Good day, everyone, and welcome to the Movado Group, Inc. Third Quarter Fiscal 2024 Earnings Conference Call. As a reminder, today's call is being recorded and may not be reproduced in full 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 and 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, our 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, and welcome to Movado Group's third quarter conference call. This morning, I will review the highlights of the quarter, current operating environment and progress on our strategic initiatives, and then Sallie DeMarsilis, our COO and CFO, will review our financial results in greater detail as well as our outlook. In an ongoing challenging environment for discretionary products in our largest markets in Europe and the United States, our company continued to report strong profitability, maintain a durable balance sheet and generate strong cash flow while investing behind our brands, people and product innovation to position the company to accelerate growth in the future. For the third quarter, our sales declined 11.2% to $187.7 million or 13.5% on a constant dollar basis. Our operating profit was $20.7 million versus $38.3 million last year. Our adjusted earnings per share were $0.78 against $1.31 in the third quarter last year. While the environment was challenging, we achieved noteworthy accomplishments. We continue to maintain a strong balance sheet with $201 million in cash and no debt, and we returned $47.7 million in dividends and stock repurchases to our shareholders during the first 9 months of this fiscal year. As the year has progressed, we have seen the challenging retail environment advance into more categories and retailers. As we proceed through the important holiday quarter, we are taking a cautious view while supporting important marketing initiatives to ensure that our brands get stronger while we navigate the uncertain retail climate and steer clear of the excessive promotional environment. The continued strength of our balance sheet allows us to build a strong foundation for the next period of growth from Movado Group. While we remain cautious for the holiday season, we are confident in our ability to navigate the current global…

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 2024, 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 the special items included in our results for the third quarter and year-to-date period of fiscal 2024 and fiscal 2023 and our press release issued earlier today, which also includes a reconciliation table of GAAP and non-GAAP measures. Overall, our performance for the third quarter of fiscal 2024 continued to be negatively impacted by a challenging retail environment. Despite being down year-over-year, we continued to make good progress on our strategic initiatives and maintained an extremely strong balance sheet. Turning to a review of the quarter. Sales were $187.7 million as compared to $211.4 million last year, a decrease of 11.2%. In constant dollars, the decrease in net sales was 13.5%. Net sales decreased across owned brands, licensed brands and company stores. By geography, U.S. net sales decreased 12.3% as compared to the third quarter of last year. International net sales decreased 10.4%. On a constant currency basis, International net sales decreased 14.4% with continued softening in our largest international market, Europe. Gross profit as a percent of sales was 54.5% compared to 57.3% in the third quarter of last year. The year-over-year decrease in the gross margin rate was anticipated and primarily driven by unfavorable channel and product mix and the deleverage of certain fixed costs over lower sales, partially offset by lower shipping costs and the favorable impact of foreign currency exchange rates. We expect the tough comparison to last year to continue into the fourth quarter. Operating expenses were $81.3 million as compared to…

[Operator Instructions]. Our first question is from Michael Legg with the Benchmark Company. Please proceed. Michael, please check and see if your phone is muted.

Sorry about that. A couple of questions. First, I just want to start with the general question. Digital watches seem to have been pretty strong during season so far. Can you comment on the impact, if you see any of that or if that's something that you're not competing with?

We really don't compete in that category. We will have a few anti-digi analog digital watches and I don't know if you're talking specifically about digital watches or smart watches and -- but we're not really in that category.

But does it eat away at the share of the traditional watch market, is really the question.

I don't think so. I mean I think within the fashion category, we do have some digital watches, but we're not seeing any particular level of strength in that category versus any others. We're actually seeing better strength in products that actually have a more mechanical component to them like automatic watches.

Okay. You noted in the fourth quarter that current trends you've seen some trend improvement. Obviously, we have the outlook you gave us, so we know where we are. But how important is the month of December in the quarter? And was that kind of a wildcard that we don't know about?

Yes. I think that the month of December is very important for us, especially in our direct channels, which has an impact obviously on our overall performance for the quarter, but as well as our wholesale channel, and again, in our biggest markets in Europe and the U.S. and how retailers do for that do during that period, which then leads to can lead to stronger replenishment in the month of January.

Okay. And then when you look at today's current stocking levels at the retail level, how do you think that compares to where we were a year ago from the retailer stocking level?

Retailers are down. That is one of their -- they've really been focused as they don't have as much visibility into the future on bringing their inventories into control. Last year, I would say they went into the holiday season with much heavier inventories anticipating a stronger holiday season, and then we're disappointed.

Okay. And what are you seeing from a competitive promotional activity perspective? Are you seeing a lot of discounting out there? What are you seeing?

Yes. I think there are some of our competitors within different companies that are stressed from a financial perspective, and you're starting to see them with a higher level of promotionality and that's why we're not changing our promotional cadence for this year versus what it's been and that certainly has an effect on the competitive channel. But I think eventually, it's the right thing to do, not get into promotional and into the highly promotional landscape, which, in the end, is a detriment to brand -- our brand-building efforts.

And then talk about the brand building efforts, can you compare the level of marketing spend you expect to spend in current to '24 or I should say, fiscal '25 versus where you spent last year? Just kind of -- even though we're doing -- I know we're doing the brand-building campaign, but is this -- are we putting more money behind it also?

Yes. I think we are definitely putting -- we will invest in the U.S., I mean, behind the Movado brand, an additional $3 million versus last year, and that's built into our numbers. And we think it's an important investment to make, and we're happy to be able to do it, and are starting to see some green shoots around those efforts.

Great. And then just last question. Any areas that you're pulling back on from a spend perspective given the difficult environment?

Yes. I think as we look at different markets around the world, we certainly adjust our marketing investments. And one of the things that we are focused on as a company and is to make bigger bets, but fewer of them, so to make sure that we get to critical mass levels in certain areas. And I'm looking forward to -- we're already planning for next year. And I think that as we do that, we're really going to be focused on building our biggest markets behind our biggest brands.

Great. And then just on the stock buyback, clearly, you have $18.6 million left on that. I would expect you to continue to be doing that. Any other use of cash like a special dividend or anything like that?

I think our focus right now is maintaining our current dividend and offsetting dilution with our stock repurchases.

Great. Thank you.

Thank you very much, Mike.

We have reached the end of our question-and-answer session. I would like to turn the conference back over to management for closing comments.

I'd like to thank all of you for participating today, and we look forward to regrouping with you on our next conference call after our year-end and wish everybody great holiday season. Thank you.

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