MOV - Earnings call transcript Q2 2019

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Operator

Good morning, everyone, and welcome to Movado Group Fiscal Second Quarter 2019 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

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

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

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

Efraim Grinberg

everyone. morning, Group good and you conference Rachel, call. you, for joining Movada Thank quarter Thank second

our financial will expect close marketing updated results will and For then quarter, the and I on acquisition our will fall. we product which call the as October this of discuss of as the highlights our some upcoming the review MVMT morning, initiatives outlook. details around Sallie of X, well for the

call the open up will We questions. to then

up digits. adjusted another strong operating to pleased profit with quarter, very report sales are and double both We

constant $XXX.X our XX.X% on quarter, from million currency XX.X% or $XXX.X the sales up year. last For to million were a

operating gross was and million from million at $XX.X margin adjusted increased last our year. strong to profit XX% $XX.X XX% Our

increase. the and grew $XX.X million XX.X% months adjusted year, XX.X% increased six to the million, operating income of a For revenue to $XXX.X

business innovation declined for Wholesale continue U.S. product expect and our single-digit quarter, full-year our we Movado. in to brands for While new the the fashion by growth driven

Our Burton. Steve strong experience added to Last by driven retail. a international our Directors. with our of valuable in and and we Olivia brands Board Steve addition in brand markets saw our Sadove Board double-digit is licensed to growth, week, performance building extensive

a are LaPlante, looking We targeted and brand a that been we a Steve’s work. to for role been XX, Movado has great five passionate brands entered truly social the a time Jake Directors. based announced Instagram widely into content a in at creative August entrepreneurs. just media business leading started of followers. special recognized They follow MVMT on I developing MVMT is in and building take to have great Kramer by forward a to digital brand, look the that two we to to in all with young, world. agreement community and you Board and a Facebook millennials. credited Group’s years building contributions encourage on definitive the ago and Since Kramer On that MVMT company Kassan have acquire of Jake

to on X.X at continue that basis last great believe California. In that umbrella. potential a has brand young brand in accessible offers their a category, Playa Group with digital year, MVMT of under revenue prices others a them and experience MVMT, we that In proved a Instagram, global $XX not the brand quality millennial. resonates assembled Movado million team in grow to the generated in MVMT believe be a has consumers are Vista, great to with that young and and that are Jake While employees watch Kramer the we consumers and company also would wrong. over beautiful Facebook followers products interested acquiring on million

We before to expected purchase fiscal costs be to to accretive accounting MVMT and transaction profits year close this and expect transaction X October adjustments. around the

through over margins MVMT While EBITDA basis at of on operating this cutting a significantly we on MVMT are initiatives. online can majority year, of planning supply consumers digital we has We website. portfolio generated some platforms X.X% as believe has an the our Since believe mid founding, young wholesale that distribution, of developing the their into the areas social such MVMT synergies we do edge to reach in will our been MVMT to chain, year. teens. and fulfillment, expect Last that brand and media its business EBITDA profitable accelerate their time continue every with focused sales. in addition through that the been will logistics

and Now for her. well. In Movado bold I'd BOLD, both new minutes Museum leather marketing in Movado, few our initiatives. new and performance strong bold spend very ceramics bracelet on our product our on our and like a In to saw has metals strap classic, performed in continued we

fall expand family. the BOLD of Watches will For offering to season, some for introduce our and our additions her we Diamond Sport exciting

a available an digital is campaign. called interpretation new of the will Face movado.com. younger to Movado’s iconic on point of $XXX. exciting introduce Face Movado be an supported a will price dial Face We new also entry Museum reach segment with consumer, with exclusively

featured powerful brands, print artistically Numbers inspired will licensed You”, also we Movado’s “Don't slogan, as ad designs. our well in invest new Define television. as campaign programs our develop and and Let launching strong momentum a beautiful are Within continued as We digitally marketing product be which phenomenal new under in

women's is on marketing sell-through our We delivering continue strong new to men both collaborate very products. results. closely positive on media and with which Tommy Hilfiger social seen We've programs,

gold, Baldwin very For during and our the new in In digital quarter, yellow introduced has initiatives. the and rose collection which Coach, been campaign our point-of-sale feature season, fall performing will well. Hailey second in we Grand

extremely an our encouraging be will extensive very strongly. to been recently and has and have by which supported creative families, marketing program We executions. very number during assortment a product for Charles called from expect quarters. an men Perry Charles for continue Sports-Luxe also growth we response XXX-degree initial men a with this business. and we new launch watch In fourth Trophy efforts women just strong for fall, called Premiere. the HUGO new Perry increasing and will and consumers to a and The This third women's introduced we rollout of double-digit watch BOSS, see

collaboration on HUGO In retail forward LACOSTE, limited double-digit We led also focus the basis fashion Hugo, also heavy will distribution global a will have under fashionable with and in a quarter. a strong brand powerful product launch – with a the to younger This reach partners. with umbrella more BOSS for be our consumers. launch a e-commerce on with growth to assortment

colors an We introduction iconic point. entry-level quarter to price third the the $XX at are looking a revised in during multiple LACOSTE.XX.XX forward of

We growing our also business are kids with LACOSTE a supporting introductions. of number product new

that and we our For a first gift set collectible will will watch feature be introducing car. a SCUDERIA FERRARI,

a we are also integration infrastructure Burton very Movado Sports-Luxe Olivia We are well pleased and continues about perform that with family we introducing this new and distribution. are to excited all Fire. in global Group’s

We very products to and while team. continuing continue Olivia the creative limited global keep to distribution Burton from introduce iconic aspirational the

a Olivia pleased are and quarter, well Asia the extremely second growth we sale. opportunity. Burton throughout look in the the is significant and we China consumer and initial this resonating with launched During brand as reception at

of which artisan new performed well. we Olivia During collection, paper, Burton’s designed introduced artistic an quarter, has style very the out

the also Covent a are jewelry growing We part brand iconic flagship are experience. brand the in overall towards further pleased the To Garden end Burton of presence store Olivia launching of September. as the with we support London the in experience, of

well very X.X% the continue stores second comp sales margins outlet perform strong to quarter, gross growth. delivering during Our store and

During were the Canada. in able open outlet to store quarter, first we Ontario, international our

$XXX sheet the while $XXX year. million team’s business XX.X% proud half no with performance strong over the with first of half our Overall, the pleased last of are year. the in our reducing million overall cash and of debt by for we remains very for growing Company's Our the first I our inventory. global am year, balance versus

marketplace. on executing in would during XXXX. focus to will as MVMT We continue our sustainable, our position into well plan which on be focused completed business growing remain integrating Group, fiscal and we We growth Movado as an profitable omni-channel expect delivering

provide brand. we we truly over now support As Sallie and to global we we would accessories to believe, be the the become for I a fashion to then and questions. would the MVMT will glad complete like any call integration, to turn answer

Sallie DeMarsilis

morning, and Thank you, good everyone. Efraim,

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

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

the $X.XX quarter of Group and results acquired Included these the charges, fiscal related diluted primarily to intangible Our and items $X.XX connected to of press million to of the XXXX the amortization related of acquired of well non-cash were results diluted the measures. of XXXX fiscal consolidated charge included to as the per equates acquired X, asset. to one-month quarter. $X.X $X.X release in on includes million million for transaction months per described acquisition non-GAAP second pre-tax charge the the or of six Burton amortization July $X.X the was Olivia Movado equates of GAAP acquisition a for also asset. After-tax, table or in share. $X.X the for million After-tax, XXXX share as the

which fiscal of equates a to MVMT. $X $XXX,XXX for expected after-tax per results share of or acquisition pre-tax the GAAP XXXX our diluted to with Our in million charge, quarter $X.XX include expenses related connection second

which diluted six just with will share of include Our GAAP savings million initiatives. results remarks balance pre-tax The charge, cost $X.XX my $X.X to these in for or items the of special exclude XXXX after-tax a million fiscal connection per months discussed. our first $X.X equates

from of Sales standard, were quarter the momentum licensed second the increasing quarter, markdowns impacted strong, or broad-based second owned the for with revenue Burton, brands to million. $XXX.X to in strong was related adoption quarters. to quarter and to $XX.X million current categories, shifts and the our to performance. by new Continuing the returns for million contributed in across recognition of our sales XX.X% turning which our the we the which retail. results. pleased Now Olivia last timing growth unfavorably our were due each quarter first one-month Sales very the of owned year the are between brands, $X.X

tax cost or positive million other income offset cost last $X.X of for a operating in Wholesale income in profit in quarter. diluted by digits pleased million operated the dollars or of geography, expense or By dollars, To more increased than XX.X% in of expansion impacted the were increased margins in the million of in XX $XXX mix, international tax single decreased share. total expenses, share increase XXXX sales. $XX.X in fiscal $X.X to this increase Wholesale quarter grows $X.X end the million Gross increased of EPS sales distribution sales of XX.X% income the with the currency year-ago X.X%. million tax the to continues of increasing last last full increased XX.X% XX.X% resulting locations. of compared Operating leveraging year. $XX.X wholesale foreign the in our to unfavorable $XX.X for the product per in X.X%. due to the second dollars. were from U.S. the in compared impact rates, contributor prior $XX.X the quarter to year-ago million result was year. second investment strongest discrete to million or gross $X.X sales the Europe sales sales due of XX% three quarter fiscal an the net fiscal rate basis the the sales At outlet a changes marketing business rate was million expenses, $X.XX which to last increased compared The second International earnings. growth from operating million quarter. in new of or income of second $X.X in the The of period. channel second $XX.X expenses $XXX.X were prior leading in XXXX rates currency recorded by Latin outlet per higher Burton XX year, versus Olivia million and segment exchange quarter locations in effective second to we unfavorably a dollars, of tax end, of net year's due increased Increased Wholesale up an of to $X.XX increasing and to sales million quarter we in sold per America. jurisdictional Burton, as the million primarily the Olivia last and higher XX% change constant sales mid effective and XX.X%. operations the or an million XX.X% sales $X.XX expectation be was and than such XX.X% The million from operating in second to and to for year. Net second sales higher impact year. last driven was is U.S. sales as period. $X.X the fiscal quarter. retail foreign for compared $XX.X to the constant increase rate profit rate decreased operating Excluding support sales the the XX.X% segment The In second XX.X% increase $XX.X locations of cost in diluted $XX.X growth, The quarter. year treatment of point Income growth, XX.X% to constant sales expense XX.X% increased XX.X% quarter In compared or primarily tax year. was exchange effective $XX.X following. units the period, constant fixed of were tax increased of year’s same million with favorable approximately million Sales to sales million diluted share increase gross well favorable in million the income brand related or second XXXX XXX from Strong of and compared as $XX.X our Company's

XX, Gross million, ended increased $XXX.X at increase $XXX.X compared million, year-to-date were July XX.X% or just period was fiscal the from discussed. looking year gross the a sales our margin basis, million, XX.X%. to or Now months On an for dollar to results. as last constant for similar increase six-month Sales The XX.X% the the XXXX. sales profit XXXX $XXX.X sales, of XX.X% of percent quarter year. of reasons six was result a the current in second first of

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

inventory sheet. versus on end strong paydown $X.X our this of was sales $XX.X million our million the $XXX.X of quarter the XX.X% to as second million Now of revolver the balance same end management increased turning last of year. Illustrating months, year only first outstanding at amount Cash at increase a accounts in the to of six for the or period working capital quarter earlier stock million $XXX.X approximately equivalents. million. year, last depreciation $X.X receivable compared on strength of our acquired and decreased despite the million for the This share price very expense position in included as total considering primarily compared our results million. is the The increase the first Year-to-date, our six-month $X.X same $X.X impact period was year $X.X were share stock million to million Capital our the increased shares $X.X under diluted and to Burton. asset expenditures of Olivia related program. and the repurchased repurchase last stock of amortization we amortization of $XX intangible of common of period million outstanding a

October MVMT primarily was further close for MVMT this MVMT is Before month expected announced year, I is had business, on of In initial borrowings historically on performance that cash based anticipated an the had direct-to-consumer could fiscal of two additional approximately four next price upon discuss purchase tax will acquisition comprised fourth the of The the expected has during revolving of our on The $XX fiscal provide funded to facility. last a and about updated acquisition of brands of combination $XXX million combined will acquisition hand benefits. approximately MVMT. earlier occurring I million be of outlook which the of closing payments credit quarter Currently sales through revenue approximately total XXXX. current information financial our some purchase or annual roughly a years. million. their net year our in $XX X, is half $XXX our million in third or contingent quarter. which under price The at the

model, business. consolidated wholesale its generated direct-to-consumer percentage MVMT’s margin higher Given from gross predominantly currently is margin percentage, which our is the than gross

basis. higher consolidated higher also on MVMT’s percentage however margin more brand, of the is are ours which of than a expenses a sales, than As offset gross the by operating

contributors the percentage few investment marketing customer spend, Although was in MVMT’s there acquisition is year operating component more costs. than XXXX. a for MVMT’s the operating digits single mid to are calendar higher largest and margin

to believe the years operating MVMT’s half calendar give systems, the relatively opportunity will and select only will of channels, operating XXXX, of but be and globally For Group’s will Group’s as quarter roughly sales not brand in this Movado expand Movado which it forward. infrastructure each infrastructure. wholesale Movado of was would the of Company margin a be profit provide as year, into to scale brand yet margin allow completed MVMT’s XXXX The first fourth fiscal expect MVMT and which And the contribution percentage an integration synergies, breakeven. high to Group the spend in leverage improve and XXXX to also we not going the into brand

be adjustments, it will Excluding into the consolidated be slightly for expect months to fiscal four XXXX. we purchase MVMT profit accounting accretive to

to outlook. on our Now

closes the four of year months brand the operations, are of fiscal the October transaction-related and first reflect and costs MVMT XXXX assuming for amortization our Company's accounting the outlook of to of excluding performance XXXX, acquisition of half into adjustments. acquisition the X, updating on the We addition the

Our based global currency the outlook assumes consistent and rates current on with retail levels. and is environment economy recent

factors, global as causes XX-Q in XX-K currency and our in economic conditions in and affected customer rates referenced and exchange fluctuations materially results Our foreign maybe other changes various filing. by such many spending,

now rate. $XX For million net sales approximately Company $X.XX Capital income income XX% in be or range million XXXX approximately million, The fiscal $X.XX to a for the in fiscal $XX $XX tax anticipated be million $XXX to to that approximately anticipates XXXX will share, to expenditures and operating fiscal anticipates million million. Company net to effective XXXX, estimated will $XX be per are be $XXX a diluted to million. of $XX.X reflecting

incur to for a expect related to fiscal transaction We MVMT the approximately total the million pretax of $XX acquisition. costs year for

accounting charge well adjustments in the of amortization the will both no be non-cash MVMT the for of as unusual million like The $XX fiscal XXXX XXXX the assumes up questions. call there as we impacting excludes for as acquisition fiscal the therefore, With adjustments this Olivia acquisition that, I last would approximate MVMT open also have amortization well of acquisition and Burton. months for provided non-cash fiscal now four pretax for year. as accounting to Additionally, outlook items

Operator

We now ahead. Thank take Company. [Operator first you, and will the ma’am. from Instructions] Oliver go question Cowen Please from Chen

Oliver Chen

Hi. Thank you.

on and also U.S. forward. what to in done of business, lot should look love terms going M&A. your you're The interesting this in channel And frameworks of what results. catalyst? your what you've as Wholesale would there thoughts I seeing a Solid enthusiasm we fills

Efraim Grinberg

Sure.

particularly we But retailers and will quarter of very we’re the and in to seeing by have trends, third part, comments, good I and integrated marketing gotten first specialty response think the quarter also well during a we be campaigns. newness out sell-through that channel. from rolling we've as this and digital fourth I department supported on mentioned our and innovation store improved in my lot So, store

both particularly, initiatives, second so able business we by So improving exciting impacted their half to year. completed expansion. in expanding globally. now a things domestic of and an – that we business did the M&A a was – we UK acquire as and last direct-to-consumer which we're as with complement the believe well strong of we're ability MVMT, that brand brand. the direct has perspective, From brand that well year, that brick-and-mortar an as – and a one brands the expand presence And being to U.S. enthusiastic see Burton, Olivia have and the the has like to probably been fashion in through such with interesting strong in that channels an about MVMT And really we we really global is in very perfect

time acquiring and satisfied those the be of now, we're that we So would the the and two that really growth we're acquired the year-ago, I will with for one a in we being, companies, companies. one expansion process of say think I focused on integration, really

Oliver Chen

getting any that's to Is you. what to around very pricing your and/or are incomings And with seeing question, a strategies model? what trends, we're Thank last helpful. that cost sensitive thoughts That's product And regarding that? around how trends if about margins? tariffs. transportation business concern you're and thinking And you're

Efraim Grinberg

watches in the been have not could future. included far, tariff So potential be a That categories. for

that to or ways time looking certainly, short those occur. would are appear margins. not watch that in the threat be for medium-term, to were to at that were overall to it mitigate to that, if able being, included occur to watch But categories. fashion to a they the does be category if different the But the We in hope are

Oliver Chen

your of cost labor terms And of just outlook what your a on expecting with it supply goods you're chain, the sold? stable is side product cost in or with

Efraim Grinberg

hold. excellent as supply by our on an get And improving time also leveraged a chain overall can on over job will see Our company, of with done we able teams as supply the initiatives. to have MVMT into chain margins you be addition our our gross

to benefit our be benefit their time. for same to both at hope and able leverage the we that So

supply us side. are for think certainly there on I So – still opportunities the

Oliver Chen

Best Thank regards. you.

Sallie DeMarsilis

Thanks, Oliver.

Efraim Grinberg

Thank you, Oliver.

Operator

go will from Camma from Sidoti. now next ahead. question take our Please Instructions] We [Operator Frank

Frank Camma

Good morning, for guys. Thanks MVMT. the on detail additional

over does to their acquisition sounds over Can that expect that the Because their time. you that EBITDA I expect think to given you of time? mean address direct-to-consumer, decline like that? big… margin, cost sort And double a mentioned first basically you you

Efraim Grinberg

supply spend that that infrastructure side, we – improve will believe So both lot on I’ll little that on margins. bit the leverage over overall chain we side, a and then can get so a time, fulfillment within our of

the believe of have opportunity marketing while we that We wholesale will internationally, around for the business, have and also a overall. the still an nice majority be able it that – not and the will to customer cost be where cost acquisition world business especially leverage

you today millennial if distribution large and maintaining we brand that brand consumers of a portion surveyed have that So can a the still in fairly brick-and-mortar a in model. MVMT well, believe the of direct-to-consumer we predominantly United they while significant States, but leverage as – awareness

Frank Camma

have high fair you saying? a It sounds better it sounds also that even already assessment given time? over what they could like scale, Is Is get sourcing. your like but you gross a think, that profit, fairly you're

Efraim Grinberg

you leverage the on we side ahead we go global a fulfillment Frank. chain of important business And So meaning can if think synergies, that distribution there synergies supply the on – basis. are

Frank Camma

No. I they can you the leverage lot on think customers I individual assume? still was isn't it like that just going a different? chain. side, of So your fulfillment through Because as doing –are supply a – shipments but little you to to say,

Efraim Grinberg

growing and Company that. five think started very with capabilities, can We Yes. MVMT leverage we just that quickly the was a– is our years from ago. systems companies

those. have at to They size. normally it So scale they adding that they this be the don't have infrastructure would would systems

adding So able to those, ours. leverage them we’re rather than

Frank Camma

retail Wholesale on the shocking. you're sort getting recently. moving comment hearing Obviously, not Can for of what sort the then And pretty fair. has down, base of through favorable – year? too vis-a-vis to confidence to That's trend continues commentary season? partners I about last Okay. But that, mean, your how U.S. from you the are business. Any what holiday on channel? been you

Efraim Grinberg

I think a excited question our customers that that number in programs new very are and the we previous that about. of product innovation I commented Well, have

business, why year that half we Wholesale will trends feel sell-through of the see that's well. growth U.S. second justify in we'll that fairly believe the and we as that on So the confident

Frank Camma

Thank you. Okay. Fair enough.

Sallie DeMarsilis

Thanks, Frank. End of Q&A

Operator

closing further any I no or to to additional turn conference for management the questions. back are like There would remarks.

Efraim Grinberg

Okay. to you. again half thank of and participating second to you with results to today year report able as well. for the Well and we of look to you our all the would Thank I third forward quarter being like us

Operator

your concludes and call. This Thank gentlemen. you today’s for ladies participation,

disconnect. now may You

Movado (MOV) 29 Aug 182019 Q2 Earnings call transcript