MOV - Earnings call transcript Q3 2018

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Operator

Good day everyone. And welcome to the Movado Group Inc.'s Fiscal Third Quarter 2018 Earnings 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 Schacter of ICR. Please go ahead.

Rachel Schacter

you. Thank everyone. morning, Good the and Efraim Officer. Sallie on Chief Chairman Executive Officer DeMarsilis, call me Grinberg, is and With Chief Financial

due press of we risk Litigation are language, statements those to includes used of supplemental would Actual the this I may the statements information constitute contained call XXXX. all be get or which forward-looking filings remind of a conference The measure non-GAAP press Reform statements most facts, such Before the of call, provided the differ will as maybe the on this this you directly to with which to any familiar like number is with. today's meaning and release. uncertainties, Company's Company's measure of in historical results I’m financial Private within described from which to Harbor of our Act non-GAAP the presentation in Securities sure release. all not you’re GAAP future which Safe materially financial started, in deemed measure comparable SEC, financial If are financial in suggested

Group. and like Now, Efraim Chairman call of turn Chief Movado Executive over to Grinberg, Officer to the I would

Efraim Grinberg

morning. me Good conference Officer. to DeMarsllis, third our Financial call. Group's today quarter welcome And Movado With Chief Sallie is

key take from over against strong will morning's quarter of call, we solid to Sallie to that review share Movado growth call questions. remarks brief initiatives. outlook. with Group, included our delighted the Then to this For results another turn I will some I begin performance progress and you financial and am with your

per million. adjusted sales profit grew operating to by grew to over For the XX% earnings by $XX.X grew Adjusted $X.XX. million quarter to X% X% $XXX.X and share third

discontinue the towards In business for we of resources XX.X% to directing are We to expect drive limiting sale. our strategy that profit off-price cost quarter, sales of adhering delivered adjusted our this the gross the a $X.X growth, during minutes. excluded effort behind our quarter, Baselworld annual an to the of some million and margin we rationale This in will reducing the from areas in which while also our we I ensure in fair. participation the on charge, decision time is pretax few decision to the adjusted results. spend made resulted

the share to relates of the of it Movado strategies, expenses family balance acquisition As market; key management strength and brand our to and the full quarter gains new in brand; markets disciplined the quarter of included; with highlights continued our a a a strong international added Burton Olivia for sheet.

the line, markets On sales newly division. The the increases brand. acquired a of retail on were Burton challenging to saw growth of our pleased contribution online The by with has strategies. and result. our top are strength We benefited international our we strong world in the executing for year-to-date sales, focus from in from top our the a market United increase experienced increases Olivia somewhat to licensed year. These teams also very around brand offset States. our our us we our outlet outlook across line enabled attribute business Overall, and

remain stores. Movado. I brands, brick-and-mortar States to the with market our like traffic to challenging, in The continues place begin reduction United would retail to ongoing to Turning given

specialty price of Movado quarter. store the category. positive exceeding of low that testament gain sale-in. during in double-digits department to the market Also $XXX,XXX share is backdrop, strength is channels with continues Movado trend A this sell-through saw experienced improvement in the to its that Movado in brand the in this Given sales U.S., decline sales and

Movado.com quarter increased strong digital product our marketing efforts introductions. a business our for as new While and of the still small, doubled result

new our product seen We have resonate with consumers. introductions well extremely

the Dial well. commemorating collection, Bauhaus performed XX exclusively Museum on The our collection anniversary. extremely introduced we Movado available has quarter, Museum third the Movado.com During

first also the which features Wear Google's with and collaboration the platform, of Qualcomm excellent Android our watch is in introduction already. seeing We sell-through began Snapdragon chip

we’ll season, also We've seen in television Movado our watch Movado Connect running featured consumer our the collection. holiday BOLD and our be the the For as a to heritage response holiday Movado expansion introduction, of campaign. new strong

challenging collection, the markets, growth These watch In in brands. by for Hilfiger, continued grew Tommy Hilfiger, particularly is through an results response our ad. quarter, U.S. States. and For the our we strong Europe, driven Tommy our Tommy Boss excellent collaboration Lacoste. our while improving initiatives seeing with in In our in international media in digital we superstar the were licensed to Hugo are X.X% sell Boss, brands amplified and on United Europe performances in which the the brand Gigi Hugo remained with saw trends featured strong social fashion and and Chelsea Hadid, have

led have to collection. by our which in strong trends companion in embellished Boss seen seen strong have we In charm We our charm Classic collections, very a Coach, features Hugo sell-through styles. our response embellished Vintage

featuring our part are demand Coach also strong seeing of peanuts the as We dial characters watches for design.

seen Lacoste's our and the price of a are introduction set Movado leadership Nordstrom's. as collections position our we the seeing gift we we points, to holidays. Umbrella. support Group first uniquely Rebecca strong limited and happier completed We the product, campaign ultra the collection are of to father begun our around of holiday inspired exclusive our response the strong brand be of are slim of have In to season Lacoste our we women focus plethora from market media designed looking This Burton, markets Minkoff.com which and on a in vintage in part our see distribution watches, wholesale pleased response and has excitement sales strong we Lacoste with expectations family. It for with the of the a son a watches, trends great for in generated key XXXX we social will have with sell family; sportswear in driving and Minkoff to advertising lot benefited Ferrari, with in our our our Minkoff We cost forward in see has at through moon met the that be world. holiday it innovative not Uri and could have will believe With strong Rebecca Olivia accessible footprint future July. acquisition a partner strongly

seeing Olivia UK Olivia our Web the results October We’re are excited with Butron.com site U.S. strong site. and based in of digit of to very we continued go Salesforce.com U.S. Burton's launch a the in middle on already growth Web along platform, double

spring, the launch of the platform global addition the be We to will Olivia converting and Salesforce in UK into site Web a site. Burton.com the in

integrate around them U.S. the teams We strong with our Our Burton are the we in as first the collaborating UK very very progress holiday world launched just and upcoming are selling ever team systems. the Burton the SAP/ERP excited leadership into about Olivia advertising and in in making Olivia campaign we season.

Baselworld, no we a the in a global During basis the quarter, grew our is even affirming saw XX.X%, our on very investment division, time by our million felt $XX which quickly in runs results justify we of outlet products e-commerce, for growth strong longer company outlet with the a we when in strong year. very demand that comps could market. At substantial approximately retail challenged which a and changing

write associated booths, well which such, charge taken in account off obligations the participate as we've to decision our of our exhibition as Baselworld for As with XXXX. a not

Digital our build We partners cost, the substantially a the the as to world. and retail consumer a reinvest as lower in around savings our brands intimate well will support host execute facing Excellence Center to more distributors and setting initiatives at of

As marketplace our control we U.S. in reinvesting and a closely ever managing we strategy distribution the a strong in very challenging digital our discipline, into market. began resources with expanding an year, retail shared you, expense

enhance to Our executing teams over foundation excellent to have would future objectives Sallie. a like call beginning now and an turn job growth. the these I done to lay against to in

Sallie DeMarsilis

Thank good everyone. you, Efraim and morning

For with our and quarter begin sheet results then balance third today's of call, I our and a financial discuss review outlook. will

and I for the XXXX. fiscal XXXX begin, our point I like Before results included would items special out to fiscal in

impacted acquired also XXXX pretax which million year-to-date consolidated $X.X the primarily and press $X.X expenses. was After table the to the million fiscal Included recorded the charges, remainder $X.X of was period. Our in GAAP year-to-date operating impacted share XXXX. describes to of measures. and X, gross non-GAAP release includes Burton in for the of $X.X margin July Movado quarter. acquisition connected a to for results Approximately per the million third transaction charge Olivia diluted these the $XXX,XXX related or of $X.XX equates million the Group items and on tax,

pretax diluted which to million savings amount exhibit decided share the no for Baselworld million $XX.X including equates into charge for Our our Breaking include XXXX than the after with discussed $XX or put $XX.X $X.XX connection tax we higher per as months were due was fiscal by in year. decision, million which motion down third by nine quarter, the initiatives the the impacted of impacted as well and XXXX, gross this was months operating to $XXX,XXX related charge, to the initiatives. first we GAAP taken now as million margin fair, at have to $X predominantly Basel million. the of nine March $X.X fiscal were A results previously other events. in approximately earlier This was expenses longer chart cost XXXX pretax

fiscal company. XXXX which through privately an investment results held $X.XX includes diluted GAAP million, the $X.X for to in share Our of of non-operating per charge after equates third quarter of approximately a tax long-term or for a expense imperilment

quarter XXXX a Our will first $X.X just of diluted COO's equates The GAAP fiscal our the tax certain discussed. other Beginning the million also related stock in review my pretax balance million results exclude of announcement after computation with months the in former of $X.X for per retirement. which $X.XX statement. or remarks with income and our to special the vesting connection of items awards first of include share nine the charge, to

increased of as last driven year's the last $XXX.X million expectations. our certain $XXX XX.X% business. of million year. Company's was brand brand Gross sales the in result For on our gross sales fixed compared year. $XX the the XX.X% X%. all increased currency Sales outlet dollars, rates. of margin fiscal increase of and year business three U.S. increasing retail same approximately and were Olivia quarter, cost initiatives business to a Operating wholesale in unfavorable by exchange international mix. $X.X wholesale in savings XX.X% were period East. same the sales include and constant change of of and The to our last prior of by impact increased These the X.X% down or In XX.X% channel XX quarter. $XXX.X $XX.X last addition licensed or growth third America, was approximately an to to XX.X% XXXX third to prior or for our U.S. in categories. million, performing quarter XX.X% the $XX.X from business to were million internationally. locations primarily the quarter. with partially Sales as dollars, million from profit sales $XXX.X driven for wholesale period the owned compared year. operated increased the By XX.X% of increase fiscal million and wholesale the in $XX.X is the results as of sales expenses well year. was end strongest constant or Company’s At constant international third as of were Latin Burton in decreased locations increase $XXX.X the million, offset in the increased were Middle The of of in Europe, months product by XXXX, our This by last and compared in year. million driven sales million sales XX.X% our sales, line $XX.X we brand as sales geography, The million compared business costs in compared the X.X%, foreign wholesale from last increase both million Sales in sales segment with percent In million The as leverage sales Asia year. to compared overall to favorable the increased the quarter $XX.X dollars of retail XX

overall were of $X.X the offset expenses initiatives. and higher by appropriately decrease higher closely at distribution increase invest expenses million, primarily compensation These of initiatives and we As the $X.X benefits same million, previous operating the result higher continuing brand performance to was cost compensation continue the higher of marketing in calls, a costs following; and our million $X.X business other costs. awareness. to to based manage on expense related time and to operating primarily selling support Company's The in savings mentioned of expenses, and

million XX.X% $X.XX $X.XX share fiscal higher $X.X As our in operating as items. expense million fiscal in third as lower to was full for a quarter year million compared versus than of or to quarter offset income result impacted rate quarter million in effective EPS million tax operating increase per $XX.X the is income third million partially favorably diluted to effective XXXX year. third fiscal $X lower $XX.X timing an tax in the quarter $XX.X ago period. $XX.X XXXX diluted or discrete the Net of year to prior ago by fiscal effective expense tax jurisdictional $X.X tax the quarter expenses, or third an sales, of earnings expectations The share. for per million the of changes due XX.X% of the in XXXX in tax The rate was period. year in income diluted compared third increased well per of tax rate or Income the the of rate by $X.XX recorded net share in income the the

million sales certain for Looking to as period was at a were of $XXX.X dollar unfavorable initiatives. and of year-to-date of XXXX, million, X.X% mix the percent a and XXXX. impact unfavorable from driven margin currency are the leverage year. $XXX.X a of foreign last partially XX.X% offset fiscal period result change primarily was X.X%. gross on product in compared our ended in basis, Gross or October as the of fixed month the These decrease by The rates. decreased XX, channel costs cost exchange profit by constant savings million sales decrease nine XX.X% sales $XXX.X On or sales

Net October For $X.XX million period. net diluted $XX.X to million nine in the or ago share compared $XX.X ended XXXX. months in compared year or $XX.X operating million to per income of the was $X.XX fiscal diluted as XXXX, XX, $XX.X million was income income share per

our to turning balance Now sheet.

$XXX.X the the versus quarter at of was $XXX.X end fiscal million of million cash XXXX of the period of Our third fiscal same at the XXXX. end

the during from year. had $XX on As we year receivables reminder, the Olivia of for the same second down quarter. use end quarter, the held of revolver, a $X.X cash of the outside ago. third outstanding of Burton our U.S. the million were Accounts last we million At acquisition to $X million up as compared period

to $XXX,XXX $X.X amortization expenditures the primarily which program, solution Our $X.X million. last approximately were sales up current Olivia nine $XXX.X potential repurchase offset rewards. X% for prior relatively $X stock was share flat Depreciation at million stock intangible assets related repurchased the million, Burton. were amortization to as acquired for month of Year-to-date, included of period the or was period and acquired year. our expense compared $XX quarter we and we to inventory the Burton, same of under Capital from million million million $XX.X and the Olivia of

current year. Now, updated discuss I to would Outlook like the our fiscal for

on Our volatile outlook is it rates with challenging U.S. the economy. environment recent currency global retail based And consistent level. seems and

in Our our customer filings. results rates referenced and Fluctuations causes global in XX-Q by and foreign XXK versus spending. in many various maybe other affected economic factors changes currency and exchange materially conditions

outlook. now the $XXX fiscal $XXX For we are our to to updating be We XXXX, on of million range in million. sales expect

product impacted to previously than expect expected by percent forecasted. slightly continue be gross margin but be and our to unfavorably We mix, to channel better

approximately margin this outlook XX.X% year. to for fiscal updated gross Our be estimates

remains to Efraim expenses. our to diligent million. with of $XX approximately to And year, $XX.X range Operating as shared to is rate of for in be year. of We the the have approach $XX tax past million. our you be to record rest digital the to disciplined million expected projected of income now mentioned income this we spending Net remaining of effective is mix into track This XX%. a the area, range global resources million underlying strategy overall on the be operating projected reinvest just pretax Due $XX a while fiscal expected of the is to our results, spend. in

mentioned $X earnings are items lower to relatively share approximately fiscal be Olivia acquisition The the open now adjustments. of for be we by We XXXX questions. to charge the diluted The excluded therefore of Capital XXXX the call diluted $XX.X pretax provided Burton previously to acquisitions fiscal million. have cost tax million approximately rate and I fiscal in in per amortization million 'XX expected pretax range accounting non-cash no as of EPS $X approximate expect $XX. to the for XXXX like of savings for and up outlook for now XXXX fiscal in impacted $XX and the fiscal to unusual $X.XX would per related initiatives related estimated now charge of the expenditures estimated assumes for favorably share.

Operator

to Chen Thank you go [Operator Instructions]. Oliver Cowen. We’ll first with

Oliver Chen

Just relationship? the wholesale, on Baselworld you related to how of are A as you you, are relative revenue now. sales, the there and about curious online wholesale wholesale distribution and is maintained wholesales feeling that about you your making tremendous is, about there want question right growth you the growth sure when your even and partners think discontinue factor that risk points discontinue

Efraim Grinberg

felt viable the decision travel And and the the and were in for that option that there We and world could raining the And potential experience no we the an the it an landscape at And one felt into world start environment that's from to as and changing the customers. a in be been budgets would digital let carefully, loss around around smaller alternative that previously. our we grew expense minimal second that specifically that scale, that for with exit. facing of consumer on doing very going longer with first. part the Baselworld we me investing reinvest evaluated we feel really really have us conferences we was revenue also We're that for initiatives. that businesses distributor a have, felt our venue we

types experience seen a good of those we've in very So venues.

as the seeing part about We're first which your results second effort retail our digital sites, of one as in Web own on question, Web well traffic And marketing our digital both that is the the sites retail the excited we that the we're is of growth. offsetting -- was to as for year. part priorities and brands digital It in about the the growth. loss invest world. partners of around On our partners across some our somewhat really

certainly that investment make think of it's will continuing Company big to that for reason we're and So for on going the a return to a we into significant future I think future a that add one the has Digital future. substantial building us, Center that Excellence and

Oliver Chen

channel as ways And then catalyst what can what forward grow to key look going Efraim, the about should and that share and overtime? for the wholesale and gain continue you we

Efraim Grinberg

the stores the so the spike world. rest channel because wholesale rest the that seen the of world. in than retail we've Well, than more And U.S. more the have is of we in challenged

will stability. certainly I And a it point so think of reach

brands in fashion And in specialty store in grow our to continue brands both have beginning gain some We and Movado. we've and in market of channels our channels Movado. certainly both now store seen and fashion department to share

we the future is There a And in is still think future jewelry in store business. department so there chain stores. a

stabilizes our to can manage quarters take will several in results you and probably But chosen the we think it proactive just I it business we've think more I be see in the accordingly until U.S. a how

Oliver Chen

time eases would later channel your be on margin question, gross that the Will thoughts? comparison of headwinds some there the last Sallie, mix product prospects. And so when the a abate love

Sallie DeMarsilis

Yes, few Oliver. so a things gross on margin,

there margin. all, is First to our of gross some seasonality

part helpful year, channels impacts can which channels, of our that, year-over-year the maybe profitability a obviously, that’s lot, impact the So our to it's more explain U.S. and challenge. mix look gross This always versus is quarter-to-quarter. of one margin to I

replace challenged. as our is with it our But So this profitable then business unfortunately channels being strongest be it’ll easier stronger an or that we other stabilizes as by brands comparison. impacted year and

Operator

question We’ll from KeyBanc next Yruma with take Edward Markets. our Capital

Unidentified Analyst

This is Matt Ed. on for

noticed especially we’ve Swiss exported some recently, at So data the end. watch positives higher

price whole? stabilization what the comment your on curious different driving you are can as We’re the believe also how a tiers watch And is industry performing. of you

Efraim Grinberg

Swiss think they I the off And a weak comp U.S. saw those well. market of because had data was morning this that from numbers. the still in month a strong as year, challenged as a last

product and to rewards brands and We’re and that’s design and and is adding demand that our seeing that specific innovation markets. for in keeping the really our contributing creating to through distributions great that clean our limited brands in growth

think out it's the rages, of so running the the good to I sticking fundamentals business. a it's of And nothing basics really

Unidentified Analyst

also to I your ask wanted strategy. about advertising

little a exactly how able you're digital forms? of elaborate media specifically to you more more that can I this about traditional quantify time about asking demand, changes am social So has and if And versus on year? like those last maybe the versus changed, impact

Efraim Grinberg

And the both that U.S. in So Movado able that fashion we're across into demand our brand looked rewards our and not around very and younger XX% and from said we’re as this board. we're excitingly driving at in our site digital we’ve a that but to the year and driving consumers earlier to Olivia only significant in as brands Burton. watch shifted seeing We shifted, this I own seeing year. our now world, see Web investment approximately of we

around Burton So into a about world. we the launch we're of Oliviaburden.com with great have business also Olivia strong very Nordstrom the prospects in we excited the U.S. in for a and got U.S.,

Unidentified Analyst

you composition newer between legacy of the and the from do idea is your you inventory And of channels? last some wearables? some do in And products, any me. products inventory have How believe one on

Efraim Grinberg

is wearables a So again, pieces of small our business.

And healthy at the in cases a level be level of actually inventory we as in levels. And lower channel in lower really quality the little is inventory. should our that healthy so channels is maintaining inventories very, -- very inventory retailers they focused probably terms a in our are And in of believe terms inventory of very on there that some than of segment.

One a promotionality not maintain of to tried brands. needed we've our is business the things really do really that where in is

Operator

with [Operator Camma Instructions] We'll go Sidoti. next to Frank

Frank Camma

questions Burton, out of an you so can the here. quick Can Olivia apples-to-apples just break couple Just we get year-over-year? here

Efraim Grinberg

We're duplicate, contribute quarter out. breaking growth we'd Burton and at announced It on the plan raise not to it's that we at the expected did really to guidance Olivia it that for our but quarter basically end of second acquisition when of the time. the

increase sales million. we by So think $XX did approximately I

Frank Camma

guess But correct quarter, way. I Am ask about revenue In it international. Olivia's of different was that? the I most

Efraim Grinberg

we excluding had Yes, But growth… that is correct. had international we growth

Frank Camma

get to I I a at… trying was take just look it.

Sallie DeMarsilis

of highlighted with Lacoste Tommy our and well those we Hugo noticed other all. performing were you And brands some and

So internationally speakers]… [multiple

Frank Camma

were specifically X%. brands, up you licensed Those the called as those brands out been licensed

in Olivia obviously brand? that not is So Burton

Sallie DeMarsilis

Correct.

Frank Camma

strides said further Movado market had you itself and made give -- us share. brand just Could

maybe? past I I you've think out the about right about market or about XXX called Is to higher range, little that think XX%. still, X,XXX in share

Efraim Grinberg

number don't It's mid. to bit have probably the we we're higher it seen into now. But But I grows small at the level in at continue grow. the market certainly at growth, a little have share exact that but

a increased and with supplying nice marketplace, of declining So increases. in for quarter some a channels the actually less Movado number

Frank Camma

in saying to investment what beef over. there is side digital on know direct-to-consumer, switch talked up maybe it of But business you lot. I places you've of offset your really the so And about just question your it takes just business possible presence? to other on, type understand of a lot U.S. your Or what going I'm if it a the my last what's quantify is and is given

Efraim Grinberg

So able in one areas of building use of the reinvest terms of from media, a next that's media in somewhat some year. to terms the of of being in That's savings digital that Basel offset budgets infrastructure. in terms we'll probably move to around

into of initiatives, reinvest a of costs to substantially we that building Basel although $XX year, would a all expect marketing customer Excellence. us facing So Digital million including Center

deliver that the company the So we think help for will that growth future. in accelerated

Operator

like for With I to would back turn it no further management question, remarks. to closing

Efraim Grinberg

you all conference in today. our happy and like all. We forward call holidays for you much would wish of participating you. I Thank year-end. again And our joining to with to very after you happy Thank you Thanksgiving look

Operator

for concludes conference. That We thank today's you participation. your

now may disconnect. You

Movado (MOV) 21 Nov 172018 Q3 Earnings call transcript