MOV - Earnings call transcript Q3 2019

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Operator

Good morning everyone and welcome to the Movado Group Fiscal Third Quarter 2019 Earnings conference call.

As a reminder, today’s cal is being recorded and may 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 with. to statements those of are press risks to The includes used not supplemental like this the may constitute information call, be would a contained which in company’s filings of a measure forward-looking non-GAAP press which statements most such started, facts Reform results the call you Private provided XXXX. will statements sure as the differ the on we this which directly conference with I’m familiar to the Actual any number language, is today’s Safe and meaning release. may to uncertainties, all within from company’s measure you’re historical of Act in the this 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 be 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

to like some of highlights our third your first up acquisition October detail update an walk would greater and you our with of results to our X. will results review I for as share of then completed we you which call. will financial well as through and our product Rachel. call on questions. I season, holiday you, open Sallie we MVMT, marketing the just to Movado Group’s the on the welcome conference Thank quarter will third plans quarter and in

strategic results quarter including and with initiatives, making pleased our our and against our date are We center digital excellence. we progress are of the to year third

year. $XXX.X rose $X.X to from $XX.X X.X% adjusted $XX.X sales last third million by million million to the For up million, quarter, and grew operating income

per to and earnings million. grew by $X.XX share. to by Year $XXX.X adjusted million operating Our XX.X% $XX.X adjusted per grew grew sales to share date, income XX.X% by XX.X% to

continue $XX bank We cash million a on rate a of despite partially million our by balance $XXX.X with sheet at MVMT, to of borrowing in which a funded current amended the maintain agreement was X%. interest acquisition strong

We continue are initiatives season. on begin the positioning with holiday we excellent make to selling progress our and strategic as pleased important our

For the domestic quarter, and by accessory our business XX.X%. brands watch grew

our Coach. in sales the domestic Excluding a one accessories and X.X% for watch brands sales, Tommy increase Hilfiger month growth strong with of posted MVMT and quarter

very are been strategies are our these demonstrate which delivering businesses with in desired the results We pleased that that working results. have the domestic we on

to Olivia in On reach international of for on younger MVMT, brands through by the on a into has drive a of MVMT proven Tommy our Hilfiger a been strong and as Lacoste Burton channel. very younger Movado the our well to is introduction the for ecommerce grew X.X% months key consumers company It Group. has MVMT acquisition ability growth long-term with China. over intended digitally little acquisition native strategic focused front, a a profitability the closed demonstrated consumer. two business the we brand growth as and since

synergies with our leveraging systems capabilities in plans capabilities cost Our call global our distribution fulfillment years to the for combined drive and supply come. chain, to

engagement on integration target Instagram, within that achieved would benefit Facebook back from of beginning and initiatives has synergies awareness million these the and followers over to year. next MVMT on the half during to working are second it With of with X audience. their these virtually level teams impossible recreate be Our quarter goal the of and

world. fashion watch MVMT prospects and the has importance play look around the the Group MVMT’s that strong and to Angeles team collaboration within Movado accessory company. the level we a MVMT about can high a for forward in excited of assembled within across digitally the native are market We Los future and

would for the strong our program, collection very Movado, new selling I brand, a Connect our introduced prospects well a our In of marketing largest available Now like exclusively recently holiday With we watch digital and holiday arena, to for smart brands to season. our leather for about marketing style. excited our we our review strap we introduced season. and content our perform the and website. Movado are Movado some its In products continues Face on highlights

has also Movado. We new a for quickly Museum have introduced bestseller a a that become bracelet mesh on Classic

For for launching featuring of a the number we new Diamonds models holidays, are Her.

our On will York that to New commercial new campaigns, the we television advertising print marketing addition and a be front in and Angeles. Movado Los introducing aired digital in are

During The opened held our Burton Garden we the in We special first event entitled Dream historic Olivia quarter, a launch Garden. the boutique a great deal fanfare. Covent of with

of season. about performance selling are boutique holiday storytelling pleased feminine enthusiastic Burton the its very for and are is Olivia We messages. designs and the the initial known its with marketing

York Throughout heavily For campaign digital will York last of holiday New brand Olivia Radio by of City. Home, interpretation collections the our Out a be strong featured out brand eight unique double-decker messaging in support our an in to be the Burton season, campaigns, a in we and We Celestial supported buy dream holiday our buses Olivia build holidays, campaign, digital will bus launched and in London awareness. Dream that further also the there introduced be New Snow and will Burton week Globe. Garden. decked with XM

media especially performing in made ambassadors, third such brand and is season. growth the continue Hailey relevant. for perform brand even double-digit extremely and strong collections for well Europe increases with the for prospects Charles Hilfiger very excited to sales continue Baldwin, our to drive at retail. quarter. The Tommy are watches We well, and initiatives Americas as about the holiday Coach social this the and in Tommy’s Perry strong more in brand have the

In to in drive continue and new executions. we Hugo with in and chronograph strong Avery Our Europe new the truly three-hand results introduction the by are Ari both excited collections Boss, are and Trophy resonating consumers. of collections

launch first We third by the for distribution of seen limited our growth prospects and of re-launch holiday we its driven also the Hugo are double-digit brand global season. new iconic have Lacoste during by quarter margins. XXXX the In excited in about Ontario, the collection driven began Polo digital Lacoste, and a our location modeled strong Canada doors, key In design campaign markets. sales while including we after maintaining saw outlet the in European original stores, growth in our strong international new our

continuing in an has currency Latin increased operate economies and evolving and by this such driven decreased, offset we East. landscape, volatility political in facing conversion in America, events retail the is in traffic Brexit While been the are issues certain headwinds U.K., as softening Middle markets rates. in Overall, to by

results. As with a remain on company, we intently positive against our focused plan executing

strategic to acquisitions and top Burton MVMT of bottom drive and We line including have the long Olivia both made help term investments line growth.

holiday made exciting the for progress next front, this have and and season digital year. On have plans we

over driving would innovation throughout our to company product now detail. call financial are review brands. across our greater turn We in the results in I to marketing Sallie design like to and our

Sallie DeMarsilis

and you everyone. Efraim, Thank good morning

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

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

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

the After per $X.X diluted $X.XX acquisition, $X.X was $X.XX connected year-to-date the and the which $XXX,XXX quarter. related on nine for was as tax, of for charge Act the consolidated of XXXX. discrete Movado of tax the the primarily $X.X the intangible to acquired XXXX to months GAAP share share. to or million share the million include $X.XX results in acquisition related third Olivia to period tax, million of or impact to million was foreign results certain of change After acquired year-to-date Included fiscal year-to-date of was fiscal pre-tax last quarter. first fiscal estimated Burton the a of equates XXXX items. amortization a year. as Olivia third related the approximately Burton Our XXXX charges year-to-date million in X, acquisition $X.X charge in equates $X.X benefit Included XXXX the results for per for the tax July the assets, well non-cash in of the diluted Group recorded diluted the period $X.X of Tax in third per or million which to quarter

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

retail company and October and stores wholesale company’s and watch two brands includes and included store outlet operating accessory and brands brand the are accessories company’s watch now XX, owned segments, segment company the locations. of company’s as referred The XXXX, segment to brands, As respectively. and retail, the our licensed

turning $XX.X of our the the or for the one The quarter XXXX $XXX.X to of from million fiscal of addition quarter. Now the include X.X% an XXXX. results, third fiscal were XXXX quarter results for month of increase million, sales MVMT third fiscal

locations, company sales XX.X% brand $XXX.X By same brand geography, unfavorable increase This of the compared driven rates. currency from last primarily was locations XX% international and sales our leverage channel X% was was including product increased or million to stores business predominantly in one owned of both third X.X% brand the Canadian strength store, increased million international offset of marketing $XXX.X $XX.X business Excluding stores. year. the a as $X.X in change XX outlet by $XXX.X million our X.X% these and MVMT. and the and $XX.X certain $X.X MVMT, overall growth from XX.X% XX.X% owned company percent impact the This as was accessories U.S. in was increasing initiatives sales across dollars, we increased the and year. last million quarter brand, driven in or and Operating million In with in X.X% profit mix The including of well as sales partially million brands compared our To strongest the were increased internationally. approximately by newest quarter. XX.X% of brands were our last to of compared watch of In was sales and Europe in up by by foreign sales and licensed and expenses on end investments. of licensed fixed increased to increased Sales $XX last constant dollars to Asia. $XXX over third operated being and The increase last brands. year. in by this to were XX.X% Sales by and business unfavorable quarter, compared to XX impact margin our This support compared million, costs. million period This as to for increase accessories segment the our X.X% increase dollars, million appropriately sales year. accessories decrease year. exchange in brand sales watch sales $XXX.X compared last owned was a driven or constant driven constant million year. in last awareness, U.S. business The driven last in end, our our both the brand watch gross year. categories. sales to licensed million to Gross grew year’s At $XXX.X

or operating million million XX.X% sales compares Our effective $XX.X quarter in an tax Net to This of $XX.X or tax income third Income XXXX by increase fiscal effective offset tax in year-ago million year-ago of income $X.X $X.X period. in of compared the rate $XX.X an expense per quarter higher tax in compares the million of rate in the was or expense $X.XX drove an year. diluted increase in expenses recorded partially million period. the or to to million operating share third $X third $X.XX quarter the the million prior of net diluted XX.X% income share. $XX.X per or income of

EPS. in Gross gross of fiscal million to ended significant expansion the constant the in in XX.X% dollar On percent of sales of we year-to-date at compared or was XX.X% XX, favorable change saw profit Looking sales were foreign metrics growth basis, The $XXX.X in channel increased costs. profit favorable certain XX.X% sales, currency across with leverage increase product was by and period nine or gross margin an increased positive October driven rates, XX.X%. increase Sales XXXX, of a and last $XXX.X exchange XXXX. and sales margin, from million, performances as key million primarily fixed the mix, on year. period impact for $XXX.X

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

end $XXX.X the of $XXX.X the end the was Now turning the balance same XXXX. million third fiscal our quarter versus to at of at cash XXXX of million period fiscal our sheet, of

third aware, the are million the we revolver. of end, brand cash the quarter you $XX hand. MVMT on approximately we At equivalent acquired had during As on quarter using borrowed our

program. of $X.X intangible rate million, quarter, these related for the the have million down the due During Accounts million This Capital MVMT acquired inventory same we borrowed million. a and as of amortization $X.X Switzerland. third funds MVMT. acquired to the $XXX.X repurchase favorably were Olivia year. expense X% paying million last from of our receivable interest repurchased our stock or the on expenditures was the date, was amortization X% $XX.X Inventory approximately of the million. $X.X million global compared and of under year. are were at nine-month $XX Year increase facility to period quarter was $X.X depreciation to the share extended $X.X period and prior amended predominantly million currently from Including and to end assets a in Burton, we

includes amount some Before of our rights international purchase the in as associated balance certain outlook party international this costs information the million with date, further and acquisition is of distributors as preference third accounting our This our integration and adjustments where approximately terminating I markets, to incurred the of well of costs transaction provide discuss on to related for contractual MVMT infrastructure MVMT leverage fiscal associated our our expertise. charges acquisition year, brand. To $XX.X of we of in and I will MVMT. the newest

terminate $X of million to distributors, the we approximately charges charges additional the fiscal of any incur international Excluding expect acquisition. MVMT pre-tax for to additional this to remainder year related

to slightly Excluding adjustments, the these XXXX. continue MVMT profit that to consolidated to charges and months accounting be brand will be into accretive we the fiscal purchase for expect four

outlook, environment assumes Now currency and current based consistent is rates onto the our recent retail economy outlook global on levels. our with and

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

provided previously reiterating we XXXX, are our For outlook. fiscal

be to will approximately and of $XX a million be anticipate $XXX million in million operating continue We income million. range to that to $XXX $XX sales will

XXXX income call and expect for XXXX non-cash share. now $XX of per of Olivia related provided fiscal up to in $XX.X XXXX approximately in million With the MVMT $XX expenditures outlook as fiscal This discrete the I tax have rate. approximately as in effective items changes of fiscal assumes charges tax million. therefore we foreign Tax Act, that, are net unusual a to million estimates the to to for XX% or the be the accounting to We open would benefits $X.XX adjustments Capital reflects fiscal no amortization questions. $X.XX well for impact excludes diluted the for XXXX estimated The be and acquisition, the items. tax like Burton, for to acquisition certain XXXX the

Operator

hear [Operator instructions] & from Our Company. we’ll question, Cowen Chen Oliver with first

Oliver Chen

Hi, quarter. thank nice Good you. morning,

about and a can Olivia do the you as are the Our and on Thank of services kinds thoughts love continue on related or this different are Another U.S. your also, segment. performed, expect versus framework brand? purchases. about be was where Would sustainably your or thinking evolution MVMT How wholesale on Burton. at you we you responsibilities thoughts What question is U.S. in that each volatility positive wholesale of to planning how are make the interesting you. just side? question to M&A shared that phase

Efraim Grinberg

you, thank Sure, Oliver.

believe next impressed from there On Boss, a which that opportunity share benefits of still the $X,XXX we start London management Lacoste to its Movado We beginning the them is excited the my lower and we believe represent those acquisition, a is as marketing, certainly but team. that since take off well the front our category infrastructure, first in as to years seeing company, so are lot by in as to completely but category, us hold will be and brands, that Burton our We’ve to and of to $XXX comments, founders MVMT to part Coach on built have in in actually continue been brands the run the a acquired Burton the that as digital Olivia for the reap team work, said to exciting in price seeing and excited so With the are so its both within have our regards our and believe question, going to base, that will we team we’re were I fashion like have still and of very as board, on be very, the think particularly well. are market and in we continue especially expanded we’ve to have year. nice especially the expect with Tommy able that its in are significant we increased opportunity opportunities, Angeles largest and .licensed Shoreditch product would continues we’ve U.S., especially Hugo we in question, running Hilfiger just and some growth headquarters, the it on to the half second really several second in of of a of the they on the to MVMT U.S. relates lot we to that. watch leverage I Olivia over those last board Los Movado,

Oliver Chen

you. Thank

how wholesale to On channel are mix, how feeling your headwind mix? that. should we the happening line brand the how Will side, margin U.S. margin with and model and terms thoughts the product should of product in what’s on The to inventories gross that about sales? relative gross you expect love with be trend? continue I’d a to the we Movado

Efraim Grinberg

mix marginal it’s the at that we’re think of I issue in margin. percentage a was still so about small talking very best, terms gross probably

basis margin that. so gross the for I points, is pleased XXX Our believe up, we’re year with

also We in third we currency half had had quarter, the of some the in which benefit. year currency headwinds first the

there On same the past, significantly opportunities are channel gross accretive and believe not we’ve in about are those mall-based that at as the talked retailers issues, level and performing are the but digital that we think are actually side, the some Movado had to those significant I margin. been; they

Oliver Chen

top On organic and should love term quarter. nice speak also, thoughts can and basis, leverage had you what’s long a and industry growth could our we industry? there, line the for really Okay, As watch longer you. a you be term sustainable? SG&A? realistic growth, models, us You feeling how Would this at about number lastly, you are any about thank look like-for-like to what

Efraim Grinberg

those we those as our so future, learnings. the believe have Olivia benefit through brands important really engage significant able category acquisitions is for to the then with that the other to so able Burton investments from consumers we made believe into two younger that we’re in two to to do MVMT, We and future, and and well being our

some expense happen than be believe we’ll to that, and take we down that as that leverage but time logistics we have chain do doesn’t but does combine supply side, but we the road. that infrastructure, marketing to on as ultimately leverage investment able and will capabilities, traditionally, able I earlier, that think I a MVMT overnight. to well are able be said expense fulfillment will some we as higher the

Oliver Chen

Thank you. Happy holidays.

Efraim Grinberg

thank you. Okay,

Sallie DeMarsilis

Thanks Oliver, you too.

Operator

further call the any no would are closing there to turn questions. for time, to this back At or additional I remarks. like over management

Efraim Grinberg

you I’d everybody on participating wish thank all today next our like to for much. over a the call Thank weeks. and happy few very Okay, holiday you

Operator

today’s conclude you call. will for your That thank We participation.

Movado (MOV) 4 Dec 182019 Q3 Earnings call transcript