Movado Group Inc.

Good day, everybody, and welcome to the Movado Group Incorporated second quarter 2024 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 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 DeMarcillas, 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, our 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. Welcome to Movado Group's second quarter conference call. With me today is Sally DeMarsalis, our COO and CFO. After I review the highlights of the quarter and our strategies and initiatives for the second half, Sally will review our financial results and outlook in greater detail. Our second quarter performance reflects our strong execution in a difficult operating environment with net sales within our expectations. The retail environment in our category remained challenging during the second quarter, particularly in the United States and Europe, our largest markets. While economic numbers have remained stable, discretionary purchases have been challenged by inflation and a greater allocation of consumers' resources to travel and dining. Overall, we remain excited about our second half initiatives, especially our brand refresh at Movado, which I will discuss in greater detail in a moment. However, we are lowering our outlook for the balance of the year, given the cautiousness of our retail partners, which is expected to moderate shipments and continued economic uncertainty. Turning to a review of the quarter, second quarter net sales declined by 12.3 percent from last year to $160.4 million, and our adjusted operating profit was $10.3 million versus $31.4 million last year. From a geographic perspective, Sales declined by 12.4% in the U.S., driven by the wholesale channel, and by 12.1% internationally. Our balance sheet remains extremely strong, with almost $219 million in cash and no debt, allowing us to continue to invest in our brands and regions, despite the economic challenges that remain in the U.S. and Europe. For the six months, the company generated positive cash flow from operations and a reduction of $33.6 million in inventory from the same period last year. Importantly, we will continue to be extremely disciplined in our expense management. As we had mentioned in our last conference call, we have begun embarking on a brand refresh for the Movado brand, and we are very pleased with the progress that we have made. From a product perspective, this fall we will launch the most important collection of new products in our Bold collection since we first launched Bold over 10 years ago. Included in this introduction is the refresh of our best-selling Evolution family, Evolution 2.0. With new Sharper price points, the collection now opens at $595. We are also refreshing the original Bold TR90 collections with a brand new and exciting design in a variety of colorways. In addition, at the top end of our Bold assortment, we are launching a new titanium diver that will retail at $1,495. In our Movado Core collection, we just launched a museum classic chronograph collection that has gotten off to a very strong start. As I mentioned earlier, we're introducing a total brand update for the Movado brand, which includes new marketing initiatives that will roll out over the next few quarters, beginning with the launch of our new brand building campaign in September. As part of this initiative, we will return to magazines for the first time in a number of years. In addition, we will launch an outdoor campaign in New York, Miami, Los Angeles, and Chicago to complement our strong presence in digital campaigns. During the fourth quarter, we will round out the campaign with a significant program in both linear and digital TV. This will be the most significant investment we have made behind our flagship Movado brand in several years. While recent history has demonstrated a significant shifting where consumers consume media, we believe that incorporating a broad media mix is important to our brand building efforts. as we have found that our customers engage with multiple media outlets. During the quarter, it is important to note that our Movado.com business returned to growth. With a challenging retail environment in North America, we experienced a single-digit decline for both the quarter and year-to-date period in our outlet stores, where we were up against a strong spring from last year. We have also intentionally slowed down the growth of our digital outlet channel, where we believe we were opening with products that were too sharply priced. As always, we will take the right decisions for the long-term health of our brands. In our fashion brands, we continue to deliver innovation with compelling value and will support our licensed brand partners with strong regional marketing programs to build category awareness for our powerful licensed brand portfolio. For the fall, we have strong marketing initiatives planned in our key European markets, supporting both our watches and jewelry in digital venues, billboards, and at the point of sale. For the quarter, Europe remained challenging, while we saw strong results in India and the Middle East and a return to growth in China. In Tommy Hilfiger, we have seen a strong performance from our spring introductions, particularly our opening price points. For the fall, we're excited about the introduction of Clark for him and Lexi for her, both multifunction models that begin at $189. The Hugo Boss brand continues to amplify its messaging, and we are continuing to partner with them on these efforts. We have seen a strong reception from consumers to our Troper and Gregor families. For the fall, we will continue to support these two leading families, as well as introduce the new top chronograph collection, and our new Kander Automatic Sport Luxe family, opening at under $400. For Boss, we will amplify our messaging at the point of sale, as well as supporting the brand with our digital marketing efforts. We are excited that for this holiday season, we will partner with the new Boss brand ambassador, Suki Waterhouse. In Coach, we have seen success with our Caddy family. For the fall, we are introducing our new Elliott family, both for him and her. Elliott is a strong collection, which opens at $125. We are continuing to partner with Jennifer Lopez on our coach marketing efforts globally and with Curly Gao in China, where we have seen strong growth during the first half. Lacoste is performing very well at retail, where we have seen strong sell-through of our third generation of our Lacoste 1212 collection, inspired by the brand's iconic polos. We have also seen excellent results from our introduction of Lacoste jewelry for both men and women. This fall, we will introduce a 1212 automatic collection, retailing at $255, and a new sporty diver family called Finns. In Calvin Klein, we are pleased with the progress for our second year of our introduction into the watch and jewelry category. This spring, we saw strong retail sales performance of our featured sensation family with a uniquely shaped case design. For men, our leader has been black, a multi-eye modern design. This fall, we will be supporting the brand with our new campaign in digital and outdoor, featuring model and fashion influencer Lila Moss. In Olivia Burton, we are well into our brand refresh across all consumer touchpoints in the UK and the US. With all new product families, new point of sale, and packaging, and a new marketing campaign, we remain confident we are heading in the right direction and are seeing strong results on our website and from our key retail partners. While the beginning of the year was very challenging, we knew that we were comping against a very strong first half last year and with easier compares in the second half. We remain committed to our strategy and believe in our brand-building efforts to drive increased customer awareness and yield results over the medium and long term. We are very excited around the plans that we have put in place for the second half of the year in our new product initiatives, sharper values across our brands, and creative marketing programs. While we are operating in a challenging retail environment in our largest markets, we feel that it is important to invest in supporting our brands and company for the long term. We're particularly excited about our brand building efforts to support the Movado brand. We're willing to make this investment in order to ensure that our business will remain strong as the economic environment improves. Our strong balance sheet allows us to do that while continuing to return value to our shareholders through our dividend and share repurchase program. We will still operate prudently and diligently manage our operating expenses, as we have done in the past. I would now like to turn the call over to Sally.