pension plan in ~~Switzerland which was amended to a defined benefit plan effective December 31, 2018.~~Switzerland. The plan covers certain international employees and is based on years of service and compensation on a career-average pay basis. The assets within the plan are classified as a Level 3 asset within the fair value hierarchy and consist of an investment in pooled assets and include separate employee accounts that are invested in equity securities, debt securities and real estate. The values of the separate accounts invested are based on values provided by the administrator of the funds that cannot be readily derived from or corroborated by observable market data. The value of the assets is part of the funded status of the defined benefit plan and included in other non-current liabilities in the consolidated balance sheets at July 31, ~~2019 and~~2020, January 31, 2020 and July 31, 2019.

The ~~fair value of the Level 3~~ contingent purchase price liability related to the acquisition of MVMT Watches, Inc., owner of the MVMT brand, is ~~measured using~~considered a Monte Carlo simulation with key assumptions that include revenue and brand EBITDA, (as defined in the acquisition agreement) of the acquired business during the earn-out period, volatilities, estimated discount rates, risk-free rate, and correlation. The liability is revalued each reporting period after the acquisition and increases or decreases in the fair value of the liability are recorded in the Consolidated Statements of Operations. Changes in fair value can result from the estimated achievement of the revenue and brand EBITDA performance hurdles, and movements in discount rates, volatilities, and the other key assumptions. The inputs and assumptions are not observable in the market but reflect the assumptions the Company believes would be made by a market participant. The possible outcomes for the contingent consideration range from $0 to $100 million on an undiscounted basis. As a result, changes in the estimated fair value of the contingent consideration over time may result in significant volatility in the Company’s reported earnings.

Level 3 liability. Based on updated revenue and EBITDA (as defined in the acquisition agreement) performance expectations during the earn-out period for MVMT, the Company remeasured the contingent consideration to 0 at January 31, 2020. At July 31, 2019 the Company remeasured the contingent consideration to $1.9 million ~~at July 31, 2019. Of the $15.0 million decrease in the liability,~~and, as a result, $13.6 million is included in non-operating income (portion of contingent consideration allocated to purchase price) in the Consolidated Statements of Operations for the three and six months ended July 31, 2019, and $0.5 million and $0.9 million are reflected as a reduction of deferred compensation (portion of contingent consideration allocated to deferred compensation based on future service requirements) within other current assets and other non-current assets, respectively, in the Consolidated Balance Sheets. As the remeasurement is not a direct benefit realized from operating the MVMT business, the Company ~~has~~ recorded the change in contingent consideration within non-operating income in the Consolidated Statements of Operations and as such, ~~has~~did not ~~included~~include it in operating income for the Watch and Accessory Brands segment. Refer to Note 1719 for Segment and Geographic Information.

The following tables ~~presents~~present the change in the Level 3 contingent purchase price liability during the three and six months ended July 31, 2019:

There were no0 transfers between any levels of the fair value hierarchy for any of the Company’s fair value measurements.

The Company has minimum commitments related to the Company’s license agreements and endorsement agreements with brand ambassadors. The Company sources, distributes, advertises and sells watches pursuant to its exclusive license agreements with unaffiliated licensors. Royalty amounts under the license agreements are generally based on a stipulated percentage of revenues, although most of these agreements contain provisions for the payment of minimum annual royalty amounts. The license agreements have various terms, and some have ~~additional~~ renewal options, provided that minimum sales levels are achieved. Additionally, the license agreements require the Company to pay minimum annual advertising amounts.

The Company had previously recorded an obligation of $28.2 million due to the 2017 Tax ~~Cuts and Jobs~~ Act, which was signed into law on December 22, 2017 and imposed a one-time mandatory deemed repatriation tax on cumulative undistributed foreign earnings which have not been previously taxed. The obligation, which was recorded in prior years, is payable in installments over eight years, with the first payment having been made in the second quarter of fiscal 2019.

The Company believes that income tax reserves are adequate; however, amounts asserted by taxing authorities could be greater or less than amounts accrued and reflected in the consolidated balance sheet. Accordingly, the Company could record adjustments to the amounts for federal, state, and foreign liabilities in the future as the Company revises estimates or settles or otherwise resolves the underlying matters. In the ordinary course of business, the Company may take new positions that could increase or decrease unrecognized tax benefits in future periods.

On October 23, 2018, Swiss Time Watch & Jewellry GmbH (“ST Germany”) filed a lawsuit against the Company in the Superior Court of California for the County of Los Angeles. The lawsuit, which was subsequently removed to the United States District Court for the Central District of California, primarily alleged that the Company, as legal successor to MVMT Watches, Inc., failed to perform its obligations under the parties’ August 1, 2018 distribution agreement (the “ST Germany Agreement”). Under this agreement, ST Germany was granted the right, subject to certain limitations, to distribute a curated collection of MVMT watch styles in Germany. ST Germany also alleged various related torts and statutory violations and sought specific performance of the ST Germany Agreement as well as unspecified monetary damages. In February 2019, the parties settled the matter and the lawsuit was subsequently dismissed. The settlement terms included an immaterial cash payment by the Company and certain amendments to the ST Germany Agreement, including an extension of the agreement through early fiscal 2023.

InDecember 2016, U.S. Customs and Border Protection (“U.S. Customs”) issued an audit report concerning the methodology used by the Company to allocate the cost of certain watch styles imported into the U.S. among the component parts of those watches for tariff purposes. The report disputes the reasonableness of the Company’s historical allocation formulas and proposes an alternative methodology that would imply $5.1 million in underpaid duties over the five-year period covered by the statute of limitations, plus possible penalties and interest. The Company believes that U.S. Customs’ alternative duty methodology and estimate are not consistent with the Company’s facts and circumstances and is disputing U.S. Customs’ position. On February 24, 2017, the Company provided U.S. Customs with supplemental analyses and information supporting the Company’s historical allocation formulas and thereafter provided additional information for U.S. Customs’ review. Although the Company disagrees with U.S. Customs’ position, it cannot predict with any certainty the outcome of this matter. The Company intends to continue to work with U.S. Customs to reach a ~~mutually-satisfactory~~mutually satisfactory resolution.

The purchase consideration for the MVMT business ~~includes two~~included 2 future contingent payments that combined could total up to $100 million. ~~Although~~Based on updated revenue and EBITDA (as defined in the acquisition agreement) performance expectations during the earn-out period for MVMT, the Company ~~has established appropriate reserves for this liability based on its current estimate of~~remeasured the ~~amounts that will eventually become payable, the exact amount of the future payments will be determined by MVMT's financial performance through the end of fiscal 2023. The Company expects~~contingent consideration to recognize gains/losses, as the case may be, as the Company’s estimate of the amount payable is updated from time to time. These gains/losses could result in significant volatility in reported earnings. (See0 at January 31, 2020 (see Note 45 – Acquisitions and Note 811 – Fair Value Measurements).

The Company is involved in legal proceedings and claims from time to time, in the ordinary course of its business. Legal reserves are recorded in accordance with the accounting guidance for contingencies. Contingencies are inherently unpredictable and it is possible that results of operations, balance sheets or cash flows could be materially and adversely affected in any particular period by unfavorable developments in, or resolution or disposition of, such matters. For those legal proceedings and claims for which the Company believes that it is probable that a reasonably estimable loss may result, the Company records a reserve for the potential loss. For proceedings and claims where the Company believes it is reasonably possible that a loss may result that is materially in excess of amounts accrued for the matter, the Company either discloses an estimate of such possible loss or range of loss or includes a statement that such an estimate cannot be made. As of July 31, ~~2019,~~2020, the Company is party to legal proceedings and contingencies, the resolution of which is not expected to materially affect its financial condition, future results of operations beyond the amounts accrued, or cash flows.

The Company evaluates contractual arrangements at inception to determine if individual agreements are a lease or contain an identifiable lease component as defined by ASC 842. When evaluating contracts to determine appropriate classification and recognition under ASC 842, significant judgment may be necessary to determine, among other criteria, if an embedded leasing arrangement exists, the length of the term, classification as either an operating or financing lease and whether renewal or termination options are reasonably certain to be exercised. Lease assets represent the right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make lease payments arising from the lease. These assets and liabilities are recognized on the lease commencement date based on the present value of lease payments over the lease term calculated using the Company’s incremental borrowing rate, adjusted for the lease term and lease country, unless the implicit rate is readily determinable. Lease assets also include any upfront lease payments made and are reduced by lease incentives. Some lease terms include options to extend or terminate the lease and they are included in the measurement of the lease assets and lease liabilities if the Company is reasonably certain that those options will be exercised.

Variable lease payments are generally expensed as incurred and include certain index-based changes in rent and certain non-lease components such as maintenance and other services provided by the lessor to the extent the charges are variable. Leases with an initial term of 12 months or less are not recorded on the balance sheet, and the expense for these short-term leases and for operating leases is recognized on a straight-line basis over the lease term.

~~The depreciable life of lease assets and leasehold improvements is limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise.~~

The Company leases certain real estate properties, vehicles, and equipment in various countries around the world. Leased properties are typically used for retail, office and distribution. The Company’s leases are classified as operating leases with remaining terms of 1 to 11 years, some of which include an option to extend or renew. If the exercise of an option to extend or renew is determined to be reasonably certain, the associated right-of-use asset and lease liability reflects the extended period and payments.

~~The following table discloses supplemental balance sheet information for the Company’s leases (in thousands):~~

~~The following table discloses the weighted-average remaining lease term and weighted-average discount rate for the Company's leases:~~

~~Future minimum lease payments by year as of July 31, 2019 were as follows (in thousands):~~

~~Future minimum lease payments by year as of January 31, 2019 were as follows (in thousands):~~

~~Supplemental cash flow information related to leases was as follows (in thousands):~~

~~As of July 31, 2019, the Company did not have any material operating or finance leases that have been signed but not commenced.~~

On March 27, 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) which provides economic relief to assist American families and companies during the COVID-19 global pandemic. The CARES Act includes, among other things, provisions related to net operating loss carryback periods, refundable payroll tax credits and the delay of certain payroll taxes, and technical corrections to tax depreciation methods for qualified improvement property. The CARES Act allows U.S. net operating losses generated in fiscal 2019, 2020, and 2021 to be carried back up to five years to prior taxable years with a U.S. statutory tax rate of 35.0% and to offset 100% of regular taxable income in such years (the “CARES Act NOL Carryback Provision”). The Company anticipates that there will be a U.S. net operating loss generated in fiscal 2021 which will be carried back to prior taxable years.

The Company recorded an income tax ~~expense~~benefit of ~~$4.7~~$1.6 million and ~~$3.6~~income tax provision of $4.7 million for the three months ended July 31, ~~2019~~2020 and ~~2018,~~2019, respectively.

The effective tax rate was 19.1% and 21.4% ~~and 28.3%~~ for ~~the~~ three months ended July 31, ~~2019~~2020 and ~~2018,~~2019, respectively. The ~~change in~~significant components of the effective tax rate ~~was~~changed primarily due to a change in the statutory rate in the United Kingdom, U.S. tax provided on the sale of a non-operating asset in an international location, excess tax deficiencies related to stock-based compensation and no tax benefit being recognized on losses incurred by certain foreign ~~operations~~operations. These changes were partially offset by changes in jurisdictional earnings and ~~a decrease in permanent differences.~~the CARES Act NOL Carryback Provision.

The Company recorded an income tax ~~expense~~benefit of $~~5.6~~33.9 million and ~~$3.5~~income tax provision of $5.6 million for the six months ended July 31, 2020 and 2019, ~~and 2018,~~ respectively.

The effective tax rate was ~~20.7~~%17.8% and ~~16.8%~~20.7% for the six months ended July 31, 2020 and 2019, ~~and 2018,~~ respectively. The ~~change in~~significant components of the effective tax rate ~~was~~changed primarily due to impairments of the ~~release~~portion of goodwill of the Watch and Accessory Brands reporting unit which is not tax deductible and the recording of valuation allowances ~~against~~on certain foreign deferred tax assets, both of which occurred during the first quarter of fiscal 2021. These changes were partially offset by changes in foreign profits in lower tax jurisdictions and the CARES Act NOL Carryback Provision.

The effective tax ratefor the three months ended July 31, 2020 differs from the U.S. statutory tax rate of 21.0% primarily due to a change in the ~~prior year.~~statutory tax rate in the United Kingdom, U.S. tax provided on the sale of a non-operating asset in an international location and excess tax deficiencies related to stock-based compensation, partially offset by foreign profits being taxed in lower taxing jurisdictions and the CARES Act NOL Carryback Provision.The effective tax rate for the six months ended July 31, 2020 differs from the U.S. statutory tax rate of 21.0% primarily due to impairments of the portion of goodwill of the Watch and Accessory Brands reporting unit which is not tax deductible, partially offset by the CARES Act NOL Carryback Provision.

The effective tax rate for the three months ended July 31, 2019 differs from the U.S. statutory tax rate of 21.0% primarily due to no0 tax benefit being recognized on losses incurred by certain foreign operations, partially offset by foreign profits being taxed in lower taxing jurisdictions. The effective tax rate for the six months ended July 31, 2019 differs from the U.S. statutory tax rate of 21.0% primarily due to foreign profits being taxed in lower taxing jurisdictions, partially offset by no0 tax benefit being recognized on losses incurred by certain foreign operations.

In December 2019, the FASB issues ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes”. ASU 2019-12 simplifies the accounting for income taxes by removing certain exceptions to general principles in “Income Taxes (Topic 740)”. It also clarifies and amends existing guidance to improve consistent application. The guidance is effective for fiscal years beginning after December 15, 2020. The Company early adopted this standard effective February 1, 2020. The provision of ASU 2019-12 which has the most significant impact on the Company is the removal of a limitation on the tax ~~rate~~benefit recognized on pre-tax losses during interim periods which exceed the expected loss for the ~~three months ended July 31, 2018 differs from the U.S. statutory~~fiscal year. The Company’s income tax ~~rate of 21.0% primarily due to no tax~~ benefit ~~being recognized on losses incurred by certain foreign operations, partially offset by foreign profits being taxed in lower taxing jurisdictions. The effective tax rate~~ for the six months ended July 31, ~~2018 differs from~~2020 includes an income tax benefit of$6.2 million as a result of early adoption in the ~~U.S. statutory tax rate~~first quarter of ~~21.0% primarily due to~~fiscal 2021.

As of July 31, 2020, the ~~release of a valuation allowance against certain foreign~~Company had 0 deferred tax ~~assets and~~liability for the undistributed foreign ~~profits being taxed~~earnings of approximately $186.6 million because the Company intends to continue permanently reinvesting such earnings in ~~lower taxing jurisdictions.~~its foreign operations. It is not practicable to estimate the tax liability related to a future distribution of these permanently reinvested foreign earnings.

The components of equity for the six months ended July 31, ~~2019~~2020 and ~~2018~~2019 are as follows (in thousands):

Movado Group, Inc. Shareholders' Equity

Preferred
Stock

Common
Stock (1)

Class A
Common
Stock (2)

Capital in
Excess of
Par Value

Retained
Earnings

Accumulated
Other
Comprehensive
Income

Treasury
Stock

Total
Movado
Group, Inc.
Shareholders'
Equity

Redeemable
Noncontrolling
Interest

Balance, January 31, 2019

$
—

$
277

$
65

$
201,814

$
431,180

$
80,507

$
(217,188
)

$
496,655

$
3,721

Net income/ (loss) attributable to
   Movado Group, Inc.

21,430

21,430

(45
)
Dividends ($0.40 per share)

(9,196
)

(9,196
)

Stock repurchase

(4,199
)

(4,199
)

Stock options exercised

2

154

(1,390
)

(1,234
)

Supplemental executive retirement
   plan

67

67

Stock-based compensation expense

3,082

3,082

Net unrealized gain on
   investments, net of
   tax provision of $3

8

8

Amortization of prior service cost,
   net of tax provision of $7

26

26

Foreign currency translation
   adjustment (3)

(6,335
)

(6,335
)

(136
)
Balance, July 31, 2019

$
—

$
279

$
65

$
205,117

$
443,414

$
74,206

$
(222,777
)

$
500,304

$
3,540

Preferred
Stock

Common
Stock (1)

Class A
Common
Stock (2)

Capital in
Excess of
Par Value

Retained
Earnings

Accumulated
Other
Comprehensive
Income

Treasury
Stock

Total
Movado
Group, Inc.
Shareholders'
Equity

Redeemable
Noncontrolling
Interest

Balance, January 31, 2018

$
—

$
273

$
66

$
189,808

$
388,739

$
100,343

$
(208,894
)

$
470,335

$
—

Net income attributable to Movado
   Group, Inc.

17,255

17,255

Dividends ($0.40 per share)

(9,229
)

(9,229
)

Adoption of new revenue
   recognition Standard (Topic 606)

(724
)

(724
)

Stock repurchase

(2,057
)

(2,057
)

Stock options exercised

3

5,548

(726
)

4,825

Supplemental executive retirement
   plan

67

67

Stock-based compensation expense

2,823

2,823

Net unrealized gain on
   investments, net of
   tax provision of $19

64

64

Net change in effective portion of
   hedging contracts, net of tax
   benefit of $20

(104
)

(104
)

Foreign currency translation
   adjustment (3)

(19,901
)

(19,901
)

Balance, July 31, 2018

$
—

$
276

$
66

$
198,246

$
396,041

$
80,402

$
(211,677
)

$
463,354

$
—

			Movado Group, Inc. Shareholders' Equity
	Preferred Stock		Common Stock (1)		Class A Common Stock (2)		Capital in Excess of Par Value			Retained Earnings			Accumulated Other Comprehensive Income			Treasury Stock			Noncontrolling Interest		Total Movado Group, Inc. Shareholders' Equity			Redeemable Noncontrolling Interest
Balance, January 31, 2020	$	—	$	279	$	65	$	208,473		$	455,479		$	85,050		$	(222,809	)	$	707	$	527,244		$	3,165
Net income/(loss) attributable to Movado Group, Inc.											(156,608	)								222		(156,386	)		(325	)
Stock options exercised				2				(2	)								(474	)				(474	)
Supplemental executive retirement plan								48														48
Stock-based compensation expense (4)								3,109														3,109
Net unrealized loss on investments, net of tax benefit of $11														(32	)							(32	)
Amortization of prior service cost, net of tax provision of $8														28								28
Foreign currency translation adjustment (3)														1,063						59		1,122			197
Balance, July 31, 2020	$	—	$	281	$	65	$	211,628		$	298,871		$	86,109		$	(223,283	)	$	988	$	374,659		$	3,037

	Preferred Stock		Common Stock (1)		Class A Common Stock (2)		Capital in Excess of Par Value			Retained Earnings			Accumulated Other Comprehensive Income			Treasury Stock			Noncontrolling Interest		Total Movado Group, Inc. Shareholders' Equity			Redeemable Noncontrolling Interest
Balance, January 31, 2019	$	—	$	277	$	65	$	201,814		$	431,180		$	80,507		$	(217,188	)	$	—	$	496,655		$	3,721
Net income/(loss) attributable to Movado Group, Inc.											21,430											21,430			(45	)
Dividends ($0.40 per share)											(9,196	)										(9,196	)
Stock repurchase																	(4,199	)				(4,199	)
Stock options exercised				2				154									(1,390	)				(1,234	)
Supplemental executive retirement plan								67														67
Stock-based compensation expense								3,082														3,082
Net unrealized gain on investments, net of tax provision of $3														8								8
Amortization of prior service cost, net of tax provision of $7														26								26
Foreign currency translation adjustment (3)														(6,335	)							(6,335	)		(136	)
Balance, July 31, 2019	$	—	$	279	$	65	$	205,117		$	443,414		$	74,206		$	(222,777	)	$	—	$	500,304		$	3,540

On August 29, 2017, the Board approved a share repurchase program under which the Company is authorized to purchase up to $50.0 million of its outstanding common stock from time to time, depending on market conditions, share price and other factors. ~~The program had replaced a prior~~Under the share repurchase program, ~~approved by the Board on March 31, 2016 under which~~ the Company ~~was authorized to purchase up to $50.0 million of its outstanding common stock from time to time and under which $5.5~~ ~~million had been repurchased. Under the existing program, the company~~ may purchase shares of its common stock through open market purchases, repurchase plans, block trades or otherwise. This authorization expires on August 29, 2020. See Note 9 – Debt and Lines of Credit – for restrictions on share repurchase under the Company’s revolving credit facility.

During the six months ended July 31, ~~2019,~~2020, the Company did 0t repurchase shares of its common stock under the ~~existing~~ repurchase ~~program,~~program. Duringthe six months ended July 31, 2019, the Company repurchased a total of 131,402 shares of its common stock under the share repurchase program at a total cost of $4.2 million, or an average of $31.96 per share. During the six months ended July 31, 2018, under the existing repurchase program, the Company repurchased a total of 52,400 shares of its common stock at a total cost of $2.1 million, or an average of $39.25 per share.

At July 31, ~~2019,~~2020, $36.4 million remains available for purchase under the Company’s ~~current~~ repurchase program.

There were ~~42,127~~47,302 and ~~17,979~~42,127 shares of common stock repurchased during the six months ended July 31, ~~2019~~2020 and ~~2018,~~2019, respectively, as a result of the surrender of shares in connection with the vesting of certain stock awards. At the election of an employee, shares having an aggregate value on the vesting date equal to the employee’s withholding tax obligation may be surrendered to the Company.

The accumulated balances at July 31, ~~2019~~2020 and ~~2018,~~2019, and January 31, ~~2019,~~2020, related to each component of accumulated other comprehensive income (loss) are as follows (in thousands):

The following table presents the Company’s net sales disaggregated by customer type. Sales and usage-based taxes are excluded from net sales (in thousands):

The Company’s revenue from contracts with customers is recognized at a point in time. The Company’s net sales disaggregated by geography are based on the location of the Company’s customer (see Note 1719 – Segment and Geographic Information).

The Company’s wholesale revenue consists primarily of revenues from independent distributors, and from department stores, and chain and independent jewelry stores. The Company recognizes and records its revenue when obligations under the terms of a contract with the customer are satisfied, and control is transferred to the customer. Wholesale revenue is measured as the amount of consideration the Company ultimately expects to receive in exchange for transferring goods. Wholesale revenue is included entirely within the Watch and Accessory Brands ~~Segment~~segment (see Note 1719 – Segment and Geographic Information), consistent with how management makes decisions regarding the allocation of resources and performance measurement.

The Company’s direct to consumer revenue primarily consists of revenues from the Company’s outlet stores, concession stores, ~~ecommerce,~~e-commerce, and consumer repairs. Revenue is recognized as the end consumer obtains delivery of the merchandise. Direct to Consumer revenue derived from concession stores, e-commerce and ~~ecommerce~~consumer repairs is included within the Watch and Accessory Brands ~~Segment;~~segment; revenue derived from outlet stores is included within the Company Stores Segment (see Note 1719 – Segment and Geographic Information). Direct to Consumer revenue is included in either the Watch and Accessory Brands segment or Company Stores Segments based on how the Company makes decisions about the allocation of resources and performance measurement.

All watches sold by the Company come with limited warranties covering the movement against defects in materials and workmanship. The Company does not sell warranties separately.

The Company’s after-sales service revenues consists of out of warranty service provided to customers and authorized third party repair centers, and sale of watch parts. The Company recognizes and records its revenue when obligations under the terms of a contract with the customer are satisfied and control is transferred to the customer. After-sales service revenue is measured as the amount of consideration the Company ultimately expects to receive in exchange for transferring goods. Revenue from after sales service, including consumer repairs, is included entirely within the Watch and Accessory Brands ~~Segment,~~segment, consistent with how management makes decisions about the allocation of resources and performance measurement.

Under the Company’s Employee Stock Option Plan, as amended and restated as of April 4, 2013 (the “Plan”), the Compensation Committee of the Board of Directors, which consists of ~~four~~three of the Company’s non-employee directors, has the authority to grant participants incentive stock options, nonqualified stock options, restricted stock, stock appreciation rights and stock awards, for up to 11,000,000 shares of common stock.

Stock options granted to participants under the plan generally became exercisable in equal installments over three years or cliff-vested after three years and remain exercisable until the tenth anniversary of the date of grant. All stock options granted under the Plan have an exercise price equal to or greater than the fair market value of the Company’s common stock on the grant date.

The table below presents the weighted average assumptions used with the Black-Scholes option-pricing model for the calculation of the fair value of stock options granted during the three months ended July 31, 2020. There were 0 stock options granted during the three months ended April 30, 2020 or during the three and six months ended July 31, 2019.

The fair value of the stock options, less expected forfeitures, is amortized on a straight-line basis over the vesting term. Total compensation expense for stock option grants recognized during the three months ended July 31, 2020 and 2019 was approximately $27,000 and ~~2018 was~~ $0.1 million, ~~(net of tax of approximately $27,000) and approximately $22,000 (net of tax of approximately $7,000),~~ respectively. Total compensation expense for stock option grants recognized during the six months ended July 31, 2020 and 2019 was $0.1 millionand ~~2018 was~~ $0.3 million, ~~(net of tax of $0.1 million) and $0.4 million (net of tax of $0.1 million),~~ respectively. AAs s of July 31, ~~2019,~~2020, there was $~~0.3~~0.6 million of unrecognized compensation cost related to unvested stock options. Total consideration received for stock option exercises during both the three months ended July 31, 2020 and 2019 ~~and 2018~~ was 0~~zero~~ .~~and $1.8~~ ~~million,~~ ~~respectively~~. Total consideration received for stock option exercises during the six months ended July 31, 2020 and 2019 was 0 and ~~2018 was $0.2~~$0.2 million, ~~and $5.5 million, respectively.~~respectively.

The following table summarizes the Company’s stock options activity during the first six months of fiscal ~~2020:~~2021:

~~The fair value of~~There were 0 stock options exercised during the first six months of fiscal ~~2020 was approximately $63,000~~ ~~and the intrinsic value was approximately $47,000.~~2021.

Under the Plan, the Company can also grant stock awards to ~~employees.~~employees and directors. For the three months ended July 31, 2020 and 2019, compensation expense for stock awards was $1.5 million ($0.4 million is included in the Restructuring Plan of the corporate initiatives) and ~~2018,~~$1.3 million, respectively. Forthe six months ended July 31, 2020 and 2019, compensation expense for stock awards was $~~1.0~~3.0 million ~~(net~~ ($0.4 million is included in the Restructuring Plan of ~~tax of $0.3~~the corporate initiatives) ~~million)~~ and $$2.8 million,~~0.6~~ ~~million (net of tax of $0.2~~ ~~million), respectively. For the six months ended July 31, 2019 and 2018, compensation expense for stock awards was $2.1~~ ~~million (net of tax of $0.7~~ ~~million) and $1.7 million (net of tax of $0.6 million),~~ respectively. As of July 31, ~~2019,~~2020, there was $~~11.7~~4.4 million of unrecognized compensation cost related to unvested stock awards.

The following table summarizes the Company’s stock awards activity during the first six months of fiscal ~~2020:~~2021:

Outstanding stock awards can be classified as either time-based stock awards or performance-based stock awards. Time-based stock awards vest over time subject to continued employment. Performance-based stock awards vest over time subject both to continued employment and to the achievement of corporate financial performance goals. Upon the vesting of a stock award, shares are issued from the pool of authorized shares. For performance-based stock awards, the number of shares issued related to the performance units granted can vary from 0% to 150% of the target number of underlying stock award units, depending on the extent of the achievement of predetermined financial goals. The total fair value of stock award units that vested during the first six months of fiscal ~~2020~~2021 was $~~4.3~~5.2 million. The number of shares issued related to the remaining stock awards are established at grant date.

The Company conducts its business in ~~two~~2 operating segments: Watch and Accessory Brands and Company Stores. The Company’s Watch and Accessory Brands segment includes the designing, manufacturing and distribution of watches and, to a lesser extent, jewelry and other accessories, of owned and licensed brands, in addition to revenue generated from after-sales service activities and shipping. The Company Stores segment includes the Company’s physical retail outlet locations. The Chief Executive Officer of the Company is the chief operating decision maker (“CODM”) and regularly reviews operating results for each of the two operating segments to assess performance and makes operating decisions about the allocation of the Company’s resources.

The Company divides its business into ~~two~~2 major geographic locations: United States operations, and International, which includes the results of all 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 Middle East, Asia and the Americas (excluding the United States) accounted for 39.6%, 11.3%, 7.1% and 2.7%, respectively, of the Company’s total net sales for the three months ended July 31, 2020. For the three months ended July 31, 2019, the Company’s International operations in Europe, the Americas (excluding the United States), the Middle East and Asia accounted for 32.0%, 9.7%, 9.0% and 6.6%, respectively, of the Company’s total net ~~sales for the three months ended July 31, 2019. For the three months ended July 31, 2018, the~~sales. The Company’s International operations in Europe, the Middle East, Asia and the Americas (excluding the United States)~~, the Middle East and Asia~~ accounted for ~~32.1%~~38.8%, ~~11.2%~~8.0%, ~~8.8%~~7.7% and ~~6.9%~~5.5%, respectively, of the Company’s total net ~~sales.~~

~~The~~sales for the six months ended July 31, 2020. For the six months ended July 31, 2019, the Company’s International operations in Europe, the Americas (excluding the United States), the Middle East and Asia accounted for 33.1%, 9.2%, 9.1% and 7.1%, respectively, of the Company’s total net sales for the six months ended July 31, 2019. For the six months ended July 31, 2018, the Company’s International operations in Europe, the Americas (excluding the United States), the Middle East and Asia accounted for 32.3%, 11.0%, 9.6% and 7.4%, respectively, of the Company’s total net sales.

Operating Segment Data as of and for the Three Months Ended July 31, ~~2019~~2020 and ~~2018~~2019 (in thousands):

Operating Segment Data as of and for the Six Months Ended July 31, ~~2019~~2020 and ~~2018~~2019 (in thousands):

Geographic Location Data as of and for the Three Months Ended July 31, ~~2019~~2020 and ~~2018~~2019 (in thousands):

~~The~~ United States and International net sales are net of intercompany sales of ~~$91.0~~$29.1 million and ~~$76.5~~$91.0 million for the three months ended July 31, ~~2019~~2020 and ~~2018,~~2019, respectively.

Geographic Location Data as of and for the Six Months Ended July 31, ~~2019~~2020 and ~~2018~~2019 (in thousands):

United States and International net sales are net of intercompany sales of ~~$168.9~~$71.9 million and ~~$141.1~~$168.9 million for the six months ended July 31, ~~2019~~2020 and ~~2018,~~2019, respectively.

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

Statements in this Quarterly Report on Form 10-Q, including, without limitation, statements under 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 (the “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, inventory levels, plans for future operations, expectations regarding capital expenditures, operating efficiency initiatives and other items, cost savings initiatives, 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 (including Europe) where the Company’s products are ~~sold,~~sold; uncertainty regarding such economic and business ~~conditions,~~conditions; trends in consumer debt levels and bad debt ~~write-offs,~~write-offs; general uncertainty related to possible terrorist attacks, natural disasters, pandemics, including the effect of the COVID-19 pandemic and other diseases on travel and traffic in the Company’s retail stores and the stores of its wholesale customers; supply disruptions and delivery delays from the Company’s Chinese and other suppliers as a result of the COVID-19 pandemic; adverse impact on the Company’s wholesale customers and customer traffic in the Company’s stores as a result of increased uncertainty and economic disruption caused by the COVID-19 pandemic; the stability of the European Union (including the impact of the United Kingdom’s process to exit from the European Union),; the stability of the United Kingdom after its ~~potential~~ exit from the European Union, and defaults on or downgrades of sovereign debt and the impact of any of those events on consumer ~~spending,~~spending; changes in consumer preferences and popularity of particular designs, new product development and ~~introduction,~~introduction; decrease in mall traffic and increase in ~~e-commerce,~~e-commerce; the ability of the Company to successfully implement its business strategies, competitive products and ~~pricing,~~pricing; the impact of “smart” watches and other wearable tech products on the traditional watch ~~market, seasonality,~~market; seasonality; availability of alternative sources of supply in the case of the loss of any significant supplier or any supplier’s inability to fulfill the Company’s ~~orders,~~orders; the loss of or curtailed sales to significant ~~customers,~~customers; the Company’s dependence on key employees and ~~officers,~~officers; the ability to successfully integrate the operations of acquired businesses ~~(including the Olivia Burton and MVMT brands)~~ without disruption to other business ~~activities,~~activities; the possible impairment of acquired intangible assets including goodwill if the carrying value of any reporting unit were to exceed its fair ~~value,~~value; volatility in reported earnings resulting from changes in the estimated fair value of contingent acquisition ~~consideration,~~consideration; the continuation of the ~~company’s~~Company’s major warehouse and distribution ~~centers,~~centers; the continuation of licensing arrangements with third ~~parties,~~parties; losses possible from pending or future ~~litigation,~~litigation; the ability to secure and protect trademarks, patents and other intellectual property ~~rights,~~rights; the ability to lease new stores on suitable terms in desired markets and to complete construction on a timely ~~basis,~~basis; the ability of the Company to successfully manage its expenses on a continuing ~~basis,~~basis; information systems failure or breaches of network ~~security,~~security; the continued availability to the Company of financing and credit on favorable ~~terms,~~terms; business ~~disruptions,~~disruptions; and general risks associated with doing business outside the United States including, without limitation, import duties, tariffs (including retaliatory tariffs), quotas, political and economic stability, changes to existing laws or regulations, and success of hedging strategies with respect to currency exchange rate fluctuations.

These risks and uncertainties, along with the risk factors discussed under Item 1A. “Risk Factors” in the Company’s ~~2019~~2020 Annual Report on Form 10-K, should be considered in evaluating any forward-looking statements contained in this report or incorporated by reference herein. All forward-looking statements speak only as of the date of this report or, in the case of any document incorporated by reference, the date of that document. All subsequent written and oral forward-looking statements attributable to the Company or any person acting on its behalf are qualified by the cautionary statements in this section. The Company undertakes no obligation to update or publicly release any revisions to forward-looking statements to reflect events, circumstances or changes in expectations after the date of this report.

The Company’s ~~consolidated financial statements~~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.~~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 discounts and markdowns, product returns, bad debt, inventories, income taxes, warranty obligations, useful lives of property, plant and equipment, impairments, stock-based compensation and contingencies and litigation. 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.

Critical accounting policies are those that are most important to the portrayal of the Company’s financial condition and the results of operations and require management’s most difficult, subjective and complex judgments as a result of the need to make estimates about the effect of matters that are inherently uncertain. The Company’s most critical accounting policies have been discussed in the Company’s ~~2019~~2020 Annual Report on Form 10-K and are incorporated by reference herein.

~~Under~~In the ~~MVMT acquisition agreement,~~first quarter of 2020, the ~~estimated fair value~~Company adopted ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (ASU 2016-13. As a result of adoption, the Company replaced its methodology in determining the allowance for doubtful accounts which was based on an analysis of the ~~contingent consideration was determined using a Monte Carlo simulation with key assumptions that include revenue and brand EBITDA~~aging of accounts receivable, assessments of collectability based on historical trends, the financial condition of the ~~acquired business~~Company’s customers and an evaluation of economic conditions with a methodology that reflects expected credit losses and requires the use of a forward-looking expected credit loss rate for its trade accounts receivables. The adoption had no material impact on the Company’s Consolidated Financial Statements.

The Company performs its annual impairment assessment of goodwill and long-lived intangible assets at the beginning of the fourth quarter of each fiscal year. The Company determined that there was no impairment in fiscal 2020. During the three months ended April 30, 2020, in light of the COVID-19 induced closing of the Company’s stores and the stores of the vast majority of the Company’s wholesale customers (resulting in a decrease in revenues and gross margin), decrease in customer spending and the recent decline in the Company’s market capitalization, the Company concluded that a triggering event had occurred during the ~~earn-out period, volatilities, estimated discount rates, risk-free rate,~~first quarter, resulting in the need to perform a quantitative interim impairment assessment over the Company’s Olivia Burton, MVMT and ~~correlation (see Note 4 – Acquisitions~~Company Stores’ long-lived assets, as well as the Watch and ~~Note 8 – Fair Value Measurements).~~Accessory Brands reporting unit. The assessment concluded that the fair values of MVMT’s tradename and customer relationships and Watch and Accessory Brands reporting unit did not exceed their respective carrying values. This analysis resulted in impairment charges related to goodwill of $133.7 million and intangible assets of $22.2 million in the first quarter of fiscal 2021 and are included in operating loss in the Consolidated Statements of Operations for the six months ended July 31, 2020.

As of July 31, 2020, there have been no material changes to any of the Company’s critical accounting policies ~~disclosed in~~other than the ~~Company’s 2019 Annual Report on Form 10-K.~~

On August 28, 2019, the Board of Directors approved the payment of a cash dividend in the amount of $0.20 for each share of the Company’s outstanding common stock and class A common stock. The dividend will be paid on September 24, 2019, to all shareholders of record as of the close of business on September 10, 2019. 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, in its sole discretion.

The Company conducts its business ~~primarily~~ in two operating segments: Watch and Accessory Brands and Company Stores. The Company’s Watch and Accessory Brands segment includes the designing, manufacturing and distribution of watches and, to a lesser extent, jewelry and other accessories, of ~~quality~~ owned and licensed brands, in addition to revenue generated from after-sales service activities and shipping. The Company Stores segment includes the Company’s physical retail outlet locations in the United States and Canada. The Company also operates in two major geographic locations: United States ~~operations~~ and International, the latter of which includes the results of all non-U.S. Company operations.

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®, ~~Ebel®~~Concord®, ~~Concord®~~Ebel®, Olivia Burton® and MVMT® brands. ~~Watches~~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®, SCUDERIA FERRARI® and Rebecca Minkoff® and Uri Minkoff®.

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.

At the end of the first quarter of fiscal year 2021, the impact of the COVID-19 pandemic resulted in the closure of the Company’s retail stores and the majority of the stores of the Company’s wholesale customers. During the second quarter of fiscal 2021, many worldwide regional and local governments lifted or modified restrictions and orders. By the end of the second quarter, all of the Company’s retail stores and a majority of the stores of the Company’s wholesale customers have reopened; however, these stores have been impacted by a decrease in retail traffic and reduced hours at many locations. As we progressed through the second quarter, sales trends improved as COVID-19 restrictions began easing in various stages across the world, enabling some return of foot traffic in the Company’s retail stores and those of its wholesale customers. However, due to the closure of the stores during most of the second quarter, sales declined in these sales channels, but were partially offset by strong growth in e-commerce sales, both on the Company’s owned websites and those of third-party marketplace sites.

The Company expects declines in net sales to continue in its retail and wholesale channels as potential customers react to social distancing requirements and other safety measures, as well as face layoffs and other negative economic impacts from the COVID-19 outbreak that negatively affect their disposable income and discretionary purchases. The ongoing impact of the outbreak of COVID-19 on the Company’s liquidity, revenues, impairment considerations surrounding the Company’s indefinite and long-lived assets and results of operations cannot be reasonably predicted at this time due to the high level of uncertainty regarding future developments, the duration of containment measures and the timeline for recovery.

In response to this challenging environment, while the Company’s focus remains on the health and safety of its associates, customers and business partners, the Company has taken and continues to take the following actions:

The Company will continue to consider near-term demands and the long-term financial health of the business as steps are taken to mitigate the consequences of the COVID-19 pandemic and the uncertain business environment.

During the three months ended April 30, 2020, in light of the COVID-19 pandemic that resulted in the closing of the Company’s stores and of the vast majority of the stores of the Company’s wholesale customers (resulting in a decrease in revenues and gross margin), a decrease in customer spending and the recent decline in global equity markets, the Company concluded that a triggering event had occurred during the first quarter, resulting in the need to perform a quantitative interim impairment assessment over the Company’s Olivia Burton, MVMT and Company Stores’ long-lived assets as well as the Watch and Accessory Brands reporting unit.

The Company made revisions to its internal forecasts, resulting in a reduction in both current and future expected cash flows, due to the COVID-19 pandemic and the uncertain business environment. As a result, during the first quarter of fiscal 2021, the Company recorded impairment charges related to goodwill of $133.7 million and intangible assets related to MVMT’s tradename and customer relationships of $22.2 million.

During the first quarter of fiscal 2021, the Company recorded $3.5 million of increases in inventory reserves and $1.1 million increases in allowance for doubtful accounts, similarly driven by current and expected changes to operations as result of the COVID-19 pandemic.

Starting in July 2018, the Trump Administration announced a series of lists covering thousands of categories of Chinese origin products subject to potential U.S. special tariffs of 10% to 25% of import value, in addition to the regular tariffs that have historically applied to such products. Certain of the Company’s packaging products became subject to a U.S. special 10% tariff in September 2018, which was increased to 25% effective May 10, 2019. In addition, all of the Company’s smart watches became subject to a U.S. special 15% tariff on September 1, 2019, and in a third-party ruling, U.S. Customs and Border Patrol (“CBP”) has taken the position that this U.S. special 15% tariff applies broadly to China-sourced cases and bands on watches assembled in China and other countries. Under this position, most of the cases and bands used in the production of the Company’s traditional watches imported into the U.S. became subject to the U.S. special 15% tariff effective September 1, 2019. A pending request to CBP for reconsideration and revocation of the ruling has been filed on behalf of the Company and certain other watch importers on the basis that the CBP ruling is inconsistent with CBP’s longstanding position that the country of origin of the movement confers the country of origin of a traditional watch. On January 15, 2020, the United States and China signed a “Phase One” trade agreement pursuant to which this 15% U.S. special tariff was reduced to 7.5%, effective February 14, 2020.

During the three and six months ended July 31, 2020, the Company and many of its wholesale customers have been impacted by closures, reduced store hours or reduced traffic. The Company has seen and expects to continue to see material reductions in sales as a result of the COVID-19 pandemic and the uncertain business environment. In addition, these reductions in sales have not been entirely offset by proportional decreases in expenses, as the Company continues to incur costs such as operating lease costs, depreciation expense, and certain other costs such as compensation and administrative expenses, adversely affecting the relationship between the Company’s expenses and sales. The Company continues to take steps as discussed above in response to this challenging environment to mitigate the adverse impact of the pandemic. The current circumstances are dynamic and the impacts of the COVID-19 pandemic on the Company’s business operations, including the duration and impact on overall consumer demand, cannot be reasonably predicted at this time. The Company anticipates the COVID-19 pandemic will have a material impact on its business, results of operations, financial condition and cash flows for the year ending January 31, 2021. As the COVID-19 pandemic is complex and rapidly evolving, the Company’s plans may change.

Results of operations for the three months ended July 31, ~~2019~~2020 as compared to the three months ended July 31, ~~2018~~2019

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

Net sales for the three months ended July 31, ~~2019~~2020 were ~~$157.8~~$88.5 million, ~~$13.7~~$69.3 million or ~~9.5% above~~43.9% below the prior year period. This decrease is primarily as a result of the ongoing COVID-19 pandemic. For the three months ended July 31, ~~2019,~~2020, fluctuations in foreign currency exchange rates ~~negatively~~positively impacted net sales by ~~$2.1~~$0.1 million when compared to the prior year period.

Net sales for the three months ended July 31, ~~2019~~2020 in the Watch and Accessory Brands segment were ~~$136.8~~$78.2 million, ~~above~~below the prior year period by ~~$13.7~~$58.6 million, or ~~11.2%~~42.8%. The ~~increase~~decrease in net sales was primarily attributable to ~~increases~~the ongoing COVID-19 pandemic and the resultant closure of the stores of the Company’s wholesale customers during a portion of the period. There were decreases in net sales in both the ~~International~~United States and ~~United States~~International locations of the Watch and Accessory Brands segment.

Net sales for the three months ended July 31, ~~2019~~2020 in the United States ~~location~~locations of the Watch and Accessory Brands segment were ~~$45.9~~$24.9 million, ~~above~~below the prior year period by ~~$7.7~~$21.0 million, or ~~20.1%~~45.8%, resulting from net sales ~~increase~~decreases across all brands in both the owned and licensed brand ~~categories.~~categories due to the ongoing COVID-19 pandemic. The net sales recorded in the owned brands category ~~increased~~decreased by ~~$3.6~~$14.7 million, or ~~11.6%~~42.0%, ~~primarily due to sales attributable to the addition of the MVMT brand~~ and ~~increased sales in the Company’s e-commerce business. The~~ net sales recorded in the licensed ~~brands~~brand category ~~increased $3.1~~decreased $4.4 million, or ~~51.4%~~48.1%.

Net sales for the three months ended July 31, ~~2019~~2020 in the International ~~location~~locations of the Watch and Accessory Brands segment were ~~$90.9~~$53.3 million, ~~above~~below the prior year by ~~$6.0~~$37.6 million, or ~~7.1%~~41.4%, which included fluctuations in foreign currency exchange rates which ~~unfavorably~~favorably impacted net sales by ~~$2.1~~$0.1 million when compared to the prior ~~year. This increase was driven by~~year period. The decrease in net sales ~~increases~~was across all brands in both the owned and licensed ~~brands and owned brands categories.~~brand categories due to the ongoing COVID-19 pandemic. The net sales ~~increase~~decrease recorded in the ~~licensed~~owned brands category was ~~$4.7~~$10.4 million, or ~~7.3%, primarily~~47.8% and is due to ~~net~~ sales ~~increases~~decreases primarily in Europe, the Americas (excluding the United States), Asia, ~~Latin America~~ and the Middle East. The net sales ~~increase recorded~~decrease in the ~~owned~~licensed brands category was ~~$1.5~~$26.7 million, or ~~7.6% and is~~39.0%, primarily due to net sales ~~increases primarily~~decreases in Europe, the Americas (excluding the United States), Asia and ~~Latin America. The net sales increase in~~ the ~~owned brands category also included sales attributable to the addition of the MVMT brand.~~Middle East.

Net sales for the three months ended July 31, ~~2019~~2020 in the Company Stores segment ~~was relatively flat in comparison to~~were $10.3 million, $10.7 million or 50.7% below the prior year ~~period at $21.0 million. Although the conversion rate remained strong as products continue to resonate well with customers,~~period. The net sales decrease in comparable stores ~~decreased~~is primarily ~~as a~~the result of ~~a decrease~~the closure of the Company’s retail stores during part of the period in ~~customer foot traffic generated by~~response to the ~~outlet centers in which certain~~COVID-19 pandemic. As of July 31, 2020, all of the Company stores are ~~located.~~open. This decrease was partially offset by the addition of new ~~store openings.~~stores that did not exist in the prior-year period but contributed to sales in the current period after they reopened. As of July 31, ~~2019,~~2020, and ~~2018,~~2019, the Company operated 4547 and 4345 retail outlet locations, respectively.

Gross profit for the three months ended July 31, ~~2019~~2020 was $45.4 million or 51.2% of net sales as compared to $85.3 million or 54.1% of net sales ~~as compared to $77.8 million or 54.0% of net sales~~ in the prior ~~year.~~year period. The ~~increase~~decrease in gross profit of ~~$7.5~~$39.9 million was primarily due to ~~higher~~lower net sales and, to a ~~higher~~lesser extent, a lower gross margin percentage. The ~~increase~~decrease in the gross margin percentage of approximately 10290 basis points for the three months ended July 31, ~~2019~~2020 resulted primarily from an unfavorable impact of sales mix of approximately 290 basis points, the ~~increased~~decreased leveraging of certain fixed costs as a result of ~~higher~~lower sales of approximately 50180 basis points, ~~and the favorable impact of sales mix of approximately 10 basis points, including the addition of MVMT, partially offset by the~~a negative impact of fluctuations in foreign currency exchange rates of approximately 4070 basis points and additional U.S. special tariffs of approximately 30 basis points, partially offset by cost savings of 290 basis points.

SG&A expenses for the three months ended July 31, ~~2019~~2020 were ~~$76.6~~$54.3 million, representing ~~an increase~~a decrease from the prior year period of ~~$11.6~~$22.3 million, or ~~17.8%. The increase in SG&A expenses was attributable to higher marketing expenses of $7.4 million due~~29.1%, primarily ~~to the addition of MVMT and additional costs to support the Company’s sales growth; an increase~~from a decrease in payroll related expenses of ~~$1.5~~$13.1 million ~~primarily~~ as a result of the ~~acquisition~~furloughing of ~~MVMT~~employees and temporary salary reductions for a portion of the ~~opening~~period (with the majority of ~~new company stores; higher rent~~these actions ending in July) and ~~related~~permanent staff reductions in response to the COVID-19 pandemic; lower marketing expenses of $10.3 million; a decrease of $1.5 million in travel and entertainment charges due to travel restrictions related to the COVID-19 pandemic; a $1.3 million decrease in consulting and recruiting charges; a decrease of $1.2 million in bonus expense and sales commissions; a decrease of $0.7 million in amortization expense as a result of ~~new company store openings, expansion of one of the Company’s distribution centers and the addition of MVMT; an increase of $1.1 million~~a reduction in ~~expenses related~~intangible assets due to the ~~amortization~~impairment taken during the first quarter of ~~intangible assets~~fiscal 2021; and ~~deferred compensation~~a reduction in credit card fees of ~~MVMT, and $1.1~~$0.5 million ~~of expenses related~~due to less sales in the current year period as compared to the ~~Company’s new joint venture~~prior year period. The decrease in ~~Spain. The increases were~~SG&A was partially offset by ~~a decrease~~an increase in ~~performance-based compensation~~corporate initiative charges primarily in response to the COVID-19 pandemic of ~~$1.7~~$7.4 million consisting of $7.0 million in severance and payroll related and $0.4 million in other restructuring charges. For the ~~favorable effect of~~three months ended July 31, 2020, fluctuations in foreign currency ~~translation on SG&A expenses~~rates related to the foreign subsidiaries ~~of $0.4 million.~~negatively impacted SG&A expenses by $0.1 million when compared to the prior year period.

For the three months ended July 31, ~~2019~~2020 and ~~2018,~~2019, the Company recorded Watch and Accessory Brands segment operating loss of $9.9 million and operating income of $5.7 million, ~~and $8.2 million,~~ respectively, which includes ~~$4.1~~$6.1 million and ~~$10.6~~$4.1 million of unallocated corporate expenses as well as ~~$14.8~~$11.2 million and ~~$11.3~~$14.8 million, respectively, of certain intercompany profits related to the Company’s supply chain operations. The ~~$2.5~~$15.6 million decrease in operating income was the result of ~~higher~~a decrease in gross profit of $34.3 million, partially offset by a decrease in SG&A expenses of ~~$10.3 million, partially offset by an increase in gross profit of $7.8~~$18.7 million when compared to the prior ~~year.~~year period. The ~~increase~~decrease in gross profit was the result of ~~higher~~lower sales and, to a lesser extent, lower gross margin ~~percentage and higher sales.~~percentage. The ~~increase~~decrease in SG&A expenses ~~was~~of $18.7 million resulted primarily ~~attributable to higher marketing expenses of $7.4 million; an increase~~from a decrease in payroll related expenses of ~~$1.2~~$10.9 million ~~primarily~~as a result of the furloughing of employees and temporary salary reductions for a portion of the period (with a majority of these actions ending in July) and permanent staff reductions in response to the COVID-19 pandemic; lower marketing expenses of $10.2 million; a decrease of $1.4 million in travel and entertainment charges due to travel restrictions related to the COVID-19 pandemic; a $1.3 million decrease in consulting and recruiting charges; a decrease of $0.9 million in bonus expense and sales commissions; a decrease of $0.7 million in amortization expense as a result of a reduction in intangible assets due to the ~~addition~~impairment taken during the first quarter of ~~MVMT; higher rent related expenses~~fiscal 2021; and a reduction in credit card fees of ~~$1.0 million; an increase of $1.1~~$0.2 million due to less sales in ~~expenses related~~the current year period as compared to the ~~amortization of intangible assets and deferred compensation of MVMT and $1.1 million of expenses related to the Company’s new joint venture~~prior year period. The decrease in ~~Spain. The increases were~~SG&A was partially offset by ~~a decrease~~an increase in ~~performance-based compensation~~corporate initiative charges primarily in response to the COVID-19 pandemic of ~~$1.6 million.~~$7.4 million consisting of $7.0 million in severance and payroll related and $0.4 million in other restructuring charges. For the three months ended July 31, ~~2019~~2020, fluctuations in foreign currency exchange rates negatively impacted the Watch and Accessory Brands segment operating ~~income~~loss by ~~$0.9~~$0.4 million when compared to the prior ~~year.~~year period.

In the United States ~~location~~locations of the Watch and Accessory Brands segment, for the three months ended July 31, ~~2019~~2020 and ~~2018,~~2019, the Company recorded an operating loss of ~~$6.3~~$15.2 million and ~~$6.8~~$6.3 million, respectively, which includes unallocated corporate expenses of ~~$4.1~~$6.1 million and ~~$10.6~~$4.1 million, respectively. The ~~decrease~~increase in operating loss ~~of $0.5 million~~ was the result of ~~higher~~lower gross profit of $12.3 million, partially offset by lower SG&A expenses of ~~$3.8 million, partially offset by higher gross profit of $4.3~~$3.4 million. The ~~increase~~decrease in gross profit of ~~$4.3~~$12.3 million was due to ~~higher~~lower sales and, to a ~~higher~~lesser extent, a lower gross margin percentage. The ~~increase~~decrease in SG&A expenses of ~~$3.8~~$3.4 million ~~was~~resulted primarily ~~attributable~~from a decrease in payroll related expenses of $6.9 million as a result of the furloughing of employees and temporary salary reductions for a portion of the period (with the majority of the actions ending in July) and permanent staff reductions in response to ~~higher~~the COVID-19 pandemic; lower marketing costs of ~~$3.4 million, an increase~~$1.0 million; a decrease of ~~$1.1~~$0.8 million in ~~expenses~~travel and entertainment charges due to travel restrictions related to the ~~amortization of intangible assets and deferred compensation of MVMT; higher payroll related~~COVID-19 pandemic; a decrease of $0.7 million in amortization expense as a result of a reduction in intangible assets due to the impairment taken during the first quarter of fiscal 2021; a decrease of $0.4 million in consulting and recruiting charges; a decrease of ~~$0.5~~$0.2 million in bonus expense and sales commissions; and a reduction in credit card fees of ~~higher rent related expenses.~~$0.2 million due to less sales in the current year period as compared to the prior year period. The ~~increases were~~decrease in SG&A was partially offset by ~~a decrease~~an increase in ~~performance-based compensation~~corporate initiative charges primarily in response to the COVID-19 pandemic of ~~$1.7 million.~~$6.6 million consisting of $6.2 million in severance and payroll related and $0.4 million in other restructuring charges.

In the International ~~location~~locations of the Watch and Accessory Brands segment, for the three months ended July 31, ~~2019~~2020 and ~~2018,~~2019, the Company recorded operating income of ~~$12.0~~$5.3 million and ~~$15.0~~operating income of $12.0 million, respectively, which includes $11.2 million and $14.8 million, ~~and $11.3 million~~respectively, of certain intercompany profits related to the Company’s International supply chain operations. The decrease in operating income ~~of $3.0 million~~ was primarily related to ~~higher~~lower gross profit of $21.9 million, partially offset by lower SG&A expenses of ~~$6.5 million partially offset by higher gross profit of $3.5~~$15.2 million. The ~~increase~~decrease in gross profit of ~~$3.5~~$21.9 million was ~~primarily related~~due to ~~higher~~lower net sales and, to a ~~higher~~lesser extent, a lower gross margin percentage. The ~~increase~~decrease in SG&A expenses of ~~$6.5~~$15.2 million ~~was attributable to higher~~resulted primarily from lower marketing ~~expenses~~costs of $9.2 million; a decrease in payroll related expense of $4.0 ~~million; higher payroll related expenses~~million as a result of ~~$0.5 million; an increase~~the furloughing of ~~$0.5~~employees and temporary salary reductions for a portion of the period (with the majority of actions ending in July) and permanent staff reductions in response to the COVID-19 pandemic; a decrease in $0.9 million in ~~rent related expenses;~~consulting and ~~$1.1~~recruiting charges; a decrease of $0.7 million in bonus expense and sales commissions; and a decrease of ~~expenses~~$0.6 million in travel and entertainment charges due to travel restrictions related to the ~~Company’s new joint venture~~COVID-19 pandemic. The decrease in ~~Spain.~~SG&A was partially offset by an increase in corporate initiative charges primarily in response to the COVID-19 pandemic of $0.8 million in severance. Fluctuation in foreign currency exchange rates negatively impacted operating income by ~~$0.9~~$0.4 million when compared to the prior ~~year.~~year period.

The Company recorded operating income of ~~$3.1~~$1.0 million and ~~$4.7~~$3.1 million in the Company Stores segment for the three months ended July 31, ~~2019~~2020 and ~~2018,~~2019, respectively. The decrease in operating income of ~~$1.6~~$2.1 million was ~~the result of~~primarily related to lower gross profit of ~~$0.3~~$5.7 million ~~and higher~~primarily due to lower sales, partially offset by lower SG&A expenses of ~~$1.3~~$3.6 million. The ~~lower gross profit was the result of lower gross margin percentage and lower sales in comparable stores. The increase~~decrease in SG&A expenses ~~of $1.3 million~~ was primarily due to ~~rent and~~a decrease in payroll related expenses ~~associated with~~of $2.2 million due to the ~~opening~~closing of ~~new outlet locations.~~the Company’s stores and the furloughing of employees due to the COVID-19 pandemic during a portion of the period; a decrease in credit card fees of $0.3 million due to less sales in the current year period as compared to the prior year period; and a decrease $0.3 million in sales commissions and bonus expense. As of July 31, ~~2019,~~2020, and ~~2018,~~2019, the Company operated 4547 and 4345 retail outlet locations, respectively.

The Company recorded a gain on sale of a non-operating asset of $1.3 million related to a sale of a building in an international location for the three months ended July 31, 2020.

Based on updated revenue and EBITDA (as defined in the MVMT acquisition agreement) performance expectations during the earn-out period for MVMT, the Company recorded a non-cash gain on remeasurement of the contingent consideration of $13.6 million for the three months ended July 31, 2019.

The Company recorded an income tax ~~expense~~benefit of ~~$4.7~~$1.6 million and ~~$3.6~~an income tax provision of $4.7 million for the three months ended July 31, ~~2019~~2020 and ~~2018,~~2019, respectively.

The effective tax rate was 19.1% and 21.4% ~~and 28.3%~~ for ~~the~~ three months ended July 31, ~~2019~~2020 and ~~2018,~~2019, respectively. The ~~change in~~significant components of the effective tax rate ~~was~~changed primarily due to a change in the statutory tax rate in the United Kingdom, U.S. tax provided on the sale of a non-operating asset in an international location, excess tax deficiencies related to stock-based compensation, and no tax benefit being recognized on losses incurred by certain foreign ~~operations~~operations. These changes were partially offset by changes in jurisdictional earnings and ~~a decrease in permanent differences.~~the CARES Act NOL Carryback Provision.

The effective tax rate for the three months ended July 31, 2020 differs from the U.S. statutory tax rate of 21.0% primarily due to a change in the statutory tax rate in the United Kingdom, U.S. tax provided on the sale of a non-operating asset in an international location, and excess tax deficiencies related to stock-based compensation, partially offset by foreign profits being taxed in lower taxing jurisdictions and the CARES Act NOL Carryback Provision.

The effective tax rate for the three months ended July 31, 2019 differs from the U.S. statutory tax rate of 21.0% primarily due to no tax benefit being recognized on losses incurred by certain foreign operations, partially offset by foreign profits being taxed in lower taxing jurisdictions.

The effective tax rate for the three months ended July 31, 2018 differs from the U.S. statutory tax rate of 21.0% primarily due to no tax benefit being recognized on losses incurred by certain foreign operations, partially offset by foreign profits being taxed in lower taxing jurisdictions.

The Company recorded net loss attributable to Movado Group, Inc. of $6.6 million and net income attributable to Movado Group, Inc. of $17.5 million, ~~and $9.1 million,~~ for the three months ended July 31, ~~2019~~2020 and ~~2018,~~2019, respectively.

Results of operations for the six months ended July 31, ~~2019~~2020 as compared to the six months ended July 31, 2019

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

Net sales for the six months ended July 31, ~~2019~~2020 were ~~$304.4~~$158.2 million, ~~$33.1~~$146.1 million or ~~12.2% above~~48.0% below the prior year period. This decrease is primarily as a result of the ongoing COVID-19 pandemic. For the six months ended July 31, ~~2019,~~2020, fluctuations in foreign currency exchange rates negatively impacted net sales by ~~$6.7~~$0.6 million when compared to the prior ~~year.~~

Net sales for the six months ended July 31, ~~2019~~2020 in the Watch and Accessory Brands segment were ~~$268.3~~$141.5 million, ~~above~~below the prior year period by ~~$33.1~~$126.8 million, or ~~14.1%~~47.3%. The ~~increase~~decrease in net sales was primarily attributable to ~~increases~~the ongoing COVID-19 pandemic and the resultant closure of the stores of the Company’s wholesale customers during a portion of the period. There were decreases in net sales in both the ~~International~~United States and ~~United States~~International locations of the Watch and Accessory Brands segment.

Net sales for the six months ended July 31, ~~2019~~2020 in the United States ~~location~~locations of the Watch and Accessory Brands segment were ~~$90.6~~$47.2 million, ~~above~~below the prior year period by ~~$18.5~~$43.4 million, or ~~25.8%~~47.9%, resulting from net sales ~~increase~~decreases across all brands in both the owned and licensed ~~brands categories.~~brand categories due to the ongoing COVID-19 pandemic. The net sales recorded in the owned brands category ~~increased~~decreased by ~~$10.5~~$29.9 million, or ~~18.8%~~45.1%, ~~primarily due to sales attributable to the addition of MVMT brand~~ and ~~increased sales in the Company’s e-commerce business. The~~ net sales recorded in the licensed ~~brands~~brand category ~~increased $5.7~~decreased $8.6 million, or ~~46.0%~~46.9%.

Net sales for the six months ended July 31, ~~2019~~2020 in the International ~~location~~locations of the Watch and Accessory Brands segment were ~~$177.7~~$94.3 million, ~~above~~below the prior year by ~~$14.6~~$83.4 million, or ~~8.9%~~47.0%, which included fluctuations in foreign currency exchange rates which unfavorably impacted net sales by ~~$6.7~~$0.6 million when compared to the prior year period. ~~This increase was driven by~~The decrease in net sales ~~increases~~was across all brands in both the owned and licensed ~~brands and owned brands categories.~~brand categories due to the ongoing COVID-19 pandemic. The net sales ~~increase~~decrease recorded in the ~~licensed~~owned brands category was ~~$9.0~~$21.7 million, or ~~7.3%, primarily~~51.4% and is due to ~~net~~ sales ~~increases~~decreases primarily in Europe, the Americas (excluding the United States), Asia, ~~Latin America~~ and the Middle East. The net sales ~~increase recorded~~decrease in the ~~owned~~licensed brands category was ~~$5.0~~$59.6 million, or ~~13.4%~~45.2%, primarily due to net sales ~~increases primarily~~decreases in Europe, ~~Latin America~~the Americas (excluding the United States), Asia and the Middle East. ~~The net sales increase in the owned brands category also included sales attributable to the addition of the MVMT brand.~~

Net sales for the six months ended July 31, ~~2019~~2020 in the Company Stores segment ~~was relatively flat in comparison to~~were $16.7 million, $19.3 million or 53.6% below the prior year ~~period at $36.1 million. Although the conversion rate remained strong as products continue to resonate well with customers,~~period. The net sales decrease in comparable stores ~~decreased~~is primarily ~~as a~~the result of ~~a decrease in customer foot traffic generated by~~ the ~~outlet centers in which certain~~closure of the ~~Company~~Company’s retail stores ~~are located.~~during a portion of the period in response to the COVID-19 pandemic. This decrease was partially offset by the addition of new ~~store openings.~~stores that did not exist in the prior-year period but contributed to sales in the current period prior to and after the COVID-19 related closures that began in mid-March. As of July 31, ~~2019,~~2020, all of the Company stores are open. As of July 31, 2020, and ~~2018,~~2019, the Company operated 4547 and 4345 retail outlet locations, respectively.

Gross profit for the six months ended July 31, ~~2019~~2020 was ~~$164.2~~$77.2 million or ~~54.0%~~48.8% of net sales as compared to ~~$145.4~~$164.2 million or ~~53.6%~~54.0% of net sales in the prior year period. The ~~increase~~decrease in gross profit of ~~$18.8~~$87.0 million was primarily due to ~~higher~~lower net sales and, to a ~~higher~~lesser extent, a lower gross margin percentage. The ~~increase~~decrease in the gross margin percentage of approximately 40520 basis points for the six months ended July 31, ~~2019,~~2020 resulted primarily from the ~~favorable impact of sales mix of approximately 60 basis points, including the addition of MVMT, and the increased~~decreased leveraging of certain fixed costs as a result of ~~higher~~lower sales of approximately 40240 basis points, ~~partially offset by~~corporate initiatives related to an increase in inventory reserves in response to the COVID-19 pandemic of approximately 220 basis points, an unfavorable impact of sales mix of approximately 170 basis points, a negative impact of fluctuations in foreign currency exchange rates of approximately 7050 basis points and additional U.S. special tariffs of approximately 40 basis points, partially offset by cost savings of 230 basis points.

SG&A expenses for the six months ended July 31, ~~2019~~2020 were ~~$150.5~~$112.4 million, representing ~~an increase~~a decrease from the prior year period of ~~$26.1~~$38.1 million, or ~~21.0%. The increase in SG&A expenses was attributable to higher~~25.3%, primarily from lower marketing expenses of ~~$14.5 million due primarily to the addition of MVMT and additional costs to support the Company’s sales growth; an increase~~$20.1 million; a decrease in payroll related expenses of ~~$4.0~~$18.1 million ~~primarily~~ as a result of the ~~acquisition~~furloughing of ~~MVMT~~employees and temporary salary reductions starting at the ~~opening~~beginning of ~~new company stores; higher rent~~April (with the majority of these actions ending in July) and permanent staff reductions in response to the COVID-19 pandemic; a decrease of $2.7 million in trade show costs due to the cancellation of a global customer event due to COVID-19 health concerns and travel restrictions; a $2.2 million decrease in consulting and recruiting charges; a decrease of $2.1 million in travel and entertainment charges due to travel restrictions related ~~expenses~~to the COVID-19 pandemic; a decrease of ~~$2.6~~$1.2 million in bonus expense and sales commissions; a decrease in amortization expense of $0.9 million as a result of ~~new company store openings, expansion of one of the Company’s distribution centers and the addition of MVMT; an increase of $2.5 million~~a reduction in ~~expenses related~~intangible assets due to the ~~amortization of intangible assets~~impairment taken during the current period; and ~~deferred compensation of MVMT, $2.2 million of expenses related to its new joint venture in Spain, an increase of $0.9 million~~a reduction in credit card fees of $0.6 million due to less sales in the current year period as compared to the prior year period. The decrease in SG&A was partially offset by an increase in corporate initiative charges primarily ~~as a result~~in response to the COVID-19 pandemic of ~~the increase~~$11.1 million consisting of $7.9 million in ~~e-commerce sales~~severance and payroll related, $1.5 million in write-off of unrefunded trade show deposits, $1.1 million in additional accounts receivable reserves and $0.6 million ~~of additional costs related to an annual sales and marketing event for~~in other restructuring charges. For the ~~Company’s wholesale customers worldwide. The increases were partially offset by a decrease~~six months ended July 31, 2020, fluctuations in ~~performance-based compensation of $2.4 million and the favorable effect of~~ foreign currency ~~translation on SG&A expenses~~rates related to the foreign subsidiaries positively impacted SG&A expenses by $0.1 million when compared to the prior year period.

As a result of the economic conditions caused by the response to COVID-19, the Company performed a quantitative assessment of its goodwill and long-lived intangible assets at July 31, 2020. The Company recorded a goodwillimpairment of $133.7 million related to the Company’s Watch and Accessory Brands reporting unit as the carrying value of goodwill exceeded the fair value at July 31, 2020. The Company also recorded a $22.2 millionimpairment charge related to MVMT’s trade name and customer relationships as the carrying amount of these long-lived intangible assets exceeded the fair value.

For the six months ended July 31, ~~2019 and 2018,~~2020 the Company recorded an operating loss of $189.6 million in the Watch and Accessory Brands segment which included goodwill and intangible assets impairment charges of $133.7 million and $22.2 million, respectively. Without these charges, for the six months ended July 31, 2020, operating loss would have been $33.6 million as compared to operating income of $8.8 million ~~and $14.6 million, respectively,~~for the six months ended July 31, 2019, which includes ~~$13.1~~$12.1 million and ~~$20.7~~$13.1 million of unallocated corporate expenses as well as ~~$27.8~~$22.3 million and ~~$22.3~~$27.8 million, respectively, of certain intercompany profits related to the Company’s supply chain operations. ~~The $5.8 million~~In addition to the assets impairments, the decrease in operating income was the ~~net~~ result of ~~higher~~a decrease in gross profit of $75.8 million, which included corporate initiative costs of $3.5 million comprising an increase in inventory reserves, partially offset by a decrease in SG&A expenses of ~~$24.3 million, partially offset by an increase in gross profit of $18.5~~$33.4 million when compared to the prior ~~year.~~year period. The ~~increase~~decrease in gross profit was the result of ~~higher~~lower sales, and to a lesser extent, lower gross margin ~~percentage and higher sales.~~percentage. The ~~increase~~decrease in SG&A expenses ~~was~~of $33.4 million resulted primarily ~~attributable to higher~~from lower marketing expenses of ~~$14.5~~$20.0 million; ~~an increase~~a decrease in payroll related expenses of ~~$3.5~~$15.0 million due primarily to the addition of MVMT; higher rent related expense of $1.8 million; an increase of $2.5 million in expenses related to the amortization of intangible assets and deferred compensation of MVMT; $2.2 million of expenses related to the Company’s new joint venture in Spain, an increase of $0.9 million in credit card charges primarily as a result of the furloughing of employees and temporary salary reductions starting at the beginning of April (with the majority of these actions ending in July) and permanent staff reductions in response to the COVID-19 pandemic; a decrease of $2.7 million in trade show costs due to the cancellation of a global customer trade show due to COVID-19 health concerns and travel restrictions; a $2.2 million decrease in consulting and recruiting charges; a decrease of $1.9 million in travel and entertainment charges due to travel restrictions related to the COVID-19 pandemic; a decrease in amortization expense of $0.9 million as a result of a reduction in intangible assets due to the impairment taken during the current period; a decrease of $0.6 million in bonus expense and sales commissions; and a reduction in credit card fees of $0.3 million due to less sales in the current year period as compared to the prior year period. The decrease in SG&A was partially offset by an increase in ~~e-commerce sales~~corporate initiative charges primarily in response to the COVID-19 pandemic of $11.1 million consisting of $7.9 million in severance and payroll related, $1.5 million in write-off of unrefunded trade show deposits, $1.1 million in additional accounts receivable reserves and $0.6 million ~~of additional costs related to an annual sales and marketing event for the Company’s wholesale customers worldwide, partially offset by a decrease~~ in ~~performance-based compensation of $2.4 million.~~other restructuring charges. For the six months ended July 31, ~~2019~~2020, fluctuations in foreign currency exchange rates negatively impacted the Watch and Accessory Brands segment operating ~~income~~loss by ~~$2.3~~$0.3 million when compared to the prior ~~year.~~year period.

InFor the six months ended July 31, 2020 the Company recorded an operating loss of $132.8 million in the United States ~~location~~locations of the Watch and Accessory Brands segment which included goodwill and impairment charges of $77.5 million and $22.2 million, respectively. Without these charges, for the six months ended July 31, 2020, operating loss would have been $33.1 million as compared to operating loss of $17.1 million for the six months ended July 31, 2019, which includes unallocated corporate expenses of $12.1 million and ~~2018,~~$13.1 million, respectively. In addition to the assets impairments, the increase in operating loss was the result of lower gross profit of $30.0 million, which included corporate initiative costs of $3.5 million comprising an increase in inventory reserves, partially offset by lower SG&A expenses of $14.0 million. The decrease in gross profit of $30.0 million was due to lower sales and, to a lesser extent, a lower gross margin percentage. The decrease in SG&A expenses of $14.0 million resulted primarily from lower marketing costs of $7.9 million; a decrease in payroll related expenses of $10.1 million as a result of the furloughing of employees and temporary salary reductions starting at the beginning of April (with the majority of these actions ending in July) and permanent staff reductions in response to the COVID-19 pandemic; a decrease of $1.0 million in consulting and recruiting charges; a decrease of $1.0 million in travel and entertainment charges due to travel restrictions related to the COVID-19 pandemic; a decrease in amortization expense of $0.9 million as a result of a reduction in intangible assets due to the impairment taken during the current period; a decrease of $0.4 million in bonus expense and sales commissions; and a reduction in credit card fees of $0.3 million due to less sales in the current year period as compared to the prior year period. The decrease in SG&A was partially offset by an increase in corporate initiative charges primarily in response to the COVID-19 pandemic of $7.8 million consisting of $6.3 million in severance and payroll related, $1.1 million in additional accounts receivable reserves and $0.3 million in other restructuring charges.

For the six months ended July 31, 2020 the Company recorded an operating loss of $17.1 million and $14.6 million, respectively, which includes unallocated corporate expenses of $13.1 million and $20.7 million. The increase in operating loss of $2.5 million was the result of higher SG&A expenses of $13.7 million partially offset by higher gross profit of $11.2 million. The increase in gross profit of $11.2 million was due to higher sales and a higher gross margin percentage. The increase in SG&A expenses of $13.7 million was primarily attributable to higher marketing costs of $9.0 million, an increase of $2.5$56.7 million in expenses related to the amortization of intangible assets and deferred compensation of MVMT; higher payroll related expenses of $2.4 million an increase of $0.9 million in credit card charges primarily as a result of the increase in e-commerce sales and $0.9 million of higher rent related expenses partially offset by a decrease in performance-based compensation of $1.8 million.

In the International ~~location~~locations of the Watch and Accessory Brands segment which included goodwill impairment charges of $56.2 million. Without these charges, for the six months ended July 31, 2020, operating loss would have been $0.5 million as compared to operating income of $25.9 million for the six months ended July 31, 2019, ~~and 2018, the Company recorded operating income of $25.9~~which amounts include $22.3 million and ~~$29.1~~$27.8 million, respectively, ~~which includes $27.8 million and $22.3 million~~ of certain intercompany profits related to the Company’s International supply chain operations. ~~The~~In addition to the goodwill impairment charges, the decrease in operating income was primarily related to lower gross profit of ~~$3.2~~$45.8 million, partially offset by lower SG&A expenses of $19.4 million. The decrease in gross profit of $45.8 million was primarily related to ~~higher SG&A expenses of $10.6 million partially offset by higher gross profit of $7.4 million. The increase in gross profit of $7.4 million was primarily related to higher~~lower net sales ~~partially offset by~~and, to a lesser extent, a lower gross margin percentage. The ~~increase~~decrease in SG&A expenses of ~~$10.6~~$19.4 million ~~was attributable to higher~~resulted primarily from lower marketing ~~expenses~~costs of ~~$5.5 million, higher~~$12.1 million; a decrease in payroll related ~~expenses~~expense of ~~$1.1~~$4.9 million ~~an increase~~as a result of the furloughing of employees and temporary salary reductions starting at the beginning of April (with the majority of these actions ending in July) and permanent staff reductions in response to the COVID-19 pandemic; a decrease of $2.7 million in trade show costs due to cancellation of a global customer event due to COVID-19 health concerns and travel restrictions; a decrease of $1.2 million in consulting and recruiting charges; a decrease of $0.9 million in ~~rent related expenses, $2.2 million of expenses~~travel and entertainment charges due to travel restrictions related to the ~~Company’s new joint venture~~COVID-19 pandemic; and a decrease of $0.2 million in ~~Spain~~bonus expense and ~~$0.6 million of additional costs related to an annual~~ sales ~~and marketing event for the Company’s wholesale customers worldwide,~~commissions. The decrease in SG&A was partially offset by ~~a decrease~~an increase in ~~performance-based compensation~~corporate initiative charges primarily in response to the COVID-19 pandemic of ~~$0.6 million. Fluctuations~~$3.3 million consisting of $1.6 million in severance and payroll related, $1.5 million in write-off of unrefunded trade show deposits and $0.2 million in other restructuring charges. Fluctuation in foreign currency exchange rates negatively impacted operating ~~income~~loss by ~~$2.3~~$0.3 million when compared to the prior ~~year.~~year period.

The Company recorded operating ~~income~~loss of ~~$5.0~~$1.5 million and ~~$6.4~~operating income $5.0 million in the Company Stores segment for the six months ended July 31, ~~2019~~2020 and ~~2018,~~2019, respectively. The decrease in operating income of ~~$1.4~~$6.5 million was ~~the result~~primarily related to lower gross profit of ~~higher~~$11.1 million mainly due to lower sales, partially offset by lower SG&A expenses of ~~$1.8 million partially offset by higher gross profit of $0.3~~$4.6 million. The ~~higher gross profit was the result of higher gross margin percentage. The increase~~decrease in SG&A expenses ~~of $1.8 million~~ was primarily due to ~~rent and~~a decrease in payroll related expenses ~~associated with~~of $3.1 million due to the ~~opening~~closing of ~~new~~the Company’s stores and the furloughing of employees during portions of the period due to the COVID-19 pandemic; a decrease of $0.6 million in bonus expense and sales commissions; and a decrease of $0.3 million in credit card fees due to less sales in the current year period as compared to the prior year period. As of July 31, 2020, and 2019, the Company operated 47 and 45 retail outlet ~~locations.~~locations, respectively.

The Company recorded a gain on sale of a non-operating asset of $1.3 million related to a sale of a building in an international location for the six months ended July 31, 2020.

The Company recorded an income tax ~~expense~~benefit of ~~$5.6~~$33.9 million and ~~$3.5~~an income tax provision of $5.6 million for the six months ended July 31, 2020 and 2019, ~~and 2018,~~ respectively.

The effective tax rate was ~~20.7%~~17.8% and ~~16.8%~~20.7% for the six months ended July 31, 2020 and 2019, ~~and 2018,~~ respectively. The ~~change in~~significant components of the effective tax rate ~~was~~changed primarily due to impairments of the ~~release~~portion of goodwill of the Watch and Accessory Brands reporting unit which is not tax deductible and the recording of valuation allowances ~~against~~on certain foreign deferred tax assets, both of which occurred during the first quarter of fiscal 2021. These changes were partially offset by changes in ~~prior year.~~foreign profits in lower tax jurisdictions and the CARES Act NOL Carryback Provision.

The effective tax rate for the six months ended July 31, 2020 differs from the U.S. statutory tax rate of 21.0% primarily due to impairments of the portion of goodwill of the Watch and Accessory Brands reporting unit which is not tax deductible, partially offset by the CARES Act NOL Carryback Provision.

The effective tax rate for the six months ended July 31, 2019 differs from the U.S. statutory tax rate of 21.0% primarily due to foreign profits being taxed in lower taxing jurisdictions, partially offset by no tax benefit being recognized on losses incurred by certain foreign operations.

The effective tax rate for the six months ended July 31, 2018 differs from the U.S. statutory tax rate of 21.0% primarily due to the release of a valuation allowance against certain foreign deferred tax assets and foreign profits being taxed in lower taxing jurisdictions.

The Company recorded net loss attributable to Movado Group, Inc. of $156.6 million and net income attributable to Movado Group, Inc. of $21.4 million, ~~and $17.3 million,~~ for the six months ended July 31, ~~2019~~2020 and ~~2018,~~2019, respectively.

The Company believes that cash flows from operations, including the impact of the Company ~~had $134.9 million~~corporate initiatives, combined with existing cash on hand and ~~$175.6 million, respectively,~~amounts available under its credit lines provide adequate funds to support its operating, capital and debt service requirements for the next twelve months subsequent to the issuance of ~~cash and cash equivalents. Of this total, $119.2 million and $143.9 million, respectively, consisted~~these financial statements. During the first six months of ~~cash and cash equivalents at~~fiscal 2021, the Company’s ~~foreign subsidiaries.~~ cash generated from operations was negatively impacted due to widespread closures of the Company’s retail locations and the Company’s wholesale customers’ stores as a result of the COVID-19 pandemic. The Company entered this period of uncertainty with a healthy liquidity position, and it took actions to enhance the Company’s financial liquidity and flexibility, including minimizing all non-essential operating expenses (including marketing, travel and consulting services), reevaluating all capital expenditures, furloughing approximately 80% of the Company’s North American workforce during March through June and temporarily reducing the work-rate of international employees while applying for available government payroll subsidies in accordance with local government guidelines and programs, suspending the Company’s share repurchase program and regular quarterly dividend, reducing salaries and suspending Board of Director fees from April through June 2020, amending license agreements to reduce its royalty obligations in fiscal 2021, and negotiating rent deferrals or other arrangements in respect of its rent obligations for all of its Company Stores and certain other leases. As a precautionary measure, the Company borrowed an additional $30.9 million under its revolving credit facility in March 2020 and amended its revolving credit facility to modify some of its financial covenants. During the second quarter of fiscal 2021, the Company repaid $36.8 million under its revolving credit facility.

~~At July 31, 2019,~~Although the Company ~~had~~believes it has adequate sources of liquidity over the long term, continued uncertainty surrounding the COVID-19 pandemic, an economic recession or a ~~deferred tax liability for foreign withholding~~slow recovery could adversely affect the Company’s business and U.S. income taxes of $3.4 million related to $135.7 million of foreign earnings. This deferred tax liability is net of estimated foreign tax credits that would be generated upon the repatriation of such earnings. A deferred tax liability has not been recorded for the remaining undistributed foreign earnings of approximately $175.0 million, because the Company intends to permanently reinvest such earnings in its foreign operations. It is not practicable to estimate the tax liability related to a future distribution of these permanently reinvested foreign earnings.liquidity.

At July 31, ~~2019,~~2020 the Company had working capital of ~~$334.8~~$324.1 million as compared to ~~$378.0~~$334.8 million at July 31, ~~2018.~~2019. The decrease in working capital was primarily the result of a decrease in accounts receivable resulting primarily from lower sales due to the ~~addition of current operating lease liabilities of $14.6 million in accordance~~COVID-19 pandemic and lower inventory levels as the Company continues to monitor its inventory levels to align with ~~the Company’s adoption of ASU 2016-02, “Leases”; and the acquisition of MVMT in October 2018.~~expected sales. These factors were ~~partially~~ offset by ~~an increase~~additional cash of $35.3 million and a decrease in ~~inventories.~~accounts payable. The Company defines working capital as the difference between current assets and current liabilities.

The Company had $11.4 million of cash used in operating activities for the six months ended July 31, 2020 as compared to $32.6 million of cash used in operating activities for the six months ended July 31, ~~2019~~2019. Cash used by operating activities for the six months ended July 31, 2020 included net loss attributable to the Movado Group, Inc. of $156.6 million, positively adjusted by $135.9 million related to non-cash items. Cash used in operating activities included a decrease in accounts payable and accrued liabilities totaling $5.0 million primarily as ~~compared~~a result of a reduction in expenditures during the period and timing of payments to vendors, a decrease in income taxes payable of $4.1 million ~~cash~~due to timing of payments and pre-tax losses generated during the period, a decrease in other current assets of $2.4 million and a decrease in investment in inventories of $1.5 million as the Company continues to monitor its inventory levels to align with expected sales. Cash provided by operating activities for the six months ended July 31, ~~2018. For~~2020 included a $16.8 million decrease in trade receivables primarily due to lower sales resulting from the COVID-19 pandemic and an increase in accrued payroll of $5.8 million primarily due to an increase in severance accrual as a result of the Company’s corporate initiatives.

Cash used in investing was $0.6 million for the six months ended July 31, ~~2019 operating cash flow was the result of net income attributable~~2020 as compared to Movado Group, Inc. of $21.4 million, adjusted for the effects of unfavorable non-cash items totaling $3.4 million, including $13.6 million change in contingent consideration related to MVMT and $2.4 million benefit for deferred taxes, partially offset by $7.9 million of depreciation and amortization, $3.1 million for stock based compensation expense and $1.3 million for provision for inventories and allowance for doubtful accounts. Cash used in operating activities included an increase in trade receivable of $11.2 million due to increase in sales, increase in investment in inventories of $37.5 million to support sales growth, increase in current assets of $3.7 million due to timing of payments of annual fees and a decrease in accrued payroll and benefits of $11.4 million primarily as a result of payments of performance based compensation, partially offset by an increase in accounts payable of $12.8 million as a result of timing of payments.

~~Cash used in investing was~~ $7.0 million for the six months ended July 31, ~~2019 as compared to $5.3 million for the six months ended July 31, 2018.~~2019. The cash used in the six months ended July 31, ~~2019~~2020 was ~~primarily $6.9 million in capital expenditures~~ primarily related to ~~the opening~~capital expenditures of $1.9 million mainly due to a new website platform for MVMT and ~~renovation of the Company stores and to~~ the construction of shop-in-shops at some of the Company’s wholesale ~~customers.~~customers, partially offset by proceeds from a sale of a non-operating asset in Switzerland of $1.3 million.

Cash used inby financing activities was $6.7 million for the six months ended July 31, 2020 as compared to cash used by financing activities of $14.6 million for the six months ended July 31, ~~2019 as compared to $31.5 million of cash used in financing activities for the six months ended July 31, 2018.~~2019. The cash used in the six months ended July 31, ~~2019~~2020 included repayment of bank borrowings of $5.9 million and $0.3 million in debt issuance cost resulting from the Company amending its revolving credit facility. In response to the COVID-19 pandemic, the Company has suspended its quarterly dividends and share repurchases effective the first quarter of fiscal 2021. The Company paid $9.2 million in dividends ~~paid,~~and $4.2 million in ~~stock repurchased in~~share repurchases during the open market, and $1.2 million stock options and awards exercised, net of $1.4 million of shares repurchased as a result of the surrender of shares in connection with the vesting of certain stock awards. During thefirst six months ~~ended July 31, 2018, cash used in financing activities included $25.0 million repayment~~ of ~~bank borrowings.~~

Management believes that the cash on hand in addition to the expected cash flows from operations and the Company’s short-term borrowing capacity will be sufficient to meet its working capital needs for at least the next twelve months.fiscal 2020.

On June 5, 2020, the Company and its lenders entered into an amendment (the “Second Amendment”) to the Credit Agreement effective as of July 31, 2020. Among other things, the Second Amendment provides for the following temporary relief with respect to the financial maintenance covenants in the Credit Agreement from April 30, 2020 through the date on which the Company delivers a compliance certificate in respect of the period ended July 31, 2021 (or earlier if the Company demonstrates satisfaction of certain earnings and leverage milestones) (the “Suspension Period”): (i) the maximum consolidated leverage ratio is increased from 2.50 to 1.0 to 2.75 to 1.0 for the four quarter period ended April 30, 2020 and suspended thereafter until the end of the Suspension Period when it resumes at 2.50 to 1.0 and (ii) the minimum EBITDA covenant levels are reduced. In addition, the Second Amendment provides that (i) through April 30, 2021, the Company is required to maintain minimum liquidity (comprised of unrestricted cash and cash equivalents and unutilized commitments under the Credit Agreement) of $100.0 million, (ii) during the Suspension Period, certain covenants, including covenants related to dividends, share repurchases, debt incurrence, investments and capital expenditures, have been tightened and (iii) during the Suspension Period, the interest rate for borrowings under the Credit Agreement is increased to LIBOR plus 2.75% per annum and the commitment fee in respect of the unutilized commitments is increased to 0.45% per annum. In addition, the Second Amendment permanently increased the LIBOR floor for loans under the Credit Agreement from 0% to 1.00% and permanently reduced the minimum EBITDA financial covenant level to $35.0 million starting with the four-quarter period ending July 31, 2021.

The foregoing summary of the Second Amendment is qualified by reference to the full text of the amendment, which is attached as Exhibit 4.1 to the Company’s quarterly report on Form 10-Q for the quarter ended April 30, 2020 and incorporated herein by reference.

As of July 31, ~~2019,~~2020, and July 31, ~~2018,~~2019, there ~~were~~was 35.0 million and 50.0 million in Swiss ~~francs~~Francs, respectively (with a dollar equivalent of $38.3 million and $50.3 ~~million) and zero, respectively,~~million, respectively), in addition to $10.0 million as of July 31, 2020, in loans outstanding under the Facility. Availability under the Facility was reduced by the aggregate number 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 July 31, ~~2019~~2020 and July 31, ~~2018.~~2019. At July 31, ~~2019,~~2020, the letters of credit have expiration dates through June 1, ~~2020.~~2021. As of July ~~30, 2019,~~31, 2020, and July ~~30, 2018,~~31, 2019, availability under the Facility was $51.4 million and $49.4 million, respectively. For additional information regarding the Facility, see Note 9 – Debt and ~~$99.7 million, respectively.~~Lines of Credit to the Consolidated Financial Statements.

The Company had weighted average borrowings under the facility of ~~$50.2~~$71.5 million and ~~zero during the three months ended July 31, 2019 and 2018, respectively,~~$50.2 million, with a weighted average interest rate of 2.60% and 1.00% during the three months ended July 31, ~~2019.~~ 2020 and 2019, respectively. The Company had weighted average borrowings under the facility of ~~$50.0~~$68.6 million and ~~$3.7~~$50.0 million, with a weighted average interest rate of ~~1.00%~~1.92% and ~~3.07%~~1.00%, during the six months ended July 31, 2020 and 2019, ~~and 2018,~~ respectively.

A Swiss subsidiary of the Company maintains unsecured lines of credit with an unspecified maturity with a Swiss bank. As of July 31, ~~2019,~~2020, and ~~2018,~~2019, these lines of credit totaled 6.5 million Swiss ~~francs~~Francs for both periods, with a dollar equivalent of ~~$6.5~~$7.1 million and ~~$6.6~~$6.5 million, respectively. As of July 31, ~~2019,~~2020, and ~~2018,~~2019, there were no borrowings against these lines. As of July 31, ~~2019,~~2020, and ~~2018,~~2019, two European banks had guaranteed obligations to third parties on behalf of two of the Company’s foreign subsidiaries in the dollar equivalent of $1.3 million, and $1.2 million, ~~for both periods,~~respectively, in various foreign currencies, of which ~~$0.5~~$0.6 million and ~~$0.6~~$0.5 million, respectively, was a restricted deposit as it relates to lease agreements.

The Company did not pay cash dividends during the six months ended July 31, 2020. The Company paid cash dividends of $0.40 per share or $9.2 million during the six months ended July 31, 2019. 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. The Company is committed to resuming dividend payments when the environment and its business stabilize and dividends are permitted by the terms of its revolving credit facility (see Note 9 – Debt and Lines of Credit).

On August 29, 2017, the Board approved a share repurchase program under which the Company is authorized to purchase up to $50.0 million of its outstanding common stock from time to time, depending on market conditions, share price and other factors. Under this program the Company may purchase shares of its common stock through open market purchases, repurchase plans, block trades or otherwise through August 29, 2020. See Note 9 – Debt and Lines of Credit – for restrictions on share repurchase under the Company’s revolving credit facility. During the six months ended July 31, ~~2019,~~2020, the Company ~~repurchased a total of 131,402~~did not repurchase any shares of its common ~~stock at a total cost of $4.2 million, or an average of $31.96 per share.~~stock. At July ~~31,2019,~~31, 2020, $36.4 million remains available for purchase under the ~~company’s~~Company’s repurchase program.

The Company does not have off-balance sheet financing or unconsolidated special-purpose entities.

See Note 23- Recent Accounting Pronouncements to the accompanying unaudited ~~consolidated financial statements~~Consolidated Financial Statements for a description of certain accounting changes and recent accounting pronouncements which may impact the Company’s ~~consolidated financial statements~~Consolidated Financial Statements in future reporting periods.

The Company’s primary market risk exposure relates to foreign currency exchange risk (see Note 10 – Derivative Financial Instruments7 to the Consolidated Financial Statements). A significant portion of the Company’s purchases are denominated in Swiss ~~francs~~Francs and, to a lesser extent, the Japanese Yen. The Company also sells to third-party customers in a variety of foreign currencies, most notably the Euro, Swiss Franc and the British Pound. The Company reduces its exposure to the Swiss ~~franc,~~Franc, Euro, British Pound, Chinese Yuan and Japanese Yen 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, from time to time the Company uses various derivative financial instruments to further reduce the net exposures to currency fluctuations, predominately forward and option contracts. Certain of these contracts meet the requirements of qualified hedges. In these circumstances, the Company designates and documents these derivative instruments as a cash flow hedge of a specific underlying exposure, as well as the risk management objectives and strategies for undertaking the hedge transactions. Changes in the fair value of hedges designated and documented as a cash flow hedge and which are highly effective, are recorded in other comprehensive income until the underlying transaction affects earnings, and then are later reclassified into earnings in the same account as the hedged transaction. The earnings impact is mostly offset by the effects of currency movements on the underlying hedged transactions. To the extent that the Company does not engage in a hedging program, any change in the Swiss ~~franc,~~Franc, Euro, British Pound, Chinese Yuan and Japanese Yen exchange rates to local currency would have an equal effect on the Company’s earnings.

From time to time the Company uses forward exchange contracts, which do not meet the requirements of qualified hedges, to offset its exposure to certain foreign currency receivables and liabilities. These forward contracts are not designated as qualified hedges and, therefore, changes in the fair value of these derivatives are recognized in earnings in the period they arise, thereby offsetting the current earnings effect resulting from the revaluation of the related foreign currency receivables and liabilities.

As of July 31, ~~2019,~~2020, the Company’s entire net forward contracts hedging portfolio consisted of 46.1 million Chinese Yuan equivalent, 4.0 million Swiss Francs equivalent, 9.7 million US dollars equivalent, 22.2 million Euros equivalent and 1.3 million British Pounds equivalent with various expiry dates ranging through September 10, 2020, compared to a portfolio of 53.0 million Chinese Yuan equivalent, 33.0 million Swiss ~~francs~~Francs equivalent, 29.0 million US dollars equivalent, 23.1 million Euros equivalent and 1.1 million British Pounds equivalent with various expiry dates ranging through January 15, 2020, ~~compared to a portfolio of 30.0 million Swiss francs~~

~~equivalent, 11.5 million Euros equivalent and 0.8 million British Pounds equivalent, with various expiry dates ranging through January 1, 2019,~~ as of July 31, ~~2018.~~ 2019. If the Company were to settle its Swiss ~~franc~~Franc forward contracts at July 31, ~~2019,~~2020, the net result would be a gain of $0.1 million, net of tax ~~benefit~~provision of ~~$0.02~~$0.1 million. As of July 31, ~~2019,~~2020, the Company’s British Pound, Chinese Yuan, US Dollar and Euro forward contracts had no gain or loss. The Company had no cash flow hedges as of July 31, ~~2019~~2020 and July 31, ~~2018,~~2019, respectively.

The Company considers its exposure to fluctuations in commodity prices to be primarily related to gold used in the manufacturing of the Company’s watches. Under its hedging program, the Company can purchase various commodity derivative instruments, primarily futures contracts. When held, these derivatives are documented as qualified cash flow hedges, and the resulting gains and losses on these derivative instruments are first reflected in other comprehensive income, and later reclassified into earnings, partially offset by the effects of gold market price changes on the underlying actual gold purchases. The Company did not hold any future contracts in its gold hedge portfolio as of July 31, ~~2019~~2020 and ~~2018,~~2019, thus, any changes in the gold purchase price will have an equal effect on the Company’s cost of sales.

Floating rate debt at July 31, 2020 and 2019 totaled $48.3 million (35 million in Swiss francs and ~~2018 totaled~~$10 million) and $50.3 million (50 million in Swiss francs) ~~and zero,~~, respectively. The debt outstanding at July 31, ~~2019~~2020 is based on LIBOR plus ~~a spread ranging from 1.00% to 1.75%~~2.75% per ~~annum or on a 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 July 31, ~~2019,~~2020, the ~~Company’s spreads were 1.00% over LIBOR and 0% over the base rate.~~Company had weighted average borrowings of $68.6 million with a weighted average interest rate of 1.92%. The Company does not hedge these interest rate risks. Based on the average floating rate debt outstanding during the six months ended July 31, ~~2019,~~2020, a one-percent increase or decrease in the average interest rate during the period would have resulted in a change to interest expense of ~~$0.2~~$0.3 million for the six months ended July 31, ~~2019.~~2020.

The Company’s disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives. However, it should be noted that a control system, no matter how well conceived or operated, can only provide reasonable, not absolute, assurance that its objectives will be met and may not prevent all errors or instances of fraud.

The Company, under the supervision and with the participation of its management, including the Chief Executive Officer and the Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures, as such terms are defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended. Based on that evaluation, the Chief Executive Officer and the Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective at a reasonable assurance level as of the end of the period covered by this report.

The Company implemented changes to internal controls due to the adoption of ASU 2016-02 effective February 1, 2019. These changes include implementing a new lease accounting system and processes to evaluate and account for contracts under the new accounting standard.

On October 1, 2018, the Company acquired MVMT Watches, Inc, the owner of the MVMT brand (“MVMT”). In conducting its evaluation of the effectiveness of internal controls over financial reporting as of July 31, 2019, the Company excluded MVMT Watches, Inc. from that evaluation in accordance with the rules relating to recently-acquired entities.

There have been no ~~other~~ changes in the Company’s internal control over financial reporting during the ~~six~~three months ended July 31, ~~2019~~2020, that have materially affected, or ~~are~~is reasonably likely to materially affect, the Company’s internal control over financial reporting.

In December 2016, U.S. Customs and Border Protection (“U.S. Customs”) issued an audit report concerning the methodology used by the Company to allocate the cost of certain watch styles imported into the U.S. among the component parts of those watches for tariff purposes. The report disputes the reasonableness of the Company’s historical allocation formulas and proposes an alternative methodology that would imply approximately $5.1 million in underpaid duties over the five-year period covered by the statute of limitations, plus possible penalties and interest. The Company believes that U.S. Customs’ alternative duty methodology and estimate are not consistent with the Company’s facts and circumstances and is disputing U.S. Customs’ position. The Company continues to provide U.S. Customs with supplemental analyses and information supporting the Company’s historical allocation formulas. Although the Company disagrees with U.S. Customs’ position, it cannot predict with any certainty the outcome of this matter. The Company intends to continue to work with U.S. Customs to reach a mutually-satisfactory resolution.

In addition to the above ~~matters,~~matter, the Company is involved in other legal proceedings and contingencies, the resolution of which is not expected to materially affect its financial condition, future results of operations beyond the amounts accrued, or cash flows.

As of July 31, ~~2019,~~2020, there have been no material changes to any of the risk factors previously reported in the Company’s ~~2019~~2020 Annual Report on Form 10-K.

This section supplements and updates certain of the information found under Part I, Item 1A. “Risk Factors” of our Annual Report on Form 10-K ~~except as~~for the fiscal year ended January 31, 2020 filed with the Securities and Exchange Commission on March 26, 2020 (the “2020 Form 10-K”), and is based on the information currently known to us and recent developments since the date of the 2020 Form 10-K filing. The matters discussed below should be read in conjunction with the risk factors set forth in the 2020 Form 10-K. However, the risks and uncertainties that we face are not limited to those described ~~below.~~below and those set forth in the 2020 Form 10-K. Additional risks and uncertainties not presently known to us or that we currently believe to be immaterial may also adversely affect our business and the trading price of our common stock, particularly in light of the fast-changing nature of the COVID-19 pandemic and its impacts on economic and operating conditions.

~~Special Tariffs~~The recent COVID-19 novel coronavirus, or other ~~restrictions placed on imports from~~public health threats and epidemics, could materially adversely affect our business.

In late 2019, there was an outbreak of a novel strain of coronavirus (COVID-19) that began in Wuhan, China that has since spread to other regions in China and ~~any retaliatory trade measures taken by China, may have~~the rest of the world. The World Health Organization recognized COVID-19 as a ~~material adverse impact~~pandemic on ~~the Company’s financial condition and results of operations.~~

Starting in July 2018, the Trump Administration announced a series of lists covering thousands of categories of Chinese origin products subject to potential special tariffs of 10% to 25% of import value, in additionMarch 11, 2020. In response to the ~~regular tariffs that have historically applied to such products. Many categories of Chinese imports became subject to~~outbreak, in mid-March 2020, the ~~10% additional tariff in September 2018, including certain~~Company and the majority of the Company’s packaging products. This 10% additional tariff was increased to 25% effective May 10, 2019. In addition, on August 1, 2019, President Trump announced that a special 15% tariff will be imposed on the approximately $300 billion of inbound trade from China not already subject to a special tariff. Based upon a recent ruling by U.S. Customs and Border Protection involving a third party,wholesale customers temporarily closed all of their retail stores due to health concerns associated with the ~~Company’s smartwatches~~COVID-19 pandemic. Although the Company reopened all of its retail stores during the second quarter and most of the ~~cases, straps~~Company’s brick and ~~bracelets used~~mortar wholesale customers have reopened the majority of their retail locations as well, the discretionary consumer goods segment remains highly challenged. Various containment and mitigation measures that have been imposed by governmental and other authorities around the world (such as quarantines and other social distancing requirements) have already adversely affected sales of our products, given that those sales are heavily dependent on customer traffic in traditional retail stores, such as those of our wholesale partners, and our Company stores. Such measures have also adversely impacted our supply chain and resulted in late deliveries. The continuation or tightening of such containment and mitigation measures could continue or exacerbate the ~~production of its traditional watches are products of China and are therefore expected to attract the special 15% tariff, which is expected to go into~~adverse effect on ~~September 1, 2019. However, since China is not~~our results of operations and financial condition. In addition, as potential consumers of our products face layoffs and other negative economic impacts from the ~~country of origin~~COVID-19 outbreak, their disposable income for discretionary purchases and their actual or perceived wealth may be negatively impacted, potentially having a materially adverse impact on our sales that may extend beyond the ~~watch movements used in the production~~end of the ~~Company’s traditional watches,~~health crisis.

Adverse general economic conditions arising from the ~~special 15% tariff does not apply to the Company’s watch movements. Based~~COVID-19 outbreak, or from other public health threats and epidemics, could also result in an increase in bankruptcies or insolvencies involving our suppliers and wholesale customers, which could also have a materially adverse effect on ~~prior announcements by the Trump Administration, it is possible that the special 15% tariff could be increased to 25% in the future.~~our operations and financial condition. The ~~precise~~ impact of the ~~special tariffs~~outbreak of COVID-19 on ~~Chinese products is impossible to predict at this time.~~

~~To the extent that the special tariffs continue or increase, the Company may be required to raise prices for watches sold in the United States, which is~~ the Company’s single largest market, which could result in the loss of customers and harm its operating performance. Alternatively, the Company may seek to shift production outside of China, resulting in significant costs and disruption to the Company’s operations and materially and adversely affecting its sales, costsliquidity, revenues and results of ~~operations. In addition,~~operations cannot be predicted at this time due to the ~~Company’s business may be impacted by retaliatory trade measures taken by China or other countries in response to existing or~~high level of uncertainty, unknown future ~~tariffs, causing the Company to raise prices or make changes to its operations, any~~developments and duration of ~~which could materially harm its financial condition and results of operations.~~containment measures.

At the election of an employee, upon the vesting of a stock award or the exercise of a stock option, shares of common stock having an aggregate value on the vesting of the award or the exercise date of the option, as the case may be, equal to the employee’s withholding tax obligation may be surrendered to the Company by netting them from the vested shares issued. Similarly, shares having an aggregate value equal to the exercise price of an option may be tendered to the Company in payment of the option exercise price and netted from the shares of common stock issued upon the option exercise. An aggregate of ~~zero~~10,379 shares were repurchased during the three months ended July 31, ~~2019~~2020 as a result of the surrender of shares of common stock in connection with the vesting of certain restricted stock awards and stock options.

The following table summarizes information about the Company’s purchases for the three months ended July 31, ~~2019~~2020 of equity securities that are registered by the Company pursuant to Section 12 of the Securities Exchange Act of 1934, as amended:

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

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

650 From Road, Ste. 375 Paramus, New Jersey		07652-3556
(Address of Principal Executive Offices)		(Zip Code)

Large accelerated filer	☒☐	Accelerated filer	☐☒	Non-accelerated filer	☐
Smaller reporting company	☐	Emerging growth company	☐

			Page
Part I	Financial Information (Unaudited)
	Item 1.	Consolidated Balance Sheets at July 31, ~~2019,~~2020, January 31, ~~2019~~2020 and July 31, ~~2018~~2019	3
		Consolidated Statements of Operations for the three and six months ended July 31, ~~2019~~2020 and July 31, ~~2018~~2019	4
		Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended July 31, ~~2019~~2020 and July 31, ~~2018~~2019	5
		Consolidated Statements of Cash Flows for the six months ended July 31, ~~2019~~2020 and July 31, ~~2018~~2019	6
		Notes to Consolidated Financial Statements	7
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2426
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3339
	Item 4.	Controls and Procedures	3439
Part II	Other Information
	Item 1.	Legal Proceedings	3540
	Item 1A.	Risk Factors	3540
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3641
	Item 6.	Exhibits	3742
Signature			3843

Assets Acquired and Liabilities Assumed	Fair Value
Cash and cash equivalents	$	3,848
Trade receivables		370
Inventories		14,552
Prepaid expenses and other current assets		2,325
Property, plant and equipment		179
Other non-current assets		6,500
Goodwill		77,542
Trade name and other intangibles		28,928
Total assets acquired		134,244
Accounts payable		5,982
Accrued liabilities		9,018
Other non-current liabilities		7,064
Total liabilities assumed		22,064
Total purchase price	$	112,180

	Balance April 30, 2020		Provision		Non-Cash Use			Cash Payments			Balance July 31, 2020
Restructuring Plan:
Severance and Employee Related	$	—	$	6,966	$	—		$	(1,160	)	$	5,806
Other		—		402		(198	)		(115	)		89
Corporate Initiative:
Severance and Employee Related		936		—		—			(395	)		541
Inventory		3,507		—		(47	)		—			3,460
Accounts receivable		1,075		—		—			—			1,075
Other		1,722		—		(1,518	)		(167	)		37
Total	$	7,240	$	7,368	$	(1,763	)	$	(1,837	)	$	11,008


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


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

	Balance January 31, 2020		Provision		Non-Cash Use			Cash Payments			Balance July 31, 2020
Restructuring Plan:
Severance and Employee Related (1)	$	—	$	6,966	$	—		$	(1,160	)	$	5,806
Other (2)		—		402		(198	)		(115	)		89
Corporate Initiative:
Severance and Employee Related (1)		—		936		—			(395	)		541
Inventory (3)		—		3,507		(47	)		—			3,460
Accounts receivable (4)		—		1,075		—			—			1,075
Other (2)		—		1,722		(1,518	)		(167	)		37
Total	$	—	$	14,608	$	(1,763	)	$	(1,837	)	$	11,008

	For the Three Months Ended April 30, 2020 Provision		For the Three Months Ended July 31, 2020 Provision		For the Six Months Ended July 31, 2020 Total
Watch and Accessory Brands:
United States	$	4,704	$	6,631	$	11,335
International		2,536		737		3,273
Total Watch and Accessory Brands		7,240		7,368		14,608
Total Company Stores		—		—		—
Total Consolidated	$	7,240	$	7,368	$	14,608

Cost of sales	$	3,508	$	—	$	3,508
Selling, general and administrative		3,732		7,368		11,100
Total	$	7,240	$	7,368	$	14,608

	Three Months Ended July 31,				Six Months Ended July 31,
	2019		2018		2019		2018 (1)
(In thousands, except per share data)	(Unaudited)				(Unaudited)
Net sales	$	157,816	$	155,697	$	304,365	$	295,261
Net income		17,505	$	7,353	$	21,430	$	6,734

Basic income per share:
Net income per share attributable to Movado Group, Inc.	$	0.76	$	0.32	$	0.93	$	0.29

Diluted income per share:
Net income per share attributable to Movado Group, Inc.	$	0.75	$	0.31	$	0.92	$	0.29

	Trade names			Customer relationships			Other (1)			Total			Trade names			Customer relationships			Other (1)			Total
Weighted Average Amortization Period (in years)	10			7			7						10			7			9
Balance, January 31, 2019	$	34,771		$	12,181		$	1,231		$	48,183
Balance at January 31, 2020													$	31,075		$	10,154		$	1,130		$	42,359
Impairment														(18,595	)		(3,570	)		—			(22,165	)
Additions		—			—			99			99			—			—			51			51
Amortization		(1,865	)		(1,001	)		(188	)		(3,054	)		(1,098	)		(841	)		(169	)		(2,108	)
Foreign exchange impact		(531	)		(648	)		(54	)		(1,233	)		(123	)		25			32			(66	)
Balance, July 31, 2019	$	32,375		$	10,532		$	1,088		$	43,995
Balance at July 31, 2020													$	11,259		$	5,768		$	1,044		$	18,071

	July 31, 2019		January 31, 2019		July 31, 2018		July 31, 2020		January 31, 2020		July 31, 2019
Finished goods	$	152,262	$	123,947	$	129,587	$	123,413	$	125,603	$	152,262
Component parts		45,918		39,752		39,880		45,219		41,708		45,918
Work-in-process		2,773		1,612		1,950		4,742		4,095		2,773
	$	200,953	$	165,311	$	171,417	$	173,374	$	171,406	$	200,953

		Fair Value at July 31, 2019
	Balance Sheet Location	Level 1		Level 2		Level 3		Total
Assets:
Available-for-sale securities	Other current assets	$	187	$	—	$	—	$	187
Short-term investment	Other current assets		156		—		—		156
SERP assets - employer	Other non-current assets		1,130		—		—		1,130
SERP assets - employee	Other non-current assets		42,298		—		—		42,298
Defined benefit plan assets	Other non-current liabilities		—		—		32,244		32,244
Hedge derivatives	Other current assets		—		140		—		140
Total		$	43,771	$	140	$	32,244	$	76,155
Liabilities:
SERP liabilities - employee	Other non-current liabilities	$	42,298	$	—	$	—	$	42,298
Hedge derivatives	Accrued liabilities		—		71		—		71
Contingent consideration	Other non-current liabilities		—		—		1,900		1,900
Total		$	42,298	$	71	$	1,900	$	44,269

		Fair Value at July 31, 2018									Fair Value at January 31, 2020
	Balance Sheet Location	Level 1		Level 2		Level 3		Total		Balance Sheet Location	Level 1		Level 2		Level 3		Total
Assets:
Available-for-sale securities	Other current assets	$	187	$	—	$	—	$	187	Other current assets	$	184	$	—	$	—	$	184
Short-term investment	Other current assets		156		—		—		156	Other current assets		156		—		—		156
SERP assets - employer	Other non-current assets		1,262		—		—		1,262	Other non-current assets		988		—		—		988
SERP assets - employee	Other non-current assets		38,970		—		—		38,970	Other non-current assets		45,256		—		—		45,256
Defined benefit plan assets										Other non-current liabilities		—		—		24,227		24,227
Hedge derivatives	Other current assets		—		161		—		161	Other current assets		—		347		—		347
Total		$	40,575	$	161	$	—	$	40,736		$	46,584	$	347	$	24,227	$	71,158
Liabilities:
SERP liabilities - employee	Other non-current liabilities	$	38,970	$	—	$	—	$	38,970	Other non-current liabilities	$	45,264	$	—	$	—	$	45,264
Hedge derivatives	Accrued liabilities		—		481		—		481
Total		$	38,970	$	481	$	—	$	39,451		$	45,264	$	—	$	—	$	45,264

	Three Months Ended July 31,
(In thousands)	2019
Balance at April 30, 2019	$	16,884
Payments		—
Adjustments included in income before income taxes		(13,627	)
Adjustments to deferred compensation		(1,357	)
Ending Balance	$	1,900

~~Lease Term and Discount Rate~~	~~July 31, 2019~~
~~Weighted-average remaining lease term - in years~~
~~Operating leases~~		~~7.63~~
~~Finance leases~~		~~2.89~~
~~Weighted-average discount rate:~~
~~Operating leases~~		~~3.70~~	%
~~Finance leases~~		~~3.86~~	%

Fiscal Year	Operating Leases			Finance Leases
2020 (remaining)	$	9,277		$	63
2021		16,887		125
2022		15,359		125
2023		13,260		49
2024		12,538			—
Thereafter		45,767			—
Total lease payments	$	113,088		$	362
Less: Interest		(15,507	)		(19	)
Total lease obligations	$	97,581		$	343

Fiscal Year Ending January 31,
2020	$	14,036
2021		11,325
2022		10,135
2023		8,279
2024		7,683
Thereafter		35,020
	$	86,478

Lease Expense	Consolidated Statements of Operation Location	For the Three Months Ended July 31, 2019		For the Six Months Ended July 31, 2019
Operating lease expense	SG&A	$	4,858	$	9,534
Short-term lease cost	SG&A		263		402
Variable lease cost	SG&A		2,127		3,847
Total operating lease expense		$	7,248	$	13,783
Finance lease cost:
Amortization of right-of-use assets	SG&A	$	29	$	58
Interest on lease liabilities	Interest expense	$	3	$	7

Leases	Consolidated Balance Sheets Location	July 31, 2019
Assets
Operating	Operating lease right-of-use assets	$	91,119
Finance	Other non-current assets	$	341

Liabilities
Current:
Operating	Current operating lease liabilities	$	14,609
Finance	Accrued liabilities	$	114
Noncurrent:
Operating	Non-current operating lease liabilities	$	82,972
Finance	Other non-current liabilities	$	229

	For the Three Months Ended July 31, 2019		For the Six Months Ended July 31, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	4,223	$	8,280
Operating cash flows from finance leases		3		7
Financing cash flows from finance leases		28		56
Leased assets obtained in exchange for new operating lease liabilities		7,318		8,351
Leased assets obtained in exchange for new financing lease liabilities		—		399

	For the Three Months Ended July 31,				For the Six Months Ended July 31,				For the Three Months Ended July 31,				For the Six Months Ended July 31,
Customer Type	2019		2018		2019		2018		2020		2019		2020		2019
Wholesale	$	119,136	$	117,735	$	234,297	$	223,709	$	60,462	$	119,136	$	113,372	$	234,297
Direct to consumer		37,734		25,329		68,090		45,111		27,688		37,734		43,992		68,090
After-sales service		946		1,029		1,978		2,422		388		946		840		1,978
Net Sales	$	157,816	$	144,093	$	304,365	$	271,242	$	88,538	$	157,816	$	158,204	$	304,365

	Three Months Ended July 31, 2020
Expected volatility		50.79	%
Expected life in years		6.0
Risk-free interest rates		0.34	%
Dividend rate		4.29	%
Weighted average fair value per option at date of grant	$	3.87

	Outstanding Options			Weighted Average Exercise Price per Option		Option Price Per Share		Weighted Average Remaining Contractual Term (years)		Aggregate Intrinsic Value $(000)
Options outstanding at January 31, 2019 (264,244 options exercisable)		566,260		$	28.43	$ 23.35-$42.12		6.2		$	2,654
Granted		—			—
Exercised		(5,150	)	$	30.36	$	30.36
Cancelled		—			—
Options outstanding at July 31, 2019		561,110		$	28.41	$23.35-$42.12		5.7		$	480
Exercisable at July 31, 2019		399,905		$	30.45			4.9			—
Expected to vest at July 31, 2019		160,025		$	23.35				7.7	$	477

	Number of Stock Award Units			Weighted- Average Grant Date Fair Value		Weighted- Average Remaining Contractual Term (years)	Aggregate Intrinsic Value ($(000's)		Number of Stock Award Units			Weighted- Average Grant Date Fair Value		Weighted- Average Remaining Contractual Term (years)	Aggregate Intrinsic Value $(000's)
Units outstanding at January 31, 2019		447,022		$	32.27	1.4	$	14,282
Units outstanding at January 31, 2020										490,239		$	33.50	1.4	$	8,442
Units granted		261,067		$	32.91					89,289		$	10.02
Units vested		(146,288	)	$	29.51					(203,137	)	$	25.82
Units forfeited		(8,698	)	$	35.58					(28,164	)	$	30.57
Units outstanding at July 31, 2019		553,103		$	33.34	2.0	$	14,563
Units outstanding at July 31, 2020										348,227		$	32.20	1.1	$	3,357

	Operating Income (3)				Operating (Loss)/Income (3)
	2019		2018		2020			2019
Watch and Accessory Brands	$	5,698	$	8,202	$	(9,945	)	$	5,698
Company Stores		3,078		4,658		1,029			3,078
Consolidated total	$	8,776	$	12,860	$	(8,916	)	$	8,776

	Total Assets (1)						Operating (Loss)/Income (3)(4)(5)
	July 31, 2019		January 31, 2019		July 31, 2018		2020			2019
Watch and Accessory Brands	$	772,653	$	735,244	$	601,788	$	(189,566	)	$	8,793
Company Stores		67,978		24,457		25,460		(1,513	)		4,957
Consolidated total	$	840,631	$	759,701	$	627,248	$	(191,079	)	$	13,750

	Net Sales				Operating Income / (Loss) (3)						Net Sales				Operating (Loss)/Income (3)(5)
	2019		2018		2019			2018			2020		2019		2020			2019
United States (1)	$	66,529	$	59,020	$	(3,251	)	$	(2,209	)	$	34,766	$	66,529	$	(14,319	)	$	(3,251	)
International (2)		91,287		85,073		12,027			15,069			53,772		91,287		5,403			12,027
Consolidated total	$	157,816	$	144,093	$	8,776		$	12,860		$	88,538	$	157,816	$	(8,916	)	$	8,776

Period	Total Number of Shares Purchased		Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Amount that May Yet Be Purchased Under the Plans or Programs
May 1, 2019 – May 31, 2019		22,000	$	34.63		22,000	$	37,227,456
June 1, 2019 – June 30, 2019		20,000		26.42		20,000		36,699,039
July 1, 2019 – July 31, 2019		11,000		26.66		11,000		36,405,816
Total		53,000	$	29.88		53,000	$	36,405,816


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

101		The following financial information from Movado Group, Inc.’s Quarterly Report on Form 10-Q for the quarter ended July 31, ~~2019~~2020 filed with the SEC, formatted in Inline Extensible Business Reporting Language (iXBRL): (i) the Consolidated Balance Sheets; (ii) the Consolidated Statements of Operations; (iii) the Consolidated Statements of Comprehensive Income; (iv) the Consolidated Statements of Cash Flows; and (v) the Notes to the Consolidated Financial Statements. XBRL Instance Document – the XBRL Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL Document.

104		Cover Page Interactive Data File, formatted in Inline Extensible Business Reporting Language (iXBRL).

		MOVADO GROUP, INC.
		(Registrant)

Dated: August ~~28, 2019~~27, 2020	By:	/s/ Sallie A. DeMarsilis
		Sallie A. DeMarsilis ~~Senior~~Executive Vice President, Chief Operating Officer, Chief Financial Officer and Principal Accounting Officer