Good day, everybody, and welcome to the Movado Group, Inc. Third Quarter 2023 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 of 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, 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 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. I would like to welcome you to Movado Group’s third quarter conference call. With me today is Sallie DeMarsilis, our Chief Operating Officer and Chief Financial Officer. I will first review the highlights of the quarter and the current operating environment. Sallie will then review our financial results in greater detail as well as our outlook for the balance of the year. We would then be glad to answer any questions you might have. Since we last spoke to you in August, we have seen a substantial change in the operating environment. Globally, we have experienced high inflation and the unfavorable currency rates and unfavorable currency rates, both of which further intensified during the third quarter. In addition, we have seen European and American consumers begin to reduce their purchases of discretionary items as inflation has taken its toll on their buying power. Within this environment, our teams have done an excellent job of executing against our strategy and managing our expenses to deliver strong results, particularly on a currency-adjusted basis, despite the prevailing headwinds. For the third quarter, our sales were $211.4 million versus $217.7 million last year. On a currency-adjusted basis, our sales actually grew by 3.4%. We delivered strong gross margins of 57.3% despite the currency headwinds. Adjusted operating profit declined by 7.8% to $38.9 million, however, would have increased on a currency-adjusted basis. Our adjusted earnings per share for the quarter were $1.31. Additionally, our balance sheet remains strong with $187 million in cash and no debt at quarter end, while returning $51.8 million to our shareholders through share repurchases and dividends since the beginning of the year. In the United States and Europe, we have seen inflation of everyday goods and higher energy prices begin to take a greater toll on consumers’…

Thank you, Efraim, and good morning, everyone. For today’s call, I will review our financial results for the third quarter and year-to-date period of fiscal 2023, and then I will provide an update to our outlook for the year. My comments today will focus on adjusted results. Please refer to the description of the special items included in our results for the third quarter and year-to-date period of fiscal 2023 and fiscal 2022 in our press release issued earlier today, which also includes a reconciliation table of GAAP and non-GAAP measures. Additionally, given the significant currency impact on our results, where appropriate, sales will also be provided on a constant currency basis. We are pleased with our overall performance for the third quarter of fiscal 2023 despite being negatively impacted by the continued strength of the U.S. dollar and by intensifying economic pressures in certain key markets as the quarter progressed. Our financial performance was highlighted by an increase in global net sales on a constant currency basis, strong gross margin, and operational discipline. We once again ended our quarter with a strong balance sheet. For the third quarter of fiscal 2023, sales were $211.4 million as compared to $217.7 million last year, a decrease of 2.9%. In constant dollars, net sales increased 3.4% to $225.1 million. This increase in constant dollars reflects growth in our licensed brands, which included Calvin Klein and in our company stores was partially offset by a decline in our owned brands. U.S. net sales decreased 5.9% with decreases in both the company’s wholesale customers in the owned brand category and an online, partially offset by an increase in company store sales. As Efraim mentioned, we are seeing the effects inflation is having on the consumer in the U.S. as well as in key international…

[Operator Instructions] Our first question is from Oliver Chen with Cowen & Company. Please proceed.

Hi. It’s Tom Nass on for Oliver.

Hi Tom.

Thanks for taking the question. On the gross profit guidance reconfirmed at 58%, could you guys elaborate on that given the lowered revenue guide? What efficiencies do you expect in targeting this? And additionally, with regard to FX, how do you expect that to impact revenue and gross margin over the following quarter?

So, I will start with the gross margin question, and Efraim will pick up. So, we have had a very strong gross margin all year. We will continue that into the fourth quarter, which is a heavy direct-to-consumer period for us. But we have had a very strong mix and expect that our – to not be heavily promotional in the fourth quarter. So, we expect a very strong gross margin to continue. We are anniversarying tough numbers from last year. So, we are guiding to 58% for the entire year. And your question on…

With regard to how that should impact revenue and also gross margin?

Right. So, I will take that, and I am sure Efraim will pop in a little bit with a fill. So, we are using the current FX rate for our guide for the fourth quarter. We know we have had a very significant shift in currency, most significantly in the third quarter. And heading into the fourth quarter, we are using what we are aware of today. FX does impact our gross margin significantly, and that also is in our outlook guide, if you will, most certainly because of the complexity of our international business, multicurrency and having our supply chain also being in Switzerland and in Hong Kong.

And currency, as I stated earlier in the call, has had an effect – a material effect on our sales this year because all of our European sales get translated back into U.S. dollars at a stronger dollar rate. And that shift throughout the year and especially in the third quarter, has been material.

Great. And then could you guys talk a little bit about gas prices and retail traffic trends you are seeing across channels and geographies? We have seen some slight moderation in gas prices in the U.S., but just curious as to how you expect that to play out?

Sure. So, I think you have a combination of variables and factors playing into the consumer this coming holiday season. One is last year, they were told to buy earlier, they would be – or they would run – people would run out of products. So, I think you are going to see a later Christmas this year than we saw last year, which was not the regular pattern of the past. I think gas prices have moderated, but there are also – consumers are also now seeing inflation continue on the food side. Eventually, I believe all of these factors will moderate, but it’s just going to take some time. And particularly, I think at the middle income and upper middle income consumer inflation has taken a toll as a greater part of their income is focused on required goods like gas and food, and rent versus discretionary items.

And one last question. On a sequential basis, inventory growth appeared relatively flat. Can you speak to the freshness of your inventory and then provide some details on pricing trends ahead of the holiday season?

Sure. So, our inventory is in very good shape. And the – so we did get receipts in early throughout the year. And we expect it to drop in the fourth quarter, but it is a very clean inventory in terms of newness and quality of inventory. So, we have no concerns about that. What was the second part, pricing trends, so we did pass some price increases early in the year and that did help offset some of the currency headwinds that we were facing, especially in Europe. And I believe that now it will stay stable for a while, and I don’t anticipate any more of that. I think you will see a more promotional holiday season from retailers. But our own intention is not to be more promotional on our side.

Great. Thank you very much.

There are no questions at this time. I would like to turn the conference back over to Efraim for closing comments.

Okay. Well, thank you very much everybody and I wish everybody a great Thanksgiving holiday, and we look forward to talking with you again after our year-end. Thank you again.

Thank you. This does conclude today’s conference. You may disconnect your lines at this time and thank you for your participation.