Movado Group Inc (MOV) 2008 Q4 法說會逐字稿

At this time I would like to welcome everyone to Movado Group's conference call.

(OPERATOR INSTRUCTIONS).

It is now my pleasure to turn the floor over to your host, Suzanne Rosenberg, of Movado.

Ma'am, you may begin your conference.

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.

Also joining us today is Sallie DeMarsilis, who, as you saw in this morning's announcement, will assume the Chief Financial Officer role on March 31.

Before we begin, I would like to note that this conference call contains forward-looking statements, which are made in pursuance 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 2009 and beyond.

We currently expect to update 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 Web site 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 fourth-quarter and full-year 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.

Before I discuss our fiscal 2008 results, I would like to call your attention to the separate press releases issued this morning announcing the appointment of Sallie DeMarsilis as Chief Financial Officer and Principal Accounting Officer, effective March 31.

Sallie joined Movado Group earlier this year, and we are very pleased to welcome her into her new role.

Gene Karpovich will give his remarks on the most recent quarter and full year later in the call.

We are fortunate that he will remain with the Company for a few years before his planned retirement, which will not only allow for a seamless transition, but will allow our company to continue to benefit from his significant industry experience as he remains an officer of the Company and a senior member of our management team.

Now I would like to turn to today's earnings announcement.

We are pleased with our overall performance in fiscal 2008 considering the challenging economic and retail environment in the United States, which really began to manifest itself in December.

Despite this, our team delivered a 5% sales increase, a 150 basis point expansion in adjusted gross margin, an 11% increase in adjusted earnings per share, and we generated $84 million in cash flow from operations.

Over the past number of years, we have strategically diversified our company, both from a brand portfolio perspective and in terms of our geographic exposure.

Today, 40% of our total revenue is generated by international markets, and nearly 50% of our wholesale watch sales come from markets outside of the US.

With our healthy mix of business, we have strongly positioned our company to weather the current environment.

Our international performance exceeded our expectations and partially offset weakness in the US.

In fact, total international sales in fiscal 2008 increased a strong 29% over last year, excluding sales of excess discontinued product.

This trend came predominantly from the growing prominence of Ebel and the global expansion of our licensed brand portfolio.

We also benefited from the strength of foreign currencies in our international operations.

Our luxury brands recorded a low single-digit sales decrease in fiscal 2008, reflecting the solid performance of Ebel, which was more than offset by the repositioning of Concord in advance of our fourth-quarter relaunch.

Ebel continues to build global momentum, and the fourth quarter was marked by very important product extensions of the 1911 BTR collection.

For women, the Ebel Brasilia collection continues to perform strongly and has become a core pillar of Ebel's collections.

Next week at Basel World, the international watch and jewelry trade fair, Ebel will make a strong statement with women's watches through the introduction of a new Beluga collection.

First introduced in 1985, the Beluga has been redesigned in a manner that is fundamentally modern and more upscale than ever before.

We will continue to strongly support Ebel with a brand-new advertising campaign featuring Gisele and a product-focused men's campaign building on the brand's image-enhancing Architects of Time signature.

After 18 months of repositioning, Concord formally launched its new identity worldwide in the fourth quarter with one collection, the C1.

This collection truly personifies Concord's bold philosophy, aggressive positioning, daring products, and exclusive pricing.

The buzz generated by the C1 collection has been tremendous around the world.

Deliveries of product began in December.

However, we were impacted by industrywide capacity constraints on the manufacturers of mechanical movements and other key components.

This has led to the lengthening of leadtimes and some product delivery delays, which has also in turn increased demand from retailers.

At Basel, we will strongly communicate Concord's new positioning to retailers around the world.

The brand's niche positioning, with a modern, edgy design philosophy, will be evident in our introduction of the new limited edition C1 Tourbillon Gravity, the first ever tourbillon built outside of the watch case and retailing in excess of $250,000.

Our accessible luxury category experienced a challenging holiday season.

This category, comprised of Movado and ESQ, generates nearly 80% of its sales from the US.

As a result, it was not altogether surprising that this category was most impacted by the slowdown in the domestic economy.

Movado continues to be the leading brand within its segment of the Swiss watch category and across its distribution.

The brand enjoys phenomenal brand recognition; a very strong conversion rate from consumers' consideration of the brand to an actual purchase.

Armed with these brand strengths and this market knowledge, at the end of February, we announced a unified Movado brand strategy that builds on the strength and aspirational appeal of Movado across wholesale and retail, through product, merchandising, and marketing initiatives, along with a more streamlined wholesale distribution.

Ultimately, the bold actions we are taking should increase productivity of the brand in the remaining locations and make Movado even stronger in the future than it already is today.

We have begun communicating our plans with our retail partners, and this strategy has been very well-received.

Our Movado Boutiques recorded comparable store sales declines of 2.3% for the year and 7.3% for the quarter.

As we implement our Movado brand strategy, we are focused on the long-term success of our Boutique business.

In the immediate term, we are focused on delivering a more compelling visual experience to our Boutique shoppers, which you will begin to see this spring.

We will inject more excitement in our stores by better showcasing key items and integrating stronger visual cues to truly engage the boutique shopper.

We will also introduce color to our signature black-and-white motif.

From a product standpoint, our focus over the next year is predominantly on our watch assortment, including some Boutique-exclusive styles which will be introduced this fall.

We have already increased the amount of [linear] dedicated to our watches and given them more prominent real estate within the store to showcase what we are famous for.

We are also augmenting our design talent, and recently appointed a creative director of product development for the overall Movado brand.

This new position will allow us to unite Movado's modern design philosophy across both watches and jewelry.

Beginning next spring you will start to see a revitalized Movado-designed jewelry offering, as well as a greater focus on the Movado diamond assortment.

As you know, we are in the process of recruiting a new president of the Movado Boutiques, who will be a merchant for the overall brand.

As we focus on achieving our strategic objectives and positioning the Boutiques for the long-term success, we do not believe the quarterly comparable store sales provide an appropriate indicator of our performance.

Going forward, we will only provide annual comparable store sales results for the Boutiques.

We are doing what's right for the Movado brand today and for the long-term, partnering ourselves with the strongest retailers in the United States, while making our Boutiques into a true and engaging expression of the brand, and a core pillar to realizing the overall Movado brand vision.

As we move forward, Movado remains our largest and most profitable brand.

This spring, we are very excited to introduce one of Movado's longtime bestsellers with a redesigned Esperanza collection.

Retailers who have previewed this beautiful collection have responded enthusiastically, and shortly you will begin to see our strong advertising support.

At Basel, we will also introduce the first ceramic Museum watch into the Movado collection.

Also, over the coming year, we will transition from a distributor to a wholly-owned subsidiary of Movado Group in China.

We believe that owning our own distribution in China will enable great growth opportunities for the Movado brand, and will also lay a solid foundation for the expansion of other Movado Group brands in China.

ESQ, exclusively a North American brand, was also affected by the domestic economy, particularly during the holiday season.

Nevertheless, new products, such as the Beacon chrono, the updated Quest family, and the Lexington collection with diamonds, were standouts in their category.

As pricing on competitive Swiss brands has increased over the past few years, ESQ has a great opportunity to take advantage of the entry-level Swiss watch category and gain market share even during these tough times.

At Basel, we will introduce exciting new products that speak to the aspirational consumer with a tremendous price/value proposition.

Newness drives his business, along with our consistent support of the brand with our ESQ&U advertising campaign.

We intend to remain front and center with the consumer, and strongly positioned for growth when the economy begins to improve.

In fiscal 2008, our licensed brands delivered a stellar performance, posting a 39% sales increase over last year.

Gains were achieved in each of our businesses, from the most established, Coach and Tommy Hilfiger, to our newest businesses, Hugo Boss, Juicy Couture, and Lacoste.

Internationally, our licensed brand portfolio delivered a 63% increase for the year, reflecting growth in existing markets, new market expansion and the associated benefit from the strengthening of foreign currencies.

These results demonstrate the success of our powerful partnerships as we combine our product development, point-of-sale 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 presence.

We continue to invest in our business and support our brands, through innovative product designs, integrated marketing programs and compelling advertising campaigns.

We've been able to do all of this while maintaining a very strong balance sheet and generating significant cash flow.

Before I turn the call over to Gene for a review of the financials, I want to reiterate that our company is strongly positioned as we navigate through these uncertain times.

We have a diverse and powerful portfolio of brands, an increasingly global business, a strong and talented management team around the world, a very robust balance sheet with $170 million in cash, and an unwavering commitment to long-term growth and success.

I would now like to turn the call over to Gene, who will review our financial results in greater detail.

Thank you, Efraim, and good morning, everyone.

As Efraim stated, it was a challenging fourth quarter given the difficult economic and retail environment in the United States.

But despite these factors, our growing international presence and our margin improvement initiatives enabled us to deliver a respectable financial performance in the fourth quarter and for the full year ended January 31, 2008.

For the fourth quarter, adjusted net income, which is described in our press release, was $10.8 million, or $0.40 per diluted share, versus adjusted net income of $11.4 million, or $0.42 per diluted share in the year-ago period.

On a GAAP basis, we reported fourth-quarter net income of $19.6 million as compared to $14 million prior year.

This year's results included a $6.6 million after-tax non-cash charge for estimated sales returns related to the closing of certain Movado wholesale doors in the United States, and the benefit on our tax expense of $15.4 million, resulting from a settlement with the IRS, as well as the utilization of our international net operating loss carryforwards.

Prior-year net income included a $0.5 million gain from the sale of nonoperating assets, as well as a favorable impact on our tax expense of $2.2 million resulting from the utilization of net operating loss carryforwards in Switzerland.

This translated into fully diluted earnings per share of $0.72 as compared to $0.52 in the prior-year period.

For the year, adjusted net income increased 13.1% to $46.6 million, or $1.71 per diluted share, versus adjusted net income of $41.2 million, or $1.54 per diluted share in the year-ago period.

On a GAAP basis, we reported net income for the year of $60.8 million, or $2.23 per fully diluted share, while our prior-year net income was 50.1 million, or $1.87 per fully diluted share.

Both this year and prior-year net income included the previously mentioned items in the fourth quarter.

Prior year also included the impact of an adjustment to bad debts for aged customer deductions of $3.7 million and an out-of-period foreign exchange adjustment of $1.7 million.

The benefit of the IRS settlement and utilization of the NOL for the year was $20.8 million.

In the prior year, the favorable impact of the utilization of the NOL was $10.4 million.

Now let me discuss the operating results for the fourth quarter.

Sales for the fourth quarter were $138.6 million, as compared to $142.3 million in the prior-year period.

The fourth quarter fiscal 2008 results included a onetime $15 million sales return accrual for the closing of certain wholesale doors.

We also had liquidation sales of excess discontinued inventory in both years.

The liquidation sales amounted to $8.9 million and $4.4 million for fiscal 2008 and 2007, respectively.

Excluding the onetime sales return accrual and the liquidation sales in both years, fiscal 2008 fourth-quarter net sales were $144.6 million, or 4.9% above the prior-year period.

All the sales results I will discuss will exclude the impact of the sales return accrual and the liquidation sales.

The US wholesale business was below prior year by $9.8 million, or 16.3%.

Sales were below prior year in the luxury and accessible luxury category, while sales in the licensed brand category were above last year.

The international wholesale business was up 37.3% year-over-year.

All categories were above prior year, with licensed brands above last year by 64.2%.

Sales results in the international wholesale business were favorably impacted by foreign exchange.

The combination of the weak US dollar, as well as the impact of our Euro-based businesses, contributed 12.5% of the sales growth.

The retail business posted a 1.4% sales decrease over last year.

Sales in our Movado Boutiques were below prior year by 3.9%, and comparable store sales in our Boutiques were down compared to prior year by 7.3%.

The company outlet store sales were above prior year by 1.2%, with comparable store sales below prior year by 7.4%.

At January 31, 2008, the Company operated 30 Movado Boutiques and 32 outlet stores.

Gross profit for the quarter was $81.8 million, as compared to $86.9 million prior year.

Excluding the impact of the sales return accrual, gross profit was $93 million, or above prior year by 7%.

The gross margin for the quarter was 59% as compared to 61.1% prior year.

Excluding the previously mentioned sales return accrual and the liquidation sales in both years, gross margin was 64.3%, as compared to 63.1% last year.

The increase in gross margin was the result of general improvements across most brands, in addition to the favorable foreign currency impact from our Euro-based business.

Operating expenses for the quarter were $78.6 million, or above prior year by $6.7 million.

The increase was primarily the result of higher marketing spending of $8 million, the negative impact of foreign exchange in translating our financial results of $1.3 million, and increased spending for the retail expansion of $1.2 million.

This was somewhat offset by decreased incentive compensation costs.

Operating income was $3.2 million, as compared to $15 million last year.

Excluding the impact of the sales return accrual, operating income was $14.2 million, below prior year by $0.8 million.

Taxes for the quarter reflect a benefit of $16.2 million, as compared to a tax expense of $1.8 million last year.

This reflects the benefit of the IRS settlement and NOL utilization, which I previously discussed.

Turning now to the full year fiscal 2008 results, net sales for the year were $559.6 million, or 5% above prior year.

Sales for both periods included the liquidation of excess discontinued products of $31.2 million in fiscal 2008 and $16.6 million in fiscal 2007.

Excluding the liquidation sales and the onetime sales return accrual discussed in the quarter, net sales were $543.3 million, or 5.2% above last year.

Once again, I will discuss the sales results excluding the aforementioned items.

For the year, sales in our wholesale segment were $447.9 million, or 5% above prior-year sales of $426.6 million.

The US wholesale business was below prior year by 10.3%.

Sales were below prior year in the luxury and accessible luxury category, while sales in the licensed brand category were flat year-over-year.

The international wholesale business was above prior year by 29%.

All categories were above prior year, with licensed brands above last year by 63.1%.

The favorable impact of foreign exchange rates contributed 7.9% of the sales growth.

The retail segment increased 6.4% for the full year.

Sales increased in the Movado Boutiques by 3.6%, with comparable store sales in our Boutiques decreasing 2.3%.

The company outlet stores recorded a total sales increase of 8.9% year-over-year, with comparable store sales flat year-over-year.

Gross profit for the year was $336.7 million, or above last year by $13.7 million.

Excluding the impact of the sales return accrual, gross profit was $347.7 million, or above prior year by 7.7%.

Our gross margin was 60.2%, as compared to 60.6% in the prior year.

Excluding the previously mentioned sales return accrual and the liquidation sales in both years, gross margin was 64%, as compared to 62.5% last year.

The increase was attributed to the same factors as I mentioned for the quarter.

Operating expenses of $285.9 million reflect a 5.6% increase from prior-year expenses of $270.6 million.

The increase of $15.3 million was primarily due to the same factors as I indicated for the quarter, with the addition of the impact of the two prior-year items, which are described in our press release.

Operating income for the full year was $50.8 million, as compared to $52.3 million in the prior year.

Excluding the unusual items mentioned previously, adjusted operating income was $61.8 million, or 10.1% above prior-year period.

With respect to income taxes for the year, we recorded a benefit of $9.5 million versus a tax expense of $2.9 million prior year.

Again, this is due to the reasons I previously indicated.

Now I would like to discuss our balance sheet.

Our cash at January 31 was $169.6 million versus $133 million prior year.

The higher cash was the result of strong cash flow from operations.

Our cash flow from operations for the year was in excess of $83 million.

Accounts receivable of $94.3 million decreased by 17.1 million.

The lower receivables year-over-year were primarily due to the mix of our sales, as well as the impact of the sales return accrual, which more than offset the negative effect of foreign currency.

Our days sales outstanding at year-end were 60 days, versus 62 days in the prior-year period.

Inventories of 205.1 million increased 11.8 million, or 6.1% from last year.

The increase was due to the effect of foreign currency in translating our year-end balances.

In constant dollars, inventory was below prior year by 1.8%.

Our total current and long-term debt was $60.9 million versus $80.2 million last year, as we paid down a portion of the debt from the excess cash generated throughout the year.

Our capital expenditures were $27.4 million and depreciation expense was $15.8 million.

Our capital expenditures principally included hardware and software costs, primarily associated with the development of our ERP system, and the build-out and renovation of existing retail stores.

In summary, we are very satisfied with our financial performance.

We have a solid balance sheet and are well positioned for the future.

Now let me turn the call over to Rick.

Thank you, Gene.

Good morning, everyone.

In fiscal 2008 we significantly expanded our gross margins through new product introductions and a strong international performance.

Importantly, our business remains a significant cash flow generator, with over $150 million of cash flow from operations provided over the past two years, and we possess a very strong balance sheet with a cash position of $170 million at fiscal 2008 year-end, and a net cash position in excess of $100 million.

Our strategies and focus remain intact, and we continue to execute against our stated objectives, even in these uncertain times.

Now let me outline our operating initiatives for fiscal 2009.

First, we are focused on executing our Movado brand strategy across our wholesale and retail channels.

As previously announced, part of our strategy involves the streamlining of Movado brand's wholesale distribution in the United States, from 4000 doors to approximately 2600 doors, or a 35% reduction, by the end of fiscal 2009.

The closing of these least-productive doors represents approximately $10 million of Movado brand sales, or less than 5% of the overall brand's revenue, and less than 2% of Movado Group's consolidated revenue for fiscal 2008.

These door closings will impact the sell-in of Movado, particularly during the first half of this year.

However, we expect sellthrough to remain strong.

Over the next few years, we would expect productivity per door to improve significantly.

In addition to optimizing our wholesale distribution, we are centralizing the Movado brand's product development, marketing, and merchandising functions to organize ourselves from a brand perspective versus channel specific.

As a result, we will record certain severance costs during the first half of this year.

Our second operating initiative is aimed at maximizing growth opportunities in our existing businesses, particularly in our licensed brand portfolio, which houses some of our youngest businesses.

Hugo Boss, Juicy Couture and Lacoste all joined Movado Group within the past three years, and all are in their infancy stage with significant global growth potential.

Together with our more established licensed brands, Tommy Hilfiger and Coach, our total licensed portfolio has gone from 18% of our consolidated business last year, to close to 25% in fiscal 2008.

We would expect licensed brands to continue to be a primary driver of growth in fiscal 2009, not only as they increase in scale, but because their strong international presence provides a good counterbalance to the slowdown taking place in the domestic economy.

The third major focus for our company in fiscal 2009 is the multiyear rollout of the worldwide ERP system.

This is an important undertaking for our company and will ultimately provide us with globalized standard processes and a fully integrated end-to-end view of our multiple businesses.

The ERP implementation will support the Company's growth strategy and integrate our global sourcing, wholesale and retail operations.

In addition to gross margin expansion and increased scale, the ERP system will be a key enabler toward enhancing our overall cost structure, improving our operating margin performance, and enhancing our customers' experience.

We remain focused on driving shareholder value over the long-term, and believe our company is strongly positioned to achieve that goal.

Now I would like to turn to our financial outlook for fiscal 2009.

We are extremely cognizant of the macroeconomic trends in the US that are affecting discretionary spending.

As you know, our fiscal year ended on January 31, and there has been further deterioration in the US economy since that time.

As a result, we are extremely cautious regarding the outlook for the domestic market, certainly in the near term.

It is also not clear whether trends in the US will ultimately impact consumer discretionary spending overseas and/or how this might impact global growth prospects.

Nevertheless, we are maintaining our guidance for fiscal 2009 net sales to range between $555 million and $565 million.

We are also maintaining our earnings guidance of $1.65 to $1.72 per fully diluted share, based on a projected tax rate of 24%.

This guidance now reflects a more cautious outlook on the US economic environment, which we believe will be offset by improvements in our foreign operations and favorable foreign exchange rates.

This guidance continues to include an approximate $0.20 per fully diluted share negative impact related to expected wholesale door closings and severance costs to be completed as part of our Movado brand strategy.

Also included in the $0.20 impact are certain expenses related to our ERP implementation, assuming we go live this year.

To the extent that we delay the launch until fiscal 2010, part of the associated expense included in our projections for this year would be capitalized and, therefore, improve earnings.

Capital expenditures for fiscal 2009 will approximate $27 million and include costs associated with the ERP implementation, as well as costs to support our retail operations, our brand positioning at retail, and efficiency improvements in our worldwide operations.

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

(OPERATOR INSTRUCTIONS).

Jeff Blaeser, Morgan Joseph.

Quick question on the ERP system.

Once you decide to go live, how long do you think it will take to completely integrate it and be comfortable with it?

Obviously, before we go live, we'll be very comfortable with our revised processes that will be globalized and standardized, and very comfortable with data transferring and information of that nature, and the running of SAP.

Obviously, with anything like that, you generally have a stabilization period.

And we would expect that a normal stabilization period of approximately up to six months is a reasonable timeframe.

And that stabilization is getting everyone 100% comfortable with everything that they are running day in and day out.

On China, any particular lines that you'd be focusing on in that market?

And I guess without giving any specifics, any thoughts of adding new license going forward, or is it still focused on the three developing lines that you have right now?

Let me start with the first part of that question.

We have great brands, and really each brand has its own DNA and its unique positioning.

So our current plan, and because we believe we still have great growth prospects in our existing brands, is that we're very satisfied with the opportunities that those present themselves to us.

Really, all of our brands have the capability of having a significant market in China, and that includes our licensed brands as well as Movado, which we are currently focused on, and Concord and Ebel as well over the next several years.

And licenses -- any thoughts for introducing new ones, or still a focus on developing the three?

We're focused on the great growth opportunities that we currently believe we have in our licensed brands.

And remember that three of them are basically only two years old with us.

And they had fantastic years and still have significant growth prospects ahead of them.

So, we're really just focused on those opportunities today.

Kristine Koerber, JMP Securities.

This is Jennifer Bennett in for Kristine.

Given this weakness in the US, have you seen any slowdown start to trickle into international markets?

And my second question is, can you talk a little bit about the opportunities to expand the licensed brands abroad, whether in existing markets or new markets?

I'll take that, Jennifer.

I think -- we have not seen any slowdown overseas as of yet.

Overseas markets remain strong.

And really, on the international front, that is the strength in our licensed brand business.

We have very strong presence in Europe, but we also have a growing presence in Asia.

And that certainly represents even a bigger growth opportunity for the future.

So you have not seen a slowdown in Europe?

No we have not.

Not yet.

Okay?

But we're not sure -- as I said in my comments before, obviously, not sure how the US economy and the impact could have on overseas business.

But right now, we haven't seen that yet.

And then, opportunities to expand the licensed brand portfolio abroad?

We're in a number of markets overseas.

We're in most European markets we are in, and we have growth opportunities, for example with Juicy, that we just began launching in the second half of this year in Europe and Asia.

We have significant growth opportunities, I believe as well, in Latin America, where we had an excellent, excellent year last year.

And then, Asia is a new market, really, for the licensed brands; we're probably going on our third year there, so we still have a significant growth opportunity there.

So there are significant growth opportunities overseas for our licensed brands.

Jody Kane, Sidoti & Co.

For the Museum dial watch, did you say you're going to introduce some new colors?

We introduce new colors every season, and we introduced the colored Museum watches last fall, and we're introducing new ones again this spring and next fall.

But I think what I was covering in my remarks was that the stores are currently black and white, and we will be adding color to our visual enhancements -- and that was in my comments -- as part of our strategy to make our stores more exciting.

And you will see that beginning for Mother's Day.

How are the non-Museum dial Movado watches doing?

Really, the one non-Museum dial collection that we're really focused on is Series 800, and that's done extremely well since we introduced it.

We believe it still has a major growth opportunity for the brand.

We introduced a limited edition Tom Brady watch last fall that did extremely well, and that watch was retailing for $2500 for the stainless-steel version, to $20,000 for the gold version.

We will also introduce a Derek Jeter limited edition this fall for Series 800, so that represents a significant growth opportunity.

The Museum watch still represents 90% of the Movado brand sales, and is a significant powerhouse in all of our distribution across all channels.

Are you thinking about or working on introducing some new additional lines to the Movado series?

We will continue to introduce newness, and really, I think I said it in my comments last month, between in the price range of $2500 to $5000, which we believe represents significant opportunity for Movado.

Movado has tremendous market share of watches between $500 and $1500, and the $2500 to $5000 range gives us a great opportunity.

And we will -- and a number of those will also contain new versions of the Museum dial that we're working on.

Just lastly, now that you're moving out of some of the lower-end stores, or the sort of worst-performing stores for your Museum dial, would you now be able to raise some of the prices?

Or would your average selling price be a little higher now that you're in sort of higher-end doors?

Our average selling price has been moving up over the last several years.

It's now about $1000 in Movado, and we expect that to continue to rise over the next several years.

[Maria Delucia, Delucia Foundation].

Before I ask you to sort of talk a little bit more about the Movado Boutiques, I'm not usually on these calls live, so I want to take this opportunity to compliment the management on the diversification of the business by brand and geography over the past few years.

It's really impressive.

Thank you, Maria.

On the Movado Boutiques, I will share with you that I was in the Rockefeller Center store not too long before you made your announcement of the changes that were underway.

And I will share with you that while I was there to make a purchase as a gift, I was struck -- I'm going to be really blunt -- about what I sort of considered the sterileness of the environment.

So, I would appreciate if you could kind of talk about your thinking about -- in relationship to the changes that you're going to embark upon.

Absolutely.

And I think that one of the things that we're working on -- and that's why when I talked about visual enhancement, the addition of color to the Boutiques -- we are very focused on making a warmer shopping environment over the next year, as well as really highlighting the key features and our key items, both in jewelry and in watches, over the next year.

So, we believe that represents a significant opportunity to excite the customer in our Movado Boutiques.

And that is one of the things that we're focused on.

Along those lines, Efraim, I'm very impressed with the fact that 50% of your wholesale watch business is now overseas.

Do you see any foreign tourism in your boutiques?

We do get some, but not as significant, because Movado for us is predominantly, as I said earlier in my remarks, a North American brand.

And as we develop China -- and we have been actually fairly successful in China so far -- as we develop that market, that will present an opportunity for foreign tourists as well, as they begin to travel to the US.

You also have to recognize that although the Boutiques take a significant amount of focus from us, they still only represent about 7% of our overall business, and are a major growth opportunity for the future.

[David Taylor, David P.

Taylor & Company].

You have two programs that have been running during the course of fiscal '08.

One is the sale of excess inventory, and the second one is the reduction of the number of Movado doors.

Are these programs, in terms of their impact on sales, over?

Let me first talk about -- and I'll give Rick the liquidation one in a second.

On the Movado Boutique, the door closures, that's occurring in fiscal '09.

That's occurring this year.

We announced it after fiscal '08 was over.

We did take an accrual for the return of the expected returns of the watches from the wholesale doors that we're closing.

So that's just an accrual?

That was not --

That's right.

That's just an accrual.

The returns will actually occur this year.

And we do believe that will have an impact, obviously, in sell-in this year.

And also, the US economy will have an effect on Movado this year.

But, we expect that it will position the Movado brand extremely strongly to grow again as the economy improves.

We've got an enthusiastic -- very enthusiastic response from our retail partners.

So we believe this represents the opportunity to really return Movado to an accelerated growth pass for the future, both in wholesale and retail.

Rick, why don't you address the liquidations.

Sure.

As you know, over the last two years, we've taken some advantage of being able to convert some excess discontinued product that we would normally [hold out for] the outlets into cash.

We separately highlight that so it doesn't disrupt from the real trend taking place in our business.

The vast majority of that has taken place, however.

Clearly, if the opportunities present itself, we certainly may take advantage of that this year.

But, again, there's no plans in place right now to do that.

And if we did, we'll clearly call that out.

And that -- you also have to recognize that that was predominantly in Concord and Ebel inventory.

That was Ebel inventory that we acquired with the acquisition from -- with the acquisition that we made several years ago, and Concord inventory that became discontinued as we repositioned the brand.

Going on the Movado repositioning, again, now, as I understand it, you're going to be closing some of the doors, the less-productive doors of your -- some of your large multi-store customers.

Is that correct?

Across all channels.

So, we're closing some department stores, some chain jewelry stores doors, as well as some independent jewelers that we feel are not as productive as they should be.

I guess if I were running the likes of Macy's or Zales, and I saw a supplier say, okay, you can have my product in certain stores but not in other stores, I might get rather upset.

You haven't had any of that sort of reaction?

No.

The reaction -- we work with our retailers as partners, and they understand that we're doing the best thing for the brand and that will strengthen the brand for them.

And most of our customers are very excited, actually, about the prospects, because they recognize that they will have greater focus and greater productivity as well.

[Arnold Brief], Goldsmith and Harris.

Do you expect the closing of these wholesale outlets to have any direct impact on your Boutique sales?

We believe that all of our remaining doors will become more productive.

So within that are, obviously, included also our Movado Boutiques as well.

But one of the things that I think we also addressed as part of our strategy for the Movado Boutiques and the Movado brand is that we will also begin to develop a greater number of exclusive offering of watches for the Movado Boutiques, or specifically designed for the Movado Boutiques.

And that presents also a significant growth opportunity for the future, the first ones of which we will introduce this fall.

Has there ever been any thought -- I know the Boutiques are part of the Movado brand strategy to enhance the whole brand, but has there -- that would basically take place in the trading area around the Boutiques itself.

Has there ever been any thought that that money might be better spent, that investment might be better spent in a national advertising and promotion program to enhance the issue, as opposed to just enhancing that issue around the trade area of the Boutiques [itself]?

Our Boutiques -- and we currently have 30 of them -- are in the top trading areas in the United States.

And one of the significant things that we found as we did our review of our Boutiques is that the Movado brand significantly outperforms its competitors in markets where we have Boutiques.

So that -- we actually have now factual data that confirms that the Movado brand has a significant presence in -- has a more significant presence than other brands in the markets where we have Boutiques.

It's also a different shopper, and we found that in our research as well, that the department store shopper and the boutique shopper and the chain jewelry shopper are completely different shoppers.

So we believe it's certainly a worthwhile investment and will have major growth opportunities for the future.

And also, as distribution in the United States consolidates with multi-store operations, it also makes sense to have a retail presence as well.

Is there anything you can give us in the way of the licensed brands number of doors that are expanding, how many doors they've been in, how many -- not necessarily even by brand, but just in total?

Let me take that.

From the standpoint -- you know, we've got a well-established international network because we've been in the licensed brand business for a long period of time.

So, we are in -- when we launch a brand, basically, in the first two years, we cover the vast majority of doors that we want to be into, because these are well-recognized brands.

And as a matter of fact, with Hugo and Lacoste, they were in the watch business prior to us taking over the license for those.

So, clearly, the first two years have a lot of door expansion.

And then after two years, it's a couple of secondary market-type of expansions, and it's really productivity within the existing doors that [improve].

So, Lacoste will probably see a little bit more door expansion.

Juicy, as they grow their business internationally, we will follow in the markets that they go into.

Hugo Boss is already well distributed throughout the world.

Finally, with the Movado brand going into China, is there any thought of expanding the Movado brand more internationally?

We have a strong presence in Mexico and Canada, as well as a growing presence in Latin America and the Middle East.

So really, we're focused on one market at a time right now, and we are going to be making investments this year and next year in China.

So we believe that that represents a big growth opportunity for us.

(OPERATOR INSTRUCTIONS).

At this time there appears to be no further questions.

I will turn the floor back over to management for any closing remarks.

I would like to thank all of you for participating today and for your continued support, and we look forward to updating you again after the close of our first quarter.

Thank you very much.

Thank you.

This does conclude today's Movado Group conference call.

You may now disconnect.