Good day, and welcome to the Movado Group, Inc. Third Quarter Fiscal 2013 Earnings Conference Call. Today's conference is being recorded. I would now like to turn the call over to Ms. Rachel Schacter of ICR. Please go ahead, ma'am.

Thank you. Good morning, everyone. With me on the call is Efraim Grinberg, Chairman and Chief Executive Officer; Rick Cote, President and Chief Operating 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'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 would like to turn the call over to Rick Cote, President and Chief Operating Officer of Movado Group. Richard Coté: Thanks, Rachel. Good morning, and welcome to our conference call. Before beginning my commentary, I want to take just a moment to express our sympathy and empathy to everyone whose lives were impacted by Hurricane Sandy. Our thoughts and prayers are with all of the families that have been affected by the storm with the hope that you return to normalcy as quickly as possible. Let me now turn to our business performance. We are pleased with our third quarter and year-to-date results, which continued our strong performance from the past 11 quarters. Our consistent strength demonstrates the ongoing success of our strategies that focus on capitalizing on the unique aesthetic of our brands while -- with compelling product offering while maximizing our improved operating platform. This is best evidenced by our accessible luxury and licensed brand divisions, which drove our performance this quarter with a combined 20% increase in constant dollar sales. The quarter also included the successful relaunch of our Ebel and ESQ brand repositioning this fall, and while early, we were pleased with the initial response. We are excited about the strong growth opportunities that lie ahead afforded to us by our strengthened operating platform and by the powerful brands we possess. We remain confident in our ability to continue our positive momentum in the fourth quarter of the year and longer term. Our financial results were strong across all key metrics. In total for the third quarter, net sales increased 12.3% or 14.3% on a constant dollar basis, reflecting broad-based strength across our business, with strong consumer demand and customer sell-through. Adjusted operating income increased more than 45% to $28 million from $19.1 million last year. This improved performance resulted from our strong sales growth and having an established infrastructure that allows us to leverage our expense base as we grow. For the 9 months ended October 31, 2012, our performance was also strong with net sales increasing 10.5% or 12.7% on a constant dollar basis, and adjusted operating income increasing 84% to $47.2 million from $25.7 million in the prior period. With this improved financial performance, we have increased our adjusted full year operating income guidance to $57 million from our previous guidance of $49 million. And this represents growth of 66% from actual adjusted results of $34.3 million in fiscal year '12. Our balance sheet remains exceptionally strong as evidenced by our reduced inventory levels despite higher sales. In addition, our net cash position was $165 million at the end of the third quarter. As a reflection of our confidence in the strength and consistency of our business, our ability to invest in growth initiatives and commitment to building long-term shareholder value, we are also pleased to announce that our Board of Directors has approved a special cash dividend of $0.75 per share of the company's outstanding stock as per this morning's press release in addition to our normal $0.05 quarterly dividend. Along with our May 2012 $0.50 special dividend, this will result in dividend per share of $1.45 being paid in calendar year 2012 to our shareholders. Our current business plans do not require any debt financing and our equity position remains strong at over $400 million. Now let me briefly discuss some global trends and provide some specific brand highlights for the third quarter. From a global perspective, the watch category continues to perform well, and we continue to experience strong sell-through performance across our retail partners. We remain cognizant that there is the potential for further deterioration of the world economies. However, our plans continue to anticipate moderate growth in North America, modest growth in Northern Europe, a continued recession in Southern Europe, solid growth in South America and conservative growth in Asia. From a brand perspective, the execution of our Movado brand strategy continues to produce particularly strong results. Globally, Movado's constant dollar sales grew 20% in the third quarter as compared to fiscal 2012 and 19% in the 9-month period. Our Movado brand in the United States continues to hold the leading market share position in our key price points of $500 to $1,500 and a strong market position in the $1,500 to $3,000 price point segment. Additionally, Movado continues to outpace the category and increase its market share in total in the $300 to $3,000 price segment, and in virtually every category within this segment. Indicative of our market share growth in the United States, the $500 to $3,000 price category has grown 5% for the trailing 12 months while Movado has grown 18%. All distribution channels continue to perform well with double-digit gains in U.S. department and chain stores and even greater growth in our broad and specialty channel distribution. Product segmentation and our strategy to offer compelling products at key price points continues to help drive our growth. Introductions from spring such as the steel and ceramics Cerena and the Museum Sport chronograph have continued to perform exceedingly well. The new iteration of Circa in both the 3-hand and chronograph strategically priced at $795 and $995 respectively is a great new classic addition to our brand portfolio. Also introduced this fall and selling well is our new Vizio chronograph priced at $24.95 with a carbon fiber dial, a tungsten carbide bezel and a distinctive architecturally-designed bracelet. Movado Bold, part of our Swiss trend pillar, is still exceeding expectations. Strategically limited to less than 700 doors worldwide, Bold continues to add a fresh, younger perspective to Movado. The global Movado brand advertising campaign was updated for this holiday season. An exciting new Bold titanium TV spot was introduced this week on Facebook and is airing on TV nationally. We continue to utilize digital as a strong messaging vehicle. As mentioned on previous calls, we have repositioned ESQ to now be closer to but still distinctive from Movado. ESQ Movado, powered by Movado, has now been universally launched with our retail partners. The product, along with new displays and new packaging, started shipping in September at price points ranging from $250 to $595 and has a much improved aesthetic with a true design language throughout the entire collection. Some of our key new products are Origin, a collection of oversized ladies watches priced from $295 to $395; a bangle family Corbel; and for men, Capital, a classic watch on a strap; and Synthesis, a rectangular case on a bracelet. We have also launched a new comprehensive advertising campaign, which is in market now. Our currently running national advertising campaign features our fusion product for both men and ladies. We relaunched our luxury brand, Ebel, with 2 entirely new and distinctive collections, Onde and X-1, which bring in new bold approach to luxury. The new collections target the modern chic woman or man, a consumer who's active, stylish and fashion-driven and not a fashion victim. Ebel's comprehensive brand refresh is being supported by a 360-degree marketing program, including a new brand identity and logo, beautiful new merchandising displays and packaging, a dynamic global print and digital advertising campaign, strong public relations and a new ebel.com website. Delivery of the new collections began mid-October as did the marketing programs. We look forward to a strong Ebel holiday season. Our licensed brand division continues to perform extremely well. Our global license brand team grew sales in this division on a constant dollar basis by 17% in the third quarter and 23% year-to-date on top of exceptionally -- exceptional sales growth for the full year and fiscal year 2012. We continue to invest in developing product and infrastructure for our Scuderia Ferrari brand, which will launch globally in the spring of 2013. Growth in our licensed brand division is being driven by innovative product designs at key price points that are resonating well with consumers. Sales growth continues to be strong in the United States, Germany, China and South America. Some of the leading product performers for licensed brands during the third quarter are the Coach Boyfriend and classic signature product offerings; Tommy Hilfiger Windsurf, Blake, and Kelsey models; Hugo Boss Aviator and slim classic watches; the Juicy Pedigree and new Rich Girl lines; and the Lacoste Goa, Borneo, and Biarritz collections. Our outlet retail division remains an important contributor to our business from both a sales and profitability perspective. The greater emphasis we have placed on branding and customer service at our existing stores has helped fuel sales conversion and enhance profitability. In summary, we remain excited that all of the initiatives we have diligently been working on have been successful in creating momentum in our business. And while we recognize that the environment remains challenging, we are pleased that we were able to exceed our plans and are excited by the sustained strength we are seeing in our business as a reference to fine tune the positioning of our brands have firmly taken hold. During this important holiday season and into next year, we plan to build on these initiatives. And we will continue to refine our product lines and introduce more frequent and focused innovation, maintain consumer excitement and further improve our competitive positioning. We look forward to the exciting plans we have in place for driving sustainable, profitable growth for the foreseeable future. We believe that the breadth and depth of our more focused product offering supported by high impact marketing on television, in print and digitally will all contribute to strong continued sell-through and ongoing consumer demand. Now I'd like to turn the call over to Sallie to discuss our financial results and guidance.

Thank you, Rick, and good morning, everyone. I'm very pleased to speak to you today and present our financial results for the third quarter and first 9 months of fiscal 2013. On today's call, I will first review our income statement and balance sheet and then discuss our outlook. Lastly, I would like to point out the special items reported in the third quarter and 9-month period of fiscal 2013. Please refer to our press release for a description of these items, as well as the table of GAAP and non-GAAP measures. During the third quarter, Movado reported a $3 million pretax contribution to the Movado Group Foundation. This contribution is reflected in our operating expenses for the third quarter and 9-month period of fiscal 2013. On a GAAP basis, the tax provision for the third quarter and 9-month period of fiscal 2013 include a $19.4 million or $0.75 per diluted share, noncash tax benefit related to the reversal of the valuation allowance on certain domestic net deferred tax assets. This valuation allowance was initially recorded in the third quarter of fiscal 2010 in an amount of $20.8 million. The balance of my remarks will exclude the special items just discussed. For the third quarter, our reported sales increased 12.3% to $160.2 million. In constant dollars, sales rose 14.3%. Sales growth was driven by our accessible luxury and licensed brand categories and included a 17.7% increase in the U.S., and in constant dollars, a 10.7% increase internationally. Sales in our Wholesale segment were $147.3 million or 13.6% above sales of $129.6 million for the same period of last year. In constant currency, wholesale sales rose 15.9%. For geography, our U.S. wholesale business increased 21.7% to $74.3 million, compared to $61.1 million. Our international Wholesale business increased 6.5% to $73 million, compared to $68.5 million in the prior year. In constant dollars, international sales rose 10.7%. Sales were up in Germany, France, the Middle East, South America and Canada. Sales from the company's Retail business were relatively flat to last year, as we continue to enhance our level of profitability. At the end of the period, we operated 33 outlet stores. Gross profit was $90.4 million or 56.4%, compared to $81 million or 56.8% in the third quarter of last year. The 40-basis-point decrease in gross margin was driven by unfavorable channel and product mix, partially offset by the favorable impact of changes in foreign currency exchange rates and leverage gains on fixed costs. Operating expenses were $62.4 million, an increase of 0.8% year-over-year. The increase was primarily the result of the following: a $2.3 million increase in performance-based compensation, headcount and salaries; and a $1.3 million increase in marketing expense, partially offset by a $2 million decrease due to the translational and transactional impact of foreign currency exchange rate with a $1.1 million decrease in various operating expenses such as bad debt and tradeshow-related costs. Operating income increased 46.3% to $28 million or 17.5% of sales, compared to $19.1 million or 13.4% of sales in the year ago period. Income tax expense was $10.4, million compared to income tax expense of $2.1 million last year. And our effective tax rate was 37.1% in the third quarter of fiscal 2013, compared to an 11% effective tax rate last year. The tax provision for both periods includes the effects of the application of guidelines related to accounting for income taxes and interim periods if only the tax provision for the third quarter of fiscal 2012 include the effects of accounting for valuation allowances. The fluctuation in the effective tax rate is primarily due to the effects of accounting for valuation allowances in fiscal 2012, as well as the shift in the mix of global pretax financial results. Net income in the third quarter was $17.2 million or $0.67 per diluted share after reflecting the 37.1% effective tax rate, versus net income of $16.4 million or $0.65 per diluted share even in the 11% effective tax rate in the year ago period. EBITDA increased 37.8% to $30.3 million, compared to EBITDA of $22 million in the third quarter of fiscal 2012. Looking at the 9-month period ended October 31, 2012, sales were $381.9 million, an increase of 10.5% from fiscal 2012. On a constant dollar basis, sales increased 12.7%. The higher sales were driven by both the U.S. and international businesses. Gross profit was $215.2 million or 56.4% of sales as compared to $190.6 million or 55.1% of sales last year. Operating income increased 83.6% to $47.2 million, compared to $25.7 million in fiscal 2012. As a reminder, during the second quarter of last year, a building was sold for a gain of $747,000 or $0.02 per diluted share. Income tax expense was $14.5 million, compared to income tax expense of $3.7 million for the 9 months of last year. And our effective tax rate was 30.9% in the 9 months of fiscal 2013, compared to a 14.3% effective tax rate last year. The fluctuation in the tax rate is primarily due to the same reasons previously noted for the third quarter. Net income increased 49.8% to $31.9 million or $1.25 per share, compared to net income of $21.3 million or $0.85 per diluted share in the year ago period despite the year-over-year increase in the effective tax rate. EBITDA increased 60.1% for the 9 months of fiscal 2013 or $55.3 million from EBITDA of $34.5 million last year. Now turning to our balance sheet. Cash at quarter-end was $154.8 million, up from $138 million last year. We continue to have no debt outstanding. A portion of our cash on hand will be used to fund the payment of our quarterly dividend which is $0.05 per share, as well as a special cash dividend of $0.75 per share announced this morning. Accounts receivable increased $11.7 million or 12.3% to $107.1 million. Our focus on inventory continues to be successful as evidenced by the 3.6% decline in inventory at quarter end, even as our sales increased more than 10% year-over-year. Capital expenditures for the 9 months were $6.5 million and depreciation and amortization expense was $8 million combined. Now I would like to discuss our increased guidance for the current fiscal year. Let me note that we are still taking a cautious view of the global economy and we are assuming no significant fluctuations in foreign currency exchange rates. Also, this guidance is based upon current year results, adjusted for the reversal of the domestic valuation allowance and the charitable contributions. For fiscal 2013, we anticipate our sales will increase approximately 10% to $510 million. The gross margin rate for the fourth quarter is expected to be slightly stronger than last year. Operating income is projected to increase approximately 66% to $57 million. This is an increase of approximately 15% on prior guidance of $49 million to $50 million. EBITDA is expected to increase over 47% to $67 million, an approximate 10% increase from prior guidance of $60 million to $61 million. Due to the release of the valuations of the domestic valuation allowance, the estimated effective tax rate for the current year is now expected to be 30%, versus the previous forecast of 25%. The net income is planned to increase approximately 66% to $38.5 million. This guidance is based upon adjusted fiscal 2012 net income applying a 30% effective tax rate, the same updated effective tax rate for fiscal 2013. When adjusting our fiscal 2012 results for a 30% effective tax rate, adjusted net income would have been $23.1 million and diluted earnings per share would have been $0.92. We expect diluted earnings per share in fiscal 2013 will increase to approximately $1.50. This is an increase of $0.10 per diluted share from previous guidance of $1.40. Approximately $0.20 of this increase is due to improvement in operating results offset by the change in the estimated effective tax rates. And I'd like to also point out that our annual sales forecast continues to reflect the impact of the 53rd week for certain of our customers who are on the retail calendar. This shift delayed certain year-end shipments into next fiscal year. As previously stated, this guidance includes an investment in infrastructure for our newest licensed brand, Ferrari, but does not include any core funding revenues as this collection will not be introduced until early fiscal 2014. The guidance we have provided assumes no unusual -- additional unusual items for fiscal 2013. Now I would like to turn the call over to Efraim.

Thank you, Sallie. We are pleased with our third quarter performance and as our guidance suggests, we are expecting a strong year. Initiatives we have implemented over the past 2.5 years have led to more powerful assortment and are driving strong sales increases across our Movado and licensed brands. We are pleased by the initial response to our new ESQ powered by Movado and Ebel assortments, which we expect to provide us with incremental growth opportunities. Our balance sheet remains healthy, affording us the flexibility to invest in our business and return value to our shareholders. As Rick discussed earlier, we are pleased to have announced the second special cash dividend this year, which reflects our board's continued confidence in both our financial position and our brand strategies. Our special cash dividend is consistent with our commitment to increase shareholder returns when both our performance and outlook create the appropriate opportunities. We are optimistic as we begin the holiday season and expect the compelling innovation in our offerings combined with our memorable advertising campaigns to drive increase growth across our portfolio. We remain equally focused on continuing to deliver sustainable profitable growth for the future. We would now like to open the call up to questions.

[Operator Instructions] And we'll take our first question from Oliver Chen with Citi.

This is actually Nancy Hilliker filling in for Oliver Chen at Citi. Our question is actually how would you like us to prioritize the biggest new growth opportunities in the medium term and into next year? Should we think that Ferrari will become one of your biggest brands? And how do you see ESQ and Ebel going forward in 2013? Richard Coté: We are not counting yet on significant growth from Ebel and ESQ in the near-term. And Ferrari, we believe, will ramp up fairly quickly but it won't be one of our biggest brands for quite a while in terms of our licensed brand category. But we think it has huge potential. And we're excited about its launch next year. And I think as the year ends this year and we -- next year, we begin to give guidance for the following year, we'll give a little more color on where we think Ferrari is going.

[Operator Instructions] And we'll take our next question from Mike Richardson with Sidoti.

I'm just wondering if you could comment on any -- if you saw any change in sales trends throughout the quarter. Did things -- sort of consistent throughout the quarter, strengthened towards the end, weakened? Anything you can share with us would be helpful.

I think from a standpoint nothing major from anything unusual in trends. Obviously for us, the third quarter is a buildup to the holiday season. And the holiday season is starting off a little bit early with Thanksgiving a week earlier than normal. So really the trends we're looking for are going to be in January when we see what has taken place in the holiday season.

So no change in buying patterns from your distribution partners?

No, no. Again, we'll see that -- the 53-week will impact us at the end of January. Our fiscal year being the end of January 31 and the retail calendar being a few days later. So that will have an impact when we build that into our guidance.

Okay. And with regard to inventory, how should we be thinking about that going forward? Once again, inventory's down a little bit year-over-year. I'm just trying to -- for modeling purposes going forward, how should we be thinking about that?

I think from a standpoint, we're pleased with our inventory levels where they are. We do see that over the next couple of years, they will probably need to start growing a little bit. But we believe that we're able to grow them at a lower level than our sales grows. So we see that trend continuing, but we don't see the trend that we've had over the last 2 years, which is bringing inventory down during a period of significant sales increase. So we think we have inventory at a pretty good level, but again, I think we can do a good job of managing it and not letting it grow -- having it grow less than our sales growth.

Okay. Just one more and then I'll let the others jump in. Just back to the sales, specifically in Europe, no changes there? I know you sort of guided, I believe, modest growth in Northern Europe and sort of more of a recession in Southern Europe. Any -- was that -- that was a little bit of a change, right, for Southern Europe from the second to third quarter? Richard Coté: What I put down is in the second - at the last conference call at the end of the second quarter, I said a continued deterioration in the southern part of Europe. But I've just changed that to say it's in a formal recession. So yes, Southern Europe is important for us but not overly significant. And therefore, we have been impacted, but I think that trend has kind of continued. Northern Europe I know has been a little bit tighter. But again, our performance has continued to do quite well there. So we're pleased. But we do expect that Northern Europe may grow slightly above a 0% level. So we don't think it's quite in a recession. Certainly the whole Eurozone is when you put in the southern part, but our business is stronger in the northern part than the southern.

And just to reiterate what Rick said, Southern Europe has been tough for quite a while, so that's nothing new. Unemployment in Spain and places like Portugal and -- have been tough for quite a while. So it's nothing new.

And we'll take our next question from Raghav Nayar with Capstone Capital.

I had a question about the Ebel brand. I was hoping that you can share your thoughts with us about its potential, especially in North America. I get the sense that in the brand, it's still top of mind in North America for -- with independent retailers. Could you talk about what is the potential for North America? And how is this business different from the Movado brands, please? Richard Coté: Well it operates at a higher segment, price point segment, than the Movado brand. It is specifically really geared towards women. And we believe it has a strong opportunity in North America, but it will take some time to really communicate the new brand strategy and image to the consumer. So it has, as you said, still has strong top of mind with retailers as well as consumers. So it's a valuable franchise. And now we have to really invest behind it and continue to build that. But we're doing it in a planned, methodical approach and not trying to do it all overnight.

Okay. And I was wondering if you could share your initial reads on ESQ Movado at retail? Richard Coté: I think it's still early days from a consumer sell-through standpoint since we're just getting into the holiday season. But early response has been -- we're very pleased with the response from our retailers from product standpoint, product positioning standpoint, packaging, display material. So we're very pleased with the positioning that we have. And now it's all about getting the message across to consumers and having consumers have the same level of excitement.

Okay, great. And I'm sorry I just have a couple of more. The total Movado brand -- growth of the Movado brands, you have said that was 20% in Q3? Richard Coté: Let me just go back and confirm that but from that but from a -- yes, from a constant dollar standpoint, it was 20% in the third quarter and 19% in the 9-month period.

Okay, great. And I had just one question on the -- I guess, what's in your plan now for Asia -- in Asia? You had gone now to, I guess, conservative growth. What is the change between conservative and solid? Richard Coté: Yes, I think with all the news over the last number of months about China bidding a little bit tougher, I think from overall economy standpoint, there's been a lot of questions and concerns with that. From a Swiss watch export standpoint, the numbers have not been anywhere close to where they've been in the past. We think from a standpoint of the high-end luxury side, there's lots of inventory out in the marketplace. From our standpoint in our Movado products and licensed brands, we believe we're well-positioned. But obviously as the retailers have a lot of inventory perhaps of other brands at a higher price point, they're open to buy maybe a little bit more limited. So I think it's just highlighting that the China number seem to indicate that there's a little bit of a slowing taking pace. So that's really the change from the consistent to the more conservative.

Good. And my last question, could you just share with us your philosophy about -- in I guess using your cash strategically versus returning to. shareholders? Richard Coté: I think from a standpoint, we look at that full balance. Obviously, we're always interested in looking at additional growth opportunities. Certainly, we're using part of the cash to invest in Scuderia, Ferrari, and the launching of that brand. We thought it was a good opportunity this year to be able to return some of our U.S. cash to shareholders. But again, we look at that as an ongoing basis and looking at our cash position globally and looking at the opportunities out there and make assessments each year as to the best utilization of our cash. And sometimes it's holding onto it for potential future opportunities.

[Operator Instructions] And we'll now take our next question from Mike Richardson with Sidoti.

So just one follow-up on gross margin. I believe Sallie made a comment that you're expecting slight gross margin improvement in the fourth quarter year-over-year. What -- what are you -- what's driving -- are you raising prices? Is it just -- what's going on there?

I'll take that, Mike. I did say that. We expect gross margin in the fourth quarter to be somewhere in the range between 54% and 55% predominantly due to mix and currency. Richard Coté: Yes. From a standpoint, the increase in our sales is driven by unit growth, not by price increases. And that's been pretty consistent for quite a few years now coming out of the recession. We really have not made any changes to much -- to be at all in pricing.

And we have no further questions in the queue.

Okay. I'd like to thank all of you for joining us today. We wish all of you a happy and a healthy holiday season and a new year. We'd like you to visit our stores and take a look at our product, and they make very good holiday gifts. So, and we look forward to speaking to you again for our fourth quarter results in March. So thank you very much, and again, a happy and a healthy new year to everybody, as well as a great holiday season.

And this does conclude today's conference call. Thank you, all, for your participation.