Movado Group Inc.

Good day, everyone, and welcome to the Movado Group Inc. First Quarter Fiscal 2021 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'd 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 thank you all for joining us this morning for Movado Group's first quarter conference call. I want to open my comments by recognizing how upsetting I found the recent senseless deaths of George Floyd, Ahmaud Arbery, and Breonna Taylor. Over the last 10 days, we have had numerous discussions with our associates over the issues of racial discrimination, and as a company, we have tried to do what we can to support the continuation of the discussion Racism exists and it has no place in our society, our country, or our world. As a company, we have been focused on having the difficult discussions surrounding race, diversity, inclusion, and the biases that exist within all of us. We all need to do better. Our support goes out to the peaceful protesters who are focused on eliminating racism and discrimination from our planet. As a company, we have an obligation to take a position, and I know our employees feel very strongly about that. As we entered this year, we had a solid strategy in place, focusing on growing our profits and preparing ourselves for continued growth in an evolving landscape for retail and the watch category. For the month of February and the beginning of March, we were exceeding our internal plan, efficiently managing our expenses, even while we were continuing to experience supply constraints due to the effects of COVID-19 in China. Then by the middle of March, COVID-19 began making its way throughout the rest of the world. With the safety of our colleagues and customers at the forefront, we acted swiftly to close most of our operations around the world, including our retail stores. Most of our wholesale customers began doing the same. Our teams acted quickly to manage our expenses and our cash flow. We drew down approximately $30 million on our revolver and slowed the inflow of inventory into our warehouses. We began to manage our business remotely. I am proud of how proactively and effectively our teams executed around the world, as can be seen by the strength of our balance sheet and the 26% reduction in adjusted operating expenses during the first quarter. We ended with almost $188 million in cash and with inventory slightly down from the same period last year, despite significantly lower sales due to the pandemic. All of this was accomplished while seeing a reduction in our accounts payable and accrued liabilities of 29% from last year. Our leadership team has developed a plan to optimize our results for the balance of the year while continuing to build and prepare ourselves for the future. It is widely believed that the pandemic and the closure of many global businesses will accelerate trends already in progress, such as video conferencing, work from home, the digitalization of marketing, and of course the growth of e-commerce. While we had invested in these areas for a number of years, we recognized that the pandemic would provide for a sea change in the retail industry and our selling channels. Satya Nadella, the CEO of Microsoft, has said that they had seen two years worth of digital transformation in just two months. In aligning with this belief, we know we have to adapt our company and our management structure to this new environment. To that end, today we announce a significant realigning of our leadership team to make ourselves a truly consumer-focused company for this evolving environment. We have elevated Behzad Soltani, our Chief Digital Officer and President of our direct-to-consumer business, to Executive Vice President in charge of our whole commercial organization, including both our wholesale and direct-to-consumer businesses, as well as our Digital Center of Excellence and our IT group. We believe that we will now be able to place the consumer first wherever they choose to shop around the world, from our own e-commerce sites to our wholesale accounts, their websites, our own retail doors, and digital marketplaces. We will also see a much closer integration of our websites and our ERP system, focusing on servicing our customers. In addition, we have elevated Sallie DeMarsilis, our CFO, to Executive Vice President and Chief Operating Officer. In this role, she will add our end-to-end value chain and our global distribution operations to her responsibilities. Not only are these two proven executives within our team, but they will be supported by a seasoned and proven management team. Our company has been all about building and partnering with strong brands, connecting effectively with the consumer and designing beautiful products for them at compelling values. We also have established tremendous collaborations with our wholesale partners around the world who we will continue to support. We believe that the pandemic will have a sustained effect on global economies and markets, and we are bringing our expense infrastructure in line to maximize results while ensuring that we continue to support and build our brands through innovation and effective marketing. As we operate in an economic environment with a higher level of uncertainty, we will maximize the variability of our operating expenses and commitments. We have always succeeded in adapting our organization to challenging environments, and I am confident that we will do that now. Our teams are energized by the challenge. During this pandemic, we have seen a universal strengthening of our already strong e-commerce trends for both our own websites as well as our customers' websites. On Movado.com, we saw double-digit growth despite the fact that our principal distribution warehouse in New Jersey was closed for most of the month of April. Since reopening at the end of April, we have seen an acceleration in those trends. Olivia Burton in the UK has also shown strong growth and we have seen significant improvements in our movement website in both sales and profitability trends as we prepare to migrate them to the Salesforce e-commerce platform in July. We are encouraged by an improved performance in our customer acquisition metrics and we are continuing to invest in our digital capabilities. In China, which endured the effects of the business closures related to the pandemic early in our quarter, we have seen strong demand in our e-commerce channel throughout and improving trends in our retail business. Today, all of our retail doors in China have reopened. As certain markets around the world have begun to reopen, many of our customers are exceeding both their own and our own sales expectations. In Europe, our strongest performance has been in Germany, where May wholesale sales are approaching the prior year. In North America, we have opened 14 of our 47 Movado Company stores and expect to have 41 opened by June 17th. In the 14 stores we have opened, we have performed better than expected with sales down 10.6% when compared to the same period last year. In all of these stores, we have increased the safety measures to protect both our employees and our customers. As a whole, we are seeing some green shoots as businesses reopen, but we are still planning conservatively with a focus on maximizing cash flow for the year. We are taking the necessary actions to right-side our cost structure on an ongoing basis. I am pleased that in a challenging quarter, we protected our gross margin, delivering 50.8% on an adjusted basis despite lower volumes and increased tariffs in the US versus last year. While operating in an environment with limited visibility prevents us from being able to provide a specific outlook, we are focusing on maintaining a high level of flexibility in order to optimize our performance while maintaining a solid balance sheet. This has been a start to the year that no one could have anticipated or prepared for, but I am very proud of our team's resilience and how they embraced the challenges and they have put us on a solid footing to operate within the current environment as we continue to open our business operations around the world. I would now like to turn the call over to Sallie, who will provide details on our financial results.