Movado Group Inc.

Good day, everyone, and welcome to the Movado Group Inc. Fiscal First Quarter 2020 Earnings Conference Call. As a reminder, today's call is being recorded and may not be reproduced in whole or in part without permission from the company. At this time, I would like to turn the conference over to Rachel Schachter of ICR. Please go ahead.

Thank you. Good morning, everyone. With me on the call is Efraim Grinberg, Chairman and Chief Executive Officer, and Sallie DeMarsilis, Chief Financial Officer. Before we get started, I would like to remind you of the company's safe harbor language, which I'm sure you're all familiar with. The statements contained in this conference call, which are not historical facts, may be deemed to constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual future results may differ materially from those suggested in such statements due to a number of risks and uncertainties all of which are described in the company's filings with the SEC, which includes today's press release. If any non-GAAP financial measure is used on this call, a presentation of the most directly comparable GAAP financial measure to this non-GAAP financial measure will be provided as supplemental financial information in our press release. Now I'd like to turn the call over to Efraim Grinberg, Chairman and Chief Executive Officer of Movado Group.

Efraim Grinberg Thank you, Rachel, and welcome to Movado Group's first quarter conference call. I will begin by reviewing our first quarter results and discuss the progress made on the strategic growth initiatives we expect to drive our future performance. Sallie will then cover our financial results in greater detail, as well as our outlook. We would then be glad to answer any questions. We are pleased with our first quarter results, which confirm that our teams are executing against our strategic vision that we have developed for our business. This performance was delivered despite operating in a global retail environment undergoing transformation and even as we ramped up our investments to support our future growth. For the quarter, our sales were up 15.3% or 18.9% on a constant dollar basis. Even excluding the addition of movement, our sales were up 5.2% or 8.9% in constant dollars. Our adjusted operating profit was $7.2 million, a $1.7 million decline from last year due to our planned investments behind our brands, the ongoing integration of movement, and our digital initiatives. We were pleased to deliver an 80 basis point improvement in gross margin, despite facing significant currency headwinds, which also had a $1.4 million negative effect on operating profit during the quarter. Our successful performance over the last number of quarters has been driven by recognizing the challenges in the marketplace and developing strategies that are driven by consumer-focused innovation and marketing initiatives. We continue to evolve our marketing and storytelling across our entire brand portfolio. In Movado, we introduced very strong video initiatives and social media content in support of our innovative, bold ceramic products during the Mother's Day holiday, driving excellent results. In addition, we will launch two new TV commercials this week that truly symbolize an updated view of the iconic Movado brand. This television advertising will be our first spring TV campaign in a number of years and it is aimed at building momentum behind the Movado brand for Father's Day and graduation and position the brand well for the important second half of the year. We are excited about the product and marketing initiatives that we have coming during the second quarter and for the balance of the year, including the introduction of our new Movado Connected watch for men and our first smartwatch for women during the third quarter. While the mall-based jewelry chain distribution remains challenging, We are making strong progress across e-commerce platforms for both our retailers and Movado.com. Our investment in our digital initiatives are paying off as we have seen continued acceleration in the trends of our Movado.com business, even after a strong Q4 performance. After the first quarter end, we upgraded Movado.com to Salesforce's latest commerce cloud technology. We believe this new platform will help us to continue to grow our Movado.com business in the future. Our licensed brand business continued its very strong performance from last year into the first quarter, even while facing a difficult market for fashion watches on a global basis. We saw a double-digit sales increase in this division driven by strong performances in Europe, Asia, and Latin America. Tommy Hilfiger continued to drive strong growth and many others, fueled by the continued momentum of the parent brand and through our digital marketing initiatives featuring Tommy Hilfiger brand ambassadors Zendaya and well-received new products like Sean, a blue IP watch for men, and Jenna, a two-tone mesh introduction for women. We will be expanding the retail locations of our new interactive point of sale display for Tommy Hilfiger, which has proven to accelerate sales through in the locations where we have deployed them. led by our Perry and Charles collections introduced last year continue to drive strong sell-through, particularly in the U.S. We have also launched a flagship Coach watch store with Tmall in China and are in the process of building a meaningful marketing presence by collaborating with local influencers in that market. Hugo Boss continued to perform solidly while facing headwinds in its biggest market, the United Kingdom, where high street retailers have been very challenged as the economy faces Brexit uncertainty. Finally, in our licensed brand division, Lacoste has also continued its success with great new products that coordinate very well with the Lacoste brand, including a new introduction of our iconic Lacoste 1212 collection, now available at under $100. Olivia Burton continues to deliver strong results for Movado Group. As we grow the brand's global presence and distribution, we have continued to grow both our watch and jewelry business and are now working on developing strong content to support our e-commerce and wholesale growth initiatives for the second half. We will also transition OliviaBurton.com's business to Salesforce's latest release later this quarter. We continue to believe that Olivia Burton represents a significant opportunity in the growing e-commerce marketplace. In Movement, we have been focused on integrating the Movement brand into Movado Group's infrastructure and systems and expect this to be nearly completed during the third quarter of this year. We're also working on introducing the Movement brand into brick-and-mortar distribution, and our team in Los Angeles is developing tremendous new products for the important second half of the year. They are also developing an exciting marketing program, which includes both digital marketing initiatives as well as an increased television advertising program to continue to build the movement brand with younger consumers. Movement's positioning is highly relevant to millennial consumers and will continue to develop this trend as we expand the brand's U.S. distribution. We will also roll out marketing initiatives in our key international markets. to support wholesale expansion. As digital customer acquisition costs continue to increase, we believe that continuing to drive and grow the brand image is crucially important, as is the development of our wholesale distribution to help complement movement's strong digital presence. We have continued to make significant progress since we have established our digital center of excellence a little over a year ago. We know that to reach consumers in this evolving retail market, Messaging needs to be very different today than in past years, and where we reach them has also dramatically changed. We have made progress in this area, and we're starting to see the results in our Movado.com and OliviaBurton.com businesses, as well as the digital support that we're able to provide for our wholesale partners and our licensed brands. We have also invested behind building our data sciences capability and using software to understand our consumers and their changing desires. As we get closer to our consumers, we will make greater progress in becoming a leading consumer-centric omni-channel company in our industry. On the retail side, our outlet store sales were flat for the quarter. While this included four additional stores relative to the same period last year, it also reflected the temporary closure of two of our high-volume stores for much of the quarter for renovation. We managed to offset continued challenging traffic trends with increased gross margins and disciplined expense management. While the outlook for tariffs remains uncertain, we believe that most of the value of our U.S. imports will not be subject to the incremental tariffs that could potentially be implemented this summer. There's a great deal of uncertainty in the global political and economic environment and a sea change in the watch space and how retail is evolving. In addition, there is now uncertainty on the impact of global trade issues that have on both retail and economic growth. As a company, we have been forward-looking by making the changes needed to succeed in the future. We're also focused on managing the variables that are within our control. We're able to deliver solid results for the first quarter despite making significant investments to support our growth initiatives. including the integration of movement into Movado Group's infrastructure. We're optimistic that the initiatives we've developed including innovation across our product portfolio and creative marketing approaches are resonating with consumers and will continue to yield results throughout the year. I will now turn the call over to Sallie to review our financial results in greater detail and then we'd be glad to answer any questions.