MOV - Earnings call transcript Q2 2023

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Operator

Good day, everyone, and welcome to the Movado Group, Inc.

Second Quarter 2023 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'd like to turn the conference over to Rachel Schacter of ICR. Please go ahead.

Rachel Schacter

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

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

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

Efraim Grinberg

you and welcome global environment, with glad to Rachel, Chief X.X% and greater detail. an initiatives we and and Financial in conference are by and a you, brief today Thank our an results. currency would then for on grew strategic answer and increasingly significant second our of quarter DeMarsilis, our good headwinds, Facing overall be start Sallie constant In pleased financial currency our update the overview then review followed our COO results XX.X% will very any by Officer. basis. questions. economic sales volatile We giving to quarter is by Group's Movado a morning brands, our call. on will Sallie With results, me I

was from $XX.X XX.X% or margin delivered versus EPS of year. basis increase sales points income gross of last of or XX.X% of Adjusted versus million million year. XXX of We last year. operating $X.XX Our was $X.XX last XX.X% an sales sales, adjusted $XX.X

with Additionally, no and cash end $XXX remains at quarter strong million sheet our of debt. balance

around teams plan challenging level environment navigating the world against execute Our of while our a continue to with a uncertainty. higher

rising For anniversarying by X.X%, our retail international the saw U.S. difficult benefited and of declined grew the In on we by multiple increasingly U.S., quarter, sales stimulus basis. by categories. sales and -- our programs in robust constant a an sales inflation our XX.X% currency that XX.X% the impacted market while income consumers

impacted We than Fed less growth the have in increased our U.S. stimulus including seen were under its where control. Klein. of effort In the Calvin prior we bring brand continued markets in year the licensed launch slowing as results the the U.S., economy to inflation in international of performance, rates our programs saw also by strong

growing by image. in Movado with the offset the Movado to slower last Movado the watches product retail year. our higher-priced particularly by we at of States, our elevation the quarter continue elevate remain driven low our versus prospects single sales In excited in both international continue brands, growth the effectively declined we the XX% for look strength We retail as brands the and partially India. we against execute As the saw brand average in about price strategy. Movado, business, by digits to we in United

performed very as colorways of Verso Bold, version. women well a our continues perform has to the for which introduced In as automatic and for fall a website the sport introduction wholesale Our expanded well. and extremely Movado well new collection, both be will our new we distribution, SE on further family with women's that men

at in we the We're Automatic. our the in including influencers skier excited at crafts, influencer the the to new introducing be run Motion to models to from and gold program Always theme, are their who are their campaign medal advertising. as launching under For as are through holiday ceramicist Olympian first new well season a fall, a Fusion Bold who September top This television Bold game. ceramic Movado the best our in the addition artists will In of

more will challenging Bold the balance between of consumer shopping. that a online we and quarter excited with brick-and-mortar Digital trends TV also new commercial are introduce slowing the during more to a and We U.S. very about. normalized the return a were

we portfolio, driven during growth us by performed As our and Europe brands, licensed we look in across the XX.X% Hilfiger quarter. jewelry Tommy watches for strength well the India. saw growth at resulting in and

for campaign execution. Matthew, by driven Our watch nicely him, our sold X-tone

For consumer. minimalistic women, Libby, dial, featuring sparkle a with the connected TH

grow nice for The was their in labels. ad media. closures benefit. marketing launch in China, and consumers that COVID The campaign During the see already product on were our Novia on BOSS BOSS star, both with message, with our Coach our we continued with pink sales the and parent TikTok quarter amplified partner the Khaby beginning Matteo Europe, we as sell-through driven on in of the watches worn third Brazil HUGO we in The collection, Lame quarter, ceramic social strong rising and but tennis brand Lopez key BOSS we Bertolini. by Italian has are stable In Steer are and in is and drive of Greyson, the India. our for the for the saw focus resonating BOSS' version him brand's HUGO family by performance challenged will campaigns to market. Mexico, strong her. continued seeing with by a and We Jennifer Coach, bounce-back BOSS parent to being in brand influencers like

in the strength fall. coming the of seen brand. family XX.XX in biggest in while We're performances introduce XX.XX generation Replay the have with excited remains for strong him, to We continued this Lacoste our our iconic the third family

launch, strong a we program the in market home marketing of are beginning Lacoste's France in planning September. For

We Lacoste launch expect fourth the the quarter. during to begin of jewelry

jewelry Watches launch XX% our our Calvin feature over on key represent XX% the of well Klein which women's of global expectations. a online at by year business. doors excited early up make men's are this about and CK has X,XXX as of of retailers began opened and several basis. approximately initial have in retail sales that both branding XX% sales we at XX%. We with To as exceeded date, and Products the watches iconic watches,

billboards launch really partly in digital marketing by will the excited initial During the China. a our network. amplify message Europe programs markets key by and half growth digital We're and business. second outlet division, received we in In has year, we that reception the in CK with across in of single-digit digital distribution growth saw with our brick-and-mortar decline a offset our our both

with products the saw the our During pressures. progress assortment team -- invigorating gas Olivia stores and trends product message. is message by are marketing focused driven MVMT, quarter. third improve to Burton, head and the by We're marketing on higher introductions in already challenging iconic we we We're throughout our next with on fine-tuning we elevate early the our but traffic seeing the coming as quarter, and product the making the this and focused continuing bulk Burton making, our our prices excited updating fall, our and traffic is several Olivia of are that new year. on fall. in In our in inflationary new introductions we team business trends great In into focused

seeing As in we are progress the in you know, have MVMT the team we in of evolution a place on brand and both already new put leadership product MVMT, and marketing.

MVMT out designed iconic evolving grow with opportunities digital products are and rounding about team are the marketed in the beautifully future landscape. We excited to for an

there executed our we the increased in While how against plans. strategic with adjusted pleased economic teams very is our and have uncertainty are environment,

half design at U.S. brand the in look currency now impact will unfavorable who to the deliver strengthening in year, we results greater including while need facing the financial will due that second call believe to amplified we marketing portfolio, the the opportunities of we cover our to will Sallie, the of to brands dollar. over support, against for continue we like detail. innovation execute investing in our turn to long With strong would of I our and As environment, effective to uncertain the continue an available the term.

Sallie DeMarsilis

you, everyone. Thank morning, and Efraim, good

on owned second year. our and For which today, outlook the call, our focus includes fiscal fiscal the update to the second of fiscal the today's I will on special refer will press for our included of results non-GAAP our performance and results increase net items quarter the financial all results. for of period for a sales and in compared in $XXX.X of and was our X% reconciliation period to today an XXXX exceeded table offset a year-to-date for provide issued adjusted then will comments My million and brands. measures. of X% second quarter I in our Sales of million across Overall, Net as decreased increased and sales by the be XXXX constant partially year, our X.X%, to In X.X%. brands net which expectations $XXX.X last our fiscal increase growth. continued dollars, decrease stores, the company to were XX.X%. strong. U.S. of sales an review year-to-date release in earlier XXXX of GAAP Please quarter description licensed also XXXX,

and especially International The mentioned, international XX.X% creates last $XX inflation domestic compared compared effect the as XX.X% to compared comparison period This $XX.X market the by driven in a in driven rates. trends, to in year. sales increase difficult year. of challenging expenses consumer general sales the by as a strong by for as and retail as year's of marketing of second that percent by anniversaried the directly support slowing partially compensation. basis, was see grew net increase a partially a year-over-year. we offset last in year expenses offset Efraim stimulus sales. year. of saw As margin this to higher the was of the of sales constant on which mix, Europe. the Latin unfavorable profit We was operating performance-based U.S. Gross expanded same net impact primarily decrease and the addition quarter On America, second The channel in increase in by XX.X%. in increased quarter XX.X% all was continue growth, of foreign gross last and were last to favorable the India increased to Operating exchange product currency to million million expenses currency

We to of compared operating $XX.X spending tax the diluted $X.X in ago the of $X.XX from second quarter the gross compared fiscal XXXX. million a million reported income sales, million was operating the XX% margin fiscal million $X.X of in expenses million the to $XX.X of second XXXX increase in drove period. in $XX.X for XXXX. decreased year. controlled the second last share the to in to diluted per quarter quarter in income in per expense fiscal of $XX.X percent quarter Net or as a of quarter to second quarter income in the As as in Expansion million second XX.X% and compared or share $X.XX $X.X as quarter year second million

International our turning Now fiscal profit constant sales sales as $XXX.X ended last to year. In for to the year. or increase product last compared or to XXXX. for increased a period $XXX.X XX.X% as increased X-month sales X.X%. XX.X%. rate period XX.X% or $XXX.X sales U.S. due XX, results. were net constant the The first margin to million Gross X primarily net compared was dollars, on XXXX, channel in increase XX.X% July and basis. Sales XX.X% was sales Total declined the months of of was $XXX.X million XX.X% million net currency mix. the compared year-to-date gross sales of favorable million in as X-month to

as For the $XX.X X income compared fiscal ended XXXX. $XX.X operating XXXX, months to in XX, was July million million

fiscal of was first as income period. fiscal half net the year per to per in share XXXX Net first $XX.X $XX.X as diluted XX.X% sales, operating ago of compared As a XX.X% $X.XX diluted was in XXXX. percent the $X.XX to million million share in or or compared income half of the

at receivable Now Accounts same $XXX.X compared the above last of Cash X-month same increase our to the Inventory of first million from the brand we portfolio. XXX,XXX was or of share which of program. the Klein the sheet. the to year. of fiscal last period up and as the amortization $XX MVMT. period of addition million million the last due Capital of to at repurchased approximately the quarter $X expenditures included sales. of turning quarter acquired under primarily the million primarily and $XX.X same was depreciation shares year, amortization of year, or in million, our was end up $XXX.X due million were at timing end balance $XXX.X to receipts was half to the of period and second million for assets $X.X the million, intangible expense and period our related Olivia $XX.X $X.X XXXX, the the million, Calvin In repurchase to Burton XX.X%,

Now like to outlook. I would discuss our

had we are environment. year, operating fiscal challenging the a recognize strong we a While start to in that we

of This million the impact million, dollar. primarily is of Our the of net previous headwinds range sales expected the million to $XXX strengthening by range to $XXX million. currently driven to $XXX $XXX outlook of currency the be the are in of midpoint U.S. due a is which below to

of We sales. of gross XX% continue to profit approximately expect

the our questions. of high for currently $XXX And now million expect we to I the tax the rate. continue to like XX% call end range up operating we million. anticipate at would outlook a effective first open half, income Given strong $XXX of to

Operator

Instructions]. [Operator

Our from Oliver from first Cowen. question today coming Chen is

Oliver Chen

that, caution your how you The elaborate It does and happening? negative, inventories would I that outlet freshness include those given continuation was that traffic. love a of the experiencing trends, channel inventories? like also guidance the -- that of a on negative it And the of are sounded point. U.S. to that

Efraim Grinberg

Sure.

really weakness throughout our going in be the year U.S. inflation, to lapping the yes, the that X factors: think stimulus there's year of does to that those, last consumer factor at -- December. the on I and continued ends and that continued of end due both did the one is really two on and So is occur of probably outlook the

we've front, outlets always challenged gas prices On when high. traffic traffic the in seen are

and we're locations. in those higher the people is gas over month, and that extremely do do business our think as -- those will well, improvement business drive are very performing you to I see pleased still with and an last I And But seen it. and comment in have both brick-and-mortar We you patterns when generally destinations less destinations. prices, in said my traffic that

point I think retailers have sale. very so front, is of on inventory the been at and inventory levels on -- cautious inventory clean the pretty

-- you And It seasonal. inventory inventory remember as is Our it a to not long-lasting is that fresh. rule. our very have is is not

think in that good I on pretty we're front. so And shape

Oliver Chen

the seeing half been worse Okay. pricing are the in of but than do better stay And trends get you on June, dynamic. U.S. side, or with July at you market the back the U.S.? in you're negative it's light really We've expect And to July. What seen a now? U.S. better of thinking it worse of or rate kind the trends

Efraim Grinberg

returning think I look to what is we're I normalized that more trends.

that last boom a rate, based actions, stimulus so taking economic were year U.S. the had interest in of low we all on big And the place.

at pre-pandemic of expect been I XXXX, they'll last be that, year, our numbers you that. they And and look than better would which have is so against the better than if that most

one within more and business actions, So is highly continue the performing to not made a well perform normalized and really by liquid that's well. will environment being government

at I think to of an look trends So important kind against environment. it's that

Oliver Chen

worse getting large and factor cautious at Okay. is monitoring And things there recession risk and well. Europe another we're as

seeing You you in trends concerned global those what slow markets? or not? had robust numbers, will are that are really but you And

Efraim Grinberg

you -- seeing an -- U.K., as the do seeing countries country. in to virtually real as that now experience in of I we're that for Europe our a me Europe also Europe growth, are has highs to also And travel economic from return some believe some robust we really We're which in to retail, is disappeared think although then and the for with business. separation digital -- get and beginning our had example, my part overall, their EU. the of we're challenges also pleased period digital already in our with like about do in lows we're this businesses the XX-month -- in and pleased in doesn't leads performance

Oliver Chen

on Okay. -- this you impressive How characterize and would had And as some retail probably what you in terms pretty with mentioned, doing topic, your performance. average mind, course, pricing? And yet then your of across portfolio manifested differently it of are everyone's inflation? you inflation is unit portfolio. the you And

Efraim Grinberg

increases take and the to the offset both on did we So side selective operating price year in the some side. cost on early inflation

I think the strong in that delivered results margins we're seeing in of our quarter. we the gross that

price challenging, you're think eventually that increases as as challenging become more costs I in hiring, well But obviously, as environment see moderate will I starting becomes And that. think, -- with areas the also. with more like well. to

our example, a country, been While and last in at both in positions there's than open year. more lot had seeing we're still this of for company candidates, -- late we

Oliver Chen

what And the the looks that? the continue on magnitude mix the Sallie, we guidance model be back channel like the should guidance FX margin of we back Sallie, tweak impact half will embedded you in FX. on in line? the second gross help as guide it and understand FX and for in Could largely us about the know margin question, top gross is to -- helpful half the the to And on line

Sallie DeMarsilis

Okay.

us to is U.S. have it's is So for call us of do let range me out you And that line that top global due with the the we critical pretty strengthening to start key to the to on the revenue. a in try continuing such factor tightening That the dollar. business all.

our gross impact margin, margin. relates to that it also does As gross

to on margin gross of at piece also but the continues related So currency impact there XX% be our gross of a at rate. stay XX%, the was strong fact rate that to that margin our

look As for mix, that. we will at

We this business are outlet. that the continuing of the looking challenging as well direct-to-consumer the at versus environment the with in and U.S. as international blend

that and all be a relatively blended complex get steady margin gross together continued there. calculation to a gets of to very rate So with has us

Oliver Chen

What's really priorities hear Okay. And of returns your you're realm a love terms seems your balance the in healthy. on thinking? of to what capitalization shareholders. be list? key and sheet -- Would to is prioritization dividend Could in special

Efraim Grinberg

cash based in generate evaluate year. in the And we year, lot I the believe, to have a year. healthy first that. dividend then Obviously, against Well, the our share half in the on of plan we overall a think repurchase half both, second place the intend it cash the of to the -- fairly throughout first we the will And and executed other have expect of continue we more generally, year, and we place we half in a continue also the in position. part half of the is would that well second I shares that repurchase than we've

Oliver Chen

Okay. far, tweaks really business? And business, part Efraim, so of the It's been executed brand. what as Klein great innovative your on have that you've biggest the a Calvin and/or made surprises you've

Efraim Grinberg

It Yes. brand. first robust America sell-through and has reception seen and of had due and probably expected pretty international watches substantial to global off the the of both closures they parts strong Look, with COVID. more product, the seen placement there. and than due the not robust Middle Asia. to the also the China of big anything gotten that during year between recognition. partner jewelry Latin really slower half It's we've results And one than obviously fact start and to has in we pleased fabulous then brand to other We've a it's them. to East a We're brands. of Europe

is learn that to you plan. So introduce is when you new What you introduced. product everything the I always -- do from you think brand, just according you a working

we as product first we're You we grow assortment fine-tune as the than the license. not signed excited, excited, you if more business. the it when But today about were

Oliver Chen

Apple you of changes. of percentage degree a that? about well the What certain particularly fluctuation sales, a question, the thinking Google as disruption costs, how are in last customer as seeing with changes and we've algorithm And iOS of been digital acquisition some Okay. as marketing is

take love the would best think So digitally use also your on as and well. as you of some MVMT practices that, at

Efraim Grinberg

Sure.

the in came So those most of during place year. last changes

the you And in -- so into already those the privacy year. in second half of those were we're second a for half changes a the we now of market -- place lot as year, go the where last of IOs,

is I think campaign. our also of in we we're of what the for example, learnings, that the recognizing MVMT some success from got influencer

major the That brand a second Movado aimed we top brands. continuing the launching image what build to funnel aspirational half. at and with call we're really So one of this for the is

we So we're excited progress. about that as

brands, really is need our the for to lot things do and more and age each day in team doing of that today's adept One do of you a at that. produce content has your gotten

As will you new to that we've Chief a Officer also had us integral be move forward. think and Marketing join know, I we as effort

Operator

We've of I'd floor comments. or turn like to any session. to our reached Efraim closing for the back the end over further question-and-answer

Efraim Grinberg

you of call. today summer of quarter final all thank very to again, end we like forward good joining you weekend. Thank I'd to wish next holiday look and a you third you a weekend for conference joining our the for and Okay. and us

Operator

conclude today's and Thank webcast. That teleconference you. does

thank day. this at participation disconnect may wonderful have for a We and today. time, your you line You your

Movado (MOV) 25 Aug 222023 Q2 Earnings call transcript