Movado Group Inc.

Good day, everyone, and welcome to the Movado Group, Inc. Second Quarter 2022 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 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.

Thank you, Rachel. Good morning, everyone, and welcome to Movado Group's second quarter conference call. With me today is Sally DeMarcellis, our Chief Operating Officer and Chief Financial Officer. After I've had a chance to share with you the highlights of our second quarter performance, Sally will review the financial highlights in greater detail. We would then be glad to answer any questions that you might have. We are very pleased with our second quarter results and the momentum that we have been building over the past several quarters. Our teams have done an excellent job of executing and delivering on our plans. The second quarter represented a record in terms of both revenue and operating profit for the period. Our sales grew by 96.4% to $173.9 million, or 10.2% from the pre-pandemic levels of fiscal 2020. Our adjusted operating profit grew to $25.5 million versus a small loss in fiscal 2021. Our adjusted operating margin was 14.6%, a record for the second quarter. We also continued to build on our already strong balance sheet with cash of almost $200 million and no debt, and with inventory growing just 5.7% despite the near doubling of net sales. Over the last 18 months, our teams have made tremendous progress in driving the opportunities that we had ahead of us in a quickly evolving retail and digital marketplace. We prioritize our investments in driving performance and continuing to support our brands as the pandemic unfolded. Over that time, we have delivered improving results and our last two quarters have generated record operating profits as we continue to drive efficiency in our marketing efforts while also investing in innovation and brand building. We have seen our e-commerce penetration continue to grow as a company, and we have improved gross margins by 540 basis points in the second quarter year over year, laying a solid foundation for continued improvement. With 28.5% growth versus the second quarter two years ago, our U.S. business continued to gain momentum, led by the very strong performance of our Movado brand, both on digital platforms and improving brick-and-mortar stores, and our Movado company stores. We're also seeing a strong response in the United States to innovation in our Coach brand, as well as Hugo Boss and Lacoste. Internationally, despite continued COVID-19 COVID-related closures, we still had a strong quarter led by Europe, Mexico, and China versus last year and the same quarter two years ago. That performance was led by our Tommy Hilfiger brand in Europe and Mexico and the continued growth of Coach in China. In our Movado brand, we drove outstanding results as we continue to strategically elevate the brand image. Our Movado.com business for the quarter grew by 71% over last year, including continued growth in our jewelry category. Movado.com is also selling higher price points, driving up our average selling price. We continue to focus on building a direct relationship with our Movado consumer base and becoming closer to the ultimate customer. The Movado wholesale business was also very strong for the quarter, with continued growth in our department store channel driven by the return of consumers to brick-and-mortar shopping. We are also seeing improved performance from Movado watches in our jewelry store distribution. On the product side, we continue to develop Movado SE, and we recently introduced our SE Automatic, which starts at $1,795.00. In our Bold family, we see continued strength in our evolution collection and generated a very strong initial response to our new Bold Verso, both for him and for her. On the marketing front, we experienced strong response to our digital marketing programs, complemented by television advertising support to support Mother's Day, Father's Day, and the graduation gift-giving season. We will continue to support our Movado marketing efforts with increased investments during the third and fourth quarter. In our licensed brands, we drove growth in Tommy Hilfiger, both against last year and pre-pandemic levels, driven by product innovation in both jewelry and watches. Iconic watches like Parker for him and sporty boyfriend watches for her drove performance. For the third quarter, we will be introducing the new Boulder looks for him in the Harley and Maverick families and crystal embellishments for her in our Kennedy collection. On the marketing front, we supported the Tommy Hilfiger brand with television in Germany for Mother's Day and strong digital campaigns around the world. In Coach, we experienced strong performance both in the U.S. and China with double and triple digit growth respectively versus pre-pandemic levels. Innovation across the Coach brand has been driving performance with new dial treatments as well as crystal embellishments. For the third quarter, we will expand our winning Arden family with line extensions as well as expand our men's collection with the introduction of Kent, a new sport chronograph. In Coach, we have seen a strong response in China to our Chinese Valentine's Day campaign, which took place earlier this month. In Hugo Boss, we saw an almost 56% increase over last year, despite significant retail closures in Europe, our biggest market for Hugo Boss. Our performance was driven by the expansion of our pilot family and the introduction of our Santiago family. For the third quarter, we're excited about the introduction of our new 46-millimeter Grandmaster Chrono and the expansion of our women's assortment with the introduction of Grand Course and Novia. Our Lacoste business continues to be driven by the continued success of the Lacoste brand. It is truly an iconic brand, and we continue to drive performance by the development of our L1212 collection and our tiebreaker families. We're looking forward to introducing the new lady crop with crystal embellishments during this upcoming quarter. During the quarter, we saw sales grow in our outlet division by 168% versus last year and 31.8% versus pre-pandemic fiscal 2020 while improving operating margin. For the first time, we are now offering styles made exclusively for our Movado Company stores, and we are seeing a strong initial response from consumers. For the quarter, both Olivia Burden and MVMT exceeded their performance over last year. In MVMT, we introduced We introduced new collections that we were excited about, led by our new ceramic chronograph that seems to sell out as quickly as we bring it in, and our ocean plastic edition, which is made from reclaimed ocean plastic and features a solar movement. Both collections are at higher price points for the movement brand. In the early stages of the third quarter, we are seeing a strong response to our new Raptor family in movements. In Olivia Burton, we introduced our new iconic Tea Party collection and are excited to expand our already successful Celestial collection, which is right on trend with a renewed interest in space. During the second half, we are planning on launching our first Olivia Burton TV commercial in the UK, complemented with a strong digital marketing effort. As a company, we have made great progress over the last 18 months. The efforts that our teams have made in driving innovation on the product and marketing front and controlling our expenses while still investing in our brand-building efforts have delivered strong results. We are excited to deliver a record operating margin for the quarter, and we are focused on continuing to support our strategic initiatives and investments to drive growth and performance over the long term. We believe our brands have additional runway to drive growth and we are preparing for the launch of Calvin Klein watches and jewelry in January of this fiscal year. While markets have been reopening around the world, we remain concerned about the potential impact of new COVID-19 variants and we will continue to plan prudently. Over the last few years, our business model has changed with a higher proportion of our sales coming from e-commerce and direct to consumer businesses. The investments that we have made in our digital efforts have provided a meaningful return, and we expect to see continued growth from this channel over the next several years. As a company, we have had a successful track record of navigating challenging times proactively and positioning ourselves to drive improvements as times improve. I could not be prouder of what our teams have accomplished during this period and setting the stage for the second half of the year in the future. During this pandemic, we have accelerated our transformation as a truly consumer-driven company. I would now like to turn the call over to Sally.