Fossil Group, Inc.

first quarter 2023 earnings call. At this time, all parties are in a listen-only mode. This conference call is being recorded and may not be reproduced in whole or in part without written permission from the company. Now I'll turn the call over to Christine Greeney of the Blue Shirt Group to begin.

Hello, everyone, and thank you for joining us today. With us on the call are Costa Katsotis, Chairman and CEO, Jeff Boyer, Chief Operating Officer, and Sumil Doshi, Chief Financial Officer. I would like to remind you that information made available during this conference call contains forward-looking information, and actual results could differ materially from those that will be discussed during this call. Fossil Group's policy on forward-looking statements and additional information concerning a number of factors that could cause actual results to differ materially from such statements is readily available in the company's form 8K, 10Q, and 10K reports filed with the SEC. In addition, FOSSIL assumes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law. During today's call, we will refer to constant currency results. Please note that you can find a reconciliation of actual results to constant currency results and other information regarding non-GAAP financial measures discussed on this call in Fossil's earnings release, which was filed today on Form 8K and is available in the Investors section of FossilGroup.com. Now I'll turn the call over to Costa to begin.

Thanks, Christine. Good afternoon, everyone, and thanks for joining us today. The company executed the plan in the first quarter, delivering financial results in line with our expectations. Constant currency net sales declined 11%, and currency translation was in line with our expectations we laid out in our last call. Our inventories are in good shape and are down 13% from last year, and we are maintaining our outlook for the rest of the year. Sunil will cover the financials in more detail in a few minutes. While the global operating environment remains choppy, we are seeing cross-currents in demand regionally. In Asia, consumer spending appears healthy so far this year overall. In mainland China, traffic in our online channels has picked up quickly, and our wholesale partners are planning for stronger growth this year as consumer spending and tourism are picking back up. In India, demand remains strong for traditional watches, and sellout trends were strong across retail, e-commerce platforms, and brick and mortar wholesale. With a generally strong economic backdrop in India and the reopening of Greater China, we will be leaning into these businesses during 2023. In the Americas, the consumer is showing some strength, but it tends to be directed more to services and to categories outside of our core watch business. Our Q1 sales in the direct-to-consumer channel were strong. Comps were up double digits, with growth in both stores and e-commerce. These DTC comps benefited from our digital investments particularly in our own e-commerce sites. In our wholesale channel, as expected, year-over-year declines in shipments continue to lag sellout trends as retailers closely manage their inventory levels and maintain caution on their outlook for consumer spending. In Europe, consumer spending in our primary categories is down, and with inflation still running high, we expect underlying consumer demand to remain soft. We are working closely with our wholesale partners to manage inventory levels and to develop ideas to help grow their businesses. We are also focused on expanding our jewelry distribution, which we believe creates an additional pathway for future growth. In our direct-to-consumer channels, comp retail sales were up double digits. Similar to the Americas region, we are seeing benefits from recent investments in digital capabilities that are translating to sales growth, especially in our owned e-commerce sites. As we go into the second quarter, we're maintaining our full-year outlook for sales and operating margin. which assumes no notable change in consumer spending. We are expecting improvement from our Q1 trend due to easier comparisons, due to the impact of TAG, and due to the continuing sales momentum in mainland China. As a reminder, the core tenets of our strategy are to simplify our business, lean into our core capabilities, and distort our most significant growth opportunities. Underpinning these strategies is our goal to return the business to top-line growth, drive profitability, and to maximize shareholder value over the long term. I'll update you on our key initiatives where our teams are making steady progress. First, the transform aspect of our strategy. We made significant inroads in Q1 on cost reduction and inventory. Looking at the balance of 2023, we are actively monitoring trends and carefully managing our open to buy to maximize sales given the dynamic macro environment. As to growth, we're focusing on our three key pillars, which include revitalizing the fossil brand, growing our core licensed brands in watches and jewelry, and growing our premium brands. As we execute our fossil brand revitalization strategy, we are making good progress on our key initiatives for traditional watches, jewelry, and leathers. We invested more in marketing to drive awareness and conversion in Q1, and we're pleased with the momentum we are driving in the brand. We are launching a major new creative campaign in the fall that is based on our recently completed consumer research on the brand. This will be accelerated by an additional ad spend and facilitated through our dramatically enhanced global digital platform. We have ramped up the creativity and innovation in all of our fossil categories and have a number of exciting collaborations in the pipeline. Our launch last week of our Star Wars limited edition collaboration was quite exciting and brought a lot of energy, awareness, and sales to our global distribution channels. We feel we have a significant opportunity to create events and campaigns that celebrate modern culture with engaging communications and exciting unique products. Moving to our license brands, we are pleased to announce the extension of our long-term licensing agreement with Giorgio Armani. This partnership is for both watches and jewelry globally for the three brands, Emporio Armani, Armani Exchange, and Armani Swiss. The Armani brand has great resonance all over the world and a great legacy in the watch and jewelry business and has a significant upside potential. Earlier this year, we also signed an extension with the Diesel brand to extend our watches and jewelry partnership. The Diesel brand is undergoing a resurgence and is creating excitement and buzz in the marketplace among millennial females in addition to their core consumers. Looking at our premium strategy, we see a significant opportunity to expand our presence in premium watches over the long term. This is a category that is projected to continue outperforming the traditional watch growth across markets globally. For 2023, we are building on our Michelle brand with new campaigns designed to drive traffic to our retail partners as well as to our direct consumer channel. Specifically, we will be amplifying our presence in wholesale through new activations and new marketing and digital activities. We believe continued focus and execution against these three pillars will help us reignite sales in the coming years as we continue to innovate with great product and storytelling, modernize our marketing, and optimize and grow our digital capabilities. We appreciate all the diligent and creative efforts of all of our teams all over the world as we embark on our plan to transform and grow the company. We are committed to building shareholder value and look forward to keeping you updated on our progress. And now I'll turn the call over to Sunil for the financials.