Good day everyone. And welcome to the Movado Group Fiscal Fourth 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.

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 am 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.

Good morning. And welcome to Movado Group's fourth quarter conference call. I will first share with you some of the highlights of our quarter and then Sallie will review our financial performance for the year. After that, we’d be glad to answer your questions. Fiscal 2018 was an important year for Movado Group, where we gained market share, return to growth on both the top and bottom line, completed an important and exciting acquisition with the purchase of the Olivia Burton brand and began to make significant progress in transforming ourselves into a consumer driven omni-channel organization. We finished the year with a very strong fourth quarter that was reflective of the progress that we made. For the fourth quarter, our sales grew by 14.1% to $149.2 million and adjusted operating profit almost doubled to $14.4 million. For the year, our revenues grew by 2.8% to $568 million. Adjusted operating profit increased by 14% to $63.6 million. Our adjusted earnings per share were $0.52 for the quarter and $2 for the year. Following the enactment of the Tax Cuts and Jobs Act, we have now provided for the tax impact on overseas earnings. The cash portion of the charge equals $28.2 million and is payable over eight years. Due to our positive result and the ability under the new tax law to repatriate overseas earnings without further U.S. tax consequences, we have made the decision to increase our quarterly dividend to $0.20. We also moved forward with an ongoing tax rate that is expected to be lower given tax reform. Sallie will spend some time discussing the 2017 tax act in her comments. Now, I'd like to share with you some of the highlights on the results of our brands from fiscal 2018 and some of our initiatives for this…

Thank you, Efraim and good morning everyone. For today's call, I will first review our financial results and then discuss our outlook for fiscal 2019. Before I begin, I would like to point out the special items included in our fourth quarter and full year results for fiscal 2018 and the full year results for fiscal 2017. Please refer to our press release for a description of these items, as well as the table of GAAP and non-GAAP measures. Our GAAP tax provision for fiscal 2018 included charges recorded in the fourth quarter, totaling $45 million or $1.95 per diluted share. This is related to the enactment of the Tax Cuts and Jobs Act. This charge includes; $28.2 million for the one-time tax on unremitted foreign earnings; $8.3 million for the impact of the reduction in the U.S. tax rate to 21% on our deferred tax assets; and $8.5 million related to deferred withholding and state income taxes; the $28.2 million will be repaid in installment over eight year. As you are aware, Movado Group acquired Olivia Burton on July 03, 2017. Included in the year-to-date consolidated results for fiscal 2018 was $6.8 million of pretax charges, primarily connected to the acquisition of which $900,000 was recorded in the fourth quarter. After tax, the charges related to the acquisition equates to $6.2 million or $0.27 per diluted share for the year. Our GAAP results for fiscal 2018 include $13.6 million pretax charge, which equates to $10.5 million after-tax or $0.45 per diluted share in connection with our cost savings initiatives, approximately $150,000 of this pretax charge within the fourth quarter. Fiscal year 2017 GAAP results included charge recorded in the third quarter of $1.3 million, which equates to $900,000 after tax or $0.03 per diluted share for an impairment of…

Thank you [Operator Instructions]. We’ll go first to Oliver Chen with Cowen and Company.

My question was about the Movado.com, it’s been very impressive. What are your thoughts on the year ahead in terms of the pace of growth, will it continue at that elevated rate of plus 40% to 50%? And what’s your vision for where that will reach a percentage of total overtime? And then it’s related to your digital center of excellence. Efraim, what’s your hypothesis for some of the key priorities and conclusions as that seems quite innovative and you’re also very engaged in thinking about the right marketing model for the future?

So multiple questions, I don’t know if we’ll reach that growth rate. We are expecting growth this year in our Movado.com Web site, and I would expect it to continue to grow. But I don’t think that accelerated level still nice growth, double-digit growth would be our expectations for that. I think on -- the digital center of excellence is really, we’re building the capability on a global basis to be able to support our subsidiaries, our Web site and as importantly, our wholesale customers online; and a lot of our initiatives with our partners, whether they be our licensing partners or our wholesale customers that moved into a digital format. And so we felt we needed to really build that infrastructure to be able to support our company on a global basis. So a good and meaningful part of our business today is done online with our wholesale customers as well. So people who have adapted to the omni-channel platform, whether they’d be department stores, specialty stores, dedicated Web site as well. So we're really pleased with the direction we’re heading in that arena as well.

And Sallie on the gross margin guidance for flat slightly improved. What's underlying how we should model that for the year ahead? And how is the performance of the Movado brand in the year ahead going to impact gross margins. What should we know about that? Thank you.

I am not really calling out anything unusual related to that. But if you noticed in the fourth quarter, I did call out that currency was a factor that listed our gross margin in the fourth quarter. And then I mentioned that we're keeping currency flat throughout next year. So that was one of the major underlying pieces. So I can't give you any more -- tied into margin by quarter or any other cadence.

And I would add that that we believe that Movado will stabilize and begin to grow again, as well as Olivia Burton is accretive to our gross margin.

And Efraim and Sallie, what are your latest thoughts on your retail partners as you look ahead to the year, the year ahead. It's been a dynamic sector in terms of how your retail partners have managed inventory, and the economy and performance has gotten better there. And related to that question is, is the performance of the Movado brand and the retail versus the wholesale channel. Would love your thoughts on what happened there and what will happen going forward? Thank you.

Well, I think you're seeing -- the U.S. was more challenged last year from a retail perspective, bouncing back late in the year versus international retailers. So I think that's one thing that's skewing the overall results. I think you had a significant focus in U.S. retailers on inventory management and resetting of inventory levels, as well as still certain channels. And as I mentioned in my comments certain channels, particularly chain, mall based and retailers have not moved as quickly to an omni-channel platform as specialty stores and department stores. So I think you will see that again, you'll see improvements in that arena this year, you’ll begin to see that. But we've seen very good results in our department stores and specialty store channels in the U.S. We continue to see very strong growth at retail in last year in our fashion watch brands, particularly in Europe and Latin America. So I think you saw last year really a year of stabilization for retail and now people addressing the new realities and the new environment and the new paradigm of retail omni-channel Web site moving forward.

We'll go next to Edward Yruma with KeyBanc Capital Markets.

So I guess building on Oliver’s question a bit. So we’re wondering about how the wholesale calendar shift is affecting orders, I guess ordering more times in the year or is it now that the channel stabilizing somewhat, are they deeper orders. I guess just any update on the cadence there would be great. Thanks.

Well, I think over the last number of years retailers have moved much closer ordering to the season, ordering more frequently, replenishment models all of those things pretty much on a global basis. So I think maintaining as a little inventory for themselves as possible to be able to produce the business. So that is not a really more recent dynamic, but one that's been evolving over time.

And so I know you said that you saw accelerated growth in the UK, France and Germany this quarter, and Europe has really outperformed U.S. for a couple of years now. So I guess do you see any catalyst on the horizon that will bring the U.S. and European growth rates more in trend or is it more just a fashion shift or inventory control and the channel. And I guess what are the puts and takes of gross margin given that the U.S. is higher margin?

As I said earlier, we expect to return to growth in the U.S this year, and part of it is that we’ve had great reaction to our products across our brand. And I believe we have the plans in place to be able to grow the U.S. again. And I think the U.S. had grown very quickly over the previous years, and it’s been a little bit in the cyclical down turn in retail. I think you saw that again begin to bounce back in the fourth quarter for retailers overall. And I think we would expect that that trend will continue but we still expect to grow in European as well.

And Matt, your question on gross margin was, it’s not necessarily U.S. versus international, it’s more of which brand. And as we talked about our license and obviously the royalty goes through, gross margin in the brands we own don’t. So things like Olivia Burton and Movado would have a stronger gross margin. So it’s all in the mix of what brand will compose of what composition they are to total.

And we’ll go next to [Jeffery Camma] with Sidoti.

It’s Frank Camma. Could you talk a little bit, first of all, but did you break out the Olivia Burton revenue for the quarter?

We have not. And like any of our brands, we don’t breakout specific brand revenues. It did meet our plans as we’ve announced at the beginning of the year when we first acquired the brand. So it’s pretty much on target for us and we’re been really excited by the acquisition.

Stepping back for a second though on the -- because a lot has changed since you announced the restructuring. For Olivia Burton you’re now making some investments. Can you just give us a recap of where you were initially as far as the total savings, how much you’ve achieved? And what your guidance is implying there on the further savings? Or has the view changed, because now obviously you’ve got sales growth and you’ve got Olivia Burton and you’ve got the digital initiatives. Can you just give us an update on that maybe?

So I’ll jump in and I am sure Efraim will add some. And you are right. We had a lot of initiatives going at once. So our cost savings initiatives, which started this time last year when we announced, those have been fully implemented. We did pull out the right amount of dollars out of our infrastructure. We did realize all of those savings. So that was throughout this year, fiscal 2018. Then later in this year, we talked about not going to Basel and that would be savings for '19. Although, we mentioned those savings are going to be reinvested in things like the small summit that we did that was more intimate, it was like adding the digital center of excellence and reinvesting those savings in. So our outlook has all of that mixed in. The slowing down if you will of our infrastructure last year as well as the new investments we have this year to support our growth.

And Basel is really a Q1 event, correct?

Historically the event happened in Q1, but the expense was throughout the year and that was for fiscal '19. Our summit on the other hand would be first quarter event and it’s obviously different scale and what that was.

And then I guess the last question is on balance sheet. You mentioned this that the inventory decreased and would have an increase given what's going on. Was there anything in there as far as timing that brought that down or is it just better inventory management. What's driving that given what's going on with sales level, new brands, et cetera?

It's just really our teams did a fabulous job in managing their inventory levels throughout the year. On a constant currency basis, there is actually even bigger drop than most single digit drop that we had. So they just did a really, really good job in managing the level, there was not any one-off events or anything like that in that.

It is no major input costs that we need to look at for here. I mean granted you're giving us guidance in your gross margins, so I'm assuming not. But is there anything we need to be aware of given what's going on just globally?

Not really. Obviously, we’re not aware -- we're not including any type of tariffs or anything like that. We don't believe that they would affect our business, but they possibly could.

We have no other questions at this time.

Okay. So since we have no more questions, I'd just like to thank everybody for being on the call today. And we look forward to speaking to everybody for our first quarter conference call and wish everybody a nice holiday this weekend. Okay, thank you very much.

And that conclude today's call. We thank you for your participation. You may now disconnect.