Movado Group Inc.

Good day, everyone, and welcome to the Movado Group Inc. Fiscal Third 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. Good morning and welcome to Movado Group's third quarter conference call. I will provide some highlights on the quarter and our strategic initiatives, and Sallie will walk through our financial results in greater detail. We would then be glad to answer any questions you might have. As we stated in our second quarter earnings call, we are operating in a challenging retail environment for our channels of distribution and our category, particularly in the United States and the United Kingdom. This continued to be the case in the third quarter. While our increased investments to elevate our brands drove market share gains, we fell short of our sales plan due to market growth below our expectations. This combined with our increased marketing efforts drove reduced profitability. For the third quarter, our sales were $205.6 million, or 1.6% lower than last year, although sales increased 0.5% on a constant currency basis. Our adjusted operating profit was $24.2 million versus $35.7 million during the same period last year. For the quarter, we invested $7.3 million more in marketing and supporting our brands versus the same period last year. Based on our results for the third quarter and existing marketing commitments, we are updating our outlook for the year. While the watch category has had a challenging year, which in turn has impacted our performance, we have faced similar challenges in the past and know what we need to do. We know there are opportunities for us to drive improved performance and profitability. As we plan for next year, we will be focused on ensuring appropriate cost structure and level of investments for our revenue expectations. Although our results for the quarter are below our expectations, we believe that with our strong brand portfolio, our product innovation, and the increased support we are giving our brands, we will maximize our performance at retail during the upcoming holiday season. By the end of the year, we will have invested an additional $30 million in our marketing efforts, which are further strengthening our position within the watch category. Turning to some highlights for the quarter. While the U.S. wholesale business continues to impact Movado's results, Movado continues to maintain the leading position within the $500 to $1,500 price category in the U.S. While the category and channel has been challenged, we see an opportunity to further enhance our assortment in watches between $1,000 and $3,000. On the e-commerce side, we grew our Movado.com business by 98% during the last quarter. In our Movado Bold offering, we continue to perform very well with ceramics, Bold Evolution, which is now available in a woman's size, and our new Fusion collection leading the way. We have also had an excellent response to our new Movado Connect 2.0, our second-generation smartwatch. Our increased television campaign for the holiday season will launch on national cable networks next week with extra support in key markets like New York and Los Angeles. Year-to-date, our licensed brands have grown 6.3% and 9.7% on a constant currency basis, with strong growth in Tommy Hilfiger, Lacoste, and Coach. Our product innovation, along with our digital marketing, has helped drive our Tommy Hilfiger growth. In Coach, our successful Perry and Charles family continues to drive sell-through. We're also excited to introduce our new iconic Coach men's collection for the upcoming holiday season. In Lacoste, we continue to drive performance with innovation in our Lacoste 1212 collection. And in Hugo Boss, we're excited about our new air, land, and sea collections. The most important season for movement is ahead of us. This week, we just launched our first national television campaign, which we're very excited about, featuring a number of MVMT's genuine relationships. The commercials are built to showcase the product while telling the MVMT brand story. We remain focused on building MVMT into an important brand within the retail market. During the last quarter, we successfully introduced MVMT into 150 Macy's doors. At Olivia Burton, we continue to be one of the leading women's fashion brands in the UK and remain focused on building our global distribution footprint. For the holiday season in the UK, we launched a collaboration with Cadbury on their iconic Cadbury Roses holiday tin. Olivia Burton continues to perform very well in Asia and will continue to drive results with great new designs in both our watches and jewelry. Our Movado Company stores had a strong end of the quarter. In an increasingly promotional environment within the outlet centers, we are giving up some profitability in order to drive sales growth. We are seeing good momentum as we enter the most important part of the year. We have made great progress in growing our digital footprint as a company, and we are seeing strong growth in our licensed brands and important regions like France, Germany, Mexico, and the Middle East. In China, we are accelerating growth in Movado, Coach, and Olivia Burton. We are also progressing in the integration of Movement and Olivia Burton into our global infrastructure and continuing to build these two young brands. In closing, while we are disappointed with our performance this quarter, our brands remain well positioned within the watch category, and we're taking the necessary actions to drive improved performance and profitability going forward. I would now like to turn the call over to Sallie.