Good day, everyone. And welcome to the Movado Group, Inc. Second Quarter 2022 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, Executive Vice President, Chief Operating Officer and Chief Financial Officer. Before we get started, I would like to remind you the company’s Safe Harbor language, which I am sure you are all familiar with. The statements contained in this conference call, which are not historical facts, may be 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 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’d like to turn the call over to Efraim Grinberg, Chairman and Chief Executive Officer of Movado Group.

Thank you, Rachel. Good morning, everyone. And welcome to Movado Group’s second quarter conference call. With me today is Sallie DeMarsilis, our Chief Operating Officer and Chief Financial Officer. After I have had a chance to share with you the highlights of our second quarter performance, Sallie will review the financial highlights in greater detail. We would then be glad to answer any questions that you might have. We are very pleased with our second quarter results and the momentum that we have been building over the past several quarters. Our teams have done an excellent job of executing and delivering on our plans. The second quarter represented a record in terms of both revenue and operating profit for the period. Our sales grew by 96.4% to $173.9 million or 10.2% from pre-pandemic level - from the pre-pandemic levels of fiscal 2020. Our adjusted operating profit grew to $25.5 million versus a small loss in fiscal 2021. Our adjusted operating margin was 14.6%, a record for the second quarter. We also continued to build on our already strong balance sheet with cash of almost $200 million and no debt, and with inventory growing just 5.7%, despite the near doubling of net sales. Over the last 18 months our teams have made tremendous progress in driving the opportunities that we -- that we had ahead of us in a quickly evolving retail and digital marketplace. We prioritize our investments in driving performance and continuing to support our brands as the pandemic unfolded. Over that time we delivered improving results and our last two quarters have generated record operating profits as we continue to drive efficiency in our marketing efforts, while also investing in innovation and brand building. We have seen our e-commerce penetration continue to grow as a company and we…

Thank you, Efraim, and good morning, everyone. For today’s call I will review our financial results for the second quarter and year-to-date period of fiscal 2022 and then I will provide an update on our outlook for the year. My comments today will focus on adjusted results. Please refer to the description of all the special items included in our results for the second quarter and year-to-date period of fiscal 2022 and fiscal 2021 in our press release issued earlier today, which also includes a reconciliation table of GAAP and non-GAAP measures. Certain comments will include comparisons to fiscal 2020 to provide additional context due to the significant impact of COVID-19 on prior year results. Our performance for the second quarter of this fiscal year exceeded our expectations and resulted in record net sales and operating profits. The financial performance was highlighted by overall -- by continued overall strength in the United States, as well as global e-commerce sales, expansion in gross margins and operational discipline. We once again ended our quarter with a strong balance sheet and continued to focus on our strategic initiatives. For the second quarter of fiscal 2022, sales were $173.9 million, as compared to $88.5 million last year, an increase of 96.4%. Strong consumer response to our brands and offerings coupled with partial recovery from the global pandemic led to net sales increases across our segments of owned brands, license brands and company stores, as well as across most geographies, most notably in the United States, but also seeing improvement in Europe. U.S. net sales increased 145.9% and international net sales increased 64.4% as compared to the second quarter of last year. Total net sales increased 10.2% as compared to the pre-pandemic second quarter of fiscal 2020, with a 28.5% increase in the United States,…

[Operator Instructions] Our first question comes from the line of Oliver Chen with Cowen. You may proceed with your question.

Hi. Good morning. The quarter had such nice momentum. To us that the guidance could have some conservatism, could you speak to your rationale and thoughts and what’s underlying some of the assumptions and the guidance? And also Sallie, will channel and product mix continue to be helpful to gross margins and how long might that be true? Thank you.

So -- yeah. So, I think, we are obviously in the first half of the year comping against markets that were virtually completely closed and so I think the comparisons are obviously a lot easier in the first half of the year. We are seeing good momentum in our sell-throughs around the world. So we are excited and but still cautiously optimistic about the second half, because we do still believe that there are the effects of the pandemic around the world and but we still see really strong momentum behind the business. I will take a little bit on the gross margins also and then turn it over to Sallie. The one thing that we have been able to do is also on the gross margin side. We see that our brands have pricing power and so we have been able to raise gross margins on the pricing side and we believe that will have a continued impact during the second half as well. But I will let Sallie talk about the mix.

Yeah. And so, all of our outlook does reflect the continuation of the strength of the channel and product, both the growth of direct-to-consumer, whether it’s in our stores or online and also the strength of the U.S., where we know Movado is a very important brand has a very strong gross margin without the royalty’s and so forth to our license source. So it is -- we do expect it to continue, you see that it’s kind of leveled off based on our outlook for the period that remains for this year.

Okay. And Efraim, could you help us understand geographically stronger markets and less strong markets and also we are seeing like a return of -- a good return of consumers to stores. What’s your view on the department store channel and the stores that you sell to, what’s happening with traffic and is it really sustainable?

Okay. So I will answer both of those. Geographically, our strongest region has been, which is really nice to see because we had a few challenging years has been the United States, where we have seen strong -- really strong momentum over two years ago and it’s the combination now of sustained performance on digital channels, but with the return of brick-and-mortar being incremental. So we have seen really good performance on that side. We continue to see strong performance in Europe. So Europe for us was ahead in the -- versus two years ago in the second quarter, despite the fact that most of the markets had a lot of retail closures during the period, and again, really strong digital and e-commerce sales in Europe. We see some continued challenges in Latin America, but better performance than last year and then we have seen really strong performance in China versus last year and two years ago. So geographically it’s -- it seems pretty good and we like having you know North America as having -- the United States having strong momentum behind it, because it’s where we make our highest gross margins as well. So -- and then your second part of your question was on the department stores and we have seen performance really improve in brick-and-mortar, and we are looking at that also against two years ago in the United States and especially in the department store channel, but we are seeing improved performance now versus where the trends had been in our mall based jewelry stores as well. So I think consumers have had a desire to return to stores and that growth has been purely incremental to the business. So our strategy to focus on the omnichannel marketplace and continue to support our brands with innovation and strong marketing has really begun to pay dividends.

Okay. Efraim and one of the things from your prepared remarks is Movado brand and pricing and average unit retail. What’s happening there like the magnitude of the increases? And also I think you need to balance that with offering the consumer a strong value. So how are you doing that?

So about two years ago, we really embarked on a strategy to make Movado more aspirational. It had always been aspirational. But really to go back to our roots and focus on building higher price points, but offering fantastic value. And we have done that through design, through innovation, through greater benefits that we design into the product and the consumer sees that and they pay for it. So products like the BOLD Verso at our high -- are at higher price points for the BOLD collection. ESG is at higher price points for our Movado core collection and we have seen strong momentum behind those products, because while they are higher price points, they offer truly excellent value to the consumer.

Okay. The cash balance is really attractive and you are managing your balance sheet well, so could you refresh us on should your shareholder return strategy and what you are thinking with respect to capital structure?

So I will take the first stab at that and then turn over to Sallie. So we did reinstitute at the beginning of this year a dividend and we are pleased with that, and obviously, as we continue to build cash, that’s a possible use of cash. And then we also reinstituted a share buyback program and we did buyback almost $10 million I think of stock in the second quarter. And so, I will let Sallie and we still have availability under that stock buyback program.

I think you have covered it other than the regular working capital running the business, being able to get the right inventory in the right places and so forth. So that covers it Oliver.

Okay. And finally, supply chain has been a big topic, also inventory availability and inflationary pressures. Will you have enough inventory or holiday inventory constraining you and/or what’s happening to your supply base and supply chain? I know you have a flexible approach to this?

So, I think our team has just done and I called it several times, I think, in my comments, have just done an excellent job across the Board as we have had to flex down last year for COVID and then flexing our resources back up and our suppliers back up. We seem to be in pretty good shape in terms of product availability, costing and where it all really comes down to strong planning on their side. And so we feel pretty comfortable right now that we will have the right amount of inventory to get through the end of the year.

Yeah. I think I would add to that. We are definitely placing strategic purchases as we need to and our team really has great visibility into recognizing any potential shortages and being able to take the step to mitigate that.

Thank you. Best regards.

Okay.

Thanks.

Thanks very much, Oliver.

Ladies and gentlemen, we have reached the end of today’s question-and-answer session. I would like to turn this call back over to Mr. Efraim Grinberg for closing remarks.

Okay. I’d like to thank all of you for participating on our call today and wish everybody a great end to the summer and we look forward to rejoining you for our third quarter conference call. Thank you very much.

Thank you for joining us today. This concludes today’s conference. You may disconnect your lines at this time.