Q4 2025 Movado Group Inc Earnings Call
Good day, everybody and welcome to the Nevada Group incorporated fourth quarter fiscal year 2025 earnings Conference call.
Speaker Change: 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 your House you know skin partner ICR. Please go ahead.
Speaker Change: Good morning, everyone with me on the call like Akron, Grinberg, Chairman and Chief Executive Officer, and Sallie, The Marcellus 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 call.
Speaker Change: This 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.
Speaker Change: 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.
Speaker Change: 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 Aaron Greenberg Chairman and Chief.
Speaker Change: Decorative officer I'll go about it great.
Speaker Change: Thank you Allison.
Good morning, and welcome to Nevada group's fourth quarter and year end conference call before we dive in full year results I would like to quickly touch on one matter that we disclosed in our form 8-K last week as we are beginning to close our financial results for the fiscal year, we became aware of irregularities in our Dubai sales office, we are immediate.
Speaker Change: <unk> suspended the leader of that office and began a thorough investigation. This included engaging outside counsel lead the investigation and ensuring our auditors price Waterhouse Coopers were kept informed throughout the process as a result of the investigation the leader of the Dubai sales office has been terminated and we restate.
Speaker Change: Our financials for each of the three fiscal years ended January 31, 2024, and the earned time periods within fiscal years, 2025, and 2020 for honesty and integrity and transparency are at the core of Novato group as a company.
Speaker Change: That is why the unethical conduct that occurred at the Dubai sales office so disappointing.
Speaker Change: Nevertheless, we will emerge from this episode as a stronger company with an even more robust control environment in place.
Speaker Change: As I discuss the state of the business. Please keep in mind that all references I make to prior period results are to the results after giving effect to the restatement.
Speaker Change: While last year was very challenging for the retail industry in our category. We began preparing for the current year by lowering our expense base for what we expect it will continue to be a challenging consumer discretionary environment.
As a company we have always taken pride in our ability to execute.
Speaker Change: Know that we will do better on that front in the year ahead.
Speaker Change: For the year sales were $653 $4 million versus $664 $4 million last year, a one 7% decline adjusted operating income for the year was $27 $1 million versus $48 $5 million last year our earnings were.
Speaker Change: <unk> by our planned investment of an incremental $17 $4 million in marketing in support of our brands.
Speaker Change: Our performance improved in the fourth quarter with sales growing by three 3% to $181 $5 million and adjusted operating profit increasing to $8 million to $13 $5 million.
Speaker Change: Our adjusted earnings per share for the quarter and the year were <unk> 51, and $1 12, respectively.
Speaker Change: We also ended the year with $208 $5 million in cash and no debt. We are pleased to announce last Friday that our board declared a quarterly dividend of 35%.
Speaker Change: And we remain committed to returning shareholder value through both dividends and our share repurchase program.
Speaker Change: Since we began the year, we're all aware of the increased level of uncertainty in the economic environment and friction in global trade as the year progresses, we intend to make every effort to protect our gross margin in the U S. Taking into account the current incremental tariff rates of 10% for all global imports.
Speaker Change: Over 100% on the Chinese bracelet or leather straps that are component of our fashion watches.
Speaker Change: U S sales and our fashion watches and jewelry represent approximately 20% of our overall fashion watch sales were in the process of developing plans to help us mitigate some of the cost increases deriving from increased U S tariffs through partnering with our vendors and customers and implementing selective.
Speaker Change: Rice increases of course, there continues to be uncertainty with regards to the final tariff rates when and if they are ultimately implemented.
Speaker Change: During the third quarter and fourth quarter of last year, we took certain difficult steps that included right sizing our organizational structure in order to navigate an uncertain retail environment. During the fourth quarter. We took an additional charge of $1 $8 million to cover incremental severance cost on an annualized basis we.
Speaker Change: Expect these changes to deliver $10 million in total savings for fiscal 2026. In addition, we anticipate a 15% to $20 million year over year reduction in marketing expenditures. This coming year. These planned reductions in operating expenditures will be partially offset by inflationary cost.
Speaker Change: <unk>, such as merit increases and the performance and performance based compensation.
Speaker Change: Considering the certain the uncertain global environment that we're operating in we will not be providing outlook. At this time, we continue to make progress in our strategic brand building efforts across our brand portfolio and I will highlight some of these collectively in.
Speaker Change: In Nevada, we're continuing our comprehensive brand refresh journey that we embarked on 18 months ago, and we're making significant progress last fall. We launched we launched our new brand building campaign, featuring a new set of novato icon, including actor and rapper Ludacris actors and business entrepreneur Jessica Alba.
Speaker Change: And basketball basketball Superstar Tyrese Halliburton, we also introduced the new <unk> display and a selection of our retail partners. We quickly saw improved metrics for these for those points of sale, we were able to launch the new display and we will continue to roll out this program in the coming quarters from a marketing perspective.
Speaker Change: This spring we have fine tuned our campaign to increase visibility both in store and across the most important digital venues, including the biggest social media platforms digital publishers Youtube and Youtube TV.
Speaker Change: Last fall, we began reducing the number of promotional events in which the novato brand was available in order to prevent to preserve the brand image and integrity and while we knew there would be a short term hit to sales. We are confident that it was the correct actions for the long term as we enter the second half. We believe we will begin to see the benefits.
Speaker Change: Of this initiative.
We're very excited by the new products that we're introducing this spring.
Speaker Change: Specially in women's watch styles that while maintain while maintaining them <unk> brand DNA are also right on trend. These include our new bold many quest, which is already performing very well at retail and a new collection of many bangles and three different shapes that our customers are very excited and will be available.
Speaker Change: Some others day.
Speaker Change: This spring we will also be introducing our first set of Nevada watches featuring lab grown diamonds that will allow us to offer beautiful high quality diamond watches below $2000 on the mens Bryan our penetration of automatic watches continues to grow.
Speaker Change: Just like in Novato brand, we're seeing an increasing opportunity in women's watches across our license licensed brands with more feminine smaller designed to to each brand's DNA, we're fortunate enough to partner with some of the fashion industry is most important brands.
Speaker Change: The coach brand success among the Gen Z consumer is well documented and I can say that we are seeing the same success within the watch category are Sammy Bangle introduced last year has been a huge success and is beloved by the younger coach consume. It. In addition to the <unk> collection, our cash collection with the square case.
Speaker Change: This is right on trend and already performing very well.
Speaker Change: And Tommy Hilfiger, we're big believers in our good better best positioning across affordable price points, we are seeing strong sell through in our skeleton families like Stewart Baker and legend and legend.
Speaker Change: On the women's front, we feel there is a big opportunity and new smaller offerings like our Tia family.
Speaker Change: And jewelry offerings like our new Togo Hart with Th is famous corporate strike.
Speaker Change: In Lacoste, our new ILC 33 collection received a tremendous response from consumers. This rugged any did you watch is true to low cost low cost board is lifestyle and has not and has numerous opportunities for continued development and expansion. This spring, we will be introducing a translucent version and new.
Speaker Change: Color ways as well as a new smaller version suited for smaller risks. We also introduced our new Parisian collection, a new hexagon all shape watch just for her are metropole bracelet has proved to be a global best seller and.
Speaker Change: In Hugo Boss, we have brought back a classic and the new evolution and its in a new evolution and it's performing better than ever our Grand Prix chronograph is already selling out and many variations and we hope to be back in stock soon our candor Chrono continues to perform very well on the jewelry side are big.
Speaker Change: All statements for Hugo boss jewelry are doing well for him and her.
Speaker Change: And Calvin Klein, we're excited by the new collections that we're introducing in both watches and jewelry with a big emphasis on women. Our pulse collection has proven to be a best seller for CK and will be continuing and we will be expanding it into a smaller version. This coming fall. We also introduced meridian and <unk>.
Speaker Change: K a door to new shapes collections that have received strong reception on the jewelry front, we're excited to introduce our new spiral collection.
Speaker Change: While the outlet business was challenging last year, we're in focusing on improving the areas within our control we have seen improving trends, where we have enhanced our point point of sale with our new <unk> fixtures and this past month, we increased the penetration of the new fixtures from 10 doors to all of our doors. We're also seeing benefits from.
Speaker Change: From improving our outlet assortment.
Speaker Change: This past year represented challenges for the company history has shown that these are the moments when our teams rise to the occasion and delivered it's in these times that we identify what needs to be corrected tightened our focus on variable expenses and raised the bar on execution. Following the events in our Dubai office, we've acted swiftly.
Speaker Change: We made necessary personnel changes and believe there are new opportunities ahead in that region under fresh leadership as always we remain committed to our core values of ethics and transparency those principles continue to guide everything we do with.
Speaker Change: With the current global uncertainty both economically and in trade, we're staying focused on executing where counts and capitalizing on the opportunities we see for our strong portfolio of brands across our global distribution network in watches and jewelry, we've always taken a long term view of the business, while remaining agile and responsive.
Speaker Change: <unk> to market dynamics. This past year has taught us a lot, but what stood out most is the incredible dedication and resilience of our team there continued commitment to the company and to delivering from Nevada and.
Speaker Change: Yes.
Speaker Change: <unk> commitment to the company and to delivering for Nevada group has been truly inspiring with that I'll turn it over to Sallie to walk through our financial results in more detail. We then be glad to answer any questions you might have.
Sallie: Thank you <unk> and good morning for today's call I will review, our financial results for the fourth quarter and fiscal 2025.
Sallie: My comments today will focus on adjusted results. Please refer to the description of the special items included in our results for the fourth quarter and full year of fiscal 2025, and our press release issued earlier today, which also includes a table for GAAP and non-GAAP measures.
Sallie: Although our overall top line performance for fiscal 2025 was slightly down from fiscal 2024, we saw a year over year improvement in the fourth quarter for the fourth quarter of fiscal 2025 sales were $181 $5 million as compared to $175 $8 million last year and.
Sallie: Increase of three 3% and.
Sallie: In constant dollars net sales increased 5%.
Sallie: <unk> growth in our licensed brands, partially offset by a decline in our own brands and in our company stores.
Sallie: By geography U S net sales decreased two 9%.
Sallie: International net sales increased eight 8% as compared to the fourth quarter of last year.
Sallie: On a constant currency basis international net sales increased by 12, 2% with growth in each of our international regions.
Sallie: Gross profit as a percentage of sales was 54, 2% compared to 53, 5% in the fourth quarter of last year.
Sallie: The increase in gross margin was primarily driven by favorable channel and product mix and increased leverage of lower fixed cost over higher sales.
Sallie: This was partially offset by the unfavorable impact of foreign currency exchange rates.
Operating expenses were $84 $8 million as compared to $83 $3 million for the same period of last year.
The increase was driven by higher marketing expenses, partially offset by a decrease in performance and equity based compensation.
Sallie: As a result of the increase in sales and gross margin, partially offset by higher operating expenses operating income increased by $2 7 million to $13 5 million compared to $10 $8 million in the fourth quarter of fiscal 2024.
Sallie: We recorded approximately $1 $4 million of other non operating income in the fourth quarter and fiscal 2025, which is primarily comprised of interest earned on our global cash position as compared to $1 $7 million. During the same period of last year.
Sallie: We recorded income tax expense of $3 $1 million in the fourth quarter of fiscal 2025, as compared to $2 $3 million in the fourth quarter of fiscal 2024.
Sallie: Net income in the fourth quarter was $11 5 million or 51 cents per diluted share as compared to $9 $8 million or <unk> 43 per diluted share in the year ago period.
Sallie: Now turning to our fiscal year results.
Sallie: Sales were $653 4 million a decrease of one 7% from fiscal 2024.
Sallie: In constant dollars a decrease in net sales was one 5%.
U S net sales declined by 4%.
Sallie: International sales decreased by 2%, but increased 6% on a constant currency basis.
Sallie: Gross profit was $353 1 million or 54% of sales as compared to 364, 2% and $364 2 million or <unk> 54, 8% of sales last year.
Sallie: The decrease in gross margin rate was due to unfavorable channel and product mix and decreased leverage of higher fixed cost over a lower sales.
Sallie: Operating income was $27 1 million compared to operating income of $48 $5 million in fiscal 2024.
Sallie: We recorded approximately $6 6 million of other nonoperating income in fiscal 2025.
Sallie: Which was primarily comprised of interest earned on our global cash position as compared to $5 5 million during the same period of last year.
Sallie: Net income was $25 $4 million or $1 12 per diluted share as compared to net income of $41 $3 million or $1 83 per diluted share in the year ago period.
Sallie: Now turning to our balance sheet.
Sallie: Cash at the end of the fiscal year with $208 5 million and we had no outstanding debt.
Sallie: Accounts receivable were $93 $4 million as compared to $86 million in the same period of last year. This increase was driven by timing and the mix of our business.
Sallie: Inventory at the end of the year was $156 $7 million as compared to $153 $9 million in the same period of last year we.
Sallie: We are pleased with the composition of our inventory at year end.
Sallie: Capital expenditures were $8 million and depreciation and amortization expense was $9 $3 million.
Sallie: As it relates to share repurchases during fiscal 2025, we repurchased approximately 120000 shares as.
Sallie: As of January 31, 2025, we had $50 million remaining under our December five 2024 authorized share repurchase program.
Sallie: Subject to prevailing market conditions, and the business environment, we plan to utilize our share repurchase plan to offset dilution in fiscal 2026.
Sallie: As a global company with 43% of our fiscal 2025 net sales in the United States, we acknowledge the potential impact of recently announced tariffs.
Speaker Change: As <unk> mentioned, we are closely monitoring developments and evaluating various strategies to try to mitigate and pending cost increases.
Speaker Change: Although we remain focused on maintaining the quality and value consumers expect we will be implementing selective price increases while actively engaging with our supply chain partners and customers to respond effectively.
Speaker Change: Given the current economic uncertainty and the unpredictable impact of tariffs on our business. The company has elected.
Speaker Change: Not to provide fiscal 2026 outlook at this time.
Speaker Change: I would now like to open the call up for questions.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: I used to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is from the question queue. You May Press Star two if you would like to remove your question from the queue and for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star he is.
Speaker Change: Our first question is from had that question.
Speaker Change: AWS financial please proceed.
Speaker Change: Hey, good morning.
Speaker Change: Could you talk.
Speaker Change: Could you talk about your marketing strategy. This year, given that you plan to spend less.
Speaker Change: So so.
Speaker Change: We will focus a greater preponderance of our marketing effort this year in digital venues and which allows us for more timely adjustments.
Speaker Change: First is.
Speaker Change: Our sales and where our sales are tracking and at the same time, we're also going to focus more of our messaging across our brands.
Speaker Change: Conversion.
Speaker Change: With our retail partners around the world. So we.
Speaker Change: We look to increase the productivity.
Speaker Change: All of our marketing efforts.
Speaker Change: This coming spring and into the fall.
Speaker Change: Okay and then.
Speaker Change: I think I heard you say that you are expecting sales to increase.
Speaker Change: Somewhere in your commentary.
Speaker Change: I may have misunderstood it but no I think I think I think with all the uncertainty in the world right now I think it's hard to predict where sales are going to come in and completely and I think.
Speaker Change: With tariffs and trade and everything going on we don't know yet the effect that if the tariffs are sustained what that effect will have.
Speaker Change: On consumers on a global basis, even if other markets arent tariffs because.
Speaker Change: Because they export.
Speaker Change: The U S and their economies are are.
Speaker Change: Dependent on some of those exports as well so I think it's very hard to predict.
Speaker Change: What the retail environment will be in the coming few months given the uncertainty I think it will stabilize and we will get some more clarity at a certain point and my hope would be that we'll have more clarity by the time we talk.
Speaker Change: On the on the first quarter.
Speaker Change: Call in May.
Speaker Change: But right now there's there's a 90 day pause.
Speaker Change: And we don't know, what's exactly going to be beyond that 90 day pause and even within that 90 day pause there is 10%.
Speaker Change: <unk> on all non Chinese.
Speaker Change: Products and obviously the Chinese products are higher so I think there's just too much uncertainty that to know if this will be a year of growth, but we know that we will.
Speaker Change: Really focus on our execution capability, which we've.
Speaker Change: Prove in adverse times to be very strong at.
Speaker Change: And control for us the controllable.
Which generally are our expenses.
Speaker Change: Which are high portion of our expenses tend to be variable in nature as well.
Speaker Change: Yes, I was going to just add is I mean this is not the first time about a scene.
Speaker Change: Yeah.
Speaker Change: Economic uncertainty so I'm just trying to understand is there are product lines that you would focus on are at price points that you would focus on.
Speaker Change: So I think what we're trying to do right now is really understand the tariff structure and see where we have to.
Speaker Change: Where we will be implementing some price increases, but do it in a way that is sustainable for the long term and and manageable with both our retail partners and <unk>.
Speaker Change: And consumers.
Speaker Change: So.
Speaker Change: I think that.
Speaker Change: What what what I always note that in times of uncertainty, it's better not to make predictions and just run your business.
Speaker Change: And a really proper.
Speaker Change: Focused way and we will do that we will continue to do that.
Speaker Change: And obviously I think I talked about in Tommy Hilfiger, but it applies to all of our brands.
Speaker Change: As well as really a good better best strategy and so we will still always have that.
Speaker Change: That some value oriented price points across each of our brands.
Speaker Change: For when the consumer becomes more challenged economically mindedness.
Speaker Change: Got it and then as far as the cost savings and that shows go.
Speaker Change: You were talking about some offsetting effects dessert.
Speaker Change: Yeah more cost savings that you could have to justify generating free cash flow this year.
Speaker Change: Our intention is to generate free cash flow this year and we're very focused also on our inventory levels, although having some inventory at the time right now is good.
Speaker Change: And.
Speaker Change: So so I think that.
Speaker Change: That as I said, we have.
Speaker Change: A number of variable expenses, our marketing expenses are generally somewhat variable in and what the digital aspect allows us to do is can make closer to the time of execution.
Speaker Change: Versus more traditional.
Speaker Change: Media, but.
Speaker Change: My hope is that I don't have to.
Reduce that but our sales that can sustain the level that we planned out for the year.
Speaker Change: Great. Thank you.
Speaker Change: Okay. Thank you very much.
Speaker Change: Amen.
Speaker Change: With no further questions I would like to turn the call back over to affirm for closing remarks.
Speaker Change: I would like to thank you all for participating today, and we look forward to talking to you hopefully with some more clarity.
Speaker Change: During the second quarter.
Speaker Change: Our first quarter conference call. Thank you.
Speaker Change: Thank you very much.
Speaker Change: Thank you. This will conclude today's conference you may disconnect. Your lines at this time and thank you for your participation.
Yeah.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: Hum.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Okay.
Speaker Change: [music].
Speaker Change: Yes.
Speaker Change: [music].
Speaker Change: Okay.