MOV

• Strategic Priorities: Management reiterated four key priorities: putting the consumer at the center, driving innovation with trend-right products, connecting via digital storytelling, and driving profitability through higher ASPs and optimized assortments.
• Financial Momentum: Sales increased 4.9% to $169.8 million in Q2. Adjusted operating profit nearly doubled to $15.1 million from $7.0 million year-over-year. Adjusted EPS rose to $0.54 from $0.23.
• Gross Margin Expansion: Gross margin improved significantly to 59.4% (from 54.1%). Excluding one-time IEPA duty refunds, margin improved by 340 basis points to 57.5%, driven by favorable sales mix, strategic pricing, and reduced promotional activity.
• Brand Performance:
  • Movado: Strong sell-through for Baby Face Mini Strap Watch; celebrating 145th anniversary with new ambassador partnerships (Ludacris, Christian McCaffrey, etc.).
  • Coach: Strong momentum with Gen Z consumers driven by Sammy and Iris collections.
  • Tommy Hilfiger: Success with TH Oxford and Bryant men's chronographs; women's watch penetration increasing.
  • Lacoste: Continued success of LC 33 collection and Metropole jewelry.
  • Calvin Klein: Sophisticated square watch collection sold out quickly; new 'Shape' cushion shape collection introduced.
  • Boss: Focus on Grand Prix and Sky Traveler hero collections; introducing Archer jewelry for men.
  • Olivia Burton: Sales up 23%; strategy focused on UK and US markets with small, shaped watches.
• New Partnership: Expanding partnership with Tapestry to launch Kate Spade watches beginning next fiscal year.
• Balance Sheet: Ended quarter with $212 million in cash and no debt. Returned over $16 million to shareholders via dividends YTD.

• Discontinuation of Annual Outlook: Management announced it will discontinue providing an annual outlook to focus on long-term strategy execution.
• Remainder of Fiscal Year Guidance: The company expects top-line growth in the mid-single-digit range for the remainder of the fiscal year.
• Margin Guidance: Second-half gross margin is expected to be in the range of 55% to 56%.
• Context on Guidance: The lower second-half margin guidance compared to Q2 is attributed to the absence of the one-time IEPA tariff benefit that boosted Q2 margins, as well as higher shipping costs due to fuel surcharges and e-commerce volume.

The transcript does not provide a breakdown of financial performance by specific product segment (e.g., specific brand lines or watch vs. jewelry). Financial results are reported at the consolidated company level and by geography (U.S. and International) rather than by product segment.

• Geopolitical Headwinds: Ongoing conflict in the Middle East continues to negatively impact international tourism-dependent markets, causing declines in those regions.
• Shipping Cost Inflation: Higher shipping costs, driven by fuel surcharges related to geopolitical tensions and increased e-commerce logistics (e.g., Mother's Day), are pressuring margins.
• Transitory Nature of Benefits: The significant gross margin improvement in Q2 was partially driven by one-time IEPA duty refunds and legacy inventory benefits, which are not expected to recur in the second half of the fiscal year.

Q: Analyst asked about the drivers of the 340 bps gross margin expansion excluding IEPA benefits, questioning if it was structural (mix/pricing) or transitory (inventory/tariffs), and how this impacts H2 guidance.

A: CEO explained the improvement is a mix of structural factors like better pricing/ASP and transitory benefits from legacy inventory that had accrued IEPA tariffs which were reversed when tariffs were repealed. He confirmed that the H2 margin guidance of 55-56% reflects the removal of these one-time inventory benefits, returning to current inventory cost structures.

Q: Analyst inquired about the significance of higher shipping costs noted in the quarter, asking if rates are locked in or renegotiable.

A: CFO clarified that costs rose due to fuel surcharges linked to Middle East conflicts and higher e-commerce shipping volumes (specifically around Mother's Day). She stated these factors are already factored into the H2 outlook, implying limited immediate flexibility to offset these specific cost increases despite tight operational management.

Q: Analyst requested commentary on broader trends in the fashion watch and jewelry category and how they shape strategy.

A: CEO highlighted a resurgence in traditional watches among younger consumers (Gen Z/Millennials) who view watches as accessories/fashion statements rather than just wearables. He noted strong momentum in the U.S., Mexico, Brazil, and India, suggesting that as these consumers mature and gain income, they will move into higher-priced segments, validating the company's innovation and storytelling strategy.