Good morning ladies and gentlemen and welcome to the Movado Group Inc. Fiscal Second Quarter 2016 Earnings call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. As a reminder, ladies and gentlemen this conference is being recorded and may not be reproduced in whole or in part without permission from the company. I would now like to introduce Miss. 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; Ricardo Quintero, President; and Sallie DeMarsilis, Chief Financial Officer. Also in the room is, Rick Coté, Vice Chairman and Chief Operating Officer who will join us for questions-and-answers. 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 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 include 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 Ricardo Quintero, President of Movado Group.

Thank you, Rachel. Good morning and welcome to our Q2 conference call for Movado Group. We are pleased with our Q2 results, as it reflects strong execution of our strategic approach to growing our business and capturing the full potential of our brand portfolio. Sales were up 6.1% on a constant currency basis and 1.4% on a reported basis, with international sales increasing 12.4% on a constant currency basis and 2% on reported basis. Operating income was also up 23.9% on a constant currency basis were 6.2% on a reported basis. During the second quarter, the global market has given us many variables we do not control, but the theme of constant change remains and it's within our ability to successfully manage through these changing times, so that our company and our brands can win. As discussed on our previous calls foreign exchange and currency volatility is one of the big central themes affecting our industry and our business and rather than have a wait and see attitude, we implemented a number of proactive measures to reveal the positive results. One of these key initiatives was our selective price increases, which we executed successfully. To note our gross margin expanded to 54.3% of net sales despite a 200 basis point overall unfavourable currency impact on gross margin. Our price increases were done thoughtfully and strategically resulting in an improvement in gross margin offsetting currency headwinds without a significant impact to volume. In the U.S., where we are able to effectively track market share through NPD in the 300 to 3,000 price category where we compete, our Movado brand market share rose to over 21% for the period of January through June up to 150 basis points versus prior year. In the same January through June period, Movado sales of retail…

Thank you Ricardo and good morning everyone. For today's call I will begin with a review of our financial results for the second quarter and first six months of fiscal 2016 and close with our outlook. Before I begin I'd like to point out that special items included in our year to date results for fiscal 2016, please refer to our press release for a description of this item as well as a table of GAAP and non-GAAP measures. Our GAAP results for the first six months of fiscal 2016 include a $2.7 million pre-tax charge which equates to $2.5 million after tax or $0.10 per diluted share in connection with our operating efficiency initiatives and other items. The balance of my remarks will exclude this special item. Beginning with a review of our income statement sales for the second quarter were $145.6 million, an increase from the same period of the prior year of approximately $2 million or 1.4%. In constant dollars sales increased 6.1% as currency unfavourably impacted our sales by $6.8 million. This growth was primarily driven by our licensed brands and luxury businesses. Sales were up 0.8% in the U.S. and in constant dollars increased 12.4% internationally. Sales in our wholesale segment were $129.8 million, an increase of 1.5% from $127.8 million for the same period of last year. In constant dollars wholesale sales increased 6.8%. By geography our U.S. wholesale business increased 0.9% to $63 million compared to $62.4 million last year. Our international wholesale business increased 2% to $66.8 million compared to $65.5 million in prior year. In constant dollars international sales increased 12.4%. Sales growth was led by increases in Europe and to a lesser extent Latin America. Sales from the company's retail business were about flat at approximately $15.8 million compared to…

Thank you, Sallie. We are very pleased with our overall results for the second quarter, results which included increases sales, a stronger gross margin percentage and operating income above last year despite operating in a challenging retail environment and facing significant currency headwinds. During the quarter and the first half of the year, we were able to execute our strategy which included selective price increases, continued delivery of strong product innovation in our brands and gaining market share in our targeted markets. As we enter the second half for the year, we continue to see a global economic environment with increased risk and volatility and a continued challenging retail environment. We believe we have strong plans in place for each of our brands that help drive consumers to our retail partner stores and Web sites. As Ricardo mentioned, we're particularly excited about our new product family in Movado designed by world famous industrial designer that will be introduced in the fourth quarter and our first entrée into the evolving wearable category in our Movado brand. Product innovation is what has helped Movado continue to garner market share gains in the U.S. and we remain focused on introducing and marketing, truly exciting products for our consumers. We're also excited about the launch of our Coach men's watches and the introduction of our Hugo Boss Swiss collection. As a company, we continue to execute in a disciplined manner and continue to outperform the category for our retail partners. We remain focused on continuing to grow our company for the long-term and believe our new organizational structure which Ricardo described, will positioned us appropriately to capture the full potential of our brands on a global basis. I would like to thank our teams around the world for their continued focus and execution. Now I would like to open up the call to questions.

Thank you. [Operator Instructions] And we will take our first question from Oliver Chen with Cowen & Company.

Nice and solid results in a tough environment. With a question, your inventory is look really good under pacing sales growth, will that continue to be a trend for your inventories and could you give us an update on how you're feeling about how the wholesalers are managing inventories? I know there has been a trend of tightening and do you expect that to continue and if so for how long?

So, Oliver, thank you and on the first part, we have continued to basically see inventory management at retail being consistent with the trends that it's been over the past several quarters. So, there has been a fairly tight management and in most cases our sales are outpacing inventory growth in the current retail environment but overall we're very pleased with our results. I'll give it to Sallie to answer the second question about our expectations for our own inventory levels for year end.

Yes, Oliver I think right now we’re very pleased with our inventory positions and then we would expect it to be in line with our sales growth.

Your comments on digital were helpful and sounded like a newness relative to how long have covered you. What do you think about that in terms of percentage of sales overtime, I mean the websites looks like it has a lot more product than I’ve ever seen before on your site and so -- and also how do you marry omni-channel in the context of your business model being some multichannel between direct to consumer and wholesale? I was also curious about at certain brands or price points are more suited for success and penetration online?

So thank you, I am happy you're already able to get on Web site. Your questions are very important questions and really this is a new space, I mean it's going to be hard for us to make a prediction on what the impact will be, the reality is there will be an impact and we’re starting to participate. But the market will evolve in consumers pace that evolve in different ways. So I wouldn’t like to give you a prediction because I really, it's hard to give you one. I think as far as the omni-channel question, I mean we are seeing that consumers, as I mentioned in my prepared remarks are moving to digital to buying online or even searching for product and learning about product online. And in many cases this is actually happening while they are in the store. So this is something that we believe is very important and we’ll continue to support all of these digital elements for a story telling and product information to support not only purchases that are made online, but also support those purchases for those consumers that we want information at the point of sale and they are going to have it through our digital platforms.

And just a final question, you mentioned selective price increases, which sounds pretty great in the context of a mixed international and macro environment, what’s the nature of how you're able to achieve that was it across the globe and across your brand portfolio?

So, we’ve been very careful over the past several years about continuing to offer consumers tremendous value and so I think we were able to do that and execute and deliver price increasing continue to do that and really by being very strategic, very selective and being very pointed at what we’ve done. So we’re very pleased with the overall execution by our teams of the global price increase that we implemented. And you can see that by actually an increase gross margin in a time where currency had a negative impact of 200 basis points.

We’ll take our next question from Ed Yruma with KeyBanc Capital Markets.

I guess first just housekeeping, Sallie I think you resided on the tax rate obviously little higher because you were unable to recognize some tax benefits from I think some of your foreign subs. Was that anticipated when you introduced annual guidance and I guess how should we be thinking about modeling that tax rate kind of longer term given all the volatility you brought?

Yes, yes you are correct it was higher because of some of our foreign entities and yes that was built into our model but unfortunately we only give annual guidance and those loses in some of those foreign subs create some volatility quarter-to-quarter.

So is that a one shot deal or is this really kind of -- should we think about so long as you have the international volatility this tax rate to be elevated because of an inability to recognize some of those tax benefits?

Yes, we’re still aiming for 30% for the year and so that may help you a little bit with what the back half maybe.

And again congrats on the pricing increase, I guess did you get any pushback at all at retail and was that kind of a one-time or should we expect you to kind of more selectively take a pricing through the balance of the year? Thanks.

Well I think our price increase we’re now planning on having another price increase this year. I think gross margin is a continued focus of the company. So you're going to continue to see and beyond just our price increase execution, our teams did a fabulous job on the supply chain side and improving some of our costs and that was really helpful during the quarter and should continue to yield benefit for the balance of the year.

And one final follow up, I think it was Hugo Boss you mentioned, you roll out a Swiss program I might have missed that but just how should we think about interest in doing more Swiss products within your license portfolio? Thank you.

I would think that this is probably, a fairly exclusive offering that we introduced to our customers in Basel and got a great response and then we will see how it rolls out through the balance of the year. I would think that probably Hugo Boss is the brand that we will focus Swiss made product to.

We'll take our next question from Rick Patel with Stephens.

This is Shreya Jawalkar filling in for Rick. Thank you for taking our question. I wanted to ask about your connected technology, any update on which month it will launch in 4Q and should we expect an uptake in marketing spend to support this and also from a pricing perspective, do you expect this to be comparable with the core Movado brand at luxury price points or will it be some more aspirational consumers? Thank you.

So, we expect to introduces as we mentioned in the fourth quarter and it will be supported appropriately to make sure the consumers know that we now have this with the Movado brand and it will be within not only the designer aesthetics of the brand but also within the price points that our consumers expect for the Movado brand.

We'll take our next question from Kristine Koerber with Barrington Research Associates.

First just a follow up on this smart watch, can you talk about the technology around the device and will it be synced, will you be able to sync it with iPhone or android devices?

So, we really have not given out any information yet about the product that we'll launch and we would anticipate giving out that information during the third quarter as we prepare for deliveries and introduction and fourth quarter but it's product that we're very excited about and hits the sweet spot of the Movado brand both from the design and price point.

So, when you talk about the fourth quarter launch, I'm assuming it is December when is the launch during in December?

Q4 holiday, stores for holidays and we will happily make it available as well.

How many doors, do you know at this point?

We haven't finalized that yet.

And then can you quantify -- is there any way to quantify the price increase, how much of the price increase, the benefit of having gross margin during the quarter it wasn’t the increase taken light in the quarter?

No, increase was -- some of the increases began late in the first quarter and then by the beginning of the second quarter early in the second quarter most of the price increases did take place. I think it be very difficult to quantify exactly the impact to gross margin but it did offset more than offset a negative currency headwind of 200 basis points that in our...

It was mixed pricing in our...

In our cost reductions.

Sourcing of important threats.

And then Sallie I believe you had indicated a quarter two ago that expecting a $26 million impact, FX impact and sales for the full year is that guidance unchanged at this point?

Well I mean obviously that was one, a year it’s last year end when we were looking forward into this year that was our estimate of what the impact would be and because of that we did things like the price increases and took other actions. So our guidance does reflect all of the actions that we're taking to react to what is now the new reality of currency.

I would now like to turn the conference back over to management for any additional or closing remarks.

Okay. I would like to thank all of you for participating on today's call and we'll obviously update you again in our third quarter call and wish everybody a very happy end to the summer. Okay. Thank you very much.