MOV - Earnings call transcript Q4 2019

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Operator

Good day everyone and welcome to the Movado Group fiscal fourth quarter 2019 earnings conference 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 Ms Rachel Schacter of ICR. Please go ahead, ma’am.

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

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

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

Efraim Grinberg

strategic well walk and Sallie morning greater as and Thank then you, in our coming Group’s our the call. year-end plans as conference will and to Rachel. Good for through for XXXX, will share for quarter vision our year. welcome well the financial and outline as detail as Movado the I fiscal highlights you with you results outlook the year

during pleased quarter fiscal end deliver challenging we In very such a global to our glad be the We to will then questions your to were a retail season, particularly holiday year. strong and marketplace, answer

our of acquisition EPS share digital and market on our in operating footprint and vision prior us quarter from of and to Our for XX.X% focusing the to the by the MVMT, XX.X% regions excluding around to that gain increased grew by year grew strategic brands innovation, profit MVMT adjusted confirming Adjusted $X.XX expanding driving the XX.X% quarter is recent enabling including increased and sales $X.XX for world. million, period. our the $XX.X

to sales our grew year, by XX.X% the $XXX.X million. For

profit last to and U.S. the the of We At our our to growth, in adjusted Olivia with $XX.X of million, for in versus increase fiscal million fiscal year. of to share MVMT. fiscal revenue have we a the made pleased wholesale XXXX. last XXXX and XXXX in ended Burton return Our and earnings year very were our we despite XX% per grew X.X% were the also U.S. in year, business acquisitions addition the year to expected important operating year, without said grew over adjusted $XXX having the $X beginning cash wholesale MVMT $X.XX over

Now of brands the grew in some highlights I’d year. as In coming XXXX, brand to like share year. of quarter our the for plans the as with the our you Movado and both fiscal for our some well

While ecommerce stronger. challenging, remained was traffic performance

on Classic Museum and customers. Evolution with retail our resonated Mesh our including Movado, in new introductions product our new Our Bold

the Our and over mm XX Museum collection available XX, a in propel our waves Movado.com growth various business limited in XX helped XX% color series for mm to quarter.

XX our support a For for help spring Evolution to a campaign men continued our X.X continued campaign to to we sizes: in help and be and and fall, Movado available we retailers a In and In marketing Movado drive introduce brand, and will now fiscal Bold plans for demand our together of put digital collection drive set both featuring strong have women television we including two growth, XXXX, Connect coming Movado.com. our XX website. watches, are growth focus continue to on accelerated which on Movado.com mm this driving excited will smart mm.

For key a We the and second of during previewed women. collection the Movado to annual smaller our available with strong our time reaction X.X. some Switzerland we’ll in first customers received Davos, Connect have size Movado for a Group Summit

smart Wear OS Google will watch platform chip. Qualcomm be the supported by and new Our the XXXX features

While functionality, our smart for watches capability. deal about they first the are will feature great time a all of rate design, updated including heart

China specifically consumers, significant retailer. ecommerce excited JD.com, We are invested opportunity about China’s and and there largest is and with also marketplace our in have both our believe for in initiatives Chinese where capabilities digital Tmall online we online

symbolizes important had successful performances and and Having quarter In global we strong started significant this strong of been has new the increased fall, East. incremental performance saw for and in brand we Tommy brands strong Charles Hilfiger and will programs holiday there driving the a Park with Perry watch from the Coach, The t-bar built-in be global in Decker shop-in-shop testing with with of effective and the omni-channel the points Hilfiger and driving Tommy division. Him. our proven business, a and product marketplace. North the we Middle strong global about new enhancement very our our in very our record season the Her technology licensed Partnering growth part discussion for been that and to marketing the new at with by in marketing In drove strong Ari performance reach brands, by selling Europe. challenges the U.S., especially market, this both sell-through, driven led sales in throughout sale products, Tommy America world. new we quarter While Europe strong double-digit South performances has the Latin of Hilfiger, the drove fashion bestsellers, truly with America, initiatives collections. featuring year expand continued during our a for had In we and we strong innovation fourth

fall for growth driving in Our the successful season marketing programs were during the holidays.

we new with to an in men’s and a drive men’s for offering second arena In the position strong brands of exciting and very focused we leading the half spring, an category. as Hugo increasing in are and innovation this presence in the Perry of For fashion on continued the women’s one continue the Boss, watch Charles year.

digits quarter, polo iconic we shirts. of cities key is fourth strong also Lacoste reached the which Hugo Prix Europe. Mexico XXXX. our a retail record very in helped sales impactful growing in ran as collection. Grand well campaign sell-through Retro Lacoste our in City, with like fiscal partners. We drive In We billboard In XXXX our new watches for York, global and very the from Lacoste complement Boss saw Hugo we double the continued and Trophy in momentum, selection, sales L.A., New to as Products designed successes

holiday we our During season, Lacoste successful also the with very were kids watches.

our at product were Burton coming growth Davos. Burton for Lacoste introductions launched our year new driven We our of in the performance and one by Tmall. awareness. spring excited by by ecommerce had Olivia in well the year received was Power are Burton in Award Olivia we sales We strong results Our Olivia earlier growing best as in the China the retail this brand launches on of Asia. partners and very awarded a

and was Olivia first Christmas very this open was performed Covent flagship boutique Burton it our the addition, in Garden, well. that In

Osaka, Japan in launched our with also a We local boutique partner.

the great believe the and the front future. Burton strides made has jewelry last is we it Over Olivia that opportunity a in year, for significant

been on in and have we For Since We focusing Singapore, expand begin our synergies integrating our on acquired the Japan, acquisition, systems, deal like capabilities, and quarters. expanding our ecommerce supply this fourth focused of and in and markets Korea, key awareness Latin building the these of expect chain. would positioning year. continuing a great to to teams first our China, in October increased half in U.S. some be America. progress of Asian during are of the fiscal MVMT to integrating and We XXXX, realizing and strong during brand year global MVMT past made very the our third the

a has brand the can basis. MVMT one biggest believe it on distribution a global media grown following, While with and consumers leading brands we at ecommerce a that targeted become wholesale watch into ecommerce strong both social in young very of

both distribution abroad, our MVMT United global launching strong States the a have have customers in enthusiastic We about into marketplace. network omni-channel been very and and the

that as it presence. the needs next digital development in believe omni-channel an built brand have was its the to to a level predominantly reach MVMT player, we While for

and also executing additional brand at prices, margins. invest we MVMT and build roll-out begin In in of products with gross against awareness in to sales the to drive being support jewelry headquarters With the watches, community MVMT’s great will including creative we powerful our and the affordable and continue presence team we We great wholesale loyal believe marketing U.S. of year. is very to engaged profitability Los store in developed growth has programs an that division, second strong followers, strong to Group, half at sunglasses, by a Angeles. This long-term the our strong Movado with focused potential increased outlet for are on adding and profit vision. and investing during

to remained conversion increased rates. traffic we While challenging, continued drive

sales increased of by comps with XX.X% we year, the For X.X%.

X.X% growth our we For embarked X.X%, the our on with excellence. an and a brand store this sales footprint. launch center drive Last our announced season. prior global digital comps to of to in digital effort the down our and robust the quarter, were build traffic lower help strong year, platform up We for reflecting holiday sales project of across

strides incremental great upgrade building our This this ecommerce. will data already believe strong latest great half Movado add grow Over and ecommerce, an across our and Movado.com. the disciplines, Movado value enhance set marketing, have this we’ll further spring, digital year, an digital and made have platform including with performance group a presence. solution in ecommerce the With have exceptional Group for competencies assembled with important brand, our various build we as salesforce.com CRM. last We we to second we added today group to value of of sciences,

to We Burton. out this for Olivia roll to enhance excited mobile-first experience consumer our solution further and Movado are

distribute During fourth collaboration we Spanish our market. Spain growth venture believe the We our accelerate the of closer with entered in partner this a to all help in future brands. quarter, joint long-time will into

We on be to are execute omni-channel to a player vision leading category. our the working in diligently

a drive share progress We to year. this of over market continue growth gain have we year great are and coming deal to last made the excited and

invest we discuss, in also opportunities future As most to will growth; Sallie growth. will our for important embeds our strong a that foundation we both profit provide believe continue will for and sales however, outlook

in believe quickly and that the we making retail we global We landscape deliver evolving a can continue results. that are to right choices are strong and and operating challenging will

over passed call away. I would members, board one Sallie, acknowledge Adame long-time turning Hayes Before Margaret like our to that the of recently to

our a to respected missed. and a will great As be board retail Margaret greatly contributor executive, was

Now to Sallie. the over I call would like to turn

Sallie DeMarsilis

Thank you Efraim, everyone. good and morning

financial results outlook for then our review For first call, and discuss today’s I will fiscal XXXX. our

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

describes fiscal and items. Our XXXX. equates in acquisition, or fiscal of of discrete million per After these includes quarter results to also items or in XXXX the XXXX benefits $X.X $X.XX measures. pre-tax well our Included Movado share the the the press and million X, the for million the recorded for tax of was diluted tax Included Group XXXX charge non-GAAP Tax certain consolidated on tax, per the was diluted recorded connected $XX.X which Act of table October quarter. $X.X fourth share as to related $X.XX in GAAP diluted quarter. $X.XX foreign as acquired integration charges impact of a or million per consolidated accounting fourth results finalizing of the $X.X $XX the MVMT in was share. were release for with million primarily fourth

primarily XXXX Olivia July the Tax or XXXX the per $X.XX Our share. which of charges acquisition of quarter. of in quarter XXXX. Included fourth to and in or fiscal $X.X enactment for Burton Act results charge year. tax, which GAAP million this Olivia XXXX $X.XX was to per of intangible acquired of was fiscal Group approximately After in non-cash share acquired results After for to diluted was per related million Burton on the $XXX,XXX for in Included connected million million to results $XXX,XXX fourth estimated $XX acquisition $X.X last pre-tax assets, X, $X.XX $X.X year-to-date quarter. amortization acquisition, XXXX the related of year-to-date to $X.X Movado equates was the share last diluted the million period to the fiscal year. the diluted the impact due recorded the for included consolidated fourth charge the charge the or the tax, of equates the of

initiatives. diluted GAAP $XXX,XXX after to or charge per pre-tax included charge In a of balance was cost was savings of share my Our results for with the of fiscal in tax, million special items our in pre-tax XXXX. $X.XX fourth connection small $XX.X fiscal equates XXXX million $XX.X this just which charge exclude the this a quarter fourth quarter to the of of fiscal recorded. reduction remarks $XXX,XXX XXXX, The discussed. will Approximately

as reminder, brands locations operating now retail outlet segments, retail, to our well than other wholesale locations. segment company’s channels two business, brand the October accessories and all the our and and of XXXX as and a sales are retail the accessories company distribution The As watch and referred comprises stores. company including segment stores as our of our as rest comprises outlet XX, watch wholesale direct-to-consumer

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

of sales in as sales To overall this was year. Excluding XX.X% States increase driven as in constant grew United dollars end, company growth licensed the internationally. sales our and well over increased and XX.X% the in up our The impact last brands owned strength MVMT, stores. XX.X% across in were by

were MVMT, U.S. period to Excluding sales our brand watch in accessories as and X.X% XX.X% million same $XXX.X increased sales last for Sales segment increased $XXX.X the in of of compared and the year. million internationally.

increase dollars, in year. of brand year. XX.X% last these $XX.X compared our U.S. XX.X% categories. impact By and by both watch owned sales and to MVMT, increased In grew business brand to driven licensed the a over Excluding geography, accessories the increased brand $XX.X sales sales constant million last million XX.X%

compared accessories XX.X% MVMT, This of dollars, Asia. to being licensed grew million last increase and our impact over XX.X% increased and prior $XX.X brand international in XX.X% increased driven year. international watch The our and growth $XX.X business strongest sales the year. sales to brands. million Excluding owned by Europe was constant with the sales In in both

XX.X% Excluding the last impact sales over grew MVMT, of year.

brand, gross compared XXX year. quarter, fixed For favorable we store, the impact end from and XX.X% $XXX.X of of the year. XX.X% including year. profit operated XX Canadian X.X% was outlet sales or primarily as was to point and increase one the company’s up million At quarter, XX locations, last retail Gross last the business locations to margin by or million was mix the rates. partially compared last expenses across basis in channel driven were channel exchange The support product $XX.X marketing fourth on unfavorable foreign the in quarter to leverage of the by inclusion in largest costs. was quarter These mix $XX.X offset change our of in year. initiatives MVMT newest were increase million million, sales in product ecommerce an uplift currency increase our the appropriately the Operating a of brand and MVMT. of predominantly the driven This in Contributing was increase XX.X% by $XX.X investments to our year-over-year. business portfolio, awareness including and our

of million XXXX. $X.X million Net compared was year. the income or quarter per growth better operating increase quarter of offset year the share $X.X operating and $X.XX the versus the diluted expansion Strong performance-based expense period X.X% in end, in there $X.XX $XX.X or operating was income in the was million fourth increased of same expected compared last $XX.X million share in this more sales quarter. profit diluted sales compensation. to in of than or gross income To than same fiscal period. and tax $XX of million XX% payroll per $XX.X a for was or leading ago fourth million fourth Income expenses, sales Additionally, to to the $X.X in million net income

Looking January of profit results. in million, were at in without with for $XXX.X year and record key We expansion margin, the Sales the XXXX. results performances significant profit ended positive MVMT or per XXXX, increase metrics in an growth inclusion record operating our across full from XX.X% with and fiscal XX, earnings reached we sales, the of saw share. sales gross increased

$X extent full XXXX income and or in fourth in prior was $XX.X or per compared rate net year. rate XX.X% of for product but $XX.X to results, million effective to in XX.X% was Income was gross again, increased over million year last organically last Diluted XX.X% to than $XX.X per XX.X% million year. Once tax a dollars, international mix Gross the XX.X%. XX.X%, well compared million XX.X%, was period Sales sales to basis margin the and contributed leverage on or brands, year-to-date of categories as sales dollar Excluding constant to by our income the XXXX. year million primarily international increased year. compared year. fiscal XX.X% of with fiscal $XXX.X the tax was the to constant the compared brands, and profit million increased share increased of earnings licensed and Operating sales channel as current on Net driven a channel or XX.X% of the and In sales increase million of mix effective year. our $XX.X income compared inclusion uplift for product in increased retail in XX.X% certain for in owned fiscal $XXX.X MVMT. smaller Total U.S. total fixed $X.XX year, the grew sales MVMT, share quarter. $XX.X a sales impact sales expense The share XX.X%. of to sales $XX.X in per tax increased was costs. as MVMT favorable and the for impact last million last compared of to last percent sales to

was last to Now sheet, of million $XXX.X end $XXX.X at turning year. as our the cash compared year balance the to million

paying X% MVMT revolver of funds of we increase hand. from currently these end quarter, in quarter $XX million, are rate amended or using a the facility, MVMT. the the on million global on third and cash a the third $XXX.X predominantly At for was we borrowed our the X% end the extended and the our equivalent prior to inventory the Switzerland. we as acquired Inventory had interest of at approximately year due $XX.X favorably acquired had borrowed on During million quarter,

expenditures $XX.X from and our of fiscal $XX.X million of of stock offset under the related During awards. stock included we Capital XXXX, approximately million. Olivia intangible program the to dilution and primarily acquired the repurchase fiscal repurchased million, to year $X.X share expense potential were $X.X will amortization Depreciation I amortization outlook which discuss of Burton. million for XXXX. was assets MVMT our for now

rates assumes levels. consistent currency with outlook Our recent

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

in growth As Efraim foundation to to on sales anticipate which profits for plan range a mentioned, fiscal we a drive and million. light in approximately $XXX year the revenue of of foregoing $XXX the be our have ahead. we In we for million solid will XXXX,

to gross We flat percentage XXXX. fiscal slightly improved from be expect or margin our

for track As of operating expenses, we over have control a spending. disciplined record our

is tax million. to income $XX a XX% be across invest a range line be growth rate, top our to and $XX to of will, anticipate brand to income of in million on $XX.X jurisdictional consumer a earnings, and in expected Operating million projected approximately is net demand to effective million. build Based initiatives we continue We our $XX to awareness range support approximately our to portfolio. however, with

$X.XX outlook improvements estimated be be $X.XX. are of call fiscal We $XX assumes amortization for acquired XXXX fiscal we $X purchase accounting approximate open for to to items intangible up earnings and amounts Olivia in MVMT. in our sites. XXXX to for the are unusual million excludes questions. in to XXXX estimated expect now ecommerce total, like to The a provided expenditures no million. the range Capital approximately as these have and related assets fiscal to include I support related to approximately to Burton of adjustments would as well In per share diluted

Operator

& now [Operator first Co. line our instructions] go from from We’ll open. Oliver is question Cowen Please your ahead, take Chen

Oliver Chen

Hi, and you thank channel thoughts year on We you. your trending on ahead, U.S. that there’s as and curious about Good macro see wholesale a that across look in your were channel. Also, the within risks. number views how globally, morning. inventory control the of you

Chinese your Thank your the speak U.K., could you how be business, on helpful is well. If as behaving about it thoughts as and France, to consumer that reflects would you.

Efraim Grinberg

Okay, thank you, Oliver.

small and share in believe has and fashion share obviously of very patterns again watch we’ve so there own seeing there’s our there’s are traffic to and today believe challenging Let opportunity the account our slowdown to retail people are spots stores, economic people in is taking forecasts. be that market the a a obviously in us on going me we taken environment, that in in bright the Europe with and there’s in a the so what Inventories goes risk partners environment, numbers risk, to for in even conscious. have continued, our the gain in so I a in When U.S. start in one that good we still into market. despite of in category Europe. growth are China lot [indiscernible] you’re watch we’re for inventory category,

Oliver Chen

both the incremental risk should also big approach be as thinking how to watch and mitigate a innovation? of you’re or group into of but right announcements innovation of On watches level is total, the the smart about pursue just making, your inventory to you percentage what and this this how

Efraim Grinberg

need of season and They’ll a our more a doing that have and excited challenging the bring the come we’re the second properly with inventorying the half retailers. strong well in watches. behind found support watches We’re we marketplace, believe innovation program standing smart you it about as marketing more into we’re so We then second to second year the afterwards the for What they that. first in to little that is get for our do and half year. extremely of smart

Oliver Chen

over you the Burton are thoughts breakout and very your of Burton balance Award What as help there was that team The Olivia for the are geographic Mall impressive. portfolio learnings also well? with there time, Olivia your

Efraim Grinberg

found that has significant but of drive the I still Olivia and fashion Burton healthy been is one very most--Olivia Asian receptive some most and the presence U.S. well. in in its in as and brands on watch Olivia year awareness growing Europe, this U.S. Burton to market very, brand driving think of it’s really the and we’ve focused U.K. to growth the one beginning overall helped the growth, we’re behind the Burton build in

Oliver Chen

Thank you.

regards. Solid results, best

Efraim Grinberg

you. Thank

Operator

question Thank ahead, you. go our take Please We’ll Sidoti. your now next Camma is from line from open. Frank

Frank Camma

thanks for morning, questions. Good the guys, taking

than First, because base with I’d remind the seasonality MVMT and you I your with that, start just to different Can of in how reflected that’s like business, guidance. guidance? know it’s just the us your

Sallie DeMarsilis

next during selling half the the months are I’m year, timing with will is seasonality, the as the too. they very back course of right will purchasing half mentioned and when now in MVMT we the three year I’m last a that with so the to acquired anniversaried go this sure to that seasonal Correct, them, of of with active this very be and impact season, were in the holiday Efraim start back ecommerce, of going that year. year business the we and four so in our will we

Frank Camma

sorry? I’m ahead, so--go yes, Okay

Efraim Grinberg

the substantial a of will the half light, during that all make and part growth the second the of businesses will and year In MVMT our of year. come earnings I in think behind for our that first investments we would half,

Frank Camma

at today Okay, their of strategy? I you what that’s know that’s is part longer sort versus getting MVMT’s important you or versus can because term, what business, look was Of I maybe mix out about business an their watches talk of as at. correct, least accessories,

Efraim Grinberg

nice very big Hilfiger really company has Everscroll. is portfolio. jewelry opportunity business that one last screens, when basis, there��s It best on global Burton done a acquired, in some that is very the and nice overall they’ve year. jewelry as a in for sunglass of opportunities business We’ve and very Olivia launch recently right well. a think selling and opportunity jewelry We think as in to have today lifestyle future. believe so for Tommy was our items very called be significant front a jewelry online, across a the significant now and growth a we We of well We as launched gamers had computers, the used had had our that’s brand good They’ve also on company brand on the the can eyeglasses jewelry.

Frank Camma

Okay, or so to extend those licenses you perhaps beyond-- the do have rights ability

Efraim Grinberg

of some Well, that--

Frank Camma

--or some of them?

Efraim Grinberg

Right.

jewelry jewelry as our We are--currently will launch we in year, Movado well testing will Hugo the the half second of website. and begin on we Boss

Frank Camma

of into keeping so is put guidance second, side bit mouth, on--I would end in give Okay, you’re to Can so on the the a maybe don’t investment? given words little just that in explained, in increase think mostly decent you would your say, right, us spending staying gross digital your operating--which did spending? least, the if but want high that of on increase I the flavor look build-up you at at just you margins for bit that more roughly the or a if that math you I flat, that imply a

Efraim Grinberg

during behind invest which there’s we combination so of effective reach first as well didn’t Sure. digital It’s the the a spending, significant have year, to campaigns, remember and half that. will of consumers, vehicles we so outdoor investment MVMT influencer [indiscernible] as

see, television you adding spring in our to campaign the we’re As can a fall campaign. Movado

about do excited that, take investments. but We’re those

Frank Camma

now? your continue pretty--at inventory pretty and keep right It on looks of My U.S. partners can how is you controls inventory, sheet. just question retail stacked your tight balance they own least, your about keep Okay. be like on you to the but may last specifically talk

Efraim Grinberg

a healthy periodically adjusts. a their very the have--you retailers adjust good Our inventories know, and a position inventories their They place. done of in in market healthy they’ve job are keeping them as

Frank Camma

for thank all you. That’s me, great. Okay,

Efraim Grinberg

Thank you.

Operator

close Thank turn call, would like remarks. you. it the back for management to closing now to I

Efraim Grinberg

Okay, thank that the participating we’re on progress and you today, has year strategic the tell, company you very much made about excited can its everybody upcoming the for and as initiatives.

our on execute to our talking goals Thank to conference we focus and continue you first call. to you. quarter to on look forward We

Operator

Thank concludes gentlemen, you and participation. this Ladies for call. your today’s

You disconnect. may now

Movado (MOV) 28 Mar 192019 Q4 Earnings call transcript