Good day, everyone, and welcome to the Movado Group, Inc Fourth Quarter and fiscal Year 2021 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. Thank you. 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'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 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.

Okay. Thank you, Rachel. Good Morning and welcome to our fourth quarter and year-end conference call. With me today is Sallie DeMarsilis, our Chief Operating Officer and Chief Financial Officer. I will first share with you some highlights for the fourth quarter we just reported, as well as our plans and strategies for the current year. Sallie will then walk through our financial results in greater detail. We would then be glad to answer any questions you might have. While we are seeing improvements in terms of COVID-19 cases in the United States, we're experiencing closures across European markets and continued challenges in Latin America, especially Brazil and Mexico. We are hopeful that as vaccination rates increase around the world, we will slowly return to a new normal. Our thoughts are with the families that have experienced personal devastation from this disease. Having just finished one of the most unusual years in our history, I couldn't be more proud of our teams around the world operating in the first and hopefully only pandemic in our lifetimes. I am very pleased with our overall execution and results given the challenging operating environment. And I would like to personally thank our teams for all that they accomplished this year. During fiscal 2021, we made significant progress in how we execute as a company which positions as well for the future. For the fourth quarter and the full year, we exceeded our expectations on both the top and bottom-line. Our sales for the fourth quarter were down 6.6% to $178.3 million and showed a sequential improvement from the third quarter. Our adjusted operating profit for the fourth quarter was $23.9 million versus $8.3 million last year a 186% improvement and higher than the $19.9 million reported in the fourth quarter two years ago.…

Thank you, Efraim, and good morning, everyone. For today's call, I will review our financial results for fiscal 2021. My comments today will focus on adjusted results. Please refer to the description of all the special items included in our results for the fourth quarter and fiscal year period of fiscal 2021 and fiscal 2020, in our press release issued earlier today, which also include the table for GAAP and non-GAAP measures. Our performance improves sequentially each quarter of this fiscal year with our fourth quarter results highlighted by growth in ecommerce sales, expansion in gross margin and the disciplined management of expenses. We ended the quarter with a strong balance sheet and significant progress on our strategic initiatives. For the fourth quarter of fiscal 2021, sales were $178.3 million as compared to $191 million last year. As mentioned, we saw sequential improvement in our top-line versus prior quarters. Nonetheless, the impact of COVID-19 was built globally, with restrictions specifically affecting brick and mortar retail, leading to net sales declines across our segments of owned brands, licensed brands and company stores, as well as across most geographies. Importantly, consumer response to our brands and offerings remain strong, which is reflected in our ecommerce sales, both on our owned websites and those of third party marketplaces. Gross profit as a percent of sales was 54.9% compared to 52.7% in the fourth quarter of last year. The increase in gross margin was primarily driven by favorable channel and product mix and favorable changes in foreign currency exchange rates. Operating expenses were $74.1 million as compared to $92.3 million for the same period of last year. The decrease was driven by actions taken to minimize all non-essential operating costs, as well as reductions in payroll expense and the right sizing of marketing expenses…

Thank you. The floor is open for questions. [Operator Instructions] Our first question is coming from Oliver Chen of Cowen.

You're seeing that encouraging momentum from the customer? What are your thoughts on how you're seeing the trends in wholesale relative to your own stores and do you expect to continued amount of volatility and the traffic levels in both channels?

So we expect to continue to see volatility. I think, what we're seeing is there's some light at the end of the tunnel with the vaccination especially with the progress that we're making in the United States, a lot more challenging in Europe, where three of our biggest markets are virtually closed from a traffic point of view. And what I believe is that you're also seeing the benefits in the U.S. of stimulus. That we see people with increased span levels than conversion rates improve, while traffic continues to be down in stores. And we're seeing that both in our wholesale channels and our own channels. And then online continues to be very strong, particularly in the United States.

Efraim what are your thoughts about how the wholesale channel inventories look now and how wholesalers and department stores are thinking about planning inventories, relative to what they're seeing and what levels they have currently in store and online?

So I think that the inventories are in a very healthy place. I think the retailers have done an excellent job of managing their inventories, particularly throughout now we're going on almost a year ago or a little more than a year of the pandemic having an effect. So I think they've done an excellent job of managing their inventories and really the sell through and the inventory levels are very closely aligned today and that's on a global basis.

Okay. And Efraim, as you think about product innovation amidst the pandemic, what's on your mind regarding the pipeline and what consumers want? And given that all experiencing the crisis and how innovation may trend with the changes and at home and flexibility of work?

So I think we are continuing to see is, an increase towards casual and what we call sport elegant collections that that closely aligned with how people are living their lifestyles today. I think what we are also seeing the category I think benefit from maybe a lack of spend in other categories today and disposable income being spent on watches and jewelry and other accessories rather than as much maybe an apparel or entertainment or travel. So -- and as we continue to pursue innovation for us, materials have become very important, colorations have become very important. And we continue to really closely align, especially on a licensing front with our brand partners as they continue to innovate, and we're closely aligned with their innovation.

Lastly, I'm just done the model, the gross margin has been impressive. How much longer might you have the mixed benefit? Or what should we monitor in terms of when you'll anniversary that and current trends there? And you mentioned the variability of your cost structure as well, if you can elaborate on differences there and what it implies for the model and leveraging the leverage. That would be helpful. Thank you.

Sure. I'll ask Sallie to answer the gross margin question and then we'll both talk a little bit about expenses.

So on margin, Oliver this year, obviously, we've benefited from mix as well as currency. Mix was really a component of moving more towards direct-to-consumer, which does have a higher gross margin, but also has some higher operating expenses related to it. I think, we've almost already anniversaried as Efraim said, we're now hit the 12 month mark and moving on where we do think our direct-to-consumer will continue to be strong. That includes both of our outlet stores as well as our ecommerce business. So I think that that probably hits most of your gross margin items. Just keep in mind too, that it is there is some fixed costs element in there. So we have the benefit in bigger quarters to have more leverage on those fixed costs than in smaller quarters.

And then, I think the second part was on cost structure. I think, what we are doing and I really talked about we've applied an increased amount of discipline to our spending, both from an infrastructure perspective, but also from a marketing perspective and as marketing for us moves to more and more digital platforms, we're able to execute much closer to the time of -- that the ads will run. And we're able to use a lot more variability in our spend based on what we're seeing in revenue trends. So we're really, we as a company, we have embraced the digital marketplace and the changes that have occurred over the last year and while at the beginning, you see tremendous challenges as we navigated as we also saw tremendous opportunities.

Thank you. At this time, I'd like to turn the floor back over to Mr. Grinberg for closing comments.

Okay. I'd like to thank all of you today for participating on our conference call. While there's still a lot of obviously uncertainty in the market, we really are very proud of what our team has accomplished this year and we look forward to talking to you in our first quarter conference call. Thank you.

Ladies and gentlemen, thank you for your participation and interest in Movado Group. You may disconnect your lines and log off the webcast at this time and have a wonderful day.