Movado Group, Inc. Aktie

Good day, everyone, and welcome to Movado Group, Inc. Second Quarter Fiscal 2027 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 Allison Malkin of ICR. Please go ahead.

Thank you. Good morning, everyone. With me on the call today are Efraim Grinberg, Chairman and Chief Executive Officer; and Sallie DeMarsilis, Executive Vice President 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 would like to turn the call over to Efraim Grinberg, Chairman and Chief Executive Officer of Movado Group.

Good morning. Thank you for joining us, and welcome to Movado Group's second quarter conference call. With me today is Sallie DeMarsilis, our Executive Vice President and Chief Financial Officer. Following our prepared remarks, we'll be happy to take your questions. We were very pleased with our results for the quarter and the first half of the year.

We continue to see momentum across our business and strength in consumer demand despite the ongoing challenges related to the conflict in the Middle East, which reflects meaningful progress advancing our strategy and favorable trends in our categories. For the quarter, sales increased 4.9% to $169.8 million. Adjusted operating profit increased to $15.1 million from $7 million last year and included $3.2 million of IEEPA duty refunds received in the quarter.

Adjusted EPS increased to $0.54 from $0.23 last year and included $0.11 per share attributed to the IEEPA duty refunds. As I've done on previous calls, I'd like to reiterate our 4 key strategic priorities. First, putting the consumer at the center of our universe, learning more about who they are, how they relate to our brands and how we build long-lasting emotional connections across our portfolio.

Second, driving innovation and delivering trend-right products while remaining true to each brand's DNA and their unique target customer. Third, connecting with those consumers through compelling content and digital storytelling. There has never been a greater opportunity to tell our brand stories directly to customers. And fourth, driving profitability and strengthening gross margin through higher average selling prices, greater full price selling penetration and a more optimized product assortment and supply base.

Our teams continue to make progress against these priorities during the quarter with sales growth in the U.S. and across our principal international markets. In the U.S., we saw increased sell-through rates in both Movado and our licensed brands. Internationally, we delivered strong growth in Latin America and India and low single-digit growth in Europe. This was partially offset by a decline in the Middle East, where the region continues to face headwinds, particularly in the markets that rely heavily on international tourism.

Gross margin for the quarter improved to 59.4% from 54.1%. Excluding the IEEPA duty refunds received, gross margin for the second quarter of fiscal 2027 would have been 57.5%, a 340 basis point improvement. Gross margin benefited from business mix and strategic pricing initiatives we implemented during the first quarter. I will go into this in further detail after I update you on our brands.

We also ended the quarter with a very strong balance sheet with $212 million of cash and no debt. And year-to-date, we returned over $16 million to shareholders through quarterly dividend payments. We continue to see strong results from our customer-centric approach, particularly from trend-right products in new shapes and sizes that are resonating with younger consumers as they increasingly engage with traditional watches.

A great example is the Movado spring launch of our Baby Face mini strap watch. The product sold out quickly with more than 400 units sold on movado.com in less than a month. We plan to follow that success with new fall colorways available both on our website and through a limited group of retail partners where we would expect a similarly strong response.

As I review our brands, I'll highlight both the product innovation we're bringing to market and how we're connecting with today's consumers through storytelling initiatives, predominantly across digital platforms. Across our portfolio, we are seeing consumers respond to innovation that's both trend right and authentic to each brand.

At Movado, 2 of our recent women's collections, Museum Bangle and Velura, are great examples of this strength. Velura is a beautiful new round Museum watch on a classic Milanese bracelet with and without lab-grown diamonds. On the men's side, this spring, we introduced the new BOLD Verso S and have quickly seen a strong customer response. We will expand Verso S' collection over the next several quarters, including the introduction of the Verso S Chronograph during the third quarter. On the marketing front, we're elevating our engagement with consumers as we celebrate Movado's 145th anniversary. We have launched a compelling collection of digital content, highlighting Movado's heritage, iconic design and Swiss craftsmanship.

As we move into the second half, we will further amplify our consumer engagement and storytelling through our 145th anniversary content as well as through our Movado ambassadors, including Ludacris, Christian McCaffrey, Julianne Moore and Tyrese Haliburton. movado.com and our Movado outlet stores also continue to perform extremely well, with sales increasing 8% and 3%, respectively, as we continue to elevate average selling prices and drive improving margins.

Consumer-focused innovation is also helping drive growth across our fashion brands. We have seen very strong momentum in Coach watches, particularly with Gen Z consumers driven by the continued success of Sammy and the recent introduction of Iris, a mini round jewelry-inspired collection.

We will continue that innovation in the second half with a new mini Sammy and the addition of Greta, a new Tonneau shaped collection for Coach. This fall, our marketing campaign will feature Lola Tung, star of "The Summer I Turned Pretty," helping us further connect the Coach brand with a younger generation of consumers.

Innovation also continues to drive success at Tommy Hilfiger, led by the T.H. Oxford family, which offers a tailored look designed for today's customer. We also recently introduced the Bryant family of men's chronographs with beautiful dials and a 38-millimeter case size.

Bryant is receiving a strong response from consumers. As we continue to innovate within our women's assortment, we have seen women's watch penetration increase around the world. Collections such as Mia and Nora are now proven successes. On the jewelry side for Tommy Hilfiger, our heart charms continue to drive sales. Bryant, T.H. Oxford and Mia will be featured prominently in our Tommy Hilfiger storytelling this fall.

At Lacoste, we continue to see success in our rugged LC33 collection while also driving innovation through new introductions that elevate average selling prices through a combination of materials, including rubber and metal. Our Lacoste jewelry business also continues to perform very well, led by the success of the Metropole collection, which will expand with new designs and feature crystals.

Our fall Lacoste content will feature both LC33 and Metropole jewelry across digital channels and at the point of sale. I am also encouraged by the improvement we are seeing in Calvin Klein watches, particularly in women's. Our new sophisticated square watch collection sold out quickly this spring across markets around the world. It is a great complement to our already successful Twisted Bezel collection and CK Pulse.

We are equally committed to growing our Calvin Klein men's business and are excited by the response to our new cushion shape collection, aptly named Shape, which will be featured prominently in our upcoming campaign. We have also received a strong response from retailers to the introduction of our new Command jewelry collection for men.

At BOSS, we will continue to support our 2 leading hero collections, Grand Prix and Sky Traveler, while introducing the new Grand Prix Vitesse, which will be the focus of our fall campaign. We're also excited about the introduction of Archer jewelry collection for men. For women, we have received a strong response to Violet. Its distinctive shape and 21-millimeter size are right on trend, and it will be the focus of our women's marketing this fall.

At Olivia Burton, our strategy of focusing on the United Kingdom and the United States is working with sales increasing 23% for the quarter. Small shaped watches continue to drive the business, led by key collections, including Mini Grove and Mini Grosvenor. Our campaign watch for the fall will be the new Cambridge family, our first tonneau-shaped collection for the brand.

The Olivia Burton campaign will evolve from our successful Mini to the Max concept with a new message, "Mini is more," further solidifying Olivia Burton's position as an authority in smaller women's watches. Across our portfolio, innovation and compelling storytelling allows our brands to connect with customers, particularly younger consumers as they increase their engagement with traditional watches and learn more about the category. In that regard, we are excited to be expanding our long-term partnership with Tapestry.

And beginning next fiscal year, we'll be launching Kate Spade watches. We have already begun to preview our introductory collection and are receiving a strong response from partners around the world. We are excited by the resurgence that we see in the watch category, and we believe our brands are well positioned to capitalize on it.

As I previously mentioned, our fourth strategic priority is to expand margins and drive greater profitability. As mentioned, excluding the IEEPA duty refunds, gross margin for the second quarter improved 340 basis points, reflecting improved sales mix, strategic pricing actions and reduced promotional activity.

Gross margin also benefited from a favorable mix of inventory sold during the period, including inventory carrying lower duty rates following the repeal of IEEPA tariffs in February 2026. We continue to streamline our assortments, reducing SKU counts and improve efficiency across our value chain. We are driving higher levels of full price selling through stronger brand positioning while reducing promotional activity.

At the same time, our brands remain focused on increasing average selling prices where appropriate while continuing to offer consumers compelling value. As we look ahead, we remain pleased with the performance of our business and the positive trends we have now delivered for 5 consecutive quarters. We believe this momentum reflects the successful execution of our strategy and the strength of our brands, our teams and our consumer-focused approach.

Going forward, we remain committed to providing transparency and meaningful insight into our business, our markets and the trends we are seeing. At the same time, we have decided to discontinue providing an annual outlook. We believe our focus is better served by executing our long-term strategy and making the right decisions to drive sustainable, profitable growth and create increased value.

We entered the second half encouraged by the momentum in our business, excited about the innovation and storytelling we have planned across our portfolio, and we are focused on continuing to execute against our strategic priorities. With that, I'll turn the call over to Sallie to review our financial results in greater detail.

Thank you, Efraim, and good morning, everyone. For today's call, I will review our financial results for the second quarter and year-to-date period of fiscal 2027. My comments today will focus on adjusted results. Please refer to the description of the special items included in our results for the second quarter and first 6 months of fiscal 2027 in our press release issued earlier today, which also includes a reconciliation table of GAAP and non-GAAP measures.

Turning to a review of the quarter. Overall, we were pleased with our performance for the second quarter of fiscal 2027. The execution of our strategy drove increases across our key financial metrics, while we maintained a strong balance sheet and generated positive cash flow. Sales were $169.8 million as compared to $161.8 million last year, an increase of 4.9%. In constant dollars, the increase in net sales was 4.4%.

Net sales increased across licensed brands, company stores and owned brands. By geography, U.S. net sales increased 4.9% as compared to the second quarter of last year. International net sales also increased 4.9%. On a constant currency basis, international net sales increased 4.1% with strong performances in certain markets such as Asia, Europe and Latin America.

Gross profit as a percent of sales was 59.4% compared to 54.1% in the second quarter of last year. This quarter, we received $3.2 million of IEEPA duty refunds, which favorably increased our gross margin by 190 basis points. Excluding the IEEPA duty refunds, the second quarter gross margin would have been 57.5%, an increase of 340 basis points over the same period of last year. This 340 basis point increase was primarily driven by favorable channel and product mix, partially offset by higher shipping costs.

Similar to the first quarter, the second quarter of fiscal 2027 gross margin benefited from a favorable mix of inventory sold during the period, including inventory carrying lower duty rates following the repeal of IEEPA tariffs in February of 2026. This benefit is expected to be temporary and is not anticipated to continue in the second half of the fiscal year.

In addition, we are pursuing refunds and expect to recover the remaining $6.8 million of IEEPA duties we had previously paid. However, we have elected to not recognize the gain until the cash refund is received. Operating expenses were $85.7 million as compared to $80.6 million for the second quarter of last year. The $5.2 million increase was driven by higher performance-based compensation and increased selling and marketing expenses to support the higher sales.

The combination of higher revenue and gross profit, including the IEEPA duty refunds, more than offset the increase in operating expenses and drove operating income to $15.1 million, an $8.1 million improvement from $7 million in the second quarter of fiscal 2026. We recorded approximately $1.1 million of other nonoperating income in the second quarter of both fiscal 2027 and fiscal 2026.

Other nonoperating income is primarily comprised of interest earned on our global cash position. Income tax expense totaled $3.6 million in the second quarter of fiscal 2027 as compared to $2.7 million in the second quarter of fiscal 2026. Net income in the second quarter was $12.5 million or $0.54 per diluted share, including a $2.5 million or $0.11 per diluted share after-tax benefit from the IEEPA duty refund, compared to $5.3 million or $0.23 per diluted share in the year ago period.

Now to review the highlights of our year-to-date results. Sales for the 6-month period ended July 31, 2026, increased 6.3% to $312.2 million as compared to $293.6 million last year. Gross profit was $182.4 million or 58.4% of sales as compared to $158.9 million or 54.1% of sales last year. Excluding the IEEPA duty refunds, gross margin for the first 6 months of fiscal 2027 would have been 57.4%, an increase of 330 basis points over the same period of last year. Operating expenses for the first half of 2027 were $159.9 million and included higher performance-based compensation and increased selling and marketing expenses to support the higher sales.

For the 6 months ended July 31, 2026, operating income, which included $3.2 million in IEEPA duty refunds, was $22.6 million as compared to $7.9 million in fiscal 2026. Net income was $19.7 million or $0.86 per diluted share, including a $2.5 million or $0.11 per diluted share after-tax benefit from the IEEPA duty refunds, as compared to $7.2 million or $0.32 per diluted share in the year ago period.

Now turning to our balance sheet. Cash at the end of the second quarter was $211.6 million as compared to $180.5 million at the same period of last year. Accounts receivable was $94.3 million, flat to the same period of last year, primarily due to timing and mix of business. Inventory at the end of the quarter was down $15 million or 7.1% below the same period of last year due to timing of receipts.

With top sellers being replenished to support our third and fourth quarter top line, we feel comfortable with the composition and level of our inventory position. In the first 6 months of fiscal 2027, capital expenditures were $2.3 million, and we repurchased approximately $61,000 under our share repurchase program.

As of July 31, 2026, we had paid $44.6 million remaining -- we had $44.6 million remaining under our authorized share repurchase program. Subject to prevailing market conditions and the business environment, we plan to utilize our share repurchase plan to offset dilution in fiscal 2027. As Efraim mentioned, we have decided to discontinue providing an annual outlook. We do, however, remain committed to providing transparency and insight into our business. As such, consistent with the first half results, the company expects top line growth in the mid-single-digit range for the remainder of this fiscal year and second half gross margin to be in a range of 55% to 56%. I would now like to open the call up for questions.

[Operator Instructions] Our first question is from Owen Rickert with Northland Capital Markets.

Congrats on a great quarter. First for me, gross margin expanded 340 bps, excluding IEEPA benefit year-over-year. That was great to see. How much of that improvement is structural, maybe mix and pricing power versus transitory favorable FX, onetime cost reductions? Anything to call out there?

Well, I would think it's a mix of both, okay? So it's a mix of improved pricing and better average selling prices across the board. But it's also -- we did have a benefit of legacy inventory that was in our warehouses that we had accrued an IEEPA tariff on, and we immediately were able to reverse that during the first quarter. And so that benefited both the first and the second quarter. It's a little harder to understand, but because it's not -- it's inventory that was in our warehouse, and we were already anticipating having IEEPA tariff against it, and it was immediately removed. And so it had no -- we paid duties on it, but it had no incremental tariffs. We're back now on current inventories and incoming inventory have now new tariffs. And that affects all companies, not just us.

Right. Got it. Okay. So yes, that kind of leads to my second question just on the back half of the year gross margin guidance of 55% to 56%, a little step down from 2Q performance. Is that just due to what you just mentioned on the inventory?

100%.

Okay. Perfect. Perfect. And then you guys cited some higher shipping costs as a partial offset to that margin improvement. How significant is this headwind? Are you locked into current freight rates? Or do you have some flexibility to renegotiate?

Well, we always operate tightly and we try to get the best shipping costs. But what transpired in the second quarter was a few things, some fuel surcharges resulting from, obviously, what's happening in the Middle East, and we'll better be prepared to manage that. The other was because our e-com business was up and a lot of it was shipping related to Mother's Day and things like that. So good business sometimes creates a little bit more expense. So we have that all of those factors built into the back half of the year as well.

Okay. Super helpful. Super helpful. And then lastly for me, more of a fun question. You did allude to it a lot on the prepared remarks, but can you just speak to some of those broader trends you're seeing across the fashion watch and jewelry category right now and how those trends are shaping your strategy going forward?

So we're seeing some real momentum in the category on -- particularly in the United States and then markets like Mexico and Brazil and India, where younger consumers are coming back pretty seriously into traditional watches, beginning again to collect traditional watches and have multiple products. So it's a really nice trend to see. And that means that the Gen Z consumer as they become more mature and older and get -- and have higher availability of income, we will move into better watches as well.

And so you're seeing it across social media channels. You're seeing an interest from the press and from retailers. So our retailers are seeing that momentum as well. And I think it was -- there was a period of time coming with the introduction of the Apple Watch in the mid -- around 2015 that there was a lot of question marks about the fashion watch category. And what we've seen is that younger consumers are wearing other kinds of wearables and not watches as wearables. They're wearing watches as accessories and fashion statements.

Great. Super helpful.

There are no further questions at this time. I would like to turn the conference back over to management for closing remarks.

Okay. Thank you. We're very -- as you can tell, we're very pleased with our results, are optimistic about the journey that we're on for the future and how our teams are executing on a global basis. So we're very pleased with the results and look forward to continued success. With that, I want to wish everybody a very happy end of the summer, and thank you very much for attending today.

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

Good day, everybody, and welcome to the Movado Group, Inc. First Quarter 2027 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 Allison Malkin of ICR. Please go ahead.

Thank you. Good morning, everyone. With me on the call today are Efraim Grinberg, Chairman and Chief Executive Officer; and Sallie DeMarsilis, Executive Vice President 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 would like to turn the call over to Efraim Grinberg, Chairman and Chief Executive Officer of Movado Group.

Thank you, Allison. Good morning, everyone. Thank you for joining us. With me today is Sallie DeMarsilis, our Executive Vice President and Chief Financial Officer. After these prepared remarks, we'll be happy to answer your questions. We are very pleased with our start of the year. Our first quarter performance demonstrates meaningful momentum across our business and continued consumer strength despite a dynamic external environment. Sales increased 8.1% as reported or 4.5% on a constant currency basis, reaching $142.4 million.

Adjusted operating profit increased to $7.5 million from $900,000 in Q1 of last year. Adjusted earnings per share increased to $0.32 from $0.08, driven by strong execution against our strategic priorities. Continued strong U.S. momentum and improving trends in Europe led the way. This was supported by increased retailer replenishment activity, currency tailwinds and robust direct-to-consumer growth across both movado.com and our company stores. The Middle East region was extremely challenging due to the ongoing conflict. Excluding this region, our growth would have been even more significant, underscoring the strength of our core markets. On the profitability front, gross margin improved 320 basis points due to a favorable mix of business despite a stronger Swiss franc. Our teams executed well against the strategic priorities we've outlined. We ended the quarter with $225 million (sic) [ $225.3 ] in cash and no debt, providing us with significant financial flexibility.

In recognition of our solid financial position and belief in the long-term health of our business, I am also pleased to share that our Board approved a $0.05 per share increase in our quarterly cash dividend to $0.40 per share. I'd now like to discuss our performance in the context of our key strategic priorities. Our first priority is to put our customers at the center of everything we do. In that regard, we continue to strengthen consumer engagement across digital platforms while delivering trend-right products that honors each brand's unique identity.

We're particularly encouraged by the resurgence of the fashion watch category, especially among younger consumers globally who are increasingly attracted to traditional watches. Let me share some brand highlights. Movado delivered strong performance with renewed interest in both innovative new designs and iconic classics. Several best-selling styles sold out during the quarter, and we expect to replenish these key items by summer.

Movado.com sales increased 12.8%, reflecting strong direct-to-consumer demand and our improved digital capabilities. Our company stores achieved a 10.2% sales increase, while our enhanced analytics and customer engagement tools are helping us better understand consumer preferences and optimize assortments across all our channels.

Our second strategic priority is to deliver consumer and brand-focused innovation. In that regard, -- the Movado brand sales growth was driven by retailer replenishment and continued consumer response to our Bangle collection, Museum Veloura and the new Mini Bold Evolution Tank. The Heritage 1917 Collection for both men and women continue to exceed expectations, and our new Curve jewelry collection is resonating strongly on movado.com, validating our strategy to expand jewelry within the Movado portfolio.

Looking ahead to Father's Day and the second quarter, we're excited about 2 launches, the new Sporty BOLD Verso S collection and the vintage-inspired Kingmatic collection, both experiencing strong early demand. Additionally, our limited drop of the new 23-millimeter Baby Face watch in spring colors sold out quickly, validating consumer appetite for smaller distinctive sizes.

Across our licensed brands, we're seeing strong momentum. Net sales were up 6.5% for the first quarter over last year. Excluding the Middle East, licensed brand sales increased 9.2% on a constant currency basis, with new shapes and sizes driving results across multiple markets and categories. Coach is seeing strong Gen Z engagement, particularly with the iconic Signature C dial on our Sammy Oval family. The new 22-millimeter Iris family is off to a strong start, further validating demand for innovation in smaller women's watches.

Lacoste is building strong momentum with new LC33 execution, including a square version in Signature khaki green. The René collection named after René Lacoste himself is resonating well. Our Metropole bracelet continues to drive jewelry sales globally. HUGO BOSS performance is led by the Grand Prix Chronograph family and the new Grand Prix Vitesse with expanding men's classic assortments. The North Pendant, our latest men's jewelry innovation, has quickly become a bestseller.

Tommy Hilfiger's Bruce family continues to drive global performance. We're increasingly penetrating the women's market with strong demand for new shapes and sizes, particularly the MIA and the newly introduced McKinsey collections. In Calvin Klein, the Mini Pulse family continues its strong performance, while the new sophisticated square is quickly becoming a bestseller. Men's is gaining traction with the new 39-millimeter Motion family. And finally, Olivia Burton's retail sell-through in the U.S. and the U.K. remains strong, both in-store and online, driven by the Mini Grove and the Mini Grosvenor collections. Our third strategic priority is to deliver compelling consumer storytelling. We recently launched digital content celebrating the 145th anniversary of Movado, inviting consumers to experience not only our rich heritage, but also the quality and craftsmanship behind every Movado watch. Engagement has been exceptionally strong across digital platforms.

Our brand ambassadors, Ludacris, Christian McCaffrey, Julianne Moore, Jessica Alba and Tyrese Haliburton continue to authentically represent our collections. Across the portfolio, we're deepening consumer connections through strategic storytelling, including our association with Checo Perez and the Cadillac Formula 1 team for Tommy Hilfiger. We will continue amplifying these initiatives across our brand portfolio throughout the year.

Our fourth strategic priority is to expand margins and increase profitability. In that regard, we improved gross margin by 320 basis points in Q1, primarily due to a favorable sales mix and continuing to elevate our full price-selling. Our focus remains on 3 key drivers: introducing higher-margin products, driving full price selling through stronger brand positioning while reducing promotional activity and improving efficiency across our value chain and operations.

While progress may vary quarter-to-quarter, we believe these initiatives position us to deliver meaningful long-term margin improvement. As we look ahead, we remain encouraged by the improving trends across the business and by demonstrated consumer resilience. While the external environment remains dynamic, we believe our strong portfolio of brands, disciplined execution, healthy balance sheet and commitment to innovation position us well for the remainder of the year. We are particularly optimistic about the renewed momentum in the fashion watch category, the strength in our direct-to-consumer business and the positive reception to our new product introductions across both owned and licensed brands.

While we're not providing guidance due to the current economic and geopolitical uncertainty, including the unpredictable impact of the current Middle East conflict, we expect sales growth to moderate in the second quarter, particularly on a constant currency basis, following the strong replenishment activity we experienced in Q1. Our focus remains on controlling what we can control, investing behind our brand. [Technical Difficulty]

We are having technical difficulty. Thank you for your patience. The conference will be resuming momentarily. Once again, we are having technical difficulties.

I understand we dropped off for a second. So, I will finish my comments and then turn it over to Sallie. Our focus remains on controlling what we can control, investing behind our brands, deepening consumer engagement, improving operational efficiencies and driving long-term profitability. I want to recognize our global teams for their commitments to our strategy and execution within a complex environment. Now I'll turn the call over to Sallie to review our financial results in greater detail.

Thank you, Efraim, and good morning, everyone. For today's call, I will review our financial results for the first quarter of fiscal 2027. My comments today will focus on adjusted results. Please refer to the description of the special item included in our results for the first quarter of fiscal 2027 in our press release issued earlier today, which also includes a reconciliation table of GAAP and non-GAAP measures.

Overall, we were very pleased with our first quarter fiscal 2027 performance. Our results included top line growth of 8.1% versus the first quarter of fiscal 2026 and marked our fourth quarter of sequential improvements. 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 $142.4 million as compared to $131.8 million last year, reflecting growth in our owned brands, licensed brands and in our company stores. In constant dollars, the increase in net sales was 4.5%. Strong overall sales more than compensated for our weak performance in the Middle East due to the ongoing conflict. By geography, U.S. net sales increased 8.7% as compared to the first quarter of last year. International net sales increased 7.6%.

On a constant currency basis, international net sales increased 1.6%. Gross profit as a percent of sales was 57.3% compared to 54.1% in the first quarter of last year. The year-over-year increase in gross margin rate was primarily driven by favorable channel and product mix and increased leverage of certain costs over higher sales, partially offset by a negative impact of the fluctuation in foreign currency -- foreign exchange rates.

We experienced temporary favorability in gross margin during the first quarter of fiscal 2027 due to the elimination of the IEEPA tariffs to the extent that we had residual inventory in our U.S. warehouse. As for the potential recovery of the $10 million of IEEPA tariffs we had previously paid, we have elected not to recognize the gain until the cash refund is received. Operating expenses were $74.1 million as compared to $70.5 million for the same period of last year. The increase was driven by higher marketing expenses and performance-based compensation. Higher sales and gross margin dollars more than offset the increase in operating expenses resulting in operating income increasing $6.6 million to $7.5 million as compared to $900,000 in the first quarter of fiscal 2026. We recorded approximately $2 million of other non-operating income in the first quarter of fiscal, which was primarily comprised of interest earned on our global cash position and distributions received from a venture capital fund in which we hold a limited partnership interest. This is in which we hold a limited partnership interest.

This compared to $1.8 million recorded during the same period of last year, which was primarily interest earned on our global cash. We recorded income tax expense of $2.1 million in the first quarter of fiscal 2027 as compared to $800,000 in the first quarter of fiscal 2026. Net income in the first quarter was $7.3 million or $0.32 per diluted share as compared to $1.9 million or $0.08 per diluted share in the year ago period.

Now turning to our balance sheet. Cash at the end of the first quarter was $225.3 million as compared to $203.1 million at the same period of last year, and we reported positive cash flow from operations in the first quarter of fiscal 2027 of $7 million. In recognition of our strong cash flow generation and solid financial position, this morning, we are pleased to have announced a $0.05 increase in our quarterly dividend to $0.40 per share. Accounts receivable was $80 million as compared to $87.3 million for the same period of last year. The reduction was due to timing and mix of business. Inventory at the end of the quarter decreased $7.3 million from the same period of last year due to the timing of receipts. In the first 3 months of fiscal 2027, capital expenditures were $1.2 million. As it relates to share repurchases, we repurchased approximately 61,000 shares in the first quarter of fiscal 2027. As of April 30, 2026, we had $44.6 million of availability remaining under our December 5, 2024, share repurchase program.

Given the current economic and geopolitical uncertainty, including the unpredictable impact of the current Middle East conflict, the company has elected to not provide fiscal 2027 outlook at this time. I would now like to open the call up for questions.

[Operator Instructions]

Our first question is from Owen Rickert with Northland Securities.

Congrats on a great quarter. First for me, how much of the strong gross margin expansion is structural versus one-time? And what's the right baseline to think about for the rest of the year?

We would expect based on the balance of the year to generate higher gross margin than last year, but not at this level that we did in Q1. So, it's probably somewhere between halfway across both of those, Sallie, would you say that's true? -- and so, we are looking for an improvement in gross profit, and we think that the actions that we're taking will have long-term benefits in our gross margin improvement, especially as we reduce SKU counts across our brands and rationalize our suppliers.

Got it. Super helpful. And then building off of that, you cited channel and product mix as key drivers of that expansion for the quarter. Which brands or channels are really moving the needle here?

So, our direct channels did very well, obviously, in Q1, our movado.com website, our oliviaburton.com website and our retail channel. We're also seeing strength across our digital partners across the world with the exception of the Middle East. So, I think all those things contributed to improved gross margin. Improved Movado wholesale business also drives our margins as well.

Got it. Got it. And next for me, we keep hearing smaller case sizes in distinctive shapes. So, that seems to be a key theme here. How are you repositioning inventory in the product road map to lean into that? And are retailers ordering ahead on it?

So, we've been -- one of our focuses has really for the last 18 months has been driving innovation. Obviously, there's a lead time to do that. And there are places where we've advanced -- brands where we've advanced the needle better than in other brands. So, we still have a lot of opportunities in that area. But what's been really rewarding, particularly, has been to see younger consumers in the traditional watch space, and we think they're here to stay.

And they've been out of the market for a long period of time. And so that's really exciting to see and getting them into the fashion watch market means that ultimately, they'll be moving up the up the channel and price points as well. And that phenomenon have really been on a global basis. So, I think it portends well for the future of the watch category.

Our next question is from Hamed Khorsand with BWS Financial.

So, the commentary about the retailer's replenishment, was that a one-time event in the quarter and you think it was just borrowed from Q2? Or is that really just a matter of timing as far as that replenishment selling through? I'm just a little confused with why you're talking about Q2.

Sure. So really, it has to do with -- and as you remember, Q4 was better than we expected and better than our retailers expected. So, they needed to replenish more inventory than usual or than certainly the last number of years. And that occurred in Q1. And what it's also done is deplete us of certain inventory, which, as I said, will be hopefully solved by summer. Which will enable us, I think, to get on a more balanced schedule through the second half of the year and the important holiday selling season. I think we're in good -- we have shortages today of inventory, particularly in our Movado brand. And they were unanticipated prior to Q1 of this year.

Okay. And then what are your thoughts about the current ongoing interest in Swatch's new release? And is that a good thing for you, a bad thing for the industry? What are your thoughts?

I think I'm fairly neutral on it, but I think any interest in the watch category is a good interest. And especially in -- although this is somewhat of a hybrid, but of traditional watches that celebrate craftsmanship and watchmaking and mechanical movements. All those things are certainly a good note for the watch business. And I think we make a lot of really beautiful fashion watches, and you've seen that our innovation is driving demand among young consumers.

We know that our penetration of Gen Z consumers, for example, in our Coach brand, is extremely high. And so, we think that bringing interest to the category is a great thing. And I think -- so that's probably my point of view on that situation.

With no further questions, I would like to turn the floor back over to Efraim for closing remarks.

Okay. Thank you. Thank you very much, all of you for participating and great questions today. As you can tell, we have a big belief in our business and the long-term prospects of both the category and our company and think that there are a lot of opportunities ahead, and we look forward to talking to you at the end of our second quarter. Thank you.

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

Good day, everyone, and welcome to the Movado Group, Inc. Fourth Quarter 2026 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 Allison Malkin of ICR. Please go ahead.

Thank you. Good morning, everyone. With me on the call today are Efraim Grinberg, Chairman and Chief Executive Officer; and Sallie DeMarsilis, Executive Vice President 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 would like to turn the call over to Efraim Grinberg, Chairman and Chief Executive Officer of Movado Group.

Thank you, Allison. Good morning, everyone, and welcome to Movado Group's Fourth Quarter and Full Year Conference Call. Joining me today is Sallie DeMarsilis, our Executive Vice President and CFO. After our prepared remarks, we will be glad to take your questions.

After a challenging fiscal 2025, we are pleased to return to growth in fiscal 2026. Revenue increased 2.7% to $671.3 million and adjusted operating income grew 28.7% to $34.8 million, reflecting strong execution across our strategic priorities. These results exceeded our expectations and improved as the year progressed, with fourth quarter sales up 5.6% to $191.6 million, led by our U.S. wholesale and retail business.

Adjusted operating income grew by 6.2% for the quarter to $14.4 million. We also generated strong operating cash flow of $57.9 million and ended the year with $230 million in cash and no debt, which gives us significant flexibility as we move forward. These results were helped by a strong euro, offset somewhat by the impacts of a very strong Swiss franc.

During the year, we advanced our strategic priorities, which focused on 4 key areas. Let me discuss highlights of each. First, putting the customer at the center of everything we do. This focus continues to guide how we operate across all channels. Digitally, we strengthened our engagement with consumers, and we're seeing the benefits of a more connected omnichannel approach.

From a category standpoint, we saw continued strength in both the fashion watch and accessible luxury segments in the U.S. Importantly, we are seeing increased participation from younger consumers, along with a strong return of women into the category, driven by smaller case sizes and jewelry-inspired designs and fresh styling.

In our company stores, we delivered a strong holiday season with sales up 9% for the fourth quarter, driven by higher average selling prices, improved merchandising and better in-store execution. Our teams have done an excellent job elevating the consumer experience at the point of sale.

Second, delivering consumer and brand-focused innovation. Innovation was a major driver of our momentum, particularly in the fourth quarter. Across our portfolio, traditional watches are resonating strongly, especially with younger consumers who are responding to new shapes, sizes and design expressions.

Within the Movado brand, we had an excellent quarter. Wholesale sales grew over 25% and our e-commerce business increased 18%, reflecting the success of our brand refresh initiatives we began implementing about 18 months ago.

From a product standpoint, we had a number of exciting highlights, including continued strength in our mini bangle collection, which is performing very well with women across multiple shapes, strong demand to our Movado 1917 heritage collection, which is resonating with both men and women.

Ongoing growth in higher price point automatic watches led by the Museum Classic Automatic and encouraging traction in jewelry, particularly with our Ono collection. Looking ahead, we're excited about the pipeline of innovation we will bring to consumers. We'll be introducing Valeura, a beautiful new women's museum watch, expanding our Movado Bold offering with Verso S and launching a new heritage model inspired by the original Movado Kingmatic.

We're also expanding our jewelry collections, including our new curve line for women. Our licensed brands also delivered strong innovation and growth. Coach performed very well, driven by Gen Z engagement and the continued success of the Sammy family, along with Cadie and Reese.

We're clearly capturing the momentum of the parent brand with Gen Z consumers. HUGO BOSS saw strong momentum with Grand Prix and growth in women's with the May collection. Lacoste continued to perform, led by the LC33 and strength in men's jewelry, particularly the Metropole bracelet.

In Tommy Hilfiger, we're seeing a strong response to new shapes, smaller case sizes and trend-right design. In Tommy Hilfiger men's, we've also seen success with Oxford inspired by the traditional Oxford shirt. In Calvin Klein, we saw a strong reaction to our innovation in watches with the introduction of our new Pulse Mini, our unique circle in the square watch designs. We also received a favorable response to our CK Motion for him and believe that men's represents a significant opportunity going forward.

Finally, Olivia Burton continued its growth in both the U.K. and the U.S., driven by Mini Grove and Grosvenor, supported by our Mini to the Max campaign. Overall, we're very encouraged by the return of consumers to the fashion watch category, particularly women, and we believe we are well positioned to capitalize on that trend.

This brings us to our third strategic priority, connecting with consumers through compelling storytelling across digital and communication platforms. This is an area where we've made meaningful progress. During the holiday season, our Movado campaign featuring brand ambassadors, including Ludacris, Christian McCaffrey, Julianne Moore, Jessica Alba and Tyrese Haliburton performed very well.

What made it effective was the authenticity of the storytelling with each ambassador sharing how they personally connect with our brand. We amplified this across digital channels, social platforms and through influencers and content creators, allowing us to reach consumers in more relevant and engaging ways.

Looking ahead, storytelling will be even more important as we celebrate Movado's 145th anniversary. We're developing a series of campaigns that highlight our Swiss heritage, craftsmanship and the growing interest in our vintage time pieces, which we believe will further strengthen our emotional connection with consumers.

As a company, we will also be amplifying our investments by expanding our consumer insights capabilities, further reinforcing the importance of placing the consumer at the center of each of our brands' universe.

And finally, driving profitability and strengthening our gross margins. This remains a key focus for us. Despite external pressures, including tariffs, we were able to maintain stable gross margins while significantly increasing operating income. This reflects the disciplined execution of our teams across pricing, sourcing, product mix and cost management.

As we move forward, our initiatives are clearly focused on improving profitability. This includes continuing to shift our mix towards higher-margin products, driving more full price sell-through through stronger brand positioning while reducing promotional activity and improving efficiency across our supply chain and operations.

We see a clear path to margin expansion over time as we continue to execute against these priorities. So overall, we are very pleased with the momentum in the business as well as the strong execution and collaboration our teams have demonstrated in advancing our strategic initiatives. These investments we've made over the past several years are delivering results, and we believe we are well positioned for continued growth.

At the same time, we remain mindful of the broader environment. The conflict in the Middle East has introduced additional uncertainty in global markets. We are closely monitoring the situation while supporting our teams and partners in that region. With that, I'll turn the call over to Sallie to review our financial results in more detail, and then we'll be happy to take your questions.

Thank you, Efraim, and good morning. For today's call, I will review our financial results for the fourth quarter and fiscal year. 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 2026 in our press release issued earlier today, which also includes a table for GAAP and non-GAAP measures.

We were very pleased with our overall top line performance for fiscal 2026, which delivered 2.7% growth over fiscal 2025 and included a year-over-year increase of 5.6% in the fourth quarter. For the fourth quarter of fiscal 2026, sales were $191.6 million as compared to $181.5 million last year, reflecting growth in our owned brands, licensed brands and in our company stores. In constant dollars, net sales increased 1.8%.

By geography, U.S. net sales increased 11.2% International net sales increased 1% compared to the fourth quarter of last year with strong performances in certain markets such as Europe and Mexico, offset by a weaker performance in the Middle East, where we were making progress rebuilding this important market.

On a constant currency basis, international net sales decreased by 5.9%. We held gross margin nearly flat at 54.1% of sales as compared to 54.2% in the fourth quarter of last year. We absorbed increased U.S. tariffs with favorable channel and product mix, increased leverage of lower fixed costs over higher sales and the favorable impact of foreign currency exchange rates.

Operating expenses were $89.3 million as compared to $84.8 million for the same period of last year. The increase was driven by higher performance-based compensation, partially offset by a planned reduction in marketing expenses. Higher sales and gross margin dollars more than offset the increase in operating expenses, resulted in operating income increasing $900,000 to $14.4 million compared to $13.5 million in the fourth quarter of fiscal 2025.

We recorded approximately $600,000 of other nonoperating income in the fourth quarter of fiscal 2026 as compared to $1.4 million during the same period of last year. Income tax expense was $1.7 million in the fourth quarter of fiscal 2026 as compared to $3.1 million in the fourth quarter of fiscal 2025. Net income in the fourth quarter was $13 million or $0.57 per diluted share as compared to $11.5 million or $0.51 per diluted share in the year ago period.

Now turning to our fiscal year results. Sales were $671.3 million, an increase of 2.7% from fiscal 2025. In constant dollars, the increase in net sales was 1%. U.S. net sales increased by 4.3%. International sales increased 1.6%, but decreased 1.5% on a constant currency basis. Gross profit was $363.6 million or 54.2% of sales as compared to $353.1 million or 54% of sales last year.

The increase in gross margin rate was due to favorable channel and product mix and increased leverage of lower cost over higher sales -- lower fixed costs over higher sales, partially offset by increased U.S. tariffs and the unfavorable impact of foreign currency exchange rates.

Operating income was $34.8 million or 5.2% of sales compared to operating income of $27.1 million or 4.1% of sales in fiscal 2025. We recorded approximately $4.5 million of other nonoperating income in fiscal 2026, which was primarily comprised of interest earned on our global cash position as compared to $6.6 million during the same period of last year. Net income was $30.4 million or $1.34 per diluted share as compared to net income of $25.4 million or $1.12 per diluted share in the year ago period.

Now turning to our balance sheet. Cash at the end of the fiscal year was $230.5 million, and we had no outstanding debt. Accounts receivable were $102 million as compared to $93.4 million at the same period of last year. This increase was driven by timing and the mix of our business.

Inventory at the end of the fiscal year, which included $3.1 million of IEEPA reciprocal tariffs was $158.3 million as compared to $156.7 million at the same period of last year. Capital expenditures were $4.5 million and depreciation and amortization expense was $9.4 million.

As it relates to share repurchases, during fiscal 2026, we repurchased approximately 208,000 shares. As of January 31, 2026, we had $46.1 million remaining under our December 5, 2004 authorized repurchase program. Subject to prevailing market conditions and the business environment, we plan to utilize our share repurchase plan to offset dilution in fiscal 2027.

Given the current economic and geopolitical uncertainty, including the unpredictable impact of the current Middle East conflict and ongoing tariff developments, the company has elected to not provide a fiscal 2027 outlook at this time.

I would now like to open the call up for questions.

[Operator Instructions] Our first question comes from the line of Owen Rickert with Northland Capital.

First for me, movado.com grew 18% in 4Q '26. What's driving that strong performance? Is it traffic, conversion, higher ASPs? Or is it a combination of all of that? And maybe how are you thinking about the D2C mix of the business longer term?

So I think -- thank you for that question, Owen, and good to talk to you. So we see a number of things driving it, and I think you actually touched on all of them. Really, it's a higher level of engagement from consumers and the connection that Movado is making them with new innovation and shapes and sizes across our product segments. also driving higher price points with the growth of automatic watches, particularly for men.

So we're really encouraged. I think D2C will continue to play a significant role in our business, but so will our wholesale business. So we saw growth in most of our biggest customers, particularly across -- during the fourth quarter. And those trends, a lot of those have continued into the first quarter. So it's exciting to see the engagement across the Movado brand.

Got it. And secondly for me, U.S. net sales grew about 11.2% in the quarter. Can you break down how much of that growth was volume-driven versus price driven? And how you expect that mix to evolve throughout fiscal year '27?

I think it's mostly volume driven. We passed some very minimal price increases last year, mostly to try to offset tariffs somewhat. We've passed a second price increase in the first half of this year across multiple of our brands. So we're just really looking at the consumer returning to the fashion watch category as well as the accessible luxury category, particularly in the United States.

It's also, as I highlighted in my comments, to see the strength of women in the category, and they are the main shoppers in the marketplace. So I think it's great to have them back after a long period of time where there was probably less interest in watches from women, but to see younger women lead that effort, particularly in brands like Coach and Movado is really exciting.

Great. And then -- you called out tariffs as a partial offset to gross margins during the quarter and the year. I guess, can you just quantify the total tariff drag on gross margin in basis points for fiscal year '26? And then maybe if possible, just what's embedded in your internal planning assumptions for fiscal year '27?

Sure, Owen. I'll take that and hopefully get you all the information you're looking for. The IEEPA tariffs this past fiscal year hurt us in our cost of goods sold by about $10 million. In basis points for the year, it was 150 basis points. It was about a little more than $3 million a quarter towards second, third and fourth quarter of this year just based on the timing of it. So the fourth quarter was impacted by about 180 basis points in gross margin.

So that recaps really what happened this past fiscal year. Going forward, we kind of have some information now and are using our current tariff information in our current plans for the next fiscal year, which is closer to about a 10% tariff on top of what is normal. I don't know what normal is nowadays, but...

On top of normal duty rates.

Correct. So hopefully, that answers what you're looking for.

Yes. Yes, absolutely. And then lastly for me, guys. You repurchased roughly 208,000 shares in fiscal '26 under that current program. And just given you have [ $46 million ] remaining strong cash balance, what would accelerate the pace of buyback activity?

I think it's a combination of we look at -- one, we are always very prudent with our cash balances and want to make sure that the dividend is solid, and it has been and continues to be important for us, and I believe important for our shareholders. And then we try to offset dilution with our share repurchases. And so I would expect that to occur as we move forward, especially with our significant cash balances.

Our next question comes from the line of Hamed Khorsand with BWS Financial.

I'll start with a follow-up on the tariffs. Last year, you had been highlighting maybe potentially saving because of the revision in the Swiss tariff. Do you think that still exists now? And how much of that would be a help in this fiscal year?

So -- and I think, Hamed, what you're referring to and good to talk to you today is that at one point for about a 6-week to 2-month period, Swiss tariffs went to 39%. We brought in very little during that period of time with the idea that 39% tariffs would not be long-lasting. So I don't think we will see a major benefit this year because we didn't bring in a lot of inventory at those types of tariff, only really on things that we needed to have in a timely manner. If anything, it might have caused our inventories to be a little lower at the end of the year and as we entered this year, particularly in the Movado brand, which is the one that's the most impacted -- was the most impacted by the 39% tariff rate.

The new tariff rate, the Swiss and the U.S.A. agreed to was a 15% tariff. But right now, it's a 10% plus about a 6% to 8% tariff duty rate on top of that. And so we don't really know which one will be the permanent tariff rate going forward. And that's why, as we highlighted in the comments, there's still a lot of volatility around tariffs because there's a new statute -- there's a statute that's being used to impose the current 10% rate, but that is above the current duty rates, whereas the 15% was an all-inclusive rate when the Swiss and the United States negotiated that.

Okay. And then given the high growth rate of your wholesale segment, is that because you think your wholesalers and retailers, they were underinvested in inventory and they're catching up? Or was that driven by all of demand?

No, it was really driven by demand. It was driven by sell-through, and we still have retailers right now chasing inventory, and that is one of the things that we're focused on because sales were better in Q4 in Movado, particularly on the wholesale channel, we are focused on rebuilding our inventory and accelerating the delivery of those products on our best-selling products in Movado.

Okay. And my last question is just given this increase in the number of units sold and how much you should be producing, would there be some sort of operational efficiency here?

Ultimately, as volume increases, and we did benefit, I believe, this year a little bit from leveraging our supply chain infrastructure over greater volume. But as volume increases, it should help to leverage our gross margin and cost of goods sold.

Are you assuming anything in your -- in '27 right now?

Sallie, I'll give -- turn that over to you.

Well, we -- as Efraim mentioned in his comments, we do have -- we are focused on improving our profitability. And as part of that, we're looking at the efficiencies that you were just talking about through supply chain or other operations. So we don't really give outlook for forward-looking information, but it is something our teams are focused on. And what you just mentioned is very much a part of it. As demand grows, you can get leverage on your purchases and so forth with increased units.

We have no further questions at this time. Mr. Grinberg, I'd like to turn the floor back to you for closing comments.

I'd like to thank all of you for joining us today, and we're really pleased with how our year turned out and where our brands stand right now. We hope that this conflict is short-lived and that business can return to a somewhat normal basis on a global basis. So I'd like to thank all of you again for participating today. Thank you.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.

Good day, everybody, and welcome to the Movado Group Third Quarter Fiscal 2026 Earnings 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 Allison Malkin of ICR. Please go ahead.

Thank you. Good morning, everyone. With me on the call today are Efraim Grinberg, Chairman and Chief Executive Officer; and Sallie DeMarsilis, Executive Vice President 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 would like to turn the call over to Efraim Grinberg, Chairman and Chief Executive Officer of Movado Group.

Thank you, Allison. Good morning, and welcome to Movado Group's third quarter conference call. Joining me today is our Executive Vice President and CFO, Sallie DeMarsilis. After I review the highlights of our quarterly results and the progress we're making against our strategic initiatives, Sallie will discuss our financial results for the quarter and year-to-date in greater detail. We'll then be glad to take your questions.

We're pleased with our results for the third quarter and more importantly, with the progress we're making in building our brands and business in a sustainable way. In a globally challenging retail environment, we delivered revenue growth of 3.1% to $186.1 million. Excluding the Middle East, where we have rebuilt our team and are refining our strategy, growth was 5.9%. We plan to return to growth in that region next year.

For the quarter, gross margin improved by 80 basis points to 54.3% compared to 53.5% last year, despite a $4.5 million and 230 basis point impact from incremental U.S. tariffs. After quarter end, the U.S. and Switzerland announced a framework agreement that we expect will lower our overall U.S. tariff rate on Swiss watches to 15%, roughly 1/3 of the rate we've paid since August. This positive development will allow us to plan effectively for next year and reduce the level of price-based mitigation, benefiting both American consumers and the company.

Adjusted operating income grew more than 40% to $12.6 million. For the first 9 months, we generated positive operating cash flow of $1.3 million versus a use of cash of $40.6 million last year. We ended the quarter with a strong balance sheet, a $183.9 million in cash and no debt and our Board has approved a quarterly dividend of $0.35 per share.

This quarter reflects continued progress on our strategic priorities, strengthening our brands, driving innovation and delivering improving financial results. Our results are a direct reflection of our team's effort, dedication and commitment. Despite ongoing global economic and political uncertainty, we're increasingly optimistic about the improving dynamics in the fashion and accessible luxury watch categories, driven by innovation in new shapes and sizes and growing interest from women and younger consumers.

We're also seeing a strong momentum in fashion jewelry, supported by the growing adoption of jewelry for men. Regionally, we're pleased that the United States returned to 6.9% growth, led by our fashion brand business and our direct-to-consumer business, 11.9% growth in Movado company stores and 12.4% growth on movado.com.

Internationally, our business in Europe and Latin America continue to perform strongly, partially offset by softer results in the Middle East. From a branding standpoint, we're very pleased with the progress we're making on the Movado brand. Our product innovation this year has resonated strongly. The Museum collection performed well, particularly our new Bangle collection, and we're introducing a new style set with lab grow diamonds for the holiday season. This collection will be featured prominently in holiday marketing with Jessica Alba and Julianne Moore.

For men, we launched the automatic Museum Imperio, a new hero collection inspired by an iconic design from the late 1970s. Holiday marketing will feature the collection in videos with Star running back Christian McCaffrey. In BOLD, our limited edition collaboration with brand ambassador Ludacris, celebrating the 25th anniversary of his debut album has been a standout. The MVP collection is already sold out. We're also seeing strong growth in Movado Heritage, inspired by our rich archives. The new 1917 collection based on a square vintage design from that year has launched successfully, supported by a digital campaign featuring basketball Superstar, Tyrese Halliburton, who is an avid vintage watch collector.

Sell-through is strong across both men's and women's styles. Our holiday campaign is designed to deepen engagement between our products, ambassadors and consumers while driving performance at the point of sale through enhanced displays, training and retail partner support to ensure an elevated in-store experience. The Movado brand helped drive double-digit growth in both sales and contribution margin in our company stores.

Overall, sales in Movado company stores grew 9.4% on a comparable store basis, with Movado brand sales up 17.7%. Over the past year, we've refreshed all Movado displays and visuals in our stores, improved assortments leading to a strong results from these initiatives. Among our licensed brands, we saw a strong performance in both jewelry and watches delivering a 6.4% growth overall and a 2.9% on a constant currency basis.

Leading the way to Gen-Z consumers has been coached which continues to drive double-digit growth led by the Sammy collection, inspired by Coach's Iconic Turnlock. We've expanded the Hero family with Sammy stretch bracelets and a mini ring watch, which is trending strongly. Other successes include the CADE, CAS and Reese families, all featuring safe cases.

HUGO BOSS continues to perform well, led by Hero families such as Sky traveler, the Grand Prix and the Principal tank watch. We're also excited about the potential in HUGO BOSS jewelry particularly for men, led by the watch inspired Candor bracelet. For Tommy Hilfiger, the new TH Oxford family with a dial inspired by the classic Oxford [indiscernible] is gaining traction with new case shapes rolling out this fall.

On the women's side, we are increasing our penetration with our best-selling Mea collection already sold out in many markets. Lacoste continues to set trends in jewelry with the best-selling Metropole collection and strong results in the rugged LC 33 anti-digiline, which is truly aligned with the Lacoste brand. The new Black & Gold version introduced this fall is expected to sell out over the holidays.

In Calvin Klein, we're building leadership in women's watches, complemented by a strong jewelry offering. The Mini Pulse has quickly become a best seller and the new micro contemporary is performing very well. For Olivia Burton, we're seeing healthy growth in our 2 key markets, the U.S. and the United Kingdom, led by the Mini Grove collection and our Mini to the MAX campaign, which will continue through the spring. We're very proud of our team's execution this year, especially following a challenging fiscal 2025. We're making strong progress against our strategic initiatives and capturing opportunities across global markets.

We're also encouraged by the renewed interest among younger consumers embracing analog watches for their design, innovation, quality and value. With our strong portfolio of brands, we're well positioned to capture this momentum. At the same time, we've made meaningful strides in improving gross margin and controlling expenses as we return to sales growth.

Looking ahead, our focus remains on driving improved profitability across every aspect of the business. We're looking forward to a strong holiday season and to building on this momentum as we plan for the next year.

I'll now turn the call over to Sallie.

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 2026. 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 first 9 months of fiscal 2026 and fiscal 2025 and in our press release issued earlier today, which also includes a reconciliation table of GAAP and non-GAAP measures.

Turning to a review of the quarter. Overall, we were pleased with our performance for the third quarter of fiscal 2026. Sales were $186.1 million as compared to $180.5 million last year, an increase of 3.1%. In constant dollars, the increase in net sales was 1.2%. Net sales increased across licensed brands and company stores, partially offset by a decrease in net sales in owned brands.

By geography, U.S. net sales increased 6.9% as compared to the third quarter of last year. International net sales increased 0.6% with strong performances in certain markets such as Europe and Latin America, offset by a weaker performance in the Middle East, which is where we are making progress rebuilding this important market. On a constant currency basis, International net sales decreased 2.5%. Gross profit as a percent of sales was 54.3% compared to 53.5% in the third quarter of last year. The increase in gross margin rate as compared to the same period last year was primarily driven by favorable channel and product mix, the increased leverage driven by certain reduced costs and higher sales. This was partially offset by increased tariffs.

Operating expenses were $88.5 million as compared to $87.9 million for the third quarter of last year. The $600,000 increase was driven by an increase in performance-based compensation, partially offset by a planned reduction in marketing expenses. The combination of higher revenue and gross profit more than offset a relatively small increase in operating expenses to deliver a 43.5% increase in operating income to $12.6 million. This is a $3.8 million improvement from the $8.8 million spent in the third quarter of fiscal 2025.

We recorded approximately $1.2 million of other nonoperating income in the third quarter of fiscal 2026 as compared to $1.4 million in the same period of last year. Other nonoperating income is comprised of interest earned on our global cash position. We recorded income tax expense of $3.5 million in the third quarter of fiscal 2026 as compared to $1.5 million in the third quarter of fiscal 2025. Net income in the third quarter was $10.2 million or $0.45 per diluted share as compared to $8.5 million or $0.37 per diluted share in the year ago period.

Now turning to our year-to-date results. Sales for the 9-month period ended October 31, 2025 were $479.7 million as compared to $471.9 million last year. Total net sales increased 1.7% as compared to the 9-month period of fiscal 2025. In constant dollars, the increase in net sales for the year-to-date period was 0.6%. U.S. net sales increased by 1.5%, and international net sales increased 1.8%. Gross profit was $260 million or 54.2% of sales as compared to $254.8 million or 54% of sales last year.

The increase in the gross margin rate for the first 9 months was primarily due to favorable channel and product mix, partially offset by increased tariff costs and the unfavorable foreign currency exchange. Operating expenses were $239.5 million as compared to $241.3 million for the same period of last year. The decrease was driven by a reduction in marketing expenses partially offset by an increase in performance-based compensation.

For the 9 months ended October 31, 2025, operating income was $20.5 million compared to $13.5 million in fiscal 2025. We reported approximately $4 million of other nonoperating income in the 9-month period of fiscal 2026, which is primarily comprised of interest earned on our global cash position as compared to $5.2 million in the same period of last year. Net income was $17.4 million or $0.77 per diluted share as compared to $13.9 million or $0.62 per diluted share in the year ago period.

Now turning to our balance sheet. Cash at the end of the third quarter was $183.9 million as compared to $181.5 million in the same period of last year. Accounts receivable was $118.3 million, up $4.5 million from the same period of last year, primarily due to foreign currency.

Inventory at the end of the quarter was up $20.8 million or 11.8% above the same period of last year, $5.4 million of the increase was due to foreign currency and $6.4 million of EPA reciprocal tariffs is included in the inventory on hand at the end of the third quarter. We are comfortable with the composition and balance of our inventory at quarter end.

In the first 9 months of fiscal 2026, capital expenditures were $3.5 million and we repurchased approximately 100,000 shares under our share repurchase program. As of October 31, 2025, we had $48.4 million remaining under our authorized share repurchase program. Subject to prevailing market conditions and the business environment, we plan to utilize our share repurchase program to offset dilution. As Efraim mentioned, there has been a recent trade agreement impacting future Swiss tariff rates, and we will adjust our mitigation strategy accordingly.

Given the current economic uncertainty and the unpredictable impact of tariff development, the company is not providing fiscal 2026 outlook.

I would now like to open the follow-up for questions.

[Operator Instructions] Our first question today is coming from Hamed Khorsand of BWS Financial.

So first, I just wanted to ask you, the success you're seeing with many of your watches and brands, is that coming from your influencers, our spokespeople that you have? Or is that because of the design and it's just trending well with Gen-Z.

Well, I think it's a combination of both, Hamed. Thank you. It's a good question. And so what you're seeing is an increased coverage of these products on social media. And Obviously, the bulk of our campaigns are also on digital media. And so that resonates and they're resonating with younger consumers across the spectrum. I think it's also the combination of innovation of new shapes and sizes and the embrace of younger consumers to the watch category and that's occurring pretty much on a global basis. So it's nice to see.

Okay. And then as far as the commentary you made about many of your brands being selling well or being sold out, do you want the sold-out conditions? I mean, would that -- wouldn't that impair your sales?

So I think it's really on some select product families across -- I think I mentioned Tommy Hilfiger in some markets and some of our other brands. And I think that what -- this is not a -- in some cases, we also, in the case of Ludacris watch in Movado, it was a limited edition. So it was planned to be sold out. We still have one model available, which we expect to sell out in the next few weeks.

So I think it's always good to have a balance of supply and demand, and we'll be able to replenish most of the styles into the first -- early first quarter or the end of the fourth quarter of this year. So I think it's a good balance have. And part of it is as the category comes back and the innovation has increased and consumers are going back into the category.

Obviously, the levels of demand change, and that's also very good to see.

And the success you're seeing in sales, does that change your commentary coming into the calendar year about what your spending levels would be for the fiscal year?

I think it's really a balance. And our focus has been on improving profitability and you saw that through the first 9 months of this year and particularly in this quarter.

So it's really -- we will continue to invest in our brand building efforts. But at the same time, we have made it a goal and we're very serious about it. of driving improved profitability at the company.

[Operator Instructions] We're showing no additional questions in queue at this time. I'd like to turn the floor back over to Mr. Grinberg for closing comments.

Well, thank you very much all for participating today. I'd like to wish everybody a great Thanksgiving holiday. And of course, it's the really formal beginning of the holiday shopping period. We'll all be in stores looking to see how business is out there, and I'm sure many of you will be as well as beginning your holiday shopping.

So again, enjoy the holiday, and thank you very much for being here today.

Ladies and gentlemen, this concludes today's event. You may disconnect your lines or walk off the webcast at this time, and enjoy the rest of your day.

Good day, everybody, and welcome to the Movado Group Second Quarter Fiscal 2026 Earnings 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 Allison Malkin of ICR. Please go ahead.

Thank you. Good morning, everyone. With me on the call today are Efraim Grinberg, Chairman and Chief Executive Officer; and Sallie DeMarsilis, Executive Vice President 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 would like to turn the call over to Efraim Grinberg, Chairman and Chief Executive Officer of Movado Group.

Thank you, Allison. Good morning, and welcome to Movado Group's second quarter conference call. With me today is our Executive Vice President and Chief Financial Officer, Sallie DeMarsilis. After I review the highlights of the quarter, and share our progress on key strategic initiatives, Sallie will take you through the financial results in more detail. We will then be happy to answer questions.

We are pleased with our overall results this quarter as we return to growth in both sales and profitability. Sales grew by 3% to $161.8 million and adjusted operating profit more than doubled to $7 million from $2.6 million last year despite a $2.2 million impact from unmitigated U.S. tariff expenses. Although we've taken certain actions to partially offset tariffs, those actions will predominantly impact future periods. After the quarter ended, the United States implemented a tariff rate of 39% on Swiss imports.

During the second quarter, we have built a strong position in inventory of Swiss-made watches in the United States and would expect a substantial portion of the year's needs are covered. We are hopeful that over the next several months, the United States and Switzerland will agree to lower tariff rates. Of course, we continue to monitor the situation closely and to develop mitigation plans.

We continue to operate with a strong balance sheet with over $180 million in cash and no debt. Overall, we are pleased with the progress that we have made on our strategic initiatives with a focus on returning the company to growth and profitability. We would expect to see approximately $10 million of annualized savings spread evenly throughout this year as a result of the actions we took late last year to reduce operating expenses. Although we experienced a 5.6% sales decline in our Movado brand, we continue to make progress on our Movado strategy, which I will discuss later in my remarks.

In our licensed brands, we grew by 6.5% on a constant currency basis or 9.5% on a reported basis. Overall, we reported gross margins of $54.1 million versus -- 54.1% versus 54.3% in Q2 of last year despite the 130 basis point impact of additional tariffs in the U.S. Most of our strategic pricing actions to partially offset the impact of tariffs became effective July 1.

Our international business grew by 6.9% or 3.9% on a constant currency basis, led by a strong performance in Europe, Latin America and India, with Europe seeing particularly strong trends. As expected, this performance was offset somewhat by the Middle East, where we are in the process of rebuilding our team.

Our U.S. business declined by 1.6% as we focus on rebalancing our chain jewelry store distribution, although we had an improved performance in our domestic department store and e-commerce channels.

Our outlet storage segment grew 2.4% for the quarter, and we're excited by the recent initiatives and accelerating trends in that channel. As we look at the progress that we're making in our brands, we're particularly pleased by the success that we are seeing in the overall performance of trend-right products across our brand portfolio.

In Movado, we're making significant progress in returning the brand to growth in our wholesale distribution. We have seen strong performance in our own e-commerce site with 6% growth and strong trends in our digital partners.

In brick-and-mortar, Movado brand sell-through has returned to growth in the second quarter in our department store channel, where we have implemented and expanded our coverage at the point of sale and installed our new point-of-sale display. We will continue to execute behind these initiatives as the year progresses.

On the product front, Movado has seen increased penetration and success in women's watches, including our new iconic bangle watches and our new Mini Quest in BOLD, which along with our BOLD tank watch, is the best seller. On the men's side, we're seeing strong performance in the Movado BOLD collection, including Verso Automatic and Quest Automatic.

Our Heritage collection inspired by Movado's rich heritage, continues to do particularly well, while in a limited distribution across the country.

The Movado brand marketing campaign for the second half will include new creative featuring our Movado icons, Ludacris, Jessica Alba, Julianne Moore, Christian McCaffrey and Tyrese Haliburton. We're very excited by the digital-first content that our team has executed with a greater focus on products associated with each of the icons. We have exciting new products debuting this fall like the new Museum Imperio with Christian McCaffrey and our Heritage 1917 with Tyrese Haliburton.

On the women's side, Jessica Alba and Julianne Moore will be featured with different shapes of our Museum Bangle collection and a women's version of the Museum Imperio and Heritage 1917.

Turning to our licensed brands. We're seeing a return to the fashion watch and jewelry category with increased interest by Gen Z consumers across digital platforms like TikTok, Reels and YouTube. Sales in our licensed brands grew by 9.5% for the quarter or 6.5% in constant currency.

In HUGO BOSS, we have experienced strong growth in our iconic families, Time Traveler and Candor. Our new updated Grand Prix is quickly becoming a best seller. We're also excited by our new women's watches led by the Mae family with a petite Square shape.

In Tommy Hilfiger, we're very excited to be refocused on the women's watch category. Our MIA family is already showing signs of strong sell-through and will be featured in our fall campaign. Complementing Mia is Moira, a new mini East West Oval that has gotten a strong reception. On the men's front, we're excited by our new 70s inspired Chronograph Hudson collection, which will be featured in our holiday campaign as well as by Regatta-TH a new sports watch collection in exciting colors opening at $139.

In Lacoste, we're introducing a new black and gold version of our iconic LC33 collection and will complement our Tank Parisienne with a new oval version. Our Lacoste jewelry business continues to exceed expectations, and we're very excited to introduce the Arthur and Crocodile families to complement our best-selling Metropole bracelet collection.

In Calvin Klein, we're launching a new mini version of our best-selling Pulse collection as well as a new 18-millimeter contemporary collection that has really peaked our retailers' attention.

Coach continues to perform extremely well, particularly in the United States and is now showing momentum in Europe as well. For the second half, we have several new introductions in our best-selling Sammy Oval collection with a strong new 20-millimeter Reese tank. We'll also be expanding our best-selling charter collection for him.

As we enter for the second half of the year, we recognize that uncertainty remains around tariffs and the broader retail environment. At the same time, we're excited by the new products we have introduced and encouraged by the resurgence we are seeing in the fashion watch market. As a leadership team, our focus remains on driving profitability and delivering consistent growth in both sales and operating margin, while maintaining the strength of our balance sheet and executing against our strategic plans across all of our businesses.

While some of our initiatives have longer time horizons, we're confident that we're taking the right actions for the long term and positioning Movado Group for sustainable success.

I'm happy about the plans that we're building for the year ahead, and I would now like to turn the call over to Sallie.

Thank you, Efraim, and good morning, everyone. For today's call, I will review our financial results for the second quarter and the year-to-date period of fiscal 2026. My comments today will focus on adjusted results. Please refer to the description of the special items included in our results for the second quarter and first 6 months of fiscal 2026 in our press release issued earlier today, which also includes a reconciliation table of GAAP and non-GAAP measures.

Turning to review of the quarter. Overall, we were pleased with our performance for the second quarter of fiscal 2026. Sales were $161.8 million as compared to $157 million last year, an increase of 3.1%. In constant dollars, the increase in net sales was 1.4%. Net sales increased across licensed brands and company stores partially offset by a decrease in net sales in owned brands.

By geography, U.S. net sales decreased 1.6% as compared to the second quarter of last year. International net sales increased by 6.9%. On a constant currency basis, International net sales increased 3.9%, with strong performances in certain markets such as Latin America and Europe.

Gross profit as a percent of sales was 54.1% compared to 54.3% in the second quarter of last year. The decrease in gross margin rate as compared to the same period of last year was primarily driven by increased tariffs and unfavorable foreign exchange, partially offset by favorable channel and product mix.

Operating expenses were $80.6 million as compared to $82.6 million for the second quarter of last year. The $2 million decrease was driven by a strategic reduction in marketing expenses, partially offset by an increase in performance-based compensation. The combination of higher revenue and gross profit and the decline in operating expenses drove operating income to $7 million, a $4.4 million improvement from $2.6 million in the second quarter of fiscal 2025.

We recorded approximately $1.1 million of other nonoperating income in the second quarter of fiscal 2026 as compared to $1.8 million in the same period of last year. Other nonoperating income is primarily comprised of interest earned on our global cash position.

We recorded income tax expense of $2.7 million in the second quarter of fiscal 2026 as compared to $843,000 in the second quarter of fiscal 2025.

Net income in the second quarter was $5.3 million or $0.23 per diluted share as compared to $3.5 million or $0.15 per diluted share in the year ago period.

Now turning to our year-to-date results. Sales for the 6-month period ended July 31, 2025, were $293.6 million as compared to $291.4 million last year. Total net sales increased 0.8% as compared to the 6-month period of fiscal 2025. In constant dollars, the increase in net sales for the year-to-date period was 0.3%. U.S. net sales declined by 1.6% and international sales increased by 2.6%.

Gross profit was $158.9 million or 54.1% of sales as compared to $158.2 million or 54.3% of sales last year. The decrease in gross margin rate for the first 6 months was primarily due to unfavorable foreign exchange and increased tariff costs partially offset by favorable channel and product mix.

Operating expenses were $151 million as compared to $153.4 million for the same period of last year. The decrease was driven by a strategic reduction in marketing expenses, partially offset by an increase in performance-based compensation.

For the 6 months ended July 31, 2025, operating income was $7.9 million compared to $4.8 million in fiscal 2025. We recorded approximately $2.7 million of other nonoperating income in the 6-month period of fiscal 2026 which is primarily comprised of interest earned on our global cash position as compared to $3.8 million in the same period of last year.

Net income was $7.2 million or $0.32 per diluted share as compared to $5.5 million or $0.24 per diluted share in the year ago period.

Now turning to our balance sheet. Cash at the end of the second quarter was $180.5 million as compared to $198.3 million of the same period last year. Accounts receivable was $94.4 million up $7.7 million from the same period of last year, primarily due to timing and mix of business. Inventory at the end of the quarter was up $28.3 million or 15.5% above the same period of last year. $5.1 million of the increase was due to foreign currency and $4.6 million of reciprocal tariffs is included in inventory on hand at the end of the second quarter.

As Efraim mentioned, as of July 31, we have built a strong position of inventory -- a strong position in inventory of Swiss-made watches in the United States and would expect that a substantial portion of this year's needs are covered. We are comfortable with the composition and balance of our inventory at year-end. In the first 6 months of fiscal 2026, capital expenditures were $2.8 million, and we repurchased approximately 100,000 shares under our share repurchase program.

As of July 31, 2025, we had $48.4 million remaining under our authorized share repurchase program. Subject to prevailing market conditions and the business environment, we plan to utilize our share repurchase program to offset dilution in fiscal 2026.

As Efraim mentioned, we closely monitor the changing tariff landscape, and we will continue to develop mitigation plans. Given the current macroeconomic environment and the ongoing uncertainty of the impact of tariffs on our business, the company is not providing fiscal 2026 outlook.

I would now like to open the call up for questions. Thank you.

[Operator Instructions] Our first question comes from the line of Hamed Khorsand with BWS Financial.

So there was lots of commentary about many watches. And I just want to understand what you're seeing from a consumer habits or purchasing that you think that the mini is the route that you're taking?

So I think -- and we have both what we call mini watches, and we have micro watches though, which are smaller mini watches for us are watches from like 23 to 28 millimeters. And what had happened is that for a period of time, watches had gotten bigger, both for men and for women. And over the last few years, they've gotten smaller again.

And with that, with that aspect, it's actually brought young women back into the category, and there's a lot of social media around that and layering of women's watches with jewelry. And so we believe it represents a significant opportunity across our brand portfolio. And that trend as many trends do begins in luxury and then moves into more accessible products as well.

Okay. And during Prime Day, I know you guys were participating. Was there anything stood out of that event that has continued sense? Or was it purely the consumer responding to price?

So we're probably a bigger participant in the prime events in Europe than we are in the United States. And -- but we've seen our overall digital business with those retailers that are completely focused on digital environment, whether it be Zalandos or the Amazons of the world, really doing very well on a global basis. And that's really, really good to see. And that's really across our brand portfolio. And so we believe that, that's an increased opportunity as we continue to progress down our strategic plan.

Okay. And then I know you talked about you raised inventory because of the Swiss watches. But earlier this year, you had also raised inventory because of what's going on with tariffs, how much of your increase overall year-to-date, I'm speaking of calendar, excuse me, year-to-date on the calendar, can you just digest through the channel by the holiday shopping season?

Sure. So I'll start, and then I'll turn it over to Sallie. Our inventories got very low at year-end. So we began to rebuild inventory in Q1 of this year and now into Q2. We would expect our inventories to be in line by year-end since -- and what that's allowed us to do at the same time is to offset some of the tariff impact by having inventory move to the United States prior to the implementation of certain tariffs. Obviously, we can't offset all of it. And then we have taken other actions, whether it be pricing or negotiations with suppliers to help mitigate some of the effect as well.

But I'll turn it back to Sallie as well.

The only detail I will add to that, and thank you, Efraim, that was very thorough is we have, as I mentioned, about $28 million of additional inventory at this time. We do expect to work it down by the end of the year to something more reasonable. But of that $18 million, about $16 million of it is in the U.S. So we did pull it forward into the U.S. so that we can manage through these tariffs and kind of get ahead of some uncertainty with that.

And as we also mentioned, just to reiterate, we do think that a substantial portion of what we need in the U.S. is probably already here. We will add in what might be new styles or something that is an advertisement or maybe something that is just selling faster than we had anticipated and bring it in, but we should be in relatively good shape.

Okay. Can I ask one more question?

Certainly.

Absolutely.

You've taken a lot of these restructuring charges in the last few quarters. When do they stop? And when us and investors see it show up in quarterly results?

Well, I think it's a combination both of charges dealing with our event that occurred in the Middle East last year as well as some charges on the restructuring side. I would think on the restructuring side, they're predominantly done and there could be some laggard still expenses on the other charges. But I would expect overall that they will be reduced significantly.

And just to remind you that we did mention when we were talking about the savings and the initiatives we were putting in place, those are offset by some increases this year in our cost. So you will see -- they offset kind of some of the increases that we would have for regular year-over-year increases for merit, adding back performance-based compensation and, of course, currency.

Thank you. We have reached the end of the question-and-answer session. I'd like to turn the floor back to Efraim Grinberg, for closing remarks.

Thank you all for participating with us today, and we look forward to joining you again for our third quarter conference call. We will -- hopefully we'll be able to share with you the progress that we continue to make on our strategic initiatives. Thank you.

Thank you. And this concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.