Movado Group Inc.

Good day, everyone, and welcome to Movado Group Incorporated's second quarter fiscal year 2025 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 Allison Mackin with ICR. Please go ahead.

Good morning, everyone. With me on the call is Ephraim Grinberg, Chairman and Chief Executive Officer of and Sally D. Marcellus, Executive Vice President and Chief Operating Officer and Chief Financial Officer. Before we get started, I would like to remind you of the company 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 for 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 would like to turn the call over to Ephraim Grunberg, Chairman and Chief Executive Officer of Movado Group.

Thank you, Allison. Good morning, and thank you for joining us today. I am pleased to share our second quarter of performance as we make progress advancing our strategy in a challenging consumer spending environment. We improved our sales trends from the first to the second quarter, reporting virtually flat net sales on a constant dollar basis to last year. Our operating profit declined to $3 million, driven by increased marketing investments that are expected to accelerate sales growth in the future. We maintained a healthy gross margin with the rate declining versus the second quarter last year due to the overall mix of our business. Our balance sheet remains strong with $198 million in cash and no debt. Inventory increased from the beginning of the fiscal year to support our sales expectations for the second half of the year. Across geographies, our retail partners placed orders cautiously, especially in Europe and the U.S., where customers are maintaining lower levels of inventory in a challenging consumer spending environment. Despite this, we were pleased to see a favorable response to our increased marketing investments. we saw increased interest across our brands with unit volume in our licensed brands increasing by 10%, buoyed by our marketing efforts and the reintroduction of certain price points that we had previously vacated across our brands. In our Movado brand, sales grew by 1.4%, with growth in the direct-to-consumer channel, including a 21% increase in Movado.com, mostly offset by a 6% decline in our wholesale channels. While we are pleased that we have improved our retail trends overall, we recognize that the global operating environment remains challenging for retail and the watch category in particular. With a heightened level of uncertainty, and we believe this will have an impact on our second half results and are updating our outlook for the balance of the year. We remain confident in the initiatives that we have put in place to support our brands, as these investments are continuing to strengthen our position in the marketplace and should lead to market share growth in a difficult consumer spending backdrop. While the initiatives are beginning to deliver improving results, they are not at the level we had planned, impacted by the difficult macro environment. As we look at the balance of the year, we will be focused on beginning to bring our operating expenses in line with sales while laying a solid foundation for continued support of our brand building efforts. In our Movado brand, we're excited to launch our new icons advertising campaign that we announced yesterday in a separate press release. Movado has had a long association with iconic brand ambassadors from Kerry Washington to Derek Jeter and Pete Sampras. We are introducing five new ambassadors into a new advertising campaign entitled When I Move, You Move, featuring Ludacris, Jessica Alba, Julianne Moore, Christian McCaffrey, and Tyrese Halliburton. The ad campaign will also feature Ludacris' iconic song, Stand Up. This will be the most comprehensive brand campaign that we have ever launched. and we will have a 360-degree media campaign throughout the holiday season, including the most important digital and social platforms, print magazines, billboards, and both digital and linear TV. We are very excited to see the results and are confident that we will continue to build on Movado's strong brand equity and to introduce new consumers to the Movado brand, both online and in-store. The positive press coverage that we received online yesterday was the most that we have ever received. Seven publications reaching a potential of over 245 million readers. In addition to our new campaign, we also have a number of exciting new products that we will introduce at retail, including line extensions in our very successful Bold Quest collection. This includes a smaller size of 35 millimeters, a new chronograph, and a beautiful new automatic version for the holidays. We have seen strong success in our heritage collection, and we will be introducing a new Colendo Plan S automatic assortment. With shaped watches performing well in the marketplace, we will be introducing our first tank collection in bold evolution, which has received a strong reception from our retailers. In addition to Movado improving its performance during the first half of the year in the United States, the brand is also seeing a strong response from consumers in India as we begin to grow that market. As we look at our licensed brand businesses, we continue to partner with some extraordinary brands like Coach, Tommy Hilfiger, Hugo Boss, Lacoste, and Calvin Klein. While the fashion watch category has been challenging, we were able to grow our business by 2.5% for the quarter. We continue to focus on developing and introducing iconic product in both watches and jewelry and collaborating with our brand partners on our marketing efforts. Hugo Boss highlights for the coming second half of the year include continued support of the Sky Traveler and Candor families and the introduction of our new Bossmatic family. Bossmatic is a diver-inspired family that features our hybrid automatic movement. powered by the motion of the wearer with the accuracy of a quartz watch. Bossmatic will feature a six-month power reserve. Our retailers are very excited about the Bossmatic family, and it will be featured in a limited number of our retailers in every market. In Tommy Hilfiger, we will continue to support our iconic TH85 collection and will introduce innovation such as our new chronograph. We will also be introducing new models to our growing Baker family. Our Lacoste brand continues to perform very well in both watches and jewelry. We are very excited to be introducing this fall the LC33 family of Annie Digi sports watches. Available in multiple colorways, the LC33 is featured on silicone straps and will be marketed with the tagline, Unleash Your Inner Crocodile. We will be collaborating closely with our partners around the world with this significant launch. Our results for our Coach brand have been strong for the first half of the year, and we will continue with exciting launches as the year progresses. In our men's collection, we have introduced Charter, a fabulous automatic watch opening at $295, featuring Coach brand ambassador Jason Tatum in our marketing campaign. In line with the trend-supporting shape cases, our customers are really excited by the introduction of our new oval family, Sammy. Finally, in CK, we will continue to place a greater emphasis on women's watches and jewelry with the introduction of the CK Pulse Collection and the expansion of our iconic twisted bezel, which will now be available in an oval bangle version. During the second quarter, our outlet stores were on plan, with a decline in brick-and-mortar store sales offset by growth in our digital business. During the second half of the year, we expect that the additional marketing behind the Movado brand will benefit our direct-to-consumer channels, including our outlet store channel, particularly in the fourth quarter. Overall, while we recognize it will take time to achieve our desired results, we are making progress and are confident in our strategic plan, including growing unit volumes and improving sales trends in certain of our retail channels. We're adjusting to the consumer landscape, bringing our expenses more in line to begin to improve our financial metrics while continuing to support our brands and our customers. We believe that the increased spending in our brand building efforts will enable us to jumpstart our Movado brand and ensure that our fashion business is positioned to deliver accelerated growth as the market improves. This year, has been an investment year, and as we begin to plan for next year, we will ensure that our expenses are in line with anticipated sales, allowing us to return to profitable, sustainable growth. I would now like to turn the call over to Sally.