Movado Group Inc (MOV) 2016 Q4 法說會逐字稿

Good day, everyone and welcome to the Movado Group's fiscal fourth-quarter 2016 earnings conference call.

As a reminder, today's call is being recorded and may not be reproduced in whole or in part without permission from the Company.

At this time, I would like to turn the conference over to 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.

Also in the room is Rick Cote, Vice Chairman and Chief Operating Officer, who will join us for questions and answers.

Before we get started, I would like to remind you of the Company's Safe Harbor language which I'm 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'd like to turn the call over Efraim Grinberg, Chairman and Chief Executive Officer of Movado Group.

Thank you, Rachel and thank you for joining us on today's conference call.

We are very pleased with our fiscal 2016 performance.

Despite the extremely challenging retail environment, slowing growth in the watch category and strong currency headwinds, we were able to deliver a solid year with sales growth to $594.9 million and adjusted operating income growing by 3.7% to $74.1 million.

We generated $74.6 million of operating cash flow and ended the year with a record $228.2 million in cash.

Fiscal 2016 marks the third year in a row that Movado Group has delivered adjusted operating income in excess of $70 million despite the increased level of volatility in the marketplace.

We are very proud of the strong execution by our teams around the world.

We have built a solid global infrastructure and have continued to drive the growth of our brands.

As a company, we remain focused on driving innovation across our brand portfolio, which was truly exemplified by the extremely successful launch of the Movado Edge collection introduced late last year.

As a leadership team, we are focused on driving long-term value for our shareholders, customers and employees.

We are pleased that our Board has authorized both an 18% increase in our quarterly dividend, as well as a new $50 million share repurchase authorization.

While we expect the environment to remain challenging in fiscal 2017, we remain optimistic about our opportunities longer term.

We have decided that during this period, we will continue to invest in marketing, brand-building programs and our connected watch initiatives.

We believe that these investments, along with continued product innovation, will position us extremely well for sustainable profitable growth in the coming years.

With this in mind, we are planning for sales of $585 million to $600 million and diluted earnings per share of $1.85 to $2.00.

Before I turn the call over to Ricardo, who will highlight some of our brand performances and initiatives, I would like to acknowledge Rick Cote who has announced that he will be retiring in June.

Rick has been an extremely valuable partner and colleague in helping to lead the growth of the Company since he joined us in 2000.

We are fortunate that Rick will continue to serve on our Board of Directors where he will provide tremendous counsel and strategic advice.

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

Thank you, Efraim and good morning.

We are pleased with our fourth-quarter and our full-year fiscal 2016 results as they demonstrate strong execution of our strategic approach to growing our business and capturing the full potential of our brand portfolio.

In the fourth quarter, net sales were $143.3 million, up 10.1% on a constant currency basis and up 7% on a reported basis and adjusted operating income at $12.9 million, up 29.6% on a constant currency basis.

We delivered solid international growth with net sales increasing 16.4% on a constant currency basis and up 9.6% on a reported basis.

And US wholesale was up 6.8% both on a constant currency and reported basis.

For fiscal 2016 full-year results, we were well within our guidance with net sales at $594.9 million, up 5.5% on a constant currency basis and up 1.4% on a reported basis and adjusted operating income at $74.1 million growing by 18.1% on a constant currency basis.

As discussed previously on our third-quarter call, we are living in a [buca] environment that is accelerating in terms of volatility, uncertainty, complexity and ambiguity.

This environment has affected the global retail landscape, has accelerated shifts in consumer purchasing patterns and has made it much harder to grow.

At Movado Group, we have taken a proactive approach to navigate in this environment, leveraging our strengths and focusing on superior execution of our strategies centered on the consumer to create compelling innovation.

We believe that great product always wins if it is desirable, relevant and at a competitive value.

So while the short term is difficult, we are confident in our stated strategy and will continue to invest to build our brands and our people to deliver sustainable profitable growth in an industry that continues to have great long-term growth potential.

To this effect, during Q4, we completed the acquisition of the remaining shares of two strategic entities, which previously operated under a joint venture model in Germany and France.

This will allow us to accelerate our business even further and build big meaningful businesses across our portfolio in two of Europe's key markets.

In Q4, we continued to build momentum in Europe, our largest international region.

Our largest shipment growth was in the UK where we experienced high double-digit increases in net sales, as well as sellthrough.

Other strong results reported in Germany and France with a total EMEA region up more than double our total international growth on a reported basis.

These positive results are partially driven by increases in traveling consumers, particularly the Chinese who are known to shift travel destinations in pursuit of an attractive value from currency fluctuations, but also with the local market consumers where we saw solid growth across our brand portfolio in both our luxury and licensed brand categories.

Conversely, our shipment performance in Asia continued to be difficult in Q4, including a sharper slowdown of the Chinese economy and the further decline in spending in Hong Kong and Macao.

In Asia, we continue to experience double-digit declines in sellthrough and high single digit declines at sell-in.

China continues to be challenging and we have recently reorganized ourselves to focus resources on productive doors with the highest growth potential, including those that we operate directly and in creating desirability and awareness for our brands in China to achieve conversion either in China or wherever Chinese consumers travel.

So while we continue to expect growth to be muted in the region, we will be more efficient and productive.

Our shipments in Q4 for Latin America increased mid-single digits.

While our sellthrough in Brazil, our largest market in the region, grew by double digits for all of our brands in local currency, we are seeing a significant slowdown as of late as the general environment is challenged and consumer sentiment is dampened given the political, economic and social dynamics.

We expect this to have a significant effect for the balance of fiscal 2017.

In the US, our fourth-quarter wholesale shipments were up 6.8% versus last year driven by market introductions and expansion of major innovation initiatives such as Movado Edge, Movado Motion, BOLD Motion and the Coach men's collection.

From a retail perspective, our Movado company stores in the US were about flat in Q4 in a difficult highly promotional environment where we were competitive while maintaining our profitability metrics.

Continuing the positive momentum throughout the year, our sellthrough trends continued to outpace the market for most of our brands led by our flagship brand, Movado.

In the US, we were able to effectively track marketshare through NPD.

In the $300 to $3000 price category where we compete, our Movado brand marketshare continued to grow.

For the full 12 months through January, Movado's share increased to 21.4%.

That's up 150 basis points versus prior year growing 8% on a market that was flat.

Sellthrough results in the US for licensed brands were challenged by a difficult holiday season for retail and the fashion watch category in our main channels of distribution, but still ahead or at market trend for all of our brands.

Conversely, our licensed brands experienced strong sellthrough internationally, in particular strength in the UK, Germany, France, Brazil, Mexico and a continued recovery in Spain.

Our business in the Middle East is impacted by the price of oil and regional issues where you have seen a significant slowdown at retail, but our sellthrough results continue to outpace the market.

As discussed on previous calls, the overall retail environment has made our retailers even more cautious as they continue to rebalance their inventories and many are enforcing even more rigorous retail metrics.

We expect this trend to continue for fiscal 2017, particularly during the first half of the fiscal year.

We are extremely encouraged by the consumer's response to our major innovation initiatives.

Movado Edge is shaping up to be one of our most successful launches ever.

This modern interpretation of the museum dial designed in collaboration with world renowned industrial designer, Yves Behar, continues to build positive coverage in the press and across social media platforms.

Sold in only 150 doors in its initial launch phase, it experienced extraordinary sellthrough levels and helped propel our business in Movado.

Our Movado Motion and BOLD Motion introductions met our expectations and although it is still in the early days, we are pleased with our approach to smart watches where design comes first, creating beautiful timepieces with added value via consumer-preferred functionalities such as activity tracking, notifications and sleep tracking.

These launches are an integral part of our overall strategy of accelerating our efforts in digital marketing and building capabilities to serve today's mobile-first consumer.

Our strategy in the wearable category forges ahead into our licensed brand portfolio.

As recently announced at Baselworld 2016, we have extended our partnership with HP to launch over 25 SKUs in the fall season.

These beautifully designed watches were presented to our key customers around the globe and the response has been extremely positive as we were able to truly represent each of our brand's DNA in an analog watch with smart functionality such as notifications and activity tracking.

While we are encouraged by the positive response we received during Baselworld 2016 for our major launches scheduled for this year, we also recognize that the overall retail environment is challenging, particularly during the first half of fiscal 2017.

Considering where we are today, reading the trends in the current global macroeconomic environment, particularly in major markets like the US and then planning with our key retail partners across the globe, we are projecting our sales to be between $585 million and $600 million and EPS in the range of $1.85 to $2.00.

Fiscal 2017 will be challenging from a growth perspective in what we believe is a cyclical transition and where we intend to continue outpacing our competition and acquiring marketshare to emerge even stronger once the cycle reverses into an upward growth trend.

I will now 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 for fiscal 2017.

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 2016.

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

Our fiscal 2016 results include a $4 million pretax charge, which equates to a $3.9 million after-tax or $0.16 per diluted share in connection with our operating efficiency initiatives and other items.

$1.3 million or $0.06 per diluted share of this charge was in the fourth quarter and the remainder was in the first quarter.

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

For the fourth quarter of fiscal 2016, our sales increased 7% to $143.3 million.

In constant dollars, sales increased 10.1% as currency unfavorably impacted our sales by $4.1 million.

While all sales categories experienced positive sales growth as compared to last year, our largest dollar growth was in our luxury brand category followed by our licensed brand category.

Sales increased 4.1% in the US and in constant dollars increased 16.4% internationally.

Sales in our wholesale segment were $121.2 million or 8.3% above sales of $111.9 million for the same period of last year.

In constant dollars, sales in our wholesale segment increased 12%.

By geography, our US wholesale business increased 6.8% to $54.5 million compared to $51 million last year.

Our international wholesale business increased 9.6% to $66.8 million compared to $60.9 million in the prior year.

Sales from the Company's retail business for the fourth quarter were up 0.3% from last year.

At the end of the period, we operated 40 outlet locations.

Gross profit was $75.3 million or 52.5% of sales compared to $67.4 million or 50.3% in the fourth quarter of last year.

The 230 basis point increase in gross margin was primarily driven by the favorable impact of channel and product mix, which includes selective price increases and sourcing improvement opportunities, partially offset by a 160 basis point unfavorable change due to foreign currency exchange rates.

Operating expenses were $62.4 million, an increase of 8.9% year-over-year.

The increase was primarily the result of the following -- a $3.2 million increase in performance-based compensation; a $2.2 million increase in marketing expense; and a $1.1 million increase in other operating expenses, partially offset by a decrease of $1.4 million resulting from the favorable impact of foreign currency exchange rates.

Operating income increased 27.9% to $12.9 million or 9% of sales compared to $10.1 million or 7.5% of sales in the year-ago period.

Income tax expense was $2.9 million compared to income tax expense of $33,000 last year.

I will talk further about the increase in our tax rate when I discuss our full-year results in a moment.

Net income in the fourth quarter was $9.2 million or $0.40 per diluted share versus net income of $10.1 million or $0.40 per diluted share in the year-ago period.

Looking at the results for the full year ended January 31, 2016, sales were $594.9 million, an increase of 1.4% from fiscal 2015.

Similar to the fourth quarter, all sales categories experienced positive sales growth as compared to last year.

Our largest dollar growth was in our luxury brand category, followed by our licensed brand category, which is more heavily impacted by unfavorable currency.

US sales increased 1.8%; international sales increased 0.8%, and on a constant dollar basis international sales increased 9.9%.

Gross profit was $317.6 million or 53.4% of sales as compared to $310 million or 52.8% of sales last year.

Operating income increased 3.7% to $74.1 million or 12.5% of sales compared to $71.5 million or 12.2% of sales in fiscal 2015.

Income tax expense was $23.5 million compared to income tax expense of $19.3 million for last year.

And our effective tax rate was 32.1% for fiscal 2016 compared to a 27.1% effective tax rate last year.

The increase in the effective tax rate was primarily due to the mix of earnings with increased domestic profit as a result of the US price increases being taxed at a higher rate than international profits.

Additionally, a tax benefit was recognized last year related to intercompany profit in certain jurisdictions.

Net income decreased 5.4% to $49 million compared to net income of $51.8 million in the year ago period.

Diluted earnings per share increased to $2.06 per share in the current fiscal year compared to $2.02 last year.

The unfavorable impacted diluted earnings per share resulting from the higher effective tax rate in fiscal 2016 as compared to fiscal 2015 was approximately $0.15 per diluted share.

Now turning to our balance sheet, cash at year end was $228.2 million as compared to $199.9 million last year.

We generated $74.6 million in cash flow from operations which allowed us, along with $40 million of borrowings on our revolving credit facility, to repurchase 48.7 million of shares under our share repurchase program.

In fiscal 2016 our teams once again did an outstanding job executing.

While sales were up $9.4 million or 7% in the fourth quarter accounts receivable decreased $3.1 million to $71.1 million as compared to last year.

Inventory decreased $8.3 million to $162.5 million.

Capital expenditures for the year were $8.1 million and depreciation and amortization expense was $13.2 million.

Let me now discuss our guidance for fiscal 2017.

Our plans are based upon the current challenging retail environment and volatile global economy and assume currency rates consistent with recent levels.

Our results may be materially affected by many factors such as changes in global economic conditions and consumer spending, fluctuations in foreign currency rates and various other causes.

In light of the foregoing for 2017 we anticipate our sales will be in the range of $585 million to $600 million.

We expect the first half sales performance to the below last year's levels in the mid-single digit range as retailers continue to focus on their inventory position.

As usual, we will be closely managing our expenses for the current year.

However, as Efraim mentioned, we will continue to invest appropriately in our business.

Fiscal 2017 will reflect the full-year impact of investments made in fiscal 2016, as well as additional investments to best position us for future growth.

This includes investing in connected watch initiatives and other innovations and an appropriate marketing spend to continue to both support and build our brand awareness.

Operating income is projected to be in the range of $65 million to $70 million.

We would expect our first-half operating income to be below the prior year based upon our expected first-half sales results.

Due to the projected mix of global pretax results, the estimated effective tax rate is expected to once again be 32%, and net income is planned to be in the range of approximately $43.3 million to $46.7 million.

We expect diluted earnings per share in fiscal 2017 to be in a range of approximately $1.85 to $2.00.

Capital expenditures for fiscal 2017 are estimated to be approximately $12 million.

The guidance we have provided assumes no unusual items for fiscal 2017.

We anticipate reporting an approximate $2 million pretax charge in the first quarter of fiscal 2017 for the vesting of stock awards and certain other compensation related to Rick Cote's requirement.

Therefore, this charge is excluded from the guidance as provided.

And in closing, I too would like to add a few comments about Rick Cote's retirement.

Since joining Movado in 2008, it has been my pleasure to work so closely with Rick in so many different aspects.

He is a great mentor and partner to me and I look forward to continuing to work with him as a director.

I wish Rick all the best in his upcoming retirement.

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

Thank you.

(Operator Instructions).

Oliver Chen, Cowen and Company.

Thank you.

Congrats on a great end in a tough environment.

And Rick, I will miss you as well.

It's been great working with you and looking forward to staying in touch.

We had a question regarding sell-in and sell-out.

The sellthroughs for several quarters have been outpacing your sell-in, so will this dynamic kind of mitigate over time in terms of what's happening in the wholesale channel?

And then also on the international side, this is a different question, but are there trends you could discern between the mainland Chinese customer versus the tourist Chinese customer and how is the Chinese customer impacting your portfolio overall in terms of which products or would you characterize some areas as being softer related to that cautious view?

Thanks.

Oliver, thank you.

I will take the first part of that question and then hand the part on China over to Ricardo.

We've continued to see an intense focus by retailers on inventory and as the environment continues to be challenging and we expect it to continue to be challenging, especially through the first half of the year, we expect that focus to continue both within the watch category and especially I think in the fashion watch category.

But I think overall retailers, especially department stores, are focusing on their inventory levels.

Thank you, Oliver.

As far as the Chinese consumers are concerned, we are seeing a pickup in the travel retail corridor, so we've actually done a number of initiatives on in-flight and we are in the process of doing more airport presentations, but I will tell you brands like Ferrari are doing extremely well.

In the traveling corridor, we've introduced new products that are attractive to this consumer that's traveling, buying, if you will, a souvenir.

They go back and they do the gifting.

So we've been seeing traveling Chinese consumers in Europe and seeing a pickup on some of these offerings.

Also, on our luxury portfolio, Movado also performing very well with this traveling consumer, which we are very happy with because, as we stated before, our business within mainland China is tough, but we did some initiatives on the travel retail side that are starting to get some traction, so we are very encouraged by that.

Okay.

And Efraim, your connected watch initiatives have been impressive and the product we've looked at has been innovative and well thought out in terms of consumer end design.

For investors and clients, where do you think connected watches should go as a percentage of your portfolio over time?

Do you have any thoughts on the magnitude of the size of that and potentially timing?

I know it's very early on this technology.

Sure.

So I wouldn't be able to answer what percentage it could be, but I do believe this is a quickly evolving category, but, again, it's a category that's going to get better as it goes on and technology and battery life and functionality improved to allow us to do what we do best, which is design beautiful product around this technology.

So I believe that you will see that intensify in the third and fourth quarter from our perspective, but really you are going to start seeing some really interesting things beginning next year.

And we are very encouraged by our ability to be able to play in that environment and believe that down the road connected product will play a significant part in our business, but, again, continuing to do what we do best, which is design beautifully branded product for the consumer with increased functionality.

Okay.

Best regards.

Thanks a lot.

Ed Yruma, KeyBanc Capital Markets.

Thanks so much for taking my question.

Just as a follow-up to Oliver's question on sell-in versus sellthrough, are there particular brands that are weak?

You mentioned some weakness in fashion watches, at least in sellthrough, is that maybe where some of the weakness is and if you could also help us understand how you characterize inventory in the channel today?

Thanks.

I will start with the beginning of that and I will then also turn it off to Ricardo to add to that.

I think the fashion watch category is particularly challenged in the US in the department store channel and that's an overall category phenomena.

So I don't think it's really -- in our case, actually, with particular brands, in fact, some of our brands we're very pleased with their results in beginning to grow marketshare.

Also significant for our fashion watch business is the Brazilian market, which we had very good results in last year, but given the political and economic environment, we know that those results will not be repeated this year and you read about that in the newspaper every day.

On the inventory, Ricardo, would you like to add something?

Yes, mostly, if you break it down by channels, the department store channel is probably the most challenged, but when you look at some of the chains, some of the destination locations, we are seeing that the consumer is -- the traffic is there and we are seeing that in a much healthier place.

And then you have, of course, the online phenomenon where you are seeing a lot of acceleration.

So I think it's the combination of the three, but mostly you are seeing in department stores the biggest inventory.

Got it.

And two other quick follow-ups.

I guess, first, how much have you baked into your fiscal 2017 numbers for both Edge and for connected?

And then, finally, what gives you confidence that performance in the business should improve in the back half?

Thank you.

So to answer both your questions, and you were a little breaking up, but I think I got it, we really believe still that our connected efforts will play a small role, but a little stronger role in our business in Q3 and Q4 as we begin to deliver product into our licensed brands that we are very excited about in collaboration with HP.

And there are several things that give us a little -- I wouldn't say confidence going into the second half, but a little more optimism about the second half.

And that's that we have a number of new product initiatives that we are really excited about in the second half of the year.

And quite frankly, I think in the first half of the year, retailers will focus more on their inventory metrics than in the second half of the year when consumers -- when the major holidays come along, purchasing patterns should improve and retailers then focus on also driving sales in addition to inventory optimization.

Great.

Thanks a lot and thanks very much, Rick.

Jeremy Hamblin, Dougherty & Company.

Good morning.

Thanks for taking my question.

Wanted to just get a little more granular on the first half of the year guidance.

And I think what I caught was you are expecting sales down mid-single digit for the first half of the year and then I think operating income to be down as well, but I don't think you provided a level on that.

In terms of where the split is coming from, it sounds like there's a few areas of weakness, the US department store channel, but also clearly international, whether it's Brazil, Middle East or China.

Can you just break down for us how much of that down mid-single digit is coming from the US business versus how much of that is being contributed from these international locales that are struggling?

I would say that the main part of that will come down from the US and the Brazilian market.

We are seeing the rest of our international business a bit more stable from that perspective.

Right, Ricardo?

Yes, correct.

Okay, thanks.

And I'm sorry, did you have any ability to give additional color on the magnitude of operating income being down on a year-over-year basis in the first half?

Are we thinking similar to that down mid-single digit or just down slightly?

Any additional color would be great.

Right.

No, unfortunately, we didn't provide color, but, as you know, the first half of our year is smaller than the back half, so when sales go down, it does impact the bottom line more significantly as we need to cover our operating expenses and other initiatives that we talked about.

Okay, great.

And then I wanted to come back to the Edge series and it sounds like you are very pleased with the launch of that and I think the feedback has been very strong.

Can you put some metrics behind how the launch of this -- and I realize it's only in 150 doors, so it's still early -- but how did the launch of this compare to when you did BOLD several years ago?

It's very similar in terms of the momentum that it generated and at even a more aspirational level, so we are really pleased with it.

We have also gotten some consumer research back on the type of consumer that is buying Edge and we are seeing a young affluent consumer purchasing this product, so we believe it has a lot of potential.

We have a lot of innovation and extension coming into that also in the second half of the year in Edge.

We showed those products to our customers at Basel and got a very positive reaction as well.

Okay, great.

Then one last one.

In terms of the buyback plans, you did quite a bit less in the fourth quarter than you had done in other quarters, but you did re-up or add $50 million here.

Is this now going to be a little more opportunistic?

How should we be thinking about the buyback and recognizing the timeframe is a little bit longer than the last one, which was really a 12-month program?

I will take part of that and perhaps Efraim or someone will jump in afterwards.

We did take advantage of our stock price the past 12 months or so and we were very aggressive I would say in the market buying back shares.

We thought that was a very good investment for us.

We are very bullish on our business.

So that plan was larger and did have a shorter expiration date by design.

The new plan is really more in line with what our prior years' plans have been, which was really to offset dilution.

So at this point, it's a $50 million program and an 18-month life.

And we, obviously, have a very strong cash position in the Company and I think that also allows us tremendous flexibility and opportunity as we enter, or as we operate in a volatile time and we can continue to invest in and grow our business from many perspectives.

So we did also announce today that we increased our dividend 18%, so we are pleased to return funds to shareholders also in that manner as well.

Right, and just a follow-up to that, to the question on funding the buyback, you used loan payable or loan to finance that since you have so much of your cash overseas.

Would we expect that to be the way that you would pay down that share buyback again?

You did pay back $5 million I think during the fourth quarter, but is that how you would fund the buyback going forward is potentially using a little more borrowings to do that?

I think in our current model where we are looking more to offset dilution, our US cash flow would be adequate to buy back the shares.

Understood.

Thanks for taking my questions.

Best of luck.

Frank Camma, Sidoti.

Good morning, guys.

A couple quick questions.

Could you just talk a little bit about the smart watches in your licensed portfolio?

Specifically, are there any specific brands that you find that may be more appealing for that technology?

Well, we actually got very good reaction across our brand portfolio in Basel from our customers that we previewed our connected watches to.

So it's really in every single brand and they are done very brand appropriately.

They do not appear to be smart watches if you didn't know it and they look -- a Tommy Hilfiger watch looks like a Tommy Hilfiger watch and a HUGO BOSS watch looks like a HUGO BOSS watch.

We are currently working on the apps that will coordinate with these products and we are excited about that effort as well and one that we are putting investment in as well.

Great.

I'm sorry if I missed this, but does your guidance include projected buybacks or exclude projected buybacks?

Our guidance reflects the buyback that we've already done this year in fiscal 2015, as well as our normal repurchases, which would be more of an offset to dilution for fiscal 2017.

Nothing unusual or we would have called it out.

Okay.

And just the last thing is on your CapEx.

I think you said $12 million, which obviously seems a little bit above your historical trend.

I was just wondering is that sort of some of those investments that you mentioned.

No, most of the CapEx would be related to infrastructure type things like replacing servers, refreshing our stores, shop-in-shops, things like that, not necessarily anything related to our wearables or other initiatives that we are talking about.

Okay.

So it's just sort of a timing -- because it is a little bit above where you would typically spend -- it's sort of a timing issue on refreshing the stores?

Well, even this year, quite honestly, Frank, I know you are somewhat new to the picture, it was low this year, lower than our historical pattern.

A lot of that really was us looking at our Chinese business and slowing down some of the shop-in-shops we built there as a result of our refocus on priority doors and owning our own concessions and things like that in that market.

Okay, great.

Thanks.

That's all I have right now.

And with no further questions in the queue, I would like to turn the call back over to management for any additional or closing remarks.

Hi, I would like to really ask -- I would like Rick to actually say a few words and then I will come on and conclude the call.

Thanks, Efraim.

It has certainly been a pleasure working with our long-term investors and market analysts that cover and have covered Movado Group over my 16-year career.

We have always worked to be informative and transparent in our disclosures and have many times been the first in our category to highlight market trends.

Movado Group has transformed itself over the years and I believe it is in excellent position with its talented global team of employees, its world-class infrastructure and brands to continue delivering new sustainable levels of performance.

I look forward to my continued participation in helping Movado achieve its goals in my new role as a non-management member of the Board of Directors.

I am also appreciative of the terrific group of global employees that continue to drive excellence in performance with our global customers, consumers and business partners around the world.

Our employees and our culture make Movado Group such a terrific and enjoyable place to work.

I retire knowing the business is in great hands with Efraim, Ricardo, Sallie and our entire leadership team.

Also a special thanks to Efraim, who has been a terrific partner, mentor and leader for me.

Thanks everyone for listening to me for 16 years.

Okay, well, thank you very much, Rick and I think that really says it all about how strongly we feel about our Company and I would really like to thank Rick for his help over the last 16 years, but as well in helping us plan our succession planning as effectively and seamlessly as we are now ready to do.

So again -- and thank you all for participating with us today.

Again, that does conclude today's presentation.

We thank you for your participation.