Good morning, everyone, and welcome to Movado Group Fiscal Second Quarter 2019 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’d like to turn the call over to Efraim Grinberg, Chairman and Chief Executive Officer of Movado Group.

Thank you, Rachel, and good morning, everyone. Thank you for joining Movada Group second quarter conference call. For the call this morning, I will discuss the highlights of the quarter, details around the upcoming acquisition of MVMT which we expect will close on October 1, and some of our product and marketing initiatives for the fall. Sallie will then review our financial results as well as our updated outlook. We will then open the call up to questions. We are very pleased to report another strong quarter, with sales and adjusted operating profit both up double digits. For the quarter, our sales were up 11.9% or 10.5% on a constant currency to $144.1 million from $128.8 million last year. Our gross margin was strong at 54% and our adjusted operating profit increased 13% to $14.6 million from $12.9 million last year. For the six months of the year, revenue increased 18.9% to $271.2 million and adjusted operating income grew to $23.5 million, a 50.6% increase. While our U.S. Wholesale business declined for the quarter, we continue to expect single-digit growth for the full-year driven by new product innovation in our fashion brands and Movado. Our international markets saw double-digit growth, driven by strong performance in our licensed brands and Olivia Burton. Last week, we added Steve Sadove to our Board of Directors. Steve is a valuable addition to our Board with extensive experience in brand building and retail. We are looking forward to Steve’s contributions to Movado Group’s Board of Directors. On August 15, we announced that we entered into a definitive agreement to acquire the MVMT brand, a company started just five years ago by Jake Kassan and Kramer LaPlante, two young, creative and passionate entrepreneurs. Since that time Jake and Kramer have been credited with building a truly…

Thank you, Efraim, and good morning, everyone. For today's call, I will begin with a review of our second 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 results for the first half of fiscal 2019 and fiscal 2018. Our press release also described these items and includes a table of GAAP and non-GAAP measures. Movado Group acquired Olivia Burton on July 3, 2017 included in the results for the six months of fiscal 2019 was $1.5 million of non-cash amortization of acquired intangible asset. After-tax, the charge related to the acquisition equates to $1.2 million or $0.05 per diluted share. Included in the consolidated results for the second quarter of fiscal 2018 were $4.5 million of pre-tax charges, primarily connected to the transaction as well as one-month of amortization of the acquired asset. After-tax, the charge related to the acquisition equates to $4.4 million or $0.19 per diluted share for the quarter. Our GAAP results for the second quarter of fiscal 2019 include a $1 million pre-tax charge, which equates to $846,000 after-tax or $0.04 per diluted share in connection with expenses related to our expected acquisition of MVMT. Our GAAP results for the first six months of fiscal 2018 include a $6.4 million pre-tax charge, which equates to $4.5 million after-tax or $0.19 per diluted share in connection with our cost savings initiatives. The balance of my remarks will exclude these special items just discussed. Now turning to our results. Continuing the momentum from the first quarter, we are very pleased with our broad-based sales growth across each of our categories, owned brands, licensed brands and retail. Sales for the second quarter were strong, increasing $15.3 million or 11.9% to $144.1…

Thank you, ma’am. [Operator Instructions] We will now take the first question from Oliver Chen from Cowen and Company. Please go ahead.

Hi. Thank you. Solid results. The U.S. Wholesale business, what fills your enthusiasm in terms of what you're seeing in this channel and what we should look to as catalyst? And you've also done a lot of interesting M&A. I would love your thoughts on frameworks there going forward.

Sure. So, on the first part, we’re seeing improved sell-through trends, particularly in this specialty store and department store channel. But we also have and as I think I mentioned in my comments, a lot of innovation and newness that we've gotten very good response to from our retailers and we will be rolling out during the third quarter and fourth quarter supported by well integrated digital marketing campaigns. So we see that business really improving in the second half of the year. And one of the interesting things is probably that the fashion business has – in the U.S. particularly, has been impacted by brands like MVMT direct – and their direct-to-consumer initiatives, and so we're really enthusiastic about being able to acquire such an exciting brand. From an M&A perspective, last year, we did – we completed Olivia Burton, which was a very strong brand in the UK and we're now expanding that globally. And with MVMT, we believe we have a perfect complement to that brand as well with a strong domestic presence and an ability to expand that both in brick-and-mortar channels as well as through global expansion. So I think for the time being, I would say that we're really satisfied with the two companies, one that we acquired a year-ago, one we're in the process of acquiring now, and we will be really focused on the integration, expansion and growth of those companies.

That's very helpful. And last question, we're getting incomings regarding tariffs. Is that a concern to your business model? And what are strategies around that? And any thoughts around what you're seeing with product cost trends and/or transportation trends, if that's sensitive to how you're thinking about pricing and margins? Thank you.

So far, watches have not been included in tariff categories. That could be a potential for the future. We are looking at different ways to hope to be able to mitigate that, if that were to occur. But certainly, in the short to medium-term, if they were to occur that would be a threat to the overall margins. But for the time being, it does not appear that the fashion watch or watch category are included in those categories.

And just on the product cost side with labor or your supply chain, is it a stable outlook in terms of what you're expecting with your cost of goods sold?

Our teams have done an excellent job over time on our supply chain initiatives. And as you can see by improving gross margins as a company, we will also be able to get leveraged on our overall supply chain with the addition of MVMT into our hold. So we hope to be able to leverage that for both their benefit and our benefit at the same time. So I think – certainly there are still opportunities for us on the supply side.

Thank you. Best regards.

Thanks, Oliver.

Thank you, Oliver.

[Operator Instructions] We will now take our next question from Frank Camma from Sidoti. Please go ahead.

Good morning, guys. Thanks for the additional detail on MVMT. I think you mentioned that the EBITDA margin, you expect basically to sort of double over time. And given their direct-to-consumer, does that mean you expect their acquisition cost to decline over time? Can you first address that? Because that sounds like a big…

So I’ll spend a little bit on that and then – we believe that within our infrastructure both on the supply chain side, fulfillment side, we can get a lot of leverage over time, so that will improve overall margins. We also believe that we have – while it still will not be the majority of the business, have an opportunity for a nice wholesale business around the world and especially internationally, where that will be able to leverage the marketing cost and customer acquisition cost overall. So if you today surveyed a large portion of millennial consumers in the United States, they have a fairly significant brand awareness of the MVMT brand and we believe that we can leverage that in brick-and-mortar distribution as well, but – while still maintaining a predominantly direct-to-consumer model.

It sounds like they already have a fairly high gross profit, but it also sounds like you think, given your scale, you could get even better sourcing. Is that a fair assessment over time? Is that what you're saying?

So we think there are important supply chain synergies, distribution synergies meaning on the fulfillment side of the business that we can leverage on a global basis. And if you – go ahead Frank.

No. I was just going to say, like on the fulfillment side, isn't it a little different? Because –are they doing a lot of individual shipments to customers as I assume? So – but you still think you can leverage that through your supply chain.

Yes. We think with our systems and the companies capabilities, we can leverage that. MVMT is growing very quickly from a– Company that was just started five years ago. So they don't have the systems infrastructure that they would normally have it to scale at this size. They would be adding those. So rather than them adding those, we’re able to leverage ours.

Okay. That's fair. And then moving on to sort of the base business. Obviously, U.S. Wholesale continues to trend down, not too shocking. But how about – retail commentary has been pretty favorable recently. I mean, what are you hearing from your partners for the holiday season? Any confidence vis-a-vis last year? Can you sort of comment on that, what you're getting through the channel?

Well, I think I commented that in the previous question that we have a number of new programs and product innovation that our customers are very excited about. So that's why we feel fairly confident that we'll see growth in the second half of the year on U.S. Wholesale business, and we believe that the sell-through trends will justify that as well.

Okay. Fair enough. Thank you.

Thanks, Frank. End of Q&A

There are no further questions. I would like to turn the conference back to management for any additional or closing remarks.

Okay. Well I would like to thank all of you again for participating with us today and we look forward to the second half of the year and being able to report our third quarter results to you as well. Thank you.

This concludes today’s call. Thank you for your participation, ladies and gentlemen. You may now disconnect.