Movado Group Inc.

Good morning, everyone, and welcome to the Movado Group Incorporated fourth quarter 2023 earnings conference call. As a reminder, today's call is being recorded and may not be reproduced in full or in part without permission from the company. At this time, I'd like to turn the call 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 Efrem Grimberg, Chairman and Chief Executive Officer of Movado Group.

Efrem Grimberg Thank you, Rachel. Good morning and welcome to Movado Group's fourth quarter and fiscal 2023 year-end conference call. For today's call, I will first review our results for the fourth quarter and fiscal year, followed by our thoughts on the current operating environment and our strategic initiatives. Then Sally will review our results in greater detail and provide our outlook. We will then open up the call to questions. I would like to start by recognizing our teams around the world for delivering strong results and executing our strategic plan in an evolving global economic environment. Over the course of fiscal 2023, we saw the effects of a US consumer who is no longer benefiting from COVID related stimulus programs, global headwinds from the war in Ukraine that began last March, growing inflationary pressures and rising interest rates. In addition, our results have been further impacted by currency fluctuations. Within that context, our teams delivered a record year of $751.9 million in sales, an increase of 2.7%, or 7% on a constant currency basis. On an adjusted basis, we delivered $123.2 million of operating profit versus $119.7 million last year, For the fourth quarter, our sales were $194.3 million versus $206 million last year, down 5.7% and 2.8% on a constant currency basis. Our adjusted operating profit for the quarter was $26.8 million compared to $37.9 million. While below last year's exceptional performance, our operating income for the fourth quarter was our second best ever, and exceeded fiscal 2020 and 2019's fourth quarter by 222% and 35% respectively. We ended the year with $251.6 million in cash and no debt, while returning $62.8 million to our shareholders through our dividend and share repurchase programs. We are pleased that our Board of Directors has approved a $1 special dividend in addition to the regular quarterly dividend of $0.35 per share. This demonstrates our confidence in the future performance of our business. As we had mentioned on our third quarter conference call, we believe that we would continue to see a difficult consumer landscape in the U.S. and Europe, our two largest markets. Consumers pulled back on discretionary purchases as more of their disposable income was affected by inflationary pressures, and they shifted spend towards other categories like travel and restaurants as they returned to a more normalized post-COVID environment. We were pleased that under these circumstances, we exceeded our revised expectations for the fourth quarter revenues and generated very strong cash flow and operating profits. In the U.S., we saw a 6.3% decline in sales during the quarter compared to a very strong fourth quarter in fiscal year 2022. Internationally, we experienced a 5% decline coming off a record quarter last year. Our international revenues were negatively impacted by significant challenges in Germany, the U.K., and France driven by the war in Ukraine and inflationary pressures. Notably, we had strong performances in Latin America, the Middle East, India, and Australia, which partially offset some of the declines during the quarter. On a constant currency basis, our international sales increased 0.6% in the fourth quarter. As we look at fiscal 2024, we expect the economic challenges around the world to continue. Interest rates have increased rapidly over the last year, and they appear to be having the desired effect of slowing down economic growth around the world. We are also beginning to see stresses in the banking system, which will place increased pressures on companies and consumers. In this environment, we'll continue to focus on executing on our strategic initiatives of building our brands, growing our regions, driving innovation, and continuing to develop our digital footprint. As we have done in other periods of economic volatility, we will take advantage of our powerful balance sheet to continue to make investments that support our strategy and enable us to emerge in a strong position to drive growth as economic conditions improve. We will invest in our brand building initiatives, making sure that we focus on our big brands in our biggest regions. Over the year ahead, we're expecting a sales decline of 3.6% to relatively flat, with a larger decline in the first half as we anniversary record first half results during the prior year. We expect to see improving trends in the second half as we comp against weaker sales trends. I would now like to provide some highlights of our various brands and businesses. In Movado, we saw a single-digit decline for the full year as we had compared to a very strong growth in the prior year period. We saw stronger results in our higher price points, and we were more challenged in our entry-level price points, which had been increased earlier in the year. Our average unit retail this year grew by approximately 9%. Looking ahead, while we continue to build our aspirational products at the top end of the Movado brand in fiscal 2024, we will also reinvigorate our opening price points in Movado Bold to help drive market share gains. Movado has the largest share in the $500 to $1,500 price point in the U.S., and we are taking the steps to ensure that we protect and build on that position. This spring, we are introducing Bold Horizons, a new slim and refined design that we are very excited about, which opens at $695. We'll support our spring marketing initiatives with television, featuring our new Bold TV commercial and exciting new content for Mother's Day and Father's Day. During the holiday season, we saw encouraging results in our alpha introductions at our highest price point from Avado, and we will continue to build in that arena. As we proceed throughout this year, we're reinvigorating our brand building efforts to support our company's most important brand. In our licensed brands, we saw a 3.4% decline and a 1.3% increase on a constant currency basis during the fourth quarter. For the year, we saw an 8.5% increase and a 16.5% increase on a constant currency basis. We are collaborating with the strongest brands in the fashion watch category, and we are focused on continuing to gain market share for these brands. In Tommy Hilfiger, we will drive innovation with the introduction of new Tommy Hilfiger watches in bolder and larger sizes for him, with two exciting new introductions in large at 46 millimeters and wild, a 50-millimeter sports offering with a tie-dyed strap. We will also fill some opening price point gaps with the introductions of Pipa and Norris this spring to attract value-conscious consumers in Europe. In Tommy Hilfiger, we are partnering with key influencers in our biggest markets, including a watch and jewelry partnership with European soccer player Thiago Alcantara, who has over 10 million followers on Instagram. With Hugo Boss, we will continue to collaborate on the brand's reinvigorated marketing and design efforts. One of the brand's important associations is Matteo Berrettini, the Italian tennis player with a strong social media following. This spring, we'll introduce Center Court for Boss in partnership with Matteo. We're also partnering with Hugo Boss on major events like their recent fashion show in Miami. In Boss, we'll also introduce some key offerings at strong values for the brand below 300 euros. In Lacoste, we are expanding our iconic L-1212 offerings with the introduction of aluminum versions called L-1212 Go, which allow us to offer beautiful colors in tune with the brand. We'll also launch an exciting marketing program to support Lacoste in France for the French Open, where Lacoste is a major sponsor. In Coach, we are introducing some iconic new introductions, Caddy, a smaller rectangular offering with an innovative new strap, and Hidden Time, a retro design covered watch with Coach's iconic T-Rose design. We have seen improving results in China for Coach as that market has reopened and will support the market with a strong campaign with local collaborations. We are very excited about the potential for our new Calvin Klein brand. Launched in January 2022, CK was our fastest launch ever in our licensed brand division. We saw a strong response from our retailers and consumers around the world. This year, we will support the brand with increased marketing efforts and exciting new product introductions, including CK Sensation, a modern-shaped watch starting at $160, and CK Force for Men, a 45-millimeter sports watch starting at $190. We continue to believe that CK has a tremendous global potential within the watch and jewelry space. In our outlet stores, we had anticipated that we would see a more challenging environment during Q4, somewhat offset by our digital channel. Our brick and mortar channel declined by 9.2% for the quarter and 2.3% for the year. Including our digital channel, we grew by 5.1% for the year and 3.4% for the quarter. We continue to deliver strong gross margins in this division while below last year's record-setting levels. In our young brands, Olivia Burton and Movement, we continue to make progress in evolving our strategies to a changing marketplace. We are further along in our Olivia Burton transition as we have introduced a refreshed product assortment in watches first with jewelry to follow. This spring, we are launching a UK-based marketing program entitled Postcards from London. to support the brand in the UK's largest market. We are seeing some encouraging initial results despite the UK's current economic challenges. In movement, Our teams have seen encouraging results with higher price point watches. We are focused on a strategy that will build the brand to be less dependent upon customer acquisition and more focused on building brand equity as we reinvigorate our brand message geared towards movement's maverick consumer. As we look ahead, we believe we will continue to operate in a volatile economic retail and consumer environment in our largest markets, the U.S. and Europe. Despite this, we are focused on the opportunities. With our strong brand portfolio, we intend to focus on investing in our brands and gaining market share against our competitive set while maintaining a disciplined approach to expenses. As a company, we've always been focused on delivering long-term profitable growth. While we see some short-term headwinds, we are confident in our team's ability to deliver over the long term given our strong brand portfolio, great design, and strong customer relationships. We have an impressive track record of adapting to a changing environment and maintaining a high level of nimbleness and flexibility. These attributes, coupled with our strong balance sheet, will allow us to support our key brand building initiatives while executing against our priorities, energizing our customers, investing in our people, and driving innovation in our digital marketing channels. I will now turn it over to Sally to review our financial results in greater detail as well as take a look at our outlook. We will then be glad to answer any questions.