Movado Group Inc (MOV) 2008 Q3 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Movado Group third quarter earnings conference call.

At this time, all participants are in a listen-only mode.

Later, we will conduct a question-and-answer session and instructions will follow at that time.

(OPERATOR INSTRUCTIONS) As a reminder, ladies and gentlemen, this conference is being recorded and may not be reproduced in whole or in part without permission from the Company.

I would now like to introduce Ms.

Suzanne Rosenberg of Movado Group.

Ma'am, please go ahead.

Thank you.

Good morning, everyone, and thank you for joining us today.

With me on the call is Efraim Grinberg, President and Chief Executive Officer; Rick Cote, Chief Operating Officer; and Gene Karpovich, Chief Financial Officer.

Before we begin, I'd like to note that this conference call contains forward-looking statements which are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

Factors which could cause actual results to be materially different from any future results, expressed or implied, are discussed in our filings with the Securities and Exchange Commission.

Such forward-looking statements include statements regarding Movado's performance for fiscal 2008 and beyond.

We currently expect to up the estimates.

However, the failure to update this information should not be taken as Movado's acceptance of these estimates on a continuing basis.

Movado Group may also choose to discontinue presenting future estimates at any time.

During the course of today's conference call,, management may present certain non-GAAP figures.

For a reconciliation of these figures, along with information required under SEC Regulation G, please view our earnings press release which has been posted on our website at movadogroup.com.

Let me now outline the order of speakers and topics for today's conference call.

Efraim will begin with the highlights of our third quarter performance.

Gene will then review the financial details and Rick will provide you with an update on our operating initiatives along with our financial outlook.

We would then be glad to answer any questions you might have.

I would now like to turn the call over to Efraim.

Thank you, Suzanne, and good morning, everyone.

Today I am very pleased to announce strong third quarter and nine months results, both on a GAAP basis and adjusting for unusual items.

These items have been reconciled on a table attached to our earnings press release, which Gene will detail later in the call.

We continue to recognize the growing uncertainty surrounding the outlook for the U.S.

economy.

However, our strong results for the quarter and year-to-date period reflect the continued consumer appeal to our diverse portfolio of brands.

These results are what led to the increase in our earnings per share projections, which Rick will detail later in the call.

Our brands are well positioned in the marketplace with bold new products, aspirational advertising campaigns, including Movado's milestone celebration of 60 Years of Modern Design, and fully integrated marketing programs.

We have also made great strides in building our international business which grew 33% from last year and represented over 40% of wholesale revenue during the third quarter.

These results reflect the growing prominence of Ebel and the global expansion of our licensed brand business.

In the third quarter, our licensed brands delivered a 33% sales increase over last year.

Gains were achieved in Coach and Tommy Hilfiger, as well as our newest businesses, Hugo Boss, Juicy Couture and our recently launched Lacoste watch brand.

These results demonstrate the success of our powerful partnerships as we synergize our product development, point-of-sales presence and image building advertising campaign with some of the most powerful brands in the world.

Our licensing partners share a long-term vision for their respective brands and have enabled our Company to significantly expand our global footprint.

Turning to our Swiss brands, demand in the Swiss luxury watch market has grown tremendously over the past few years resulting in industrywide capacity constraints on the manufacturers of mechanical movements and other key components.

This has led to the lengthening of lead times and some product delivery delays and some shortages in our Swiss brands.

Our luxury watch category, Concord and Ebel, posted a mid-single-digit sales decline reflecting the strong momentum of Ebel more than offset by the repositioning of Concord in advance of our fourth quarter relaunch, Ebel's third quarter was marked by the very successful worldwide introduction of Hexagon, a modern reinterpretation of the Ebel Classic.

New extensions of the Brasilia in steel and gold and the 1911 BTR featuring high-tech materials such as carbon fiber dials and rubber and titanium were also launched in the quarter.

These products, complemented by a strong product focus men's creative, and a Beautiful Women's advertising campaign featuring Giselle are driving Ebel's strength in each of its key markets and we look forward to continuing this trend throughout the holiday season.

This year we have focused on repositioning Concord into a high end luxury watch brand, resolutely upscale with a modern, edgy point of view.

Concord now has a strong foundation swith a renewed brand strategy, niche luxury positioning and exclusive distribution.

The buzz generated by our PR and communications programs is priming the market for the worldwide introduction of the new iconic C1 collection beginning in the fourth quarter.

You can view images of this groundbreaking collection now on Concord's redesigned website, www.concord.ch.

Excluding discontinued product sales, our accessible luxury segment experienced a low single-digit increase.

During the third quarter, we introduced our new Movado Safiro with black PVD-finish, and Visio with carbon fiber dial and bracelet.

We also launched the new SE in titanium and several limited editions, including the Fiero Automatic with Wynton Marsalis' signature etched on the glass, and a 45-millimeter skeleton Museum Dial to commemorate 60 Years of Modern Design retailing at $20,000.

By now I hope you have all seen Movado's new beautiful advertising campaign, 60 Years of Modern Design, which was first launched on the back cover of the all important September issue of Vogue magazine.

We're paying tribute to the iconic Movado Museum Dial this holiday season.

Dynamic product and marketing initiatives are showcasing the milestone achievement as we leverage it through special products, high impact media, and various marketing vehicles, integrating all elements of the Movado brand from wholesale to retail, from watches to jewelry.

Also for the first time, we have embarked on Internet advertising for the Movado brand, partnering with the New York Times.com and Google, to build excitement during the holiday shopping season.

In China, Movado is also celebrating 60 Years of Modern Design as the Museum Dial has resonated strongly with the Chinese consumer.

While China is still a small market for Movado, we continue to make progress as sell through grows, and we look forward to introducing new products specifically tailored to the Chinese consumer beginning next year.

Series 800 is trending strong as we enter this holiday season.

During the third quarter we introduced several new products including a sport luxury watch with fixed bezel for men and a beautiful diamond sport watch collection for women.

Our (inaudible) performance advertising campaign featuring Derek Jeter and Tom Brady brings great awareness and credibility to Series 800.

We've also leveraged our relationship to create a limited edition series of Tom Brady, Series 800 models which launched at retail during the third quarter.

Our Movado Boutiques recorded an 8.8% comparable store sales increase in the third quarter.

During our last conference call, we announced we have engaged an outside consultant to assess the overall boutique business and identify opportunities for improvement.

We are in the process of completing our study and have already been able to incorporate some of our findings into initial actions in advance of the holiday.

We've remerchandised and reassorted many of our boutiques to better highlight key items, new arrivals and exclusive products.

These efforts have allowed our stores to better showcase our products including three new jewelry collections introduced in the third quarter, Trio, Infinity and [Miri] as well as the boutique exclusive, Museum Color Dial collection.

We have also begun to increase our focus on watches in our boutiques, to leverage Movado's strengths and to reinforce its image as a luxury watch brand.

Movado Boutiques represent a core pillar towards realizing the overall Movado brand vision, and we are diligently working to build our boutiques into a true, engaging expression of the brand.

We will continue to communicate our progress with you as we move forward.

ESQ continues to benefit from very positive retailer response to new product collections and bold product focus integrated marketing campaign.

Productivity at retail has been strengthening which further solidifies our positioning in the entry level Swiss watch category.

During the third quarter, we introduced strong leadership product including Fusion, featuring a combination of advanced materials which is being sold in select channels of distribution on a limited basis and supported by a dedicated advertising campaign.

We introduced a men's watch with a complicated movement, the Quest Retrograde.

We also introduced women's diamond fashion collections such as Bali and the new Kingston Collection which was featured in our new execution of our ESQ and You advertising campaign.

We are pleased with our third quarter and year-to-date results.

We have a well balanced portfolio brand and a growing international presence.

There continues to be a growing sense of uncertainty as to the outlook for the U.S.

economy.

Nevertheless, we are well positioned at retail with fresh new products, a strong branded point-of-sale presence and image building advertising campaigns to strongly support each of our brands.

I would now like to turn the call over to Gene for a review of our financial results.

Thank you, Efraim and good morning, everyone.

We recorded strong financial results in the third quarter ended October 31, 2007 fueled by strong international sales and solid gross margins.

Sales in the third quarter were $180.2 million or 8.3% above prior year.

Sales in both periods included liquidation of excess inventory of $11.3 million in fiscal '08 and $12.1 million in fiscal '07.

Excluding the liquidation, sales for the third quarter were 9.6% above prior year.

All the sales results I will discuss will exclude the impact of liquidation year-on-year.

Sales in the wholesale segment increased 9.5% to $147 million.

The sales increase of $12.7 million was primarily the result of market expansion in our license brands.

Our license brands were above prior year by 33.4%.

All brands were above last year.

The growth is primarily the result of the launch of the Lacoste brand as well as international market expansion of our Hugo Boss and Tommy Hilfiger brands.

The U.S.

wholesale segment was below last year by $2.1 million or 2.3%.

This was primarily the result of reduced sales in our luxury category.

Sales in the luxury category were below prior year by $2.2 million.

The lower sales were recorded in the Concord brand with the new products scheduled for delivery in the fourth quarter.

The international wholesale segment was up 33% from $44.8 million to $59.6 million.

The increase of $14.8 million was primarily due to growth in the license brand category as mentioned previously.

The retail business posted a 10.2% increase over last year.

Movado Boutique sales increased by 14.7% over last year.

This was the result of an 8.8% comparable store sales increase along with sales increases in non-comparable stores year-over-year.

The Company Outlet stores were above prior year by 7.4%.

This was primarily the result of non-comparable store sales increases.

Comparable store sales were below prior year by 0.8%.

As of October 31, 2007, the Company operated 31 Movado Boutiques and 31 Outlet stores.

Gross profit for the quarter was $109.9 million or above last year by $12 million.

The increase in gross profit is primarily due to the sales increase as well as an increase in the adjusted gross margin.

Gross margin was 61% versus 58.9% last year.

Excluding the previously mentioned liquidation, gross margin for the quarter was 64.7% as compared to an adjusted margin last year of 63.5%.

The increase of 120 basis points was driven by margin improvements across most brands due in part to higher margins on new model introductions, as well as the favorable impact of price increases.

In addition, gross margin was favorably impacted by foreign exchange both in terms of translating our European financial results as well as from the favorable impact of our European license brand businesses.

Operating expenses were $81.4 million or 4.2% above last year.

The increase of $3.3 million is attributed to higher payroll and related costs of $2.4 million reflecting salary and benefit cost increases, increased head count to support the growth of both new and existing brands, and higher equity compensation cost.

In addition, increased spending of $2.1 million was made for consulting and outside service fees and higher spending of $1.1 million to support the retail expansion.

The increase also reflect the the non-recurrence of the prior year out of period foreign currency adjustment of $2.2 million.

These increases were somewhat offset by a reduction of accounts receivable expense of $6.3 million recorded last year for aged customer receivables.

Net interest income was $144,000 compared to our prior year expense of $234,000.

This was the result of lower debt as well as greater interest earned on our cash.

Our average debt for the quarter was $67.6 million compared to $96.3 million prior year.

Our average borrowing rate was 4.8% versus 3.9% prior year.

We recorded a tax expense of $1.9 million for the three months ended October 31, 2007, as compared to a tax benefit of $2 million for the same period last year.

In both years, as a result of a revised income projection, the Company recognized that it would be able to utilize a greater portion of its Swiss net operating loss carry forward.

The taxes recorded during the three months ended October 31, 2007, reflect a discrete benefit of $2.9 million as well as an adjustment to reflect the projected 20.5% annual effective tax rate.

For the three months ended October 31, 2006, we recorded a discrete benefit of $3 million as well as an adjustment to reflect the projected 11% annual effective tax rate.

Net income was $26.5 million versus $21.9 million last year.

Earnings per diluted share were $0.97 versus $0.82 last year.

Looking now at the year-to-date results.

Sales for the nine-month period were $421 million or 7.8% above prior year.

Sales for both periods include liquidation of our excess inventory of $22.3 million in fiscal '08 and $12.1 million in fiscal '07.

Excluding the liquidation, sales were 5.3% above last year.

Once again, I will discuss the sales results excluding the liquidation.

Sales in the wholesale segment increased 4.4% to $335.4 million.

The sales increase of $14.1 million was the result of growth in the license brand category particularly internationally.

Our license brands were above prior year by 35.1% reflecting the launch of the Lacoste brand and the international market expansion in the Hugo Boss and Tommy Hilfiger brands.

The U.S.

wholesale segment was below prior year by $17.1 million or 8.5%.

The decrease was the result of lower sales in the accessible luxury category primarily due to to reduced distribution in chain stores.

Additionally lower sales were recorded in the luxury category due to the repositioning of the Concord brand.

The international wholesale segment was up 25.8% from $120.7 million to $151.9 million.

This increase was primarily in the license brand category as I mentioned previously.

The retail business posted a 10.8% increase over last year.

The increase was the result of an overall 8.4% increase in Movado Boutique sales.

Comparable store sales increased by 1.1% in addition to non-comparable store sales increases year-over-year.

The Company Outlet stores were above prior year by 12.8%.

This was the result of a 3.2% comparable store sales increase as well as increases in non-comparable stores.

Gross profit for the nine-month period was $254.9 million or above last year by $18.9 million.

The increase in gross profit is primarily due to the sales increase in addition to an increase in the adjusted gross margin.

Gross margin was 60.5% versus 60.4% last year.

Excluding the previously mentioned liquidation, gross margin for the nine months was 63.9% as compared to 62.4% prior year.

The increase of 150 basis points was driven by the same factors as indicated for the quarter.

Operating expenses were $207.3 million or 4.3% above last year.

The principal reasons for the increase in expense are primarily the same as outlined for the quarter.

Net interest income was $702,000, compared to our prior year expense of $589,000.

Our average debt for the nine-month period was $74.4 million versus $100.6 million in the prior year period.

Our average borrowing rate was 4.5% versus 3.7% prior year, and the average interest rate earned on our cash was 5.2% versus 4.9% prior year.

The Company recorded a tax expense of $6.7 million for the nine months ended October 31, 2007, as compared to a tax expense of $1 million for the nine months ended October 31, 2006.

The changes in our tax rate for both periods is the result of the same reasons that were discussed for the quarter.

Net income was $41.2 million versus $36.1 million last year, and earnings per diluted share was $1.51 versus $1.35 last year.

Now taking a look at our balance sheet.

Our cash as of October 31, 2007, is $111.1 million versus $79.9 million last year.

The higher cash is the result of improvements in our cash flow from operations.

For the nine months ended October 31, 2007, cash was provided by operating activities of $19.7 million as compared to cash used of $1.3 million for the nine months last year.

Accounts receivable of $151 million were below prior year by $8 million.

In constant dollars, our accounts receivable were below prior year by $11.6 million.

This decrease is attributed to stronger cash collections as well as the mix of our business with stronger growth in the license brands and retail businesses.

Inventories of $210.5 million increased by $2.8 million from last year.

In constant dollars, inventory decreased by $5.6 million.

This was primarily due to the liquidation sale of excess product, somewhat offset by higher core inventory from our new brands.

Total debt consisting of both short and long-term debt was $60.9 million versus $87.4 million last year.

Capital expenditures were $18.5 million and depreciation expense was $12.4 million.

We expect our capital expenditures for the year to be approximately $29 million and depreciation expense for the full year to be approximately $18 million.

The higher capital expenditures this year primarily relate to the implementation of SAP, the buildout and renovation of our retail stores and the construction of booths used at the Basel Trade Fair for our new brands.

Overall, we are very pleased with financial performance in all respects delivering a solid P & L performance and maintaining a solid balance sheet.

Now let me turn the call over to Rick.

Thank you, Gene.

Good morning, everyone.

Year-to-date results again demonstrate the benefits of our committment to strong operating disciplines which translated into expanded adjusted gross margins and operating profit growth.

Here in the quarter we continued our program of converting age discontinued product into cash thereby improving our inventory mix and driving cash flow.

Going forward we remain focused on growing our operating margin through a combination of gross margin improvement and the leveraging of our existing infrastructure.

Our operating strategies remain consistent.

First, maximize growth opportunities within our current brand portfolio.

The primary driver of top line growth for this year will come from our newest brands, Hugo Boss, Juicy Couture, and Lacoste.

All three of these businesses are in their infancy and have significant global growth potential.

As Gene mentioned, the total licensed brand category has posted a 35% sales increase year-to-date.

Second, the multi-year rollout of the worldwide enterprise resource planning system.

In the past few months we've taken important steps toward transforming our operations to be more efficient and customer focused.

And finally we are committed to improving our financial returns.

By focusing on improving gross margins we anticipate operating margin to expand to the mid-teens over the next few years.

This year, our operating margin goal was to reach 11.5%.

This projection excludes sales of discontinued product.

We also continue to employ a disciplined approach to inventory management.

Throughout the year, we maximize opportunities to convert discontinued product into cash, primarily in our Ebel and Concord brands.

Looking ahead we will continue to improve our inventory position and we expect to conclude the discontinued product sales by the end of this fiscal year.

As a reminder, we exclude these discontinued sales in our financial guidance as we view them to be above and beyond our normal course of business.

Now I'd like to turn to our financial outlook.

Clearly, there has been a growing sense of uncertainty as to the outlook of the U.S.

economy in the retail marketplace.

Results for our fiscal year ending January 31, 2008 will depend on the strength of the holiday season and retail replenishment in January.

Assuming that the U.S.

economic environment does not deteriorate and based upon our positive year-to-date results, we now project full year adjusted diluted earnings per share to range between $1.74 and $1.78 based on an estimated 25% tax rate.

The 25% tax rate represents the Company's assumed normalized tax rate and allows for year-over-year financial comparisons.

This EPS projection represents a 13% to 16% increase from fiscal 2007 adjusted diluted earnings per share of $1.54.

Fiscal 2008 and fiscal 2007 adjusted diluted earnings per share exclude the impact of the tax benefit resulting from the further utilization of the NOL prior (inaudible) to fiscal 2005, and fiscal 2007 adjusted diluted earnings per share also excludes previously disclosed one-time items related to accounts receivable and foreign currency.

On a GAAP basis, we project fiscal 2008 diluted earnings per share to range between $1.95 and $2.00 with a 15.9% tax rate versus GAAP diluted earnings per share of $1.87 with a 5.4% tax rate recorded in fiscal 2007.

In fiscal 2008, net sales are projected to be approximately $560 million.

Also you may have seen in a separate press release we issued this morning we announced a share repurchase program.

This program authorizes us to repurchase up to 1 million shares of our Common Stock and will allow us to offset dilution caused by the shares of Common Stock issued upon the exercise of stock options and in connection with other equity-based compensation plans.

With that I would now like to open up the call to your questions.

Thank you.

Ladies and gentlemen, at this time we will be opening up the call for the question-and-answer session.

(OPERATOR INSTRUCTIONS) Thank you.

Your first question comes from Jeff Blaeser with Morgan Joseph.

Jeff, your line is live.

You may ask your question.

Thank you.

Your next question is coming from Jody Kane with Sidoti & Company.

Hi, thanks.

Just, first question about the SG&A.

It's been very well contained over the last three quarters and is that something we should look for going forward?

Well, I think from the standpoint of our SG&A, clearly our biggest level of spend in support of our brand businesses is in the fourth quarter with the holiday season, so I think from a standpoint you'll probably see it going up a little bit on that.

And obviously, also from a standpoint of last year, we had a $6 million charge that took place in the third quarter, so that charge is obviously not being repeated in this year so that makes the numbers look a little bit better for the year-to-date.

Okay, I'm just, I mean, in '05 and '06, it was growing sort of, SG&A was growing about 11% to 13%, 14%.

This year it's down to 4% growth.

How should we look at that going forward?

Yes, certainly we don't expect our operating expenses to grow at the same rate as our sales growth; however, we expect expenses in the fourth quarter to be a bit higher than we've experienced in the first three.

And as we go forward, I mean one of the things we've talked about is our five-year plan focuses on operating profit growth coming in the early years from gross margin improvement which we've obviously been seeing, and then the latter part of the five-year plan coming from further SG&A leveraging which will primarily come post the implementation and stabilization of SAP, our new enterprise-wide reporting system.

All right, great.

One more question, if you don't mind, and then I'll jump back in the queue.

Expansion of the sort of global brand expansion, where would you say you are in that cycle and how many new countries can you add, how many new brands can you move into new countries , if you can just talk a little bit about that,

Well, really, I think the expansion right now has come from the strength of our licensed brands internationally, and that's been very strong as well as Ebel internationally, and Ebel has been performing very well in Europe as well as in Middle East.

I don't think we're really focused on expanding markets right now rather than increasing penetration in the markets that we're in.

But, obviously, we introduce Lacoste which was brand new this year and Hugo Boss is only in its second year as well as Juicy is really in its first full year.

So there are a number of cylinders kicking in that have helped to drive the international growth, as well as the increased penetration of the Ebel brand in international markets.

So the countries you're in, there's still further penetration opportunities in those countries?

We believe so, yes.

Great.

I'll jump back in the queue, thanks.

Thank you.

Your next question is coming from Kristine Koerber with JMP Securities.

Yes, hi.

Congratulations on a good quarter.

As far as your commentary on the watch component shortage, can you give us some idea of what the lead times are now, kind of the inventory levels of Ebel and Concord, and when do you expect this issue to be resolved?

Thank you.

Well, I don't, you know, right now it's not really, there is an expansion in lead times but it's an ongoing process, and this really delays also because as the mechanical movement phenomenon grows, there is also, these are all hand made movements and hand made, and hand assembled movements, so there are further delays and demand for those type of products.

That has not significantly had an impact on inventory.

It has forced some delays in some of our deliveries of our Swiss brands, and I think that there is the way that it will be solved is twofold.

There is the expansion of some capacity being added, but not a lot, and but I think economic times will dictate really whether the cycle gets shorter or longer.

What type of delays were you talking about?

I mean, how much were the delays time wise?

Well, I think we've missed some deliveries, probably in Ebel and even in Movado in our more expensive watches, so, but obviously the numbers we're still fine with those delays, but you're talking shifts from one quarter into the next quarter and probably that goes will continue to happen for the foreseeable future.

Thank you.

Thank you.

Your next question comes from Jeff Blaeser with Morgan Joseph.

Thank you, sorry, I must have had a phone problem there.

Just on the sales side, your guidance for $560 million, that excludes liquidation?

Is that accurate?

Correct.

So that would imply about $160 million in fourth quarter?

Correct.

And any seasonal factors or any reason that you would think the gross margin shouldn't be able to sustain this level?

Well, I think as we said, as Gene said in his comments before that, obviously, we've had the benefit of our European business in the strength of the euro versus the U.S.

dollar that certainly did give us a benefit in the third quarter.

So we would think from a standpoint of an ongoing basis, we wouldn't plan on the currencies remaining at the levels that they were in the third quarter and the dollar probably getting a little bit stronger so that will have some impact.

But our margins are moving up and they are stronger so we are pleased that they're in that 63.5% range and perhaps slightly above.

Okay, great and then one on the boutique business, comps were obviously very strong.

Would you say that was driven by some of the signature lines or some of the new entry lower priced additions that you've been working on?

Well, it's really the introduction of some new watches in the third quarter as well as three new jewelry families that we introduced in the third quarter, and I have to highlight also that the third quarter is a small quarter of retail.

So obviously the most important quarter is still predominantly ahead of us and the most important selling season, and for all of our retailers, for our own retail and our retailers ahead of us.

Great.

Thank you very much.

Thank you.

Your next question is a follow-up from Elizabeth Montgomery.

Hi, guys, congratulations on a great quarter.

Thank you.

I have a question about the licensed brands in the U.S.

I wondered if you could just go through the newer ones in terms of distribution, what you have now and what your plans are for expanding distribution over the next year?

Well, obviously, if you look at our licensed brands and I'll start in order of how long we've been working with the brands.

Coach has a very strong penetration in the U.S.

between high end department stores, as well as their own stores and we expand really distribution now predominantly as they expand stores, and are really focused on improving productivity with our retail partners and have been very successful with that over the last several years.

Tommy Hilfiger in the U.S., we believe there's got to be an opportunity in the future and we are a strong partner with specifically Macy's and I'm commenting on that just because they have publicly announced that they have entered into an agreement to work very closely with the Macy's brand over the next number of years, and on an exclusive partnership, and I think that will have a positive impact on the Tommy Hilfiger brand.

And then Juicy, we're in really most of the department stores as well as Juicy's retail operations that they currently operate in.

And the nice thing about Juicy is that we did launch it internationally this quarter and have gotten a very good response in the third quarter to Juicy internationally.

And in the case of Lacoste, and of Hugo Boss and Lacoste, they're basically brand new and do have distribution opportunities as we move forward.

Both have significant department store penetration and specialty store penetration as well as their own retail venues, and so if you enter most Hugo Boss stores or Lacoste stores, you will find their watches in those stores.

Okay, thanks.

Thank you.

Your next question is coming from David Taylor with David P.

Taylor & Company.

Thank you.

I'm getting over a cold, so bear with me.

I know you track the sales of your products that your retailers are making.

Do you have any sense of how they did in November?

We don't really comment on inter-quarter sales and holiday sales, the big portion of them are yet to come, so that is really --

Well, then how did they do in the third quarter?

Our sell-through continues to be at levels that we're pleased with.

Okay.

Related question, on a lot of high priced brands, there tends to be a heavier inventory at retail than on the mid-priced and lower priced lines.

How long a pipeline do your customers typically carry for Ebel, and I'll leave out Concord because it's being repositioned?

Well, I think what one of the things that our sales teams across each of our brands work with is with each of our retail partners to manage their inventories correctly and at appropriate levels for their brand and their performance.

Sell-through in Ebel continues to grow globally including the United States and, but I think you are correct in the statement that you made that lower priced merchandise turns at a much faster rate than higher priced merchandise, but the expectations are exactly that.

Okay, and does Ebel typically have a year's worth of inventory in the field?

Is that normal?

I would think that that's a fair statement.

I mean, I'm not going to comment on specific trends but that's a fair point of view.

Very good, thank you.

Okay, thank you, David.

Thank you.

(OPERATOR INSTRUCTIONS) Your next question is a follow-up from Mr.

Jody Kane with Sidoti & Company.

Thanks.

When do you expect the liquidation sales to end for Concord?

Basically, as I said in my comments, this will be the last quarter, so it will end with this fiscal year, and basically it was a two year, not even quite a two year program.

We started last year and we will have completed over the next couple of months.

And this quarter being the fourth quarter, the last quarter.

And at that point do you expect the gross margin to level out at about 63.5%?

Well, what we said is that's kind of our level that we now achieved and obviously currency plays an impact on that on an ongoing basis, but where we are now is we feel that that is a good level for us as a Company.

But, again, it can have swings depending on what happens with currency.

Okay, and then just as far as the tax rate can you talk a little bit, longer term tax rate, when and where should it get back up to?

I mean, again, as we've talked about, even though we haven't been there for a couple of years because of continued utilization of the Swiss NOL, we, from a projection standpoint, basically use a 25% tax rate and again, I'd use that from a standpoint of where we assume to be on an ongoing basis in the future, but also for comparison basis is taking out the NOL impact so we can see performance excluding that year-over-year.

So 25% is the level I would suggest using.

All right, great.

Thanks very much.

Thank you.

There appear to be no further questions.

I'll turn the floor back to management for any closing remarks.

Okay, thank you very much for participating today.

I would like to thank all of you for being here and I would also like to wish all of you a happy and a healthy holiday season and thanks again for your participation.

This concludes today's conference call.

Thank you for your participation.