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Good day, everybody, and welcome to Movado Group, Inc. Fourth Quarter Fiscal Year 2025 Earnings Conference Call. As a reminder, today's call is being recorded and may not be reproduced in full or in part without permission from the company. At this time, I would like to turn the conference over to Allison Malkin, Partner ICR. Please go ahead.

Good morning, everyone. With me on the call is Efraim Grinberg, Chairman and Chief Executive Officer; and Sallie DeMarsilis, Executive Vice President and Chief Operating Officer and Chief Financial Officer. Before we get started, I would like to remind you of the company's safe harbor language, which I'm sure you're all familiar with. The statements contained in this conference call, which are not historical facts, may be deemed to constitute board-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual future results may differ materially from those suggested in such statements due to a number of risks and uncertainties, all of which are described in the company's filings with the SEC, which includes today's press release. 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 would like to turn the call over to Efraim Grinberg, Chairman and Chief Executive Officer of Movado Group.

Thank you, Allison. Good morning and welcome to Movado Group's fourth quarter and year-end conference call. Before we dive into full-year results, I would like to quickly touch on one matter that we disclosed in our Form 8-K last week. As we were beginning to close our financial results for the fiscal year, we became aware of irregularities in our Dubai sales office. We immediately suspended the leader of that office and began a thorough investigation. This included engaging outside counsel to lead the investigation and ensuring our auditors, Pricewaterhouse Coopers were kept informed throughout the process. As a result of the investigation, the leader of the Dubai sales office has been terminated and we restated our financials for each of the three fiscal years ended January 31st, 2024, and the interim periods within fiscal years 2025 and 2024. Honesty and integrity and transparency are at the core of Movado Group as a company. That is why the unethical conduct that occurred at the Dubai sales office is so disappointing. Nevertheless, we will emerge from this episode as a stronger company with an even more robust control environment in place. As I discuss the state of the business, please keep in mind that all references I make to prior period results are to the results after giving effect to the restatement. While last year was very challenging for the retail industry and our category, we began preparing for the current year by lowering our expense base for what we expected will continue to be a challenging consumer discretionary environment. As a company, we have always taken pride in our ability to execute, and I know that we will do better on that front in the year ahead. For the year, sales were $653.4 million versus $664.4 million last year, a 1.7% decline. Adjusted operating income for the year was $27.1 million versus $48.5 million last year. Our earnings were affected by our planned investment of an incremental $17.4 million in marketing in support of our brands. Our performance improved in the fourth quarter with sales growing by 3.3% to $181.5 million and adjusted operating profit increasing $2.8 million to $13.5 million. Our adjusted earnings per share for the quarter and the year were $0.51 and $1.12 respectively. We also ended the year with $208.5 million in cash and no debt. We were pleased to announce last Friday that our Board had declared a quarterly dividend of $0.35, and we remain committed to returning shareholder value through both dividends and our share repurchase program. Since we began the year, we're all aware of the increased level of uncertainty in the economic environment and friction in global trade. As the year progresses, we intend to make every effort to protect our gross margin in the US, taking into account the current incremental tariff rates of 10% for all global imports and over 100% on the Chinese bracelets or leather straps that are component of our fashion watches. US sales in our fashion watches and jewelry represent approximately 20% of our overall fashion watch sales. We're in the process of developing plans to help us mitigate some of the cost increases deriving from increased US tariffs through partnering with our vendors and customers and implementing selective price increases. Of course, there continues to be uncertainty with regards to the final tariff rates, when and if they are ultimately implemented. During the third quarter and fourth quarter of last year, we took certain difficult steps that included right-sizing our organizational structure in order to navigate an uncertain retail environment. During the fourth quarter, we took an additional charge of $1.8 million to cover incremental severance costs. On an annualized basis, we expect these changes to deliver $10 million in total savings for fiscal 2026. In addition, we anticipate a $15 million to $20 million year-over-year reduction in marketing expenditures this coming year. These planned reductions in operating expenditures will be partially offset by inflationary cost increases such as merit increases and performance-based compensation. Considering the certain -- the uncertain global environment that we are operating in, we will not be providing outlook at this time. We continue to make progress in our strategic brand building efforts across our brand portfolio, and I will highlight some of these selectively. In Movado, we're continuing our comprehensive brand refresh journey that we embarked on 18 months ago and we're making significant progress. Last fall, we launched our new brand building campaign, featuring a new set of Movado icons including actor and rapper Ludacris, actress and business entrepreneur Jessica Alba, and basketball superstar Tyrese Haliburton. We also introduced a new Movado display in a selection of our retail partners. We quickly saw improved metrics for those points of sale we were able to launch the new display and will continue to roll out this program in the coming quarters. From a marketing perspective, this spring, we have fine-tuned our campaign to increase visibility both in-store and across the most important digital venues, including the biggest social media platforms, digital publishers, YouTube and YouTube TV. Last fall, we began reducing the number of promotional events in which the Movado brand was available in order to prevent -- to preserve the brand image and integrity. And while we knew there would be a short-term hit to sales, we're confident that it was the correct action for the long-term. As we enter the second half, we believe we'll begin to see the benefits of this initiative. We're very excited by the new products that we're introducing this spring, especially in women's watch styles that while maintaining the Movado brand DNA are also right on trend. These include a new BOLD Mini Quest, which is already performing very well at retail, and a new collection of mini bangles in three different shapes that our customers are very excited and will be available for Mother's Day. This spring, we'll also be introducing our first set of Movado watches featuring lab grown diamonds that will allow us to offer beautiful high-quality diamond watches below $2,000. On the men's front, our penetration of automatic watches continues to grow. Just like in the Movado brand, we're seeing an increasing opportunity in women's watches across our licensed brands with more feminine, smaller designs, true to each brand's DNA. We're fortunate enough to partner with some of the fashion industry's most important brands. The Coach brand's success among the Gen

Thank you, Efraim, and good morning. For today's call, I will review our financial results for the fourth quarter and fiscal 2025. My comments today will focus on adjusted results. Please refer to the description of the special items included in our results for the fourth quarter and full year of fiscal 2025 in our press release issued earlier today, which also includes a table for GAAP and non-GAAP measures. Although our overall top line performance for fiscal 2025 was slightly down from fiscal 2024, we saw a year-over-year improvement in the fourth quarter. For the fourth quarter of fiscal 2025, sales were $181.5 million as compared to $175.8 million last year, an increase of 3.3%. In constant dollars, net sales increased 5%, reflecting growth in our licensed brands, partially offset by a decline in owned brands and in our company stores. By geography, US net sales decreased 2.9%. International net sales increased 8.8% as compared to the fourth quarter of last year. On a constant currency basis, international net sales increased by 12.2% with growth in each of our international regions. Gross profit as a percent of sales was 54.2% compared to 53.5% in the fourth quarter of last year. The increase in gross margin was primarily driven by favorable channel and product mix and increased leverage of lower fixed costs over higher sales. This was partially offset by the unfavorable impact of foreign currency exchange rates. Operating expenses were $84.8 million as compared to $83.3 million for the same period of last year. The increase was driven by higher marketing expenses, partially offset by a decrease in performance and equity-based compensation. As a result of the increase in sales and gross margin, partially offset by higher operating expenses, operating income increased by $2.7 million to $13.5 million compared to $10.8 million in the fourth quarter of fiscal 2024. We recorded approximately $1.4 million of other non-operating income in the fourth quarter of fiscal 2025, which was primarily comprised of interest earned on our global cash position as compared to $1.7 million during the same period of last year. We recorded income tax expense of $3.1 million in the fourth quarter of fiscal 2025 as compared to $2.3 million in the fourth quarter of fiscal 2024. Net income in the fourth quarter was $11.5 million or $0.51 per diluted share as compared to $9.8 million or $0.43 per diluted share in the year-ago period. Now turning to our fiscal year results. Sales were $653.4 million, a decrease of 1.7% from fiscal 2024. In constant dollars, the decrease in net sales was 1.5%. US net sales declined by 4%. International sales decreased by 0.2%, but increased 0.6% on a constant currency basis. Gross profit was $353.1 million, or 54% of sales, as compared to $364.2 million, or 54.8% of sales last year. The decrease in gross margin rate was due to unfavorable channel and product mix and decreased leverage of higher fixed costs over lower sales. Operating income was $27.1 million compared to operating income of $48.5 million in fiscal 2024. We recorded approximately $6.6 million of other non-operating income in fiscal 2025, which was primarily comprised of interest earned on our global cash position as compared to $5.5 million during the same period of last year. Net income was $25.4 million or $1.12 per diluted share as compared to net income of $41.3 million or $1.83 per diluted share in the year-ago period. Now turning to our balance sheet. Cash at the end of the fiscal year was $208.5 million and we had no outstanding debt. Accounts receivable were $93.4 million as compared to $86 million in the same period of last year. This increase was driven by timing and the mix of our business. Inventory at the end of the year was $156.7 million as compared to $153.9 million in the same period of last year. We are pleased with the composition of our inventory at year end. Capital expenditures were $8 million, and depreciation and amortization expense was $9.3 million. As it relates to share repurchases, during fiscal 2025, we repurchased approximately 120,000 shares. As of January 31, 2025, we have $50 million remaining under our December 5, 2024, authorized share repurchase program. Subject to prevailing market conditions and the business environment, we plan to utilize our share repurchase plan to offset dilution in fiscal 2026. As a global company with 43% of our fiscal 2025 net sales in the United States, we acknowledge the potential impact of recently announced tariffs. As Efraim mentioned, we are closely monitoring development and evaluating various strategies to try to mitigate impending cost increases. Although we remain focused on maintaining the quality and value consumers expect, we will be implementing selective price increases while actively engaging with our supply chain partners and customers to respond effectively. Given the current economic uncertainty and the unpredictable impact of tariffs on our business, the company has elected not to provide fiscal 2026 outlook at this time. I would now like to open the call up for questions.

[Operator Instructions] Our first question is from Hamed Khorsand with BWS Financial. Please proceed.

Good morning. Could you…

Good morning.

Hi. Could you talk about your marketing strategy this year given that you plan to spend less?

So we will focus a greater preponderance of our marketing effort this year in digital venues, and which allows us for more timely adjustments versus our sales and where our sales are tracking. And at the same time, we're also going to focus more of our messaging across our brands on conversion with our retail partners around the world. So, we look to increase the productivity of our marketing efforts this coming spring and into the fall.

Okay, and then, I think I heard you say that you're expecting sales to increase somewhere in your commentary. May have misunderstood it, but.

No, I think with all the uncertainty in the world right now, I think it's hard to predict where sales are going to come in completely. And I think with tariffs and trade and everything going on, we don't know yet the effect that if the tariffs are sustained, what that effect will have on consumers on a global basis, even if other markets aren't tariffed because they export to the US and their economies are dependent on some of those exports as well. So, I think it's very hard to predict what the retail environment will be in the coming few months given the uncertainty. I think it will stabilize and we'll get some more clarity at a certain point. My hope would be that we'll have more clarity by the time we talk on the first quarter call in May. But right now, there's a 90-day pause and we don't know what's exactly going to be beyond that 90-day pause. And even within that 90-day pause, there's a 10% tariff on all non-Chinese products, and obviously the Chinese products are higher. So, I think there's just too much uncertainty to know if this will be a year of growth. But we know that we will really focus on our execution capability, which we've proven in adverse times to be very strong at and control for us the controllable, which generally are our expenses, which a high portion of our expenses tend to be variable in nature as well.

Yeah, I was going to just add, I mean, this is not the first time Movado has seen economic uncertainty. So I'm just trying to understand, is there a product lines that you would focus on or price points they would focus on?

So I think what we're trying to do right now is really understand the tariff structure and see where we have to -- where we will be implementing some price increases but do it in a way that is sustainable for the long term and manageable with both our retail partners and consumers. So, I think that, what I always know is that in times of uncertainty, it's better not to make predictions than just run your business in a really proper and focused way. And we will continue to do that. And obviously, I think I talked about in Tommy Hilfiger, but it applies to all of our brands as well is really a good, better, best strategy. And so we will still always have some value-oriented price points across each of our brands for when the consumer becomes more challenged economically, when and if.

Got it. And then as far as the cost savings initiatives go, you were talking about some offsetting effects. Is there more cost savings that you could have to justify generating free cash flow this year?

Our intention is to generate free cash flow this year, and we're very focused also on our inventory levels, although having some inventory at the time right now is good. And so, I think that as I said, we have a number of variable expenses. Our marketing expenses are generally somewhat variable and what the digital aspect allows us to do is commit closer to the time of execution versus more traditional media. But my hope is that I don't have to reduce that but that our sales that can sustain the level that we've planned at for the year.

Great, thank you.

Thank you very much, Hamed.

With no further questions, I would like to turn the call back over to Efraim for closing remarks.

I would like to thank you all for participating today and we look forward to talking to you hopefully with some more clarity during our second quarter -- our first quarter conference call. Thank you very much.