Movado Group Inc.

Good day, everyone, and welcome to the Movado Group, Inc. fourth quarter and fiscal year 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 would like to turn the conference over to Rachel Schachter of ICR. Thank you. Please go ahead.

Thank you. Good morning, everyone. With me on the call is Ephraim Grimberg, Chairman and Chief Executive Officer, and Sally DeMarcellis, Executive Vice President, Chief Operating Officer, and 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 Ephraim Grimberg, Chairman and Chief Executive Officer of Movado Group.

Okay. Thank you, Rachel. Good morning and welcome to our fourth quarter and year-end conference call. With me today is Sally DeMarcellis, our Chief Operating Officer and Chief Financial Officer. I will first share with you some highlights for the fourth quarter we just reported, as well as our plans and strategies for the current year. Sally will then walk through our financial results in greater detail. We would then be glad to answer any questions you might have. While we are seeing improvements in terms of COVID-19 cases in the United States, We are experiencing closures across European markets and continued challenges in Latin America, especially Brazil and Mexico. We are hopeful that as vaccination rates increase around the world, we'll slowly return to a new normal. Our thoughts are with the families that have experienced personal devastation from this disease. Having just finished one of the most unusual years in our history, I couldn't be more proud of our teams around the world. Operating in the first and hopefully only pandemic in our lifetimes, I am very pleased with our overall execution and results, given the challenging operating environment. And I would like to personally thank our teams for all that they accomplished this year. During fiscal 2021, we made significant progress in how we execute as a company, which positions us well for the future. For the fourth quarter and the full year, we exceeded our expectations on both the top and bottom line. Our sales for the fourth quarter were down 6.6% to $178.3 million and showed a sequential improvement from the third quarter. Our adjusted operating profit for the fourth quarter was $23.9 million versus $8.3 million last year, a 186% improvement, and higher than the $19.9 million reported in the fourth quarter two years ago. For the year, our adjusted operating profit was $30.7 million on sales of $506.4 million. We finished the year with a very strong balance sheet with cash of $223.8 million and debt of $21.2 million. Our inventories declined by 11% and our adjusted gross margin for the quarter increased by 220 basis points to 54.9%. Given our strong performance and balance sheet, we announced this morning that our board approved a quarterly dividend of 20 cents and reinstated a share buyback program. As a company, we have effectively reinvented and evolved over our history. With the onset of the pandemic, we knew we would have to add a greater sense of urgency as we continued down the path of becoming a consumer-first company that would become a leader in the digital marketplace. Several years ago, we highlighted and focused on those priorities with the setting up of our Digital Center of Excellence. Because of those timely decisions, we were well positioned to accelerate our digital transformation during the pandemic. We also focused on disciplined management of operating expenses, as well as committing to expenses as close to the time of execution as possible. We now prioritize keeping a significant part of our expenses as variable. Our adjusted operating expenses for the quarter declined by almost 20%. As we enter this year, we intend to continue to tightly manage our operating expenses while also continuing to focus on growing our digital business and partnering with our wholesale customers. We are seeing the benefits of a consumer-first strategy in driving our product innovation and in our marketing programs. We are pleased with the overall performance of our brands. and believe that we have continued opportunities for organic growth across our brand portfolio in both watches and jewelry, which is still a small category for us that has potential for significant growth. We're also very excited that we will be launching Calvin Klein watches and jewelry in calendar 2022. As we look at our brands, we are very pleased with how Movado performed last year. and the continued momentum that we are seeing as we enter fiscal 2022. Our Movado.com business grew by 110% in the fourth quarter, driven by the acquisition of new customers, the launch of the Movado SE collection, the growth of our jewelry collection, and the continued demand for our Movado bold watches. In our wholesale channels, we also saw continued, we also continued to see sequential improvement with strong growth in e-commerce as well as sequential improvement in overall performance in brick and mortar. This spring, we are excited about our continued rollout of our SE collection, which will be supported by television advertising in May and June in support of Mother's Day, Father's Day, and the graduation gift-giving season. With a strong performance by Movado Jewelry leading up to Valentine's Day, we're excited about its future growth prospects for the Movado brand. We are also very pleased with the strong execution of our retail team, as they delivered increased profitability in our outlet division, despite serious limitations on traffic during the important holiday season. So far, we have continued to see strong momentum in our stores during the beginning of the year. Our licensed brands perform very well, considering the numerous closures in Europe, our largest region, and Latin America, an important market for our licensed brands. as sales shifted to third-party digital channels and marketplaces. In total, we saw less than a 2% decline in our licensed brands for the fourth quarter. In Tommy Hilfiger, we saw continued strong demand for our campaign watches, Mason for him and Liberty for her. We also continued to see strong online performance of our Tommy Hilfiger jewelry collection for both men and women. For the spring, we are featuring the new Parker in our tried and true blue dial with brown strap combination. In Hugo Boss, we supported two of our biggest markets, France and Germany, with television campaigns, which continued to drive share gains in these markets in Europe. We have gotten a strong response to our new Pilot Edition and our new Hugo watches. In addition, we are continuing to grow and develop jewelry for Hugo Boss. For Coach, we are seeing a strong response to our newness with consumers. The new Preston for Her features Coach's iconic T-Rose motif on a rotating disc. Our men's penetration in Coach is now 20%. In Lacoste, we continue to see a strong performance from our iconic Lacoste watches, like Boston, and we'll expand the collection with our new Tiebreaker watch. We're also collaborating with Lacoste on a new collection tied to the brand's collaboration with Polaroid. In movement last year, the brand improved its profitability as we trimmed the collection and rationalized marketing spend. As we look to this year, we're now focused on growth and are encouraged by the strong response to our first introduction of the new spring collection, Crafted in White Ceramic, which raises our average selling price. We'll continue to invest and test new marketing vehicles for the spring. While Olivia Burton's home market of the United Kingdom was closed for much of the fourth quarter, which impacted sales in our brick and mortar business, consumers continued to respond well to our OB jewelry and watches online. For the quarter, our net sales on OB.com grew by 20%. We're already seeing a strong response to our new Rainbow B collection for the spring in both watches and jewelry. As we look ahead, there still remains a significant amount of uncertainty in the global environment as the pandemic continues. As the rollout of vaccines expands, we believe we will begin to see life return to a new normal. On a global basis, we are seeing an uneven rollout of vaccination programs and delays in reopening of brick and mortar retail in certain areas of the world. As a company, the actions that we have taken position us well to continue to grow and drive both sales and profitability. We have increased the variability of our cost structure and are working diligently on improving our margins. Our innovation across our product portfolio has proven to drive consumer demand for our brand, and our investments in our digital footprint have helped to position the company for the present and the future. Our teams throughout the world have acted with a sense of urgency, and we are focused on capturing the available opportunities while driving profitability and improving results. During fiscal 2021, the company did an excellent job of significantly strengthening our balance sheet while taking the right actions to invest in our brands and our business. In fiscal 2022, we will continue to invest in growing our digital opportunities, our presence in the jewelry category, and in driving innovation across our brands. While there is still significant uncertainty remaining, we will continue to navigate the environment in a proactive manner and maintain a disciplined approach to spending. I would now like to turn the call over to Sally.