Movado Group Inc.

Good day, everybody, and welcome to the Bovado Group Incorporated third 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 Schatter 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 Technical 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 Grunberg, Chairman and Chief Executive Officer of Movado Group.

Thank you, Rachel. I would like to welcome you to Movado Group's third quarter conference call. With me today is Sally DeMarcellis, our Chief Operating Officer and Chief Financial Officer. I will first review the highlights of the quarter and the current operating environment. Sally will then review our financial results in greater detail, as well as our outlook for the balance of the year. We would then be glad to answer any questions you might have. Since we last spoke to you in August, we have seen a substantial change in the operating environment. Globally, we have experienced high inflation and unfavorable currency rates, both of which further intensified during the third quarter. In addition, we have seen European and American consumers begin to reduce their purchases of discretionary items as inflation has taken its toll on their buying power. Within this environment, our teams have done an excellent job of executing against our strategy and managing our expenses to deliver strong results, particularly on a currency-adjusted basis, despite the prevailing headwinds. For the third quarter, our sales were $211.4 million versus $217.7 million last year. On a currency-adjusted basis, our sales actually grew by 3.4%. We delivered strong gross margins of 57.3% despite the currency headwinds. Adjusted operating profit declined by 7.8% to $38.9 million. However, would have increased on a currency adjusted basis. Our adjusted earnings per share for the quarter were $1.31. Additionally, our balance sheet remained strong with $187 million in cash and no debt at quarter end while returning $51.8 million to our shareholders through share repurchases and dividends since the beginning of the year. In the United States and Europe, we have seen inflation of everyday goods and higher energy prices begin to take a greater toll on consumers' purchasing power, and we expect that trend to continue for the balance of this year and into next year. While our U.S. sales declined by 5.9% as consumers and retailers pulled back on their purchases, our international sales grew by 10.2% on a constant currency basis. Our international sales are now almost two times larger than our U.S. wholesale business. In our outlet business, which includes both our brick and mortar businesses and our digital format, we saw a mid-single-digit increase in sales, Given prevailing currency rates, economic challenges in Europe, and the uncertain retail environment and continued challenges faced by consumers, we are approaching the fourth quarter with caution. In addition, last year was a particularly strong holiday season, with less competition from travel and dining. The consumer was in fantastic shape, and they were being urged to buy early or take the risk that retailers would run out of best-selling products. Today, the environment is completely different. As we enter the important holiday season, we will continue to support our brands with strong marketing campaigns to make sure that we maximize sell-through for our watches and jewelry during the most important selling period of the year. In Movado, we are excited to introduce our new Alta collection, which represents the pinnacle product in Movado's assortment. Alta is inspired by the rich heritage of the Movado brand and incorporates luxury features, including ceramic bezels and a Movado automatic chronograph movement. As part of our elevation strategy, we will continue to expand our most aspirational product offerings, particularly in Swiss-made mechanical movements. To support our Bold assortment, we have also introduced our first Bold automatic versions in Bold Fusion Automatic. We're excited about our holiday television campaign that we launched just last week featuring our Bold Versa watches for him and her. This campaign will be complemented with our first major influencer campaign that was launched last month and will run through the holiday season. On the digital front, our Movado.com website continues to play a significant role in the ongoing development of the Movado brand, even as consumers return to brick-and-mortar locations. For the first nine months of this year, our Movado.com sales were down 14%, but up 56% ahead of two years ago. In our licensed brands, we delivered 11.6% sales growth on a constant currency basis against the background of slowing economies in our largest markets in Europe. We continue to offer compelling innovation across our brand portfolio, and we are driving demand both online and in-store. We continue to see strong results in Mexico, Brazil, and the Middle East, and India as well. In China, we are still seeing the impacts of the ongoing pandemic closures. In Tommy Hilfiger, we continue to drive results with regional influencers and associations in key markets. We received a strong reception on our advertised family miles and with a vintage-inspired multi-eyed blue dial on a mesh bracelet and Luca, a 50-millimeter sport-inspired family. In Hugo Boss, We have continued to see the momentum of the parent brands repositioning, and it continues to resonate with our consumers as exhibited by the successful introduction of two new families, Steer and Purity. We continue to collaborate with the boss influencers that connect with the consumer in our visual associations, as well as venues like TikTok, where boss watches are being worn by Cabi, who is one of the most followed individuals on the platform. In Coach, we introduced the Caddy Tank family, which is modeled after Coach's iconic badge logo and is worn by Coach Ambassador Jennifer Lopez. We are continuing to drive our Coach online business in China with associations with key online digital influencers. We are excited to introduce the third generation of our iconic 1212 family in Lacoste during the third quarter. 1212 is inspired by the iconic Lacoste polo shirt. This new collection is already off to a fast start. In addition, we just introduced Lacoste jewelry, and we are already seeing strong sell-through. We continue to roll out the launch of our Calvin Klein brand in watches and jewelry, and we are seeing a strong response from consumers, especially on the watch front. Women's represents about 50% of the watch sales, men's watches about 33%, and our For Everyone segment about 17%. We will support our key European markets with billboard advertising as well as digital efforts for the holiday season. We continue to make progress in developing our strategic plans for movement and Olivia Burton, and in building out our teams in an evolving retail market. We are encouraged by the progress that we are making on the innovation and product component of both brands at higher price points. In movement, we have seen success with our Raptor Automatic, which at $500 is our most expensive movement ever. And we will sell out our collaboration with the Hello Kitty brand, which includes watches and sunglasses. In Olivia Burton, we are also elevating price points. And while the UK continues to be economically challenged, we have gotten a strong response from retailers to our newness that is arriving for the holiday and additional newness that will be arriving next spring. As we think about the balance of the year, we believe that the intended consequences of central banks to tamp down inflation are beginning to take effect, and economies around the world are beginning to slow. There continues to be a heightened risk of a recession, and retailers and consumers are becoming increasingly cautious. The level of uncertainty makes it more challenging to forecast results for the upcoming holiday season, and we have revised our outlook to reflect our cautious posture. Within this context, we are navigating a retail environment with reduced visibility, and we will focus on controlling the things that we can control. We will tightly manage expenses while continuing to support the long-term growth opportunities for our business. We will protect gross margins and focus on continuing to drive profitability and positive cash flow. We have managed our balance sheet very effectively, and it puts us in a strong position to navigate an increasingly volatile retail climate. Our teams have done an excellent job of executing against our strategic objectives and are focused on managing our inventory, expenses, and gross margins while maximizing our sales. I would now like to turn the call over to Sally.