Movado Group Inc.

Q3 2022 Earnings Conference Call


spk_0: the day everyone and welcome to the move out of group inc third quarter two thousand twenty two earnings conference call as reminder today's call it be recorded in may not be reproduced in whole or in part without permission from the company at this time i would like to turn the coffers over to rachel schachter of i see our please go ahead
spk_1: thank you good morning everyone with me on the cause i phone grimmer chairman and chief executive officer and sally demersal executive vice president chief operating officer and chief financial officer before we get started i would like to remind you of the company safe harbor language which i'm sure you're all familiar with a statement contain and this conference call which are not historical facts maybe be able to constitute forward looking statements within the meaning of the private securities litigation reform act of nineteen ninety five actual feature results may differ materially from los suggested in such state and due to a number of risk and uncertainty is ah all which are describing the company's value of the as see which includes today's press release of any non gaap financial measure is used on this call a presentation of the most directly comparable got financial roger to the non gaap financial measure will be provided as supplemental financial information and our press release now i'd like to turn the car all over the at them grammar chairman and chief executive officer of nevada group
spk_2: thank you rachel and good morning and welcome them about a group third quarter conference call with me today is sally be marseilles or chief operating officer and chief financial officer after i had a chance to review or third quarter perform and and our strategic initiatives sally will review our financial results in greater detail oh we would then be glad answer questions we're extremely pleased with our results for the third quarter our teams around the world continue to execute at a very high level again for strategic objectives for the third quarter we delivered record sales and operating earnings revenues for the third quarter were two hundred and seventeen point seven million dollars an increase of twenty eight percent versus one hundred and sixty nine point nine million dollars last year are adjusted operating income was forty two point two million dollars a sixty eight point three percent increased from twenty five point one million dollars last year adjusted operating income for the quarter was nineteen point four percent of they'll also a record partially driven by adjusted gross margin expansion of three hundred and twenty basis point to fifty seven point seven percent from fifty four point five percent last year we continue to focus on remaining disciplined with op rating expenses which were thirty eight point three percent of sales and improvement of one hundred and forty basis point against the same period last year while increasing marketing expenses by a point one million dollars over last year our balance sheet also remains strong we increase naqqash by seventy five point nine million dollars year over year to end the quarter with two hundred and one point eight million dollars in cash by repurchasing five hundred and forty eight thousand shares for seventy million dollars we're pleased that today we announced that our board of directors has approved a twenty five percent increase in our quarterly dividend to twenty five cent and an additional fifty million dollars to our share repurchase program over the last several years we've invested in and develop a digital capabilities the colvin nineteen pandemic accelerating these efforts these initiatives prove beneficial as we began to transform into a consumer focused on any channel company focused on serving our consumers wherever they choose to shop we have also evolved or marketing capabilities to be more digitally folk as as the media landscape has continued to evolve over the last twenty month we have made our company more efficient continuing to build our business around world class brands and driving consumer demand we're driving innovation across our product portfolio and building industry leading design are flexible supply chain has allowed us to continue to have the right inventory in place for our consumers are retail partners are he care ecommerce site and are brick and mortar stores we are serving our consumers wherever they choose to shop weather in a department store for jewelry store a website where one of our outlet stores for the quarter or sales grew by forty one point seven percent in the us and by nineteen point seven percent in our international market these results were driven by strong performance both in brick and mortar and online i'm a votto 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 from of auto across as product portfolio led by compelling innovation in both our core and are bold assortment there is also been powered by a robot digital marketing efforts complemented by an increase penetration of television advertising during the third quarter we're excited to launch a limited series designed by the cuban american artist carmen herrera that has performed extremely well on mmabatho dot com as well as enhancing our brand image i'm about a website is continue to drive growth today becoming the flagship for them of auto brand as both a revenue generator and a place for the consumer to familiarize themselves with movado for the quarter i'm about a website grew by almost twenty five percent we continue to raise the average selling price on him about a website with over twenty percent of our white cells coming from watches the retail above a thousand dollars we're off as being a strong response and i went by them a auto jewelry for both men and women and we believe this will continue to play an important role in the growth of mulatto and levada we have seen a strong response and an increasing penetration of automatic watches for the holiday season and we're launching a new tv commercial to support our as the automatic which we introduce the spring we have also begun are turret television campaign earlier than is typical to support what we believe will be a longer holiday shopping season thales and i'm of auto company stored division grew by thirty one point nine percent against last year's third quarter or ecommerce 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 continue to be challenged by decrease
spk_3: in tourism
spk_2: overall average unit retail has increased and less promotional activities continue to drive strong increases in profitability our life is brand portfolio continues to drive strong result with almost twenty eight percent increase over last year powered by recovery in latin america the middle east and india and continued strong growth and europe and the united states i'm a licensed brands died each of our biggest brand performed extremely well with strong growth in tommy hilfiger hugo boss code and look past and tommy hilfiger innovation continues the driver strong performance this holiday season or 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 are strong marketing support for the tommy brand in digital platforms and using local celebrities and key market like india mexico and europe and hugo boss we're seeing strong without the retail from our book from our sports looks like admiral this holiday will feature a grand course collection address the your interpretation of a chronograph are also expanding our hugo boss jewelry business in europe will have strong support for hugo boss and digital platforms in our key market and code we continue to show iconic arden collected which beaches the signatures the coach proud were continuing to develop our men category and coach with new introductions in sport luxury offerings coach is being supported with this with strong digital campaign in both the us and china we're driving growth and look past with strong innovation and marketing support this fall we introduce new watches and look past that feature the iconic in the iconic peanuts character snoopy these ego family watches are made out of the qasr okay material and vegan straps and contain a solar movement and olivia burn we're launching our first average tv commercial for the brand and home market of the united kingdom this holiday campaign will feature iconic celestial collection in both watches and jewelry in movement we're driving higher price point we have received an excellent response to our wrap their collection with an average price point of leading few hundred dollars and also to our ceramic collections we've gone a strong reception to our own honey smoke color way across i watch families i movement ocean plastic addition 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 or teams have delivered record revenues and profits despite a volatile market we continue to pro actively managed to navigate a market that is challenge by an ongoing pandemic inflation and current the volatility as we look at the balance of the year we believe that these pressures will proceed percent so we will remain disciplined and agile and managing the business with focus attention on costs while also continuing to make the important investment to support the growth of brand brands including awareness building
spk_4: marketing
spk_2: in terms of our outlook for the year we're raising our full year our luck today to reflect a return to more normalized take purchasing patterns from retailers which drove increased hotel segment in the the third quarter and how this deliver our strong result we're excited about the prospect that lie ahead from of auto from or mulatto group as our teams continue to evolve or strategic plan putting our consumers at the centre of everything we do and continuing to deliver sustainable profitable growth valley will now review our financial resolve an outlook in greater detail and we would then be glad to answer any questions you might have
spk_5: thank you i from and good morning everyone portrayed call i will review our financial belt or the third quarter and year did a period of fiscal two thousand and twenty two and then i will provide an update on our outlook for the year iconic to they will focus on adjusted result please refer to the description up all of a special items included in our results for the third quarter and near did a period of fiscal two thousand and twenty two in fiscal two thousand and twenty one in our press release issued earlier today with auto include a reconciliation table of gap and non gap measure certain comment on can compare than the fiscal two thousand and twenty to provide additional contact is it a significant impact of covert nineteen and prior year result our performance for the third quarter of this fiscal year exceeded our expectation and resulted in record net sales and operating profit
spk_6: our financial performance of highlight by overall strength and global sales expansion and gross margin and operational disciplined will once again ended our quarter with a strong balance sheet and maiden meaningful progress and our strategic an incident
spk_5: but the third quarter of fiscal two thousand and twenty two sales were two hundred and seventeen point seven million dollars as compared to one hundred and sixty nine point nine million dollars last year and increase of twenty eight point two percent strong response to our brand and offering lead to net sales increases across our segment of own brand lightens france and company doors as well as across most geography most notably the united states that also seeing improvement in europe and latin america us net sales increased forty one point seven percent and international net sales increased seventeen i'm sorry nineteen point seven percent as compared to the third quarter of last year net sale total net sales increased five point nine percent as compared to the pre pandemic third quarter of fiscal two thousand and twenty with an eight point three percent increase in the us and a four point one percent increase in international never fail gross profit as a percent of failed with fifty seven point seven percent compared to fifty four point five percent in the third quarter of last year the three hundred and twenty basis point increasing gross margin was primarily driven by favorable channel and product mix and leverage uncertain fixed costs primarily due to the increase in sales over the prior year period operating expenses were eighty three point four million dollar that's compared to sixty seven point four million dollars for the same period of last year the increase increases threatened by higher marketing fences and performance based performance based compensation as well as general operating expenses to directly support the significant increase in failed love still continuing to be disciplined and operating expenditures as a percentage of sale operating expenses for the quarter decreased to thirty eight point three percent from thirty nine point seven percent in the third quarter of last year expanse and growth market expensive and gross margin and leverage on are operating expenses in the third quarter drove a seventeen point one million dollar increase in operating income the forty two point two million dollars as compared to twenty five point one million dollars in the third quarter of fiscal two thousand and twenty one we recorded income tax expense of nine point seven million dollars in the third quarter of fiscal two thousand and twenty two as compared to eight million dollars in the third quarter of fiscal two thousand and twenty one net income in the third quarter with thirty two point one million dollars or one dollar and thirty six cents per diluted share as compared to a net income of sixteen point four million dollars or seventy cents per diluted share and a year ago period now turning to our year to date results sales for the nine month period until october thirty one two thousand twenty one for five hundred and twenty six point four million dollars as compared to three hundred and twenty eight point one million dollars last year total net sales increased three point two percent as compared to the pre pandemic nine month period of fiscal two thousand and twenty with a fifteen point four percent increase in the united states partially offset by a five point four percent decrease in international net fail gross profit with two hundred and ninety eight point two million dollar fifty six point seven percent failed as compared to one hundred and seventy three point three million dollars or fifty two point eight percent of failed last year the increasing both margin rate for the nine month with due to favorable channel and product mix favorable changes in foreign currency exchange rate and leverage uncertain fixed costs for the nine month ended oct thirty one two thousand twenty one operating income with eighty one point eight million dollars as compared to six point nine million dollars in fiscal two thousand and twenty one total operating income was forty point one million dollars higher than the pre pandemic nine month period of fiscal two thousand and twenty as a percent of net sales operating income was fifteen point five percent and the first nine months of fiscal two thousand and twenty two as compared to a two point one percent in the first nine months of fiscal two thousand and twenty one and eight point two percent in the first nine months of fiscal two thousand and twenty net income would be two point three million dollars or two dollars and sixty three cents per diluted share as compared to one point seven million dollars or seven cents per diluted share in the year ago period now turning to our balance he has at the end of the third quarter with two hundred and one point eight million dollars an increase of a lot of almost forty million dollars over last year while paying down thirty seven point three million dollars of debt and repurchasing seventeen million dollars of common stock during the same period accounts receivable or one hundred and thirty six point four million dollar up thirty two point nine million dollars in the same period of last year primarily due to the increase in sale inventory the end of the quarter with them six point one million dollars or three point five percent although the same period of last year or failed increased over sixty percent capital expenditures for my month for the nine month period where three point six million dollars and depreciation and amortization expensive as nine point four million dollars which included two point five million dollars related to the amortization of acquired and tangible at that of olivia burton and movement as ever mentioned during the third quarter retailers returned to a more normalized purchasing pattern which drove wholesale shipments to some degree and contributed to our strong result and as such we are increasing our overall outlook for the year we currently fact fiscal two thousand and twenty two net sales in a range of approximately seven hundred and fifteen to seven hundred and twenty million dollars
spk_6: first profit of approximately fifty six point five to fifty seven percent of that sale
spk_5: operating profit in a range of fifteen to fifteen point five percent of net sales and deluded earnings per share of approximately three dollars and thirty five cents to three dollars and forty five them assuming no changes in the current tax laws our current outlook assume a twenty five percent effective tax rate this update outlook does not contemplate significant additional covert nineteen related retail closer which can adversely affect result
spk_6: i would now like to open the call up for question
spk_0: and you we will now be conducting a question and answer session if you would like to ask a question please press star one on your telephone keypad a confirmation tom will indicate your lives in the question que
spk_7: you may press start to if he would like to remove your question than the que
spk_0: so participants using speaker equipment it may be necessary to pick up your hands up before president charges
spk_7: one moment please volleyball for question
spk_0: thank you are first question comes from line of oliver ten with and please keep your question
spk_8: for hi thank you very much congrats on great result of the guidance implies my subside the were three her fourth quarter i'm could you provide more detail on expectations that went into the guidance and it sounds like you're quite optimistic for the help of the consumer i would love to hear those thoughts are relative to what you're saying what supply chain thank you
spk_2: ah well we we i think our team's gonna a fabulous job of managing supply chain for start with that first ah and ah
spk_3: and and we've had the right inventory at the right time we we feel like we're gonna continue that pattern and and fortunately for us were also have
spk_9: i'm with always blown most of our inventory
spk_2: i'm into market and and so we we have not had shipping delays that some of experience ah i think gun on the and and if i were were being at a healthy consumer and and and continuing on demand both the a in brick and mortar and and ecommerce them and at that you know in in most of our key market around the world leaps also seen a bounce back and in latin america over the over the last quarter ah and so i think what we're feeling right now pretty good about the consumer of his be there are some headway in like inflation and inflationary
spk_10: pressure's on that they can effect
spk_3: overall result
spk_2: in in the short to medium the term ah but that and growth of continuing him to modern our expenses bag both the while continue to increase or marketing investments at the same time such as philly in in he market for for the holiday season and behind he brands
spk_5: so so right now what we're excited about the prospects for for the fourth quarter of the value if you'd like to add something to that
spk_11: ah now i think that that covers no that it on
spk_8: fucking our to allow the holiday season africa dahlia an inventory vs sales on how should we model that that it looks like you're on a on a he you could be in a pipe position at are you either sell thing lost on the table or not on and then as we model gross margin
spk_5: and then near and longer term and the expect continued leverage on six cause i mean are there of items happening at a cost a good for that we should be aware of
spk_6: okay that will start with inventories though as i as i mentioned you know we did have a small population in inventory and when are you without later today of be that are i'm finished that the inventory of actually slightly up and are couponing tree that way what slightly down with is a good place to be a we feel like we're and a really good place for holiday even based upon what our core kathy
spk_5: and on failed are and and as again and that from land aren't the planking really have done an outstanding job at meeting the challenge that and i'm facing everyone around the globe right now so we feel it during the played with inventory the right product it's very current it's core for selling
spk_6: so fascinating there at the habit by working on birth margin on yep we will continue that as part of our part with him in his heart that are in gross margin that we will on continue to manage to though the fourth quarter an will look a lot like it was this quarter based on our outlook that we just gave an you know the strong year for
spk_8: gross margin with changes that have been and that we've been thing that add the growth of the us will fail to growth of them a lot of brands on year over year the girl thing that contribute to a stronger martin and we should continue to see that in the fourth quarter relative to what week very in the third quarter looking at from you have run out really globally diversified a business model either call up for regions
spk_2: and or channels that i've been stronger vs weaker and on the us department store fry how how are you feeling about the trends your thing there you mentioned a longer season as well you know either i think that and and and on on on a regional basis
spk_12: we were seeing are strong as performance and in north america american it's been there quite a few years than back and say that we're really happy
spk_2: a about that where's the improved performance than in europe and and and certainly and in latin america which caused our biggest markets or brazil and mexico and brazil having a nice not not up to it i'd but but adding and i bounce back from where where it was last year the middle east were off as being
spk_13: strong the results in it is well i think if there's one challenge right now would probably be china where brick and mortar is challenge as as bad as
spk_2: really limited
spk_3: as people kind of stay out of malls or shopping in person
spk_2: because of increased concerns over over of it can i we've all had obviously i'm sorry we've also seen india bounce back
spk_9: pretty well and then i department store business continues to be a very strong or off as being a improvement in in a jewelry store or change lose restore channel
spk_2: so so both the but the performing
spk_8: well and department stores been performing well for us for quite a while now
spk_2: and from what about prices and price increases and how you're thinking about like for like vs max specially i'm as you in a work through some of the inflationary pressures ah i think you know what will certainly be ah
spk_3: and them price increases next year we've already passed some especially in in mmabatho ah i'm and and so far
spk_8: the consumer has accepted those the those price increases and and i think we're in an environment right now and and the strength of our brand allows us to continue to have some pricing leverage as we enter next year
spk_2: okay and on the digital frontier the digital centre of excellence i mean you called out he called up television and other mediums and what's happening with their customer acquisition cost and strategy and my bride or oh sure
spk_14: yeah the i think it all complement each other and and and you know a cat television is is is always been our ah
spk_2: probably
spk_15: the place where we can we build brand awareness and and
spk_2: and ah it seems daughter compliment digital advertising very well i'm it's well known that because the digital advertising and marketing his increases demand ah i'm at as increased and and so i think having a at three hundred and sixty degree marketing effort ah
spk_3: is beneficial to the company and that includes things like outdoor ah
spk_8: things like or visuals at the point of sale also really important ah i'm and that we'd certainly increased our our television budget that is you're on a global basis
spk_2: okay and i'm will all be on the stores for black friday and holiday but other highlights for your strategy on as we approach the season know unlike any other in the history of our careers you know for what you're doing for black friday and so that a higher than that
spk_16: you know what where were being i'm fairly consistent with with what we've done in in in the past ban on black friday were not in a in a highly promotional category ah and ah and and black friday while it's important the whole month is really important
spk_2: and also and and especially the last and days ah the before before a holiday but certainly they'll be compelling values bert for consumers over over the black friday week and i think i'm black friday hopefully this year should benefit also from the fact that last year there was really in many market limited capacity that was allowed in stores that at any one time and and it here
spk_9: at least in the united states those restrictions on the don't exist
spk_8: yes more more people continue to get vaccinated
spk_17: okay and from on the product innovation fine and you made a lot of great changes and really executing on a lot of family some other reinvention of plastic as well as what's on your mind you know for what the consumer wants and what what features and styling in a you're pursuing a core movado and any other highlights across the park
spk_2: polio bye by they got our team is donna a really good job and and and executing innovation and and and driving design leadership across our brand portfolio and increased use them of diverse materials from ocean plastic to the use of ceramic guy across our portfolio and and then i'm also being able to upgrade what we gave our consumer so while we're selling and higher price point were also able to continue to give them great values so as as i mentioned
spk_18: and and increase the used of automatic movements within them of auto brand
spk_2: and ah and you know for us i was really impressed with selling online
spk_8: over twenty percent of of a of our thousand i'm about a dot com business where of was wear watches over a thousand dollars so that the a really healthy i'm number again on last two knitted a little technical that idea hey and the apple i o s changes the privacy changes have that had much impact on your business and then
spk_19: on shareholder returns as reminded them than different priorities you have a nice cash balance and and you have a track record of returning for shareholders as well
spk_2: i'm so so certainly it's made that the privacy increase the privacy restrictions have made and made it more complicated and of also raised the as i talked earlier raise the cause the digital marketing ah i'm an end but we do believe that there are there are other areas also compliment that which which improve the efficiency of
spk_10: by digital marketing so part part of you know
spk_2: part of executing at a really strong digital marketing campaigns you have to reach consumers across all different parts of the final are starting with the top of the final in there are many ways to to reach consumers that at the top of the final ah i'm and then and then convert them online
spk_9: both ourselves and and as bar are wholesale partners ah
spk_2: convert convert our our consumers though i think what we're learning how to navigate bad efficiently and then the the second question ah you can remind me here holder our dinner held holder returns we were obviously believe in paying a dividend we increased our david and an hour and a really pleased so we did that fuck for this quarter and we've also pot seventy million dollars to stock car back at the be do since the beginning of the year most of it and in the second quarter and we increased although our our share repurchase
spk_3: program by another fifty million dollars i think we still have seven or eight million dollars left on the existing plan and then this whole be an incremental fifty million dollars not our intention is to continue to generate cash and to be able ah
spk_2: to ah utilize it appropriately
spk_7: thank you bye sugar had a greeting okay thank you very my oliver have a great holiday
spk_2: we have reached the end of the question and answer session i would malik turn the floor back over to management for closing comments oh god like the bank all of you for for listening and participating today and i wish everybody
spk_7: a great thanksgiving holiday and and we look forward to to the important telling season that that that the had as well i'm so thank you very much

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