Movado Group, Inc. (NYSE:MOV) Q3 2018 Earnings Conference Call Transcript

Nov 21, 2017 • 09:00 am ET


Movado Group, Inc. (NYSE:MOV) Q3 2018 Earnings Conference Call Transcript


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Good day, everyone, and welcome to the Movado Group, Inc. Fiscal Third Quarter 2018 Earnings Call. As a reminder, today's call is being recorded and may not be reproduced in whole or in part without permission from the Company. At this time, I would like to turn the conference over to Rachel Schacter of ICR. Please go ahead.

Rachel Schacter

Thank you. Good morning, everyone. With me on the call is Efraim Grinberg, Chairman and CEO; and Sallie DeMarsilis, CFO.

(Forward-Looking Cautionary Statements)

If any non-GAAP financial measure is used on this call, a presentation of the most directly comparable GAAP financial measure to this non-GAAP financial measure will be provided as supplemental financial information in our press release.

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

Efraim Grinberg

Good morning, and welcome to Movado Group's third quarter conference call. With me today is Sallie DeMarsilis, our CFO. For this morning's call, I will begin with some brief remarks and turn the call over to Sallie to review our financial results and outlook. Then we will take your questions.

I am delighted to share with you another solid quarter of performance for Movado Group, that included strong progress against key growth initiatives. For the third quarter, sales grew 6% to $190.7 million. Adjusted operating profit grew by 8% to $33.6 million, and adjusted earnings per share grew by over 14% to $1.04. We also delivered adjusted gross margin of 54.9% for the quarter, adhering to our strategy of reducing costs, while limiting off-price sales.

In an effort to ensure we are directing our resources towards the areas of the business that we expect to drive sales and profit growth, during the quarter made the decision to discontinue our participation in the annual Baselworld fair. This resulted in a $6.3 million pretax charge, which is excluded from our adjusted result. I will spend some more time on the rationale behind this decision in a few minutes.

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

On the topline, we experienced growth across international markets and saw increases in license brand sales, online sales and a strong contribution from our outlet division. The top line also benefited from our newly acquired Olivia Burton brand. The increases were somewhat offset by a challenging retail market in the United States.

Overall, we are very pleased with our results. We attribute the focus of our teams around the world on executing our strategies. The strength of our business year-to-date has enabled us to increase our outlook for the year.

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