Movado Group Inc.

Good day, everybody, and welcome to the Movado Group Incorporated first quarter 2024 earnings conference call. At this time, all parties are in a listen-only mode. The question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. 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 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 Efrem 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 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 maturely 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 Grinberg, Chairman and Chief Executive Officer of Movado Group.

Thank you, Rachel. Good morning and welcome to Movado Group's first quarter conference call. With me today is Sally DeMarcellis, our COO and CFO. After I've had a chance to review the highlights of our first quarter results and our progress on our strategic initiatives, Sally will then review our financial results in greater detail. We would then be glad to answer any questions you might have. As we had expected, the macroeconomic environment remained challenging during the beginning of the year, with inflation and rising interest rates continuing to affect purchases made by consumers of discretionary products in our key markets, the United States and Europe. Against that backdrop, we were pleased with the results that our teams delivered for the first quarter, which met our expectations while continuing to make progress with the key growth priorities we have for our business, delivering sought-after innovation and elevating our brand awareness. This, along with continued expense discipline, has us well positioned to improve our performance as we move throughout the year. Reviewing the first quarter in more detail. Sales were $144.9 million, an 11.3% decline versus last year's record first quarter, and increased 7.5% from fiscal 2022's first quarter. Currency negatively impacted sales growth by 1.2% in the first quarter. Gross margin remained strong at 56.6%. Adjusted operating profit was $11.6 million as compared to $26.1 million in the previous year, and earnings per share on an adjusted basis were $0.43 versus $0.82 last year. We ended the quarter with a strong balance sheet. including $198.3 million in cash while paying $29.9 million in dividends, which included a dollar per share special dividend that our board had approved when we announced fiscal 2023 results. As we had talked about during our year-end conference call, we had expected a more difficult first half of the year as we were comparing against a very strong record first half last year. This year, the consumer in both the U.S. and Europe is facing both elevated inflation and rising interest rates. As many retailers have already reported, this is clearly affecting discretionary spending. From a geographical perspective, both our international and U.S. sales declined, with the U.S. declining 15.7% and international sales decreasing 8.1% or 6% on a constant currency basis. On the international front, we had strong growth in Brazil, the Middle East, China, and travel retail that was offset by a decline in Europe. As retailers and key markets deal with slowing economic growth, they are very focused on making sure that they control their inventories. From a brand perspective, we are laying the foundation for an improving second half. In our Movado brand, we are beginning to introduce innovation through our Bold Collection and our Bold Horizon family, which begins to fill price points that we had vacated over the last year. We're getting a very good response from consumers on this collection, which opens at $695. Our elevated automatic models continue to perform well, both at our wholesale partners and on our own website, with penetration doubling from last year. For Mother's Day, we drove our marketing program with both still lifes and video content to emotionally connect with consumers, and we have produced similar content for Father's Day. For Mother's Day, we saw strong results from our TV campaigns, particularly on our website. Father's Day will also feature television in addition to our digital campaigns. Throughout the year, we will invest in refreshing the Movado brand image in a bolder and more impactful way, and we are excited to make this investment behind our most important brand. In our licensed brands, we saw an 8.3% decline on a constant currency basis as consumers pulled back in our largest European markets, somewhat offset by stronger trends in Brazil, the Middle East, China, and travel retail. In all of our brands, we are driving innovation across the pricing matrix with a particular attention to introduce some value price points to reach consumers who have been impacted by inflation and slowing economies around the world. In Tommy Hilfiger, we saw a strong initial response to our new opening price point collections, Pippa for Her and Norris for Him, and to our advertised styles, Lars and Monica. In BOSS, where the parent brand has been highly energized by driving a new imaging campaign, we're seeing strong results from our new troper collection, a sporty 46-millimeter chronograph. We're also seeing a strong reception for our new Greger family, a classically styled chronograph family. Both families open at $279. We're also excited to partner with the BOSS brand's high-profile ambassadors with a new campaign which will feature Suki Waterhouse, as our ambassador for women, both for jewelry and watches that will launch in the fall. In our coach watches, our signature C collections continue to perform well, and we are seeing renewed demand in China, both at retail and online as that market reopens. We are continuing to partner with Curly Gao as our ambassador in China, and with Jennifer Lopez in our global campaign. In Lacoste, we introduce the new interpretation of the iconic 1212 polo shirt in a watch, aluminum versions in a number of new colors, including green khaki. We're also introducing new 1212 watches that connect with Lacoste's sponsorship of three Netflix series, Stranger Things, Sex Education, and Lupin. Our Calvin Klein rollout continues to progress extremely well. We are successfully collaborating with the parent brand on the marketing front to build category awareness in watches and jewelry for the Calvin Klein brand. Within CK, we are driving some exciting innovation at appealing price points, including the introduction of Sensation for Her, which features a new unexpected dial opening on a bracelet, and Charming, a new asymmetrically designed bangle. For men, we are seeing a strong response for Ambitious, a new all-black chronograph bracelet. For the first quarter, we saw a 3.5% decline in our outlet business in a highly promotional environment in the U.S. We have seen improving traffic trends as we approached the Mother's Day holiday, which we did have a calendar shift as Mother's Day moved later into May against last year's timing. As we look at the balance of the year, we are operating in a highly uncertain environment. Interest rates have risen at a very rapid pace, which is meant to curtail consumer demand in order to slow inflation in most developed markets. While the environment remains uncertain, we will continue to invest in our brands and drive innovation in our marketing and products to assure that our businesses will emerge strongly as more clarity develops in the marketplace. Of course, we will continue to closely monitor our expenses and prudently manage our inventories. With a strong cash position and no debt, our balance sheet affords us the opportunity to invest behind driving long-term profitable growth. We're excited in the initiatives that we are investing behind, predominantly refreshing the Movado brand image beginning in the second half of the year and supporting our licensed brands in their most developed and emerging markets. Our teams are energized and focused on executing and delivering against our strategic objectives. I would now like to turn the call over to Sally.