Good day everyone and welcome to the Movado Group, Inc., Fiscal First Quarter 2018 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 Rachel Schacter of ICR. Please go ahead.

Thank you. Good morning, everyone. With me on the call is Efraim Grinberg, Chairman and Chief Executive Officer; and Sallie DeMarsilis, 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, maybe deemed to constitute forward-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 risk 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 or 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, Rachel. Welcome to Movado Group's first quarter conference call. I will review the highlights of the quarter as well as our strategies as we look at the balance of the year and then Sallie will review the details of our financial performance. We will then open the call up to your questions. The evolution of the retail marketplace is continued to accelerate, especially at the U.S. brick-and-mortar retail. Department store and chain jewelers have continued to experience a reduction in traffic and the watch categories continue to remain challenging. In this environment, retailers are focused on reducing their inventories and improving their productivity. As highlighted during our fourth quarter conference call, we took the decisive action during the first quarter of the year to reduce our operating expenses and plan for a reduction in sales in our current fiscal year. Within that context, we met our expectation. Sales for the quarter were $99.3 million down 13% from last year with sales in the U.S. down 25.4% as retailers focus on reducing their inventories in a challenging marketplace. In contrast, our outlet division performed well as sales were flat to last year on lower traffic, but with a higher rate of conversion. In our international markets, we grew sales 5.1% on a constant currency basis with stronger performances in Europe and China. In the United States, retail sell-through continues to outpace sell-in and we anticipate that our sales performance for the balance of the year will show improvement as sell-in and sell-through become more balanced. For the quarter, our adjusted operating profit was $2.7 million versus $7.2 million last year. Had – we had the benefits of our reduction in operating expenses. For the full quarter, operating profit would have been over $2 million or $0.06 per share higher.…

Thank you, Efraim, and good morning, everyone. For today's call, I will begin with a review of our first quarter financial results and balance sheet and then discuss our outlook. Before I begin, I would like to point out the special items included in our first quarter results for fiscal 2018 and fiscal 2017. Our press release also described these items and includes a table of GAAP and non-GAAP measures. Our GAAP results for the first quarter of fiscal 2018 include a $6.3 million pre-tax charge, which equates to $4.4 million after-tax or $0.19 per diluted share in connection with our cost savings initiatives, which began in the middle of the quarter in North America and at the end of the quarter in Switzerland. Breaking the fiscal 2018 charge down, this impacted gross margin by approximately $1.4 million or 140 basis points, and impacted operating expenses by $4.9 million. Our GAAP results for the first quarter of fiscal 2017 include $1.8 million pre-tax charge to operating expenses, which equates to $1.1 million after-tax or $0.05 per diluted share, in connection with the vesting of stock awards and certain other compensation related to the announcement of Rick Coté’s retirement. The balance of my remarks will exclude the special items just discussed. Beginning with a review of our income statement, as Efraim mentioned sales for the first quarter were in line with our expectation. For the first quarter, sales were $99.3 million, a decline from the same period of the prior year by approximately $14.8 million or 13%. This decrease was driven by our wholesale business. Sales were down 25.4% in the United States and in constant dollars increased 5.1% internationally. Sales in our Wholesale segment were $87.2 million as compared to sales of $102 million for the same period of last…

Thank you. [Operator Instructions] We will take our first question from Oliver Chen from Cowen and Company. Your line is open, sir.

Hi, guys. It's Max on for Oliver. We're just wondering if you could give more color on regional performance in – on the first quarter and where there any surprises in the quarter versus your own expectations? Thank you.

Well, I think as we highlighted in my comments, the U.S. was particularly difficult and I think you've seen that as department stores and chain jewelers report their sales for the quarter, but we did see improvements in Latin America, where Brazil began to bounce back for us, and as well as in Europe, in the UK, Germany, and France, we see those markets as growing this year as well as we begun to grow in China, which where we began implementing our concession strategy year and a half ago for Movado and Coach. So I think we're seeing some nice bounce back in certain markets.

Okay. Thank you.

And our next question comes from Ed Yruma from KeyBanc Capital Markets. Your line is open.

Thanks for taking my question. Efraim you commented during your remarks that you believe that sell-through is still stronger than sell-in at some point, that trend should changes this year. I guess how do we think about the magnitude based on the data you look at of differential between sell-in and sell-through and when should we expect at least based in the way that you've planned out your year, when should we expect that trend to inflect?

So I think we see improvements in that trend, we believe throughout the year, especially as you get closer to holiday, and so you should see some sequential improvement because holiday is obviously the biggest selling time. The first quarter is really – is the biggest opportunity for retailers to bring down their inventory because there are no major gift-giving occasions other than really Mother's Day that this year actually fell-in into the second quarter. So it really is the biggest opportunity for retailers overall to bringing on their inventory and I think as we've all read that is a significant focus of retailers in this environment domestically.

Great. One other follow-up, how should we think about the materiality of both the Minkoff and the wearable businesses this year in your guidance? Thank you.

Well, I think the Minkoff business we think is an exciting opportunity, but it will have a small financial role this year, but we believe this as a nice opportunity for the future. And then I think again wearable is not really material to us although it will have some effect on our gross margins because the margins are not as attractive as traditional watch.

Thanks so much.

Thanks Ed.

And our next question is coming from Frank Camma from Sidoti. Your line is open. Please go ahead.

Good morning, guys.

Good morning, Frank.

Hi, Frank.

I just want to follow-up on that last question with the guidance at a similar question. So given that both Minkoff and the new watches are not that material, if you look at the top end of your range, I mean, to hit the top end of the revenue range, I mean, what has to happen? Is it basically international has to deliver that number because, I mean, it doesn't seem like you're going to get it from traditional U.S. wholesale, is that...

Our overall number for the years does show a decline in sales...

Yes, 4% decline, though, if you look at the top end of the range, right?

Right, a decline from last year and we would expect – as I said that we would see a sequential improvement in domestic inventory levels and purchases by retailers and sell through also sequentially improving as you’re comping weaker numbers in the second half of the year as well as continued growth in our international market. So that’s obviously – certainly plays a role and we did see that nice growth in the first quarter where we grew 5% on a constant currency basis about 1% on a reported basis.

So let me ask you this, so that was international you're talking about?

That was international, yes.

So did you see it, given the fall of Mother's Day, did you see some of that in the second quarter? After the first quarter ended, did you do see some tick up on U.S. business?

I don't really think we talk about that yet and we will be able to give some color in that, I think it’s on our second quarter conference call, but we would expect that things will begin to stabilize especially from a replenishment and purchasing point of view. And again, as I highlighted earlier, the first quarter is the biggest opportunity because it is a small quarter both at retail and for us is the biggest opportunity in the U.S. for retailers to bring down their inventories, especially after challenging holiday season.

Okay. And my second question is just on the – can you talk kind of specifically on what you're doing differently in digital and social media to get that going given I think that's probably a big opportunity, obviously, a shift away from traditional brick-and-mortar and like how you're addressing more the…

Well, I think that's a really good question and I think that it’s not only that there's a shift away from traditional bricks-and-mortar there's also a shift away from traditional media.

Right.

So it's really the opportunity to reach the consumer in where they're spending the most amount of time today, which is on digital forms of media whether it's a computer, predominately a mobile phone and tablet. So we began testing on a much heavier basis in – predominantly in the second quarter, advertising to consumers in digital formats, retargeting consumers and reaching them in social media platforms with ads versus just our social media platforms, so places like Facebook, Instagram, Google Search, things like that.

Okay, great. Thank you.

Okay, thank you. End of Q&A

And at this time, I would like to turn the call back over to management for closing remarks.

Okay, well, thank you very much for your questions and we look forward to speaking with you again at our second quarter conference call. Thank you very much.

That concludes today’s conference. Thank you for your participation. You may now disconnect.