Movado Group Inc.

Good day, everyone, and welcome to the Movado Group Incorporated first quarter 2023 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 DeMarcillis, 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 fact, 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 and welcome to Movado Group's first quarter conference call. I will review our first quarter performance and our strategic initiatives, and then Sally will review our financial results in greater detail. We would then be glad to answer any questions you might have. We are very pleased with our strong results. Despite operating in an increasingly volatile environment, we delivered very strong first quarter performance. Net sales grew by 21.2% to $163.4 million, or by 24.3% on a constant currency basis. Our gross margin for the quarter was 59.2%, a 420 basis point improvement over last year. Our adjusted operating profit for the quarter was $26.1 million or 15.9% of sales versus $14.1 million or 10.5% of sales last year. We also ended the quarter with cash of $225.3 million and no debt. While we delivered a very strong quarter, we recognize that we are operating in an increasingly challenging environment. In the U.S., we grew sales by 6.6% in the first quarter, reflecting solid growth despite lapping increased stimulus that began during the first quarter last year and the beginning impact of inflationary pressure on the domestic consumer. As interest rates rise, we expect the U.S. economy to moderate, and as such, we are maintaining a disciplined approach to spending while continuing to strategically invest appropriately to support our brands and our businesses in our biggest markets. Internationally, we saw very strong growth during the first quarter, with sales increasing 35.3% and 41.3% on a constant currency basis. We continue to see a certain amount of resiliency, especially in Europe and the Middle East. We're also seeing significant growth rates in Latin America and India as these markets begin to improve from the impact of the pandemic. As we look ahead, while our first quarter was extremely strong, we are seeing a heightened level of uncertainty, and as such, we are not increasing our outlook. We believe we are taking the appropriate actions to navigate an environment of slowing U.S. growth, higher inflation, increased currency volatility, and geopolitical instability. We also have seen a shift to brick and mortar as people return to work and ramp up travel and other activities. Turning to our Movado brand, for the quarter, our Movado brand continued to perform well with an increase in our wholesale revenues as retailers replenished inventories. This was partially offset by a 13% decline in our Movado.com business, as we lapped a very strong quarter last year, where we more than tripled the business. Despite our strong sales performance from Movado, we did see U.S. retail become more challenging as the quarter progressed. On the product front, we continue to see strong performance of our SE collection and increasing penetration of our automatic offerings. During the second quarter, we began introducing green dials within our SE collection and have received a very strong reception. In our licensed brands, we saw a very strong year-over-year performance, as much as Europe was closed at various times during the first quarter of last year. Coach continues to be led by strong product innovations and associations. We were pleased to continue our partnership with Jennifer Lopez, supporting our Grayson family of watches. In China, sales were challenged as COVID-related closures continue, and we're seeing customers returning to online channels during the second quarter. In Tommy Hilfiger, our newness continues to resonate with consumers. Our spring campaign introduced Matthew, a modern casual family done in Tommy's iconic blue color. For her, we are featuring Layla on a mesh bracelet in our spring marketing campaign. We had a very strong start to the year in Hugo Boss as the brand takes on an important marketing refresh with new brand associations like Hailey Bieber and TikTok star Cabi. We also participated in the brand's Hugo House branding event at Coachella. In both Boss and Hugo, we plan to introduce new strong innovation in both watches and jewelry throughout the year. In Lacoste, we launched a new sport watch in replay, done in black in both strap and mesh bracelets. We also had a strong reception from our customers to the Lacoste Minecraft collaboration. During the quarter, we rolled out Calvin Klein in watches and jewelry in about 400 points of sale with our key partners throughout the world with a very positive response. We have seen strong sell-through to our signature CK-branded watches, in our Everyone gender-inclusive segment, representing about 20% of the business. We're excited to continue Calvin Klein Rollout as the year progresses and believe it will become an important brand for Movado Group. In our outlet store division, we saw sales fluctuate throughout the quarter, with a modest increase in sales in brick and mortar. We continued to focus on profitability and delivered higher gross margin than last year, somewhat offset by increased compensation and occupancy expenses. In our movement in our Olivia Burton brands, we are making a great deal of progress with our new leaders in place for both brands. Olivia Burton will have some exciting new products for the fourth quarter, and we are in the process of updating the brand experience. In movement, we expanded our ceramic watch assortment and are already seeing some quick wins in this category at higher price points. We're in the process of developing movement's long-term strategy for the future. With almost 1 million movement customers in our database, we're excited about the long-term potential of the movement brand. While we had a very strong quarter, which has enabled us to maintain our outlook for the year, the macro environment presents a high level of uncertainty. Over the last several years, our teams have executed at a very high level as we have had to evolve our plans while navigating a global pandemic. We will use the discipline that we have acquired as we continue to navigate economic risks, including a war in Ukraine, higher energy prices around the world, rising interest rates, a strong dollar, and increased inflation in many categories. We expect to deliver solid gross margin while continuing to carefully manage operating expenses. With our strong balance sheet and cash position, we are focused on delivering sustainable, profitable growth. I would now like to turn the call over to Sally.