Movado Group Inc.

Good day, everyone, and welcome to the Movado Group, Inc. Third 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 Grimmer, Chairman and Chief Executive Officer, and Sally DeMarsolis, 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 Efrem Grimberg, Chairman and Chief Executive Officer of Movado Group.

Efrem Grimberg Thank you, Rachel. And good morning and welcome to Movado Group's third quarter conference call. With me today is Sally DeMarsalis, our Chief Operating Officer and Chief Financial Officer. After I've had a chance to review our third quarter performance and our strategic initiatives, Sally will review our financial results in greater detail. We would then be glad to answer questions. We are extremely pleased with our results for the third quarter. Our teams around the world continue to execute at a very high level against our strategic objectives. For the third quarter, we delivered record sales and operating earnings. Revenues for the third quarter were $217.7 million, an increase of 28% versus $169.9 million last year. Our adjusted operating income was $42.2 million, a 68.3% increase from $25.1 million last year. Adjusted operating income for the quarter was 19.4% of sales, also a record partially driven by adjusted gross margin expansion of 320 basis points to 57.7% from 54.5% last year. We continue to focus on remaining disciplined with operating expenses, which were 38.3% of sales and improvement of 140 basis points against the same period last year, while increasing marketing expenses by $8.1 million over last year. Our balance sheet also remains strong. We increased net cash by $75.9 million year over year to end the quarter with $201.8 million in cash while repurchasing 548,000 shares for $17 million. We are pleased that today we announced that our Board of Directors has approved a 25% increase in our quarterly dividend to 25 cents and an additional $50 million to our share repurchase program. Over the last several years, we have invested in and developed our digital capabilities, the COVID-19 pandemic accelerating these efforts. These initiatives proved beneficial as we began to transform into a consumer-focused omnichannel company focused on serving our consumers wherever they choose to shop. We have also evolved our marketing capabilities to be more digitally focused as the media landscape has continued to evolve. Over the last 20 months, we have made our company more efficient, continuing to build our business around world-class brands and driving consumer demand. We are driving innovation across our product portfolio and building industry-leading designs. Our flexible supply chain has allowed us to continue to have the right inventory in place for our consumers, our retail partners, our e-commerce sites, and our brick-and-mortar stores. We are serving our consumers wherever they choose to shop, whether in a department store, a jewelry store, a website, or one of our outlet stores. For the quarter, our sales grew by 41.7% in the U.S. and by 19.7% in our international markets. These results were driven by strong performance, both in brick and mortar and online. Our Movado brand continues to drive performance with the strongest growth of all of our brands for the quarter. Throughout the year, we have experienced strong demand for Movado across its product portfolio, led by compelling innovation in both our core and our bold assortments. The results have been powered by robust digital marketing efforts, complemented by an increased penetration of television advertising. During the third quarter, we were excited to launch a limited series designed by the Cuban-American artist Carmen Herrera that has performed extremely well on Movado.com, as well as enhancing our brand image. Our Movado website has continued to drive growth, today becoming the flagship for the Movado brand as both a revenue generator and a place for the consumer to familiarize themselves with Movado. For the quarter, our Movado website grew by almost 25%. We continue to raise the average selling price on our Movado website, with over 20% of our watch sales coming from watches that retail above $1,000. We are also seeing a strong response on our website to Movado jewelry for both men and women, and we believe this will continue to play an important role in the growth of Movado. In Movado, we have seen a strong response and an increasing penetration of automatic watches for the holiday season, and we are launching a new TV commercial to support our SE automatic, which we introduced this spring. We have also begun our television campaign earlier than is typical to support what we believe will be a longer holiday shopping season. Sales in our Movado Company storage division grew by 31.9% against last year's third quarter. Our e-commerce business for this division is growing to be an important component of this channel, and while traffic in our brick and mortar stores has increased, it continued to be challenged by a decrease in tourism. Overall, our average unit retail has increased, and less promotional activity has continued to drive strong increases in profitability. Our licensed brand portfolio continues to drive strong results, with almost a 28% increase over last year, powered by recovery in Latin America, the Middle East, and India, and continued strong growth in Europe and the United States. On the licensed brand side, each of our biggest brands performed extremely well with strong growth in Tommy Hilfiger, Hugo Boss, Coach, and Lacoste. In Tommy Hilfiger, innovation continues to drive our strong performance. This holiday season, our campaign will feature Harley for him and Kennedy for her. We also continue to drive great design in Tommy Hilfiger jewelry, both for him and her. We will have strong marketing support for the Tommy brand in digital platforms and using local celebrities in key markets like India, Mexico, and Europe. In Hugo Boss, we are seeing strong results at retail from our sports looks like Admiral. This holiday, we will feature our grand course collection, a dressier interpretation of a chronograph. We are also expanding our Hugo Boss jewelry business in Europe. We'll have strong support for Hugo Boss on digital platforms in our key markets. In Coach, we continue to show our iconic Arden collection, which features the signature C, Coach Proud. We're continuing to develop our men's category in Coach, with new introductions and sport luxury offerings. Coach is being supported with strong digital campaigns in both the U.S. and China. We're driving growth in Lacoste with strong innovation and marketing support. This fall, we introduced new watches in Lacoste that feature the iconic Peanuts character, Snoopy. These eco-friendly watches are made out of casserole case materials and vegan straps and contain a solar movement. In Olivia Burton, we're launching our first ever TV commercial for the brand in its home market of the United Kingdom. This holiday campaign will feature our iconic celestial collection in both watches and jewelry. In movement, we are driving higher price points. We have received an excellent response to our Raptor collection, with an average price point exceeding $200, and also to our ceramic collections. We've gotten a strong reception to our Honey Smoke colorway across our watch families. Our Movement Ocean Plastic Edition continues to perform very well. Movement will also increase their television advertising this fall as we focus on driving efficiency across our digital marketing investment. For the first nine months of the year, our teams have delivered record revenues and profits despite a volatile market. We continue to proactively manage and navigate a market that is challenged by an ongoing pandemic, inflation, and currency volatility. As we look at the balance of the year, we believe that these pressures will persist, so we will remain disciplined and agile in managing the business with focused attention on cost, while also continuing to make the important investments to support the growth of our brands, including awareness-building marketing. In terms of our outlook for the year, we are raising our full-year outlook today to reflect a return to a more normalized purchasing patterns from retailers, which drove increased wholesale shipments into the third quarter and helped us deliver our strong results. We're excited about the prospects that lie ahead for Movado Group as our teams continue to evolve our strategic plan, putting our consumers at the center of everything we do and continuing to deliver sustainable, profitable growth. Sally will now review our financial results and outlook in greater detail, and we would then be glad to answer any questions you might have.