Movado Group Inc (MOV) 2015 Q4 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to Movado Group Incorporated fiscal fourth-quarter 2015 earnings call.

(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. Rachel Schacter of ICR.

Please go ahead.

Thank you.

Good morning, everyone.

With me on the call is Efraim Grinberg, Chairman and Chief Executive Officer; Ricardo Quintero, President; and Sallie DeMarsilis, Chief Financial Officer.

Before we get started, I would like to remind you of the Company's Safe Harbor language, which I am sure you are 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, Rachel.

Good morning and welcome to Movado Group's fourth-quarter conference call.

With me today are Ricardo Quintero, our President, and Sallie DeMarsilis, our Chief Financial Officer.

Rick Cote, our Vice Chairman and Chief Operating Officer, will join us for questions and answers.

For the fourth quarter we met our updated forecast on the top line and exceeded our revised plan for operating profit.

On a constant currency basis, our sales would have been $138 million.

For the year, on an adjusted basis, our sales grew by 1.5% to $587 million and our operating profit was $71.5 million, a decline of 5.3%.

Our diluted earnings per share was down 2.4% to $2.02 on lower shares outstanding.

While fiscal 2015 was a more challenging year than we initially planned or anticipated, I am pleased that we were able to exceed our revised guidance.

Overall, our biggest brands performed well in a slow-growth retail environment, which portends well for the future.

In January 2015, during our fourth quarter, the Swiss franc was delinked from the euro, causing the Swiss franc and the US dollar to significantly rise in value against the euro.

The lower-value euro affects both our sales and profitability.

To deal with these external realities, we are taking decisive actions to mitigate their impact.

First, we will be taking selective price increases; second, we are streamlining certain aspects of our business to provide greater operating efficiencies; and third, our supply chain organization is focusing on sourcing opportunities.

Our management team has been diligently working on developing a strong plan for fiscal 2016.

The strength of our core brands in the marketplace and our continued focus on product innovation will allow us to grow both sales and operating profit and lay a solid foundation for continued accelerated growth in the future.

The currency impact on our revenues is forecasted to be approximately $26 million and our operating profit to be approximately $13 million.

Our actions should offset the currency effect.

Accordingly, we are planning on sales to be between $590 million to $600 million and operating profit growing to $72 million to $75 million.

Over the last year, we have made a great deal of progress in evaluating the wearables category.

While we believe that we operate predominantly in the luxury watch and fashion watch categories, and that consumers are drawn to our watches by their quality, beautiful designs, and strong brand images, we also believe that we will have significant opportunity in this new emerging space.

We have always embraced technology that allows us to make well-designed products that provide consumers with desired functionality.

Consistent with this approach and recognizing the opportunities for us in this new arena, we have a number of projects underway in close collaboration with several tech companies to develop smartwatches for Movado that will celebrate a point of difference, with introduction planned for either later this calendar year or early next year.

As part of our efforts to focus on continuous improvement for the organization, we are planning to take a $3 million to $4 million pretax charge relating to operating cost savings initiatives in fiscal 2016.

These initiatives will allow us to manage the Company more efficiently, while continuing to invest for future growth and to build our global platform.

We also continue to create value for our shareholders by continuing our share purchases and, as announced today, increasing our dividend.

I would like to turn the call over to Ricardo, who will take us through our brand highlights and our strategic growth initiatives.

Ricardo has been with our company since July 2014 and has already added tremendous value as he leads our brands in the commercial part of the business.

Ricardo?

Thank you, Efraim.

Good morning.

I am pleased to be here today to share with you the highlights of our fiscal 2015 year-end results and our key strategies to grow our business in fiscal 2016.

As you know, I joined Movado Group in July of 2014 and during the past nine months I have devoted my time to learn the watch business, our company, our brands, and spending time with our talents around the globe.

I have visited every major region and most important markets for our company.

I am quite enthusiastic about the potential of our brand portfolio as it spans many different consumer segment, which are not necessarily equal across the globe, but certainly present a great opportunity to connect with consumers worldwide by offering aspirational values, compelling design, quality, and attractive value propositions as we continue to leverage our unique creativity and innovation, which is clearly one of our core competencies and strengths.

One of our key focuses has been, and will continue to be, to leverage our portfolio of brands following a strategic approach to growth by prioritizing opportunities that are big, fast-growing, and profitable.

Multiple sources indicate that the global watch market grew about 2% to 3% in the year 2014.

The US, one of the world's largest watch markets, is growing at 3%.

This is our home market, representing approximately 50% of our global sales.

Movado, our flagship brand, continues to strengthen its leadership position in this market, growing sellthrough by 18% in the holiday season and gaining 2 full market share points in our price segment of $300 to $3,000 for the full year.

We are extremely pleased with the strength of Movado in the US, which is driven by the strength of our core assortment as well as our Movado Bold collection.

Sales of our core assortment continue to grow and key pillars such as our Classic Movado Museum watch not only remain as one of the best sellers, but actually are growing a healthy clip ahead of the market.

Our Movado Bold line is a true testament of how we have been able to modernize Movado and provide customers with unique, compelling design that is able to recruit and attract a new, younger, more diverse demographic.

Movado is a vibrant brand in the US and fiscal 2016 will be a year where we will continue to drive creativity, innovation, and newness, particularly in the second half of the year.

About three-quarters of our Movado businesses in the US, which offers an obvious opportunity to develop the brand internationally and this will be one of my key priorities in the years ahead.

Among our key international priority markets we are quite pleased with the Movado sellthrough results we are achieving, particularly in Q4, where we saw accelerated sellthrough in key locations in the UK and Brazil, as well as from certain retail formats in China and the Middle East.

We will continue to strategically invest in these markets, following a thoughtful distribution approach to ensure we grow the brand properly and position it for sustainable growth.

Moving to our licensed brand portfolio, sellthrough is up in the high teens on a combined basis globally, with particular strength in the US wholesale market, Latin America, the UK, Northern Europe, and pockets of growth in the Middle East and Asia.

Finally, Ebel and Concord made important progress, with solid sellthrough behind their two key product introductions, Ebel's New Wave and Concord's Mariner, particularly in the Middle East, where these brands enjoy strong awareness and great distribution partners who support and promote the brand with their loyal customer base.

All of these results give us confirmation that we are winning with a consumer who is voting with their pocketbook behind our brand portfolio.

The key issue we have is that there is a disconnect between the sellthrough results and sell-in as our major retail partners in key geographies, like the US, have focused on improving their retail metrics, inventory turns, and controlling their inventory levels, a trend we would expect to continue in the near-term.

We continue to work closely with our key retail partners as we keep driving sellthrough via exciting new product offerings and collections, as well as emphasizing our best sellers across the portfolio, which drive retail and accelerate sellthrough for the entire line.

A key initiative for fiscal 2016 is to expand our gross margin across the portfolio and we are implementing selective price increases in cases like Movado for the first time in five years.

We have been thoughtful and strategic, taking these increases where price elasticity and brand power allow us, while not abandoning key consumer price points and gateways.

Given the global currency headwinds, we felt even more obliged to protect profitability over volume and ensure we have the sufficient resources to fuel our key business drivers for growth.

2016 will be a transitional year, where we make the necessary adjustments to our strategy to restore the robust revenue profitability growth we enjoyed in the past.

We will accelerate our investments in the digital space, making major upgrades to our e-commerce platform in the spring, starting with the US to later open key markets like the UK and China.

We are also strengthening our capabilities in digital marketing, social media, and making important strides in order to win with today's consumer and support omnichannel experiences.

We continue to be committed to brand building with strong pull activities and a renewed focus on the point of sale through superior assortment planning, visual merchandising, and staff education.

We are being selected in these markets where we invest to leverage our strengths, maximize ROI, as well as setting the proper foundation for future sustainable growth through a renewed focus on excellence in execution.

We are making important adjustments to the way we go to market to gain efficiencies, speed, and maximize volume and profitably potential behind the key winners across the entire portfolio.

Increased focus and strategic resource allocation will allow us to further leverage our world-class infrastructure, increase productivity, and continue to create shareholder value.

We are proud to have some of the most import brands in the world in our portfolio and believe there are still tremendous opportunities to further develop into higher levels.

We're excited about our innovation pipeline for 2016 and some of the key initiatives we will be sharing with you throughout the year.

For now, let me share a few highlights.

In Movado, the introduction of our new 1881 Automatic collection, which celebrates the year our brand was founded and our heritage in fine Swiss watchmaking.

During Baselworld 2015, this collection received great enthusiasm and interest from our key customers and retail partners from around the globe.

We're also strengthening new product and key collections, especially in the women's category.

On Lacoste, this past fall we launched the L1212 Collection with great sellthrough success.

This is the quintessential design for Lacoste.

It's the iconic shirt turned into a watch.

We are launching new spring colors and a chronograph this year and we are focusing our resources around [this Hero] collection with an omnichannel approach.

With Scuderia Ferrari, we continue to learn and refine our model behind a brand that is not rooted in fashion but sports.

We have learned there are multiple consumer segments available to this brand beyond the traditional watch consumer and distribution channels.

We are re-allocating our resources to properly cater to different consumer segments, ranging from the sports brand fan to owners to souvenir gifts.

With HUGO BOSS we continue to build upon the great momentum the brand is enjoying, focusing on our core pillars and strengthening new segments, such as the higher-end prestige consumer, with the introduction of our Swiss made collection as well as BOSS Orange, a recruitment engine for younger consumers into the brand.

For Coach, fiscal 2016 will be a year of increasing productivity in the expanded distribution the US, the brand's home market.

We are launching a new men's collection later in the year and we have ambitious plans to further develop our omnichannel presence.

We're also excited about launching the brand in Mexico and strengthening our position in Brazil, the UK, and China.

On Tommy Hilfiger we continue to launch exciting new products and see opportunities not only in US department stores, but in core markets in Latin America, Europe, and the Middle East.

Finally, Juicy Couture continues to perform well in the US with our key retail partner and in the Middle East and China.

We will continue to develop this business, as well as launching Brazil later this year.

As mentioned before, we are actively working on our wearable technology strategy and developing some exciting propositions that are unique, relevant, on-brand, and provide true differentiation alternatives to the increasingly crowded wearable space.

There will be a lot of additional interest in our category this year, which will bring new consumers to the watch space, which we want to capture.

We are establishing relationships with strong technology partners that bring their state-of-the-art capabilities, in combination with our watchmaking expertise and creativity.

We have a lot of work ahead of us and many unknowns in the year ahead.

We're taking a prudent approach to planning our business with tight control of our expenses to deliver against our profitability objectives.

The majority of our growth will still come from the US market, where we have strengthened momentum, followed by the UK, Middle East, and pockets in Asia, as well as new inroads in the travel retail channel, which we are prioritizing and refocusing dedicated resources to be able to play to win in this important brand-building and growing channel.

We look forward to a successful fiscal 2016 and setting ourselves up for accelerated growth in fiscal 2017 and beyond.

Now I would like to turn the call over to Sallie.

Thank you, Ricardo, and good morning, everyone.

For today's call I will first review our income statement and balance sheet and then discuss our outlook.

Before I review the quarter and the year in total, I would like to point out the special items included in our fourth-quarter and full-year results for fiscal 2014.

Please refer to our press release for a description of these items, as well as a table of GAAP and non-GAAP measures.

Our results for the fourth quarter and fiscal 2014 include an $8.3 million pretax charge in connection with our ESQ strategy.

On a GAAP basis, net sales include a $7.8 million charge for anticipated sales returns associated with this strategy.

This charge, along with the related write-down of excess inventory, impacts gross margin on a GAAP basis by $7.5 million, or 240 basis points for the fourth quarter and 60 basis points for the full year.

Operating expenses on a GAAP basis include an $800,000 charge for excess ESQ displays and point-of-sale materials.

The ESQ strategy impacted diluted earnings per share by $0.20 for the quarter and fiscal year.

In the fourth quarter of fiscal 2014, we recorded a $2.5 million, or $0.06 per diluted share, pretax duty refund from US Customs and Border Protection to recover payments made in prior years for watches subsequently exported out of the United States.

On a GAAP basis, the duty refund impacted gross margin by 190 basis points for the fourth quarter and 40 basis points for the full year.

In the fourth quarter of fiscal 2014, we recorded a contribution to the Movado Group Foundation.

The pretax donation was $2 million, or $0.05 per diluted share, and this donation is also reflected in the full-year results.

During the first quarter and fiscal 2014, we recorded a $1.5 million, or $0.04 per diluted share, pretax gain from the sale of a building in Switzerland.

And, finally, in the second quarter in fiscal 2014 we recorded a $1 million tax benefit, or $0.04 per diluted share, primarily related to the favorable changes in connection with domestic and foreign tax audits.

The balance of my remarks will exclude the special items just discussed.

For the fourth quarter of FY15, our sales decreased 4.4% to $133.9 million.

In constant dollars, sales declined 1.5% as currency unfavorably impacted our sales by $4.1 million.

The sales decline was primarily driven by our luxury category, partially offset by an increase in our retail outlets.

Sales were approximately flat in the US and in constant dollars decreased 2.7% internationally.

Sales in our wholesale segment were $111.9 million, or 6.8%, below sales of $120.1 million for the same period of last year.

In constant dollars, sales in our wholesale segment declined 3.4%.

By geography, our US wholesale business decreased 4.4% to $51 million, compared to $53.3 million last year.

Our international wholesale business decreased 8.8% to $60.9 million, compared to $66.8 million in the prior year.

Sales from the Company's retail business for the fourth quarter were up 10.3% from last year.

At the end of the period we operated 38 outlet stores.

Gross profit was $67.4 million, or 50.3% of sales, compared to $74.3 million, or 53%, in the fourth quarter of last year.

The 270 basis point decrease in gross margin was primarily driven by the unfavorable impact of changes in foreign currency exchange rates and the unfavorable channel and product mix, as well as increased fixed costs.

Operating expenses were $57.3 million, a decrease of 4.3% year-over-year.

The decrease was primarily the result of the following, a $2.3 million decrease in marketing expense and a $2.1 million decrease in the accrual for performance-based compensation, offset by a $2.1 million increase in compensation and benefits in support of our brand-building and growth initiatives.

Operating income decreased 30% to $10.1 million, or 7.5% of sales, compared to $14.4 million, or 10.3% of sales, in the year-ago period.

Income tax expense was $33,000 compared to income tax expense of $2.2 million last year.

Net income in the fourth quarter was $10.1 million, or $0.40 per diluted share, versus net income of $12 million, or $0.46 per diluted share, in the year-ago period.

Looking at the results for the full year and in January 31, 2015, sales were $587 million, an increase of 1.5% from fiscal 2014.

The higher sales were driven by the US businesses, whereas the international sales were about flat.

On a constant dollar basis, sales increased 1.9%.

Gross profit was $310 million, or 52.8% of sales, as compared to $310.3 million, or 53.7% of sales, last year.

Operating income decreased 5.3% to $71.5 million, or 12.2% of sales, compared to $75.5 million, or 13.1% of sales, in fiscal 2014.

Income tax expense was $19.3 million compared to income tax expense of $20.9 million for last year, and our effective tax rate was 27.1% for fiscal 2015 compared to 27.8% effective tax rate last year.

Net income decreased 3.4% to $51.8 million, or $2.02 per diluted share, compared to net income of $53.6 million, or $2.07 per diluted share, in the year-ago period.

Now turning to our balance sheet, cash at year-end was $199.9 million, as compared to cash and short-term investments combined of $190.8 million last year.

We generated $59.6 million in cash flow from operations and used those funds to invest $26.4 million in share repurchases, $11.1 million in CapEx, and pay $10.1 million in dividends to our shareholders.

Although we had no debt outstanding as of January 31, 2015, we do anticipate drawing down on our new $100 million revolver as we continue to execute share repurchases in fiscal 2016.

Accounts receivable increased $5.4 million to $74.1 million.

This increase was primarily due to the provision for anticipated ESQ sales returns last fiscal year-end.

Inventory decreased $10.5 million to $170.8 million as compared to last year.

Capital expenditures for the year were $11.1 million and depreciation and amortization expense was $12.5 million.

Let me now discuss our guidance for fiscal 2016.

Our plans assume currency rates consistent with recent levels.

We estimate the unfavorable impact of foreign currency rates on our sales forecast is approximately $26 million and approximately $13 million on our fiscal 2016 forecasted operating income when compared with fiscal 2015 results.

As Efraim mentioned, we are already taking action to offset the impact of these currency moves, including selective price increases across our brand portfolio.

These price increases will go into effect throughout the spring.

Additionally, we are planning to take a $3 million to $4 million charge related to operating savings initiatives in fiscal 2016.

These initiatives will result in approximately $5 million of annualized savings with $4 million of savings being realized this year.

We will continue to closely manage our expenses, as we have done successfully in the past.

From an economic perspective, we continue to be cautious in view of the global economy.

Now I would like to discuss our guidance for the current fiscal year.

For fiscal 2016, we anticipate our sales will increase to a range of $590 million to $600 million.

On a constant-dollar basis, sales would have increased in the range of approximately 5% to 6.5%.

Gross margin rate is expected to be approximately 53.5% as compared to 52.8% in fiscal 2015, primarily due to the selective price increases offset by the negative impact of currency.

As mentioned, we will closely be managing our expenses for the current year and expect to see savings from our operating initiatives.

However, we will continue to invest appropriately in our brands.

Our forecast also includes expense related to performance-based compensation, based upon the assumption that our targets will be achieved.

This was not the case in fiscal 2015.

Operating income is projected to be in the range of $72 million to $75 million.

Due to the mix of global pretax results, its estimated effective tax rate is expected to be 30%.

Net income is planned to be in the range of approximately $48.5 million to $51 million.

We expect diluted earnings per share in fiscal 2016 to be in a range of approximately $2 to $2.10.

We estimate the favorable impact of the share repurchase program in place throughout the year will approximately offset the entire effective tax rate.

Capital expenditures for fiscal 2016 are estimated to be approximately $15 million.

Primarily as a result of the impact of currency as well as the timing of the execution of our selective price increases, we would expect our sales and operating profit growth to be in the second half of the year.

The guidance we have provided assumes no unusual items for fiscal 2016.

Therefore, as mentioned a moment ago, we expect to record a $2 million to $3 million pretax charge related to operating savings initiatives in fiscal 2016 -- I'm sorry, $3 million to $4 million pretax charge related to operating savings.

This charge is excluded from guidance just provided.

We are focused on executing our strategies and making our business more efficient to support our long-term plans.

Today we provided an annual guidance for fiscal 2016.

As currency rates and the global environment have materially changed, we remind you to not rely on the multiyear plan we previously issued at the end of fiscal 2013.

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

(Operator Instructions) Oliver Chen, Cowen and Company.

Thanks so much for the details and the announcements about the innovation ahead.

Efraim, I'm just curious about your context about the slowing category growth.

I know it has been happening in terms of the past quarters.

Can you just give us color for rationale for how that may be happening and why?

Also, there does seem to be this continuation of this gap between sell-in versus sell-out.

Is that a trend we should expect for the full year to continue?

And to your comments on wearable technology, they sound new and innovative to me.

Could you give us color about the role that you might seek to play in terms of which brands may embrace this and also the context from how might your products evolve and be differentiated?

Thank you.

Sure.

Well, on the first question of market growth, I think you've actually seen that it has been in combination with a slowing -- a slower-growth retail environment overall.

And I'm sure everybody here follows our retail customers.

Overall, comp stores have grown in a low single digits and I think that the watch category has mimicked that.

What we are pleased with is that a number of our brands, our largest brands have significantly surpassed that growth rate., but that still causes retailers to focus on inventory control and productivity overall.

We are not the only brands that they carry.

They carry multiple brands in multiple categories.

And I think you are seeing that in a slow growth retail environment, but it is continuing to grow.

So we are pleased with that.

So I think that kind of answers part one and part two of your question.

On the wearable front, as a company, we have always been a leader in embracing innovation to make beautiful products.

And so, when technology allows us to do that, we will embrace it and those are the projects that we are working on.

I think you have seen a lot of wearable products out there so far that are not beautiful products or commensurate with what a watch company would produce and much more commensurate with what a consumer electronics company would produce.

Those are the projects that we are working on and that is really probably all I'm going to say, other than the fact that we are partnering with several technology companies on that front.

And as soon as we have more news to announce about that, we will.

Okay.

But the disparity has been so large, should you think retailers -- they are just carrying less inventory but still selling through at a strong rate.

Will that trend continue?

Is this sustainable and is this just a one-year kind of process?

It seems like the sellthrough's have been healthy, but the sell-ins have been just a lot more modest.

We believe that that is a continuing trend and we have modeled our business assuming that retailers will continue to focus on inventory growth.

I think you also have the combination combined with that of part of our retailers' sales moving into the e-commerce world.

And I think you hear that typically it's between 10% and 15%, so you need to carry less inventory in the e-commerce world as it's now one location, and in some cases, drop-ship locations doing significant amounts of business.

So I think that (multiple speakers).

My last question, just a follow-up.

Thanks, Efraim.

On the strategy of the price increases, could you just give us some comfort or magnitude in terms of where -- the degree to which these will be?

And if you are able to comment on which parts of the portfolio may be most conducive to this.

Just because we're looking for you to get these increases in the context of a slowing watch growth environment and we wanted to get a sense of achievability of price increases.

Thank you.

Overall, we have looked at price increases, and they are selective, of approximately 5% to 8%.

We have chosen I think, and to use Ricardo's words here, gross profit over volume.

So recognizing and building into our models that we will have some effect on overall volume.

We felt it was the prudent thing to do in this type of environment, where our costs have materially increased due to currency fluctuations.

I would like to add that there are many price points that remain untouched, so it was very selective.

It was not a flat percentage across the portfolio.

That's really helpful.

Thanks for the details and I'm looking forward to the next year.

Best regards.

Ed Yruma, KeyBanc Capital Markets.

Thanks for taking my question.

Sallie, I think when you negatively pronounced 4Q you indicated at that point SG&A was largely baked in and you were unable to pull it back, and that was the main reason for the preannouncement.

I guess, if you take it within the context of today's release, it looks like you were able to pull back some of those expenses.

I guess could you talk about where SG&A might have come in a little bit better than you had expected in December?

We were -- obviously, we are very good at controlling our expenses and we were forecasting to really invest everywhere around the globe.

By the end of the year what ended up happening was a lot of our international locations did come in slightly lower in some marketing expenses, so it was a little bit here and there around the world.

You know where we are a very complex organization.

But primarily international and primarily around some of those local marketing spend.

I will add to that that you also had the effect of, in some places, sales coming in lower, so because of that some of our commitments to our partners came in lower as well as currency.

So you had a strengthening US dollar, which changed some of those expenses as you translated them back into US dollars.

Got it.

And on the impact of FX, the $26 million top line and $13 million op profit, is that net of the price increase or is that if you hadn't taken the price increase?

I will address that one, Ed.

That is in isolation; that is just the FX impact.

Had we not taken the price increase.

Yes, had we not taken the price increase and then offsetting that obviously is because we are seeing some growth in our overall forecast; would be the price increases.

Got it.

So your expectation is that the price increases should offset completely all of the FX shifts?

And growth.

Yes, and then there will be some growth as well.

It's one of the -- it's the major component (technical difficulty) the FX.

Got it.

I guess the final question, just asking about Oliver's sell-in verses sellthrough.

Are you embedding any improvement in sell-in through the balance of this year?

Or do you think that, as you talk about some of this stocking trend or move to e-comm is this going to reset at the end of this year and hopefully rebalance to the beginning of next year?

Thank you.

Well, we see that trend to continue throughout this year.

Hopefully, sellthrough will accelerate towards the second half of the year and things will rebalance.

But right now we are seeing the trend to continue throughout the year.

Great, thanks so much.

Rick Patel, Stephens Inc.

Thanks for taking the question.

Ricardo, great to have you on the call.

Can you talk about where you are in terms of infrastructure projects?

You've talked a little bit about e-commerce and digital investing, but are you where you need to be in terms of other IT projects, distribution facilities, and headcount, that sort of thing.

Just given the growth potential of the Company, I'm curious if you're going to have to make some other investments later this year or beyond.

We are very comfortable with where we are from an IT perspective, as well as from a facility perspective.

We are -- while we are saving approximately $5 million this year in our overall overhead, that is net of investments that we will make in growth in certain markets around the world where we believe we have opportunities.

So we will continue to invest in the Company, but that is built into our forecasts and our models for the year.

As a follow-up to that, what's the right way to think about operating margins longer-term?

I know in the past you drove a lot of upside through SG&A leverage.

This year is little bit tricky given FX, but once that normalizes, have you changed your thinking about where long-term margins can go for the business?

I think we still feel comfortable that long-term margins can go into the mid-teens, but I think we have to see FX basically stabilize for a while and then see volume growth.

Great.

And then just one more, if I may.

Can you talk about the Movado distribution footprint and what it looks like internationally?

Curious which ending year-end in Europe and in the UK in particular, and where the white space is as we think about geographic expansion over the next few years.

Right now Movado has -- we just launched very recently in the UK.

That is one of our international markets of focus.

So we're not thinking of expanding to many different markets; there's markets we already have a position where we need to grow the business.

But we want to be very thoughtful.

It's not adding doors; it's building one door at a time.

We have a position in China now that -- there are certain concessions that we run which are performing really well.

So we want to be, again, very focused on how we built this.

Again, it's not every market.

Right now the main focuses are the UK, certainly China, and then Brazil we are also, as I mentioned in my remarks, seeing very good traction.

Thanks very much and good luck this year.

Jeremy Hamblin, Dougherty & Company.

This is Kyle calling on behalf of Jeremy.

I noted that performance-based pay was down $2.1 million.

Any idea what a normalized number would look like for 2016?

I just want to -- the performance-based pay was down for the quarter $2.1 million.

I think at the end of the third quarter we also announced that it was down for the whole year.

We don't give out specifically that number, but based on the performance of the company this year, we did not have any performance-based compensation.

Okay, thanks.

With the buyback, I see the stock is north of $30.

Is that still going to be falling within the automatic buyback mechanism?

I guess I will address a piece of that and then others can follow.

We don't disclose, obviously, what our grid is for the program, but you are correct, we do have a 10b5-1 program in place which we will adjust accordingly when the window is open.

It's still a strategy of ours to continue to invest back into the Company.

Last question.

For the FY17 strategic plan, any changes being made to that?

I think we announced that that plan is no longer valid at the end of Sallie's remarks, based on the current environment and currency rates.

And we have no plan at the current time to reissue a longer-term plan.

All right, that's all.

Thanks, guys.

Kristine Koerber, Barrington Research Associates.

Good morning.

A couple of questions.

First, you mentioned streamlining your business.

Can you give us some more color what specifically are you planning to do?

This is Rick.

From a standpoint of we always look at our operations from around the world and our intention here is to always look at efficiencies, we believe we have some opportunities of further improving efficiencies, particularly as it relates to strengthening our regional operations.

So certainly that will be an aspect that we are looking at.

We think there's some added benefit in there.

But this is an ongoing program that we always have and we think it's important of putting a number of things together all at once to basically help us deal with the currency situations that is the reality out there.

Okay.

Then if we look at the inventory levels, you were down about 6% coming out of the year.

How should we think about inventory for 2016?

Again, I think from a standpoint -- we have been very conscious on inventory.

Our supply chain organization and our operational teams have done a good job of improving our speed to market and reducing our lead times and all of that.

So, therefore, we have been able to react to the marketplace situation that took place in the second half of last year.

So our intention is to basically either keep inventory flat, or if it does grow, it certainly will grow at a lower level than our growth out there.

So we believe we have further opportunities of improving our inventory turn performance levels.

Okay.

And the inventory that you have; is it pretty clean at this point?

The inventory we have is in excellent shape, both in our facilities as well as in our retail facilities.

Again, we have done -- that has been a major focus of ours over the last five, six years.

I think, as the organization, we have done a very great job.

So very pleased with our inventory levels and the composition of that inventory, both at retail and in our own distribution centers.

Then, lastly, can you talk about marketing spend; what your plans are for FY16?

We will increase marketing spend this year and continue to invest in our brand-building efforts around the world, so that is a continued focus of ours.

Obviously, we will do it in line with our sales growth.

Okay, great.

Thank you.

Oliver Chen, Cowen and Company.

Thanks for having me back.

Ricardo, congrats and also, Rick, congrats on your promotion.

Ricardo, I just wanted to ask you a broader question about what are the main --?

How are you mainly spending your time in terms of the role?

And also, if you have any color in terms of your prior background and what kind of attributes have been most helpful in your background leading consumer products companies in terms of your experience at Movado thus far?

Thank you.

Thank you, Oliver.

I've spent my time learning.

This is a new industry for me, so the majority of my time has been learning.

Learning internally from the leaders around the Company, but people at every level inside of the Company.

Traveling to the different markets, meeting with key customers, meeting with consumers, and getting a flavor of the strengths of our different brands around the globe.

It has been a process of learning, to summarize.

And also starting to learn the talent that we have and putting together strategies that restore us to growth, because growth is a very important thing for us.

So that has been the majority of my time.

As you know, if you read my bio, I spent 15 years at the Estee Lauder companies and that was a great training ground for me.

I worked with some amazing people, so I'm taking some of those learnings now to Movado Group.

And one of the main learnings is to put the consumer first and really understanding what consumers want.

And also executional excellence.

Execution is the only part of strategy the consumers see and that is one of the renewed focuses that we have in the Company.

I'm very pleased to see that our talent around the globe is really embracing this as a key strategy going forward.

Have there been aspects --?

What has surprised you most thus far?

Have there been surprises relative to your expectations?

Lastly, I was just curious about your time in geographies.

Do you expect to spend a lot of time in a certain geography or will it be pretty broad?

Thank you.

Well, I will tell you that the most surprises -- there has been several good surprises.

I knew there was great talent in this company, but as I was able to spend more time not only here in our headquarters, but traveling throughout the different regions, I was pleasantly surprised to see we have great people in this organization.

I was very excited about that because talent is such a key driver for success for any organization.

My time -- I am spending time here in the US.

This is our core market.

But also making sure that the market, the priority international markets are visited and we work together.

So I'm spending a lot of time here, but also a lot of time on a plane.

Thank you, best regards.

We have no further questions and I would like to turn the conference back over to management for any additional or closing remarks.

Okay.

I would like to thank everyone for participating today, and we look forward to talking with you on our next conference call.

Again, thank you very much.

This concludes today's conference.

Thank you for your participation.