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Steve Madden Announces Second Quarter Results

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Steve Madden (NASDAQ:SHOO), a leading designer and marketer of fashion
footwear and accessories for women, men and children, today announced
financial results for the second quarter ended June 30, 2018.

Amounts referred to as "Adjusted" exclude the items that are
described under the heading "Non-GAAP Adjustments."

For the Second Quarter 2018:

  • Net sales increased 5.8% to $395.8 million compared to $374.1 million
    in the same period of 2017.
  • Gross margin was 37.3%. Gross margin in the second quarter of 2017 was
    37.3%. Adjusted gross margin in the second quarter of 2017 was 37.4%.
  • Operating expenses as a percentage of sales were 27.4% compared to
    26.6% of sales in the same period of 2017. Adjusted operating expenses
    as a percentage of sales were 26.8% compared to 26.4% in the same
    period of 2017.
  • Operating income totaled $41.6 million, or 10.5% of net sales,
    compared to $41.9 million, or 11.2% of net sales, in the same period
    of 2017. Adjusted operating income was $44.0 million, or 11.1% of net
    sales, compared to Adjusted operating income of $43.1 million, or
    11.5% of net sales, in the same period of 2017.
  • Net income was $32.4 million, or $0.56 per diluted share, compared to
    $29.0 million, or $0.50 per diluted share, in the prior year's second
    quarter. Adjusted net income was $35.2 million, or $0.61 per diluted
    share, compared to $29.7 million, or $0.51 per diluted share, in the
    prior year's second quarter.

Edward Rosenfeld, Chairman and Chief Executive Officer, commented, "We
are pleased with our second quarter results, which were in line with our
expectations. Our flagship Steve Madden brand was the highlight in the
quarter, with strong growth in the wholesale channel in both domestic
and international markets as well as a return to positive comparable
store sales growth in the retail channel. In addition, the Dolce Vita
and Blondo brands also recorded strong percentage increases on both the
top and bottom lines. Looking ahead, we remain on track to achieve our
sales and Adjusted EPS guidance for 2018, and we are confident that our
brands and our business model position the Company for sustainable
growth for years to come."

Second Quarter 2018 Segment Results

Net sales for the wholesale business increased 5.2% to $321.4 million in
the second quarter of 2018, with gains in both the wholesale footwear
and wholesale accessories businesses. Gross margin in the wholesale
business was 31.4%. Gross margin in the wholesale business in last
year's second quarter was 31.6%. Adjusted gross margin in the wholesale
business in last year's second quarter was 31.7%. The modest decline in
wholesale gross margin compared to the prior year's second quarter
Adjusted gross margin was the result of a customer mix shift in the
Company's private label footwear business.

Retail net sales in the second quarter increased 8.5% to $74.3 million
compared to $68.5 million in the second quarter of the prior year. Same
store sales increased 1.6% in the quarter. Retail gross margin rose to
62.9% in the second quarter of 2018 as compared to 62.6% in the second
quarter of the prior year.

The Company ended the quarter with 208 company-operated retail
locations, including six Internet stores, as well as 45 company-operated
concessions in international markets.

The Company's effective tax rate for the second quarter of 2018 was
23.9% compared to 31.9% in the second quarter of 2017. On an Adjusted
basis, the effective tax rate in the second quarter of 2018 was 21.7%
compared to 32.0% in the prior year period. The reduction in the
Company's effective tax rate compared to the prior year was primarily a
result of the impact of the Tax Cuts and Jobs Act.

Balance Sheet and Cash Flow

During the second quarter of 2018, the Company repurchased 192,936
shares of the Company's common stock for approximately $9.4 million,
which includes shares acquired through the net settlement of employee
stock awards.

As of June 30, 2018, cash, cash equivalents, and current and non-current
marketable securities totaled $257.4 million.

Regular Dividend

The Company's Board of Directors declared a quarterly cash dividend of
$0.20 per share. The dividend will be paid on September 28, 2018, to
shareholders of record at the close of business on September 18, 2018.

Company Outlook

For fiscal year 2018, the Company continues to expect net sales will
increase 5% to 7% over net sales in 2017. The Company expects diluted
EPS for fiscal year 2018 will be in the range of $2.51 to $2.58. The
Company expects Adjusted diluted EPS for fiscal year 2018 will be in the
range of $2.60 to $2.67.

Non-GAAP Adjustments

Amounts referred to as "Adjusted" exclude the items below.

For the second quarter 2018:

  • $1.1 million pre-tax ($0.8 million after-tax) expense in connection
    with the integration of the Schwartz & Benjamin acquisition and the
    related restructuring, included in operating expenses.
  • $1.2 million pre-tax ($0.9 million after-tax) expense in connection
    with a warehouse consolidation, included in operating expenses.
  • $1.0 million tax expense in connection with the impairment of the
    preferred interest investment in Brian Atwood Italia Holding, LLC
    recorded in fourth quarter 2017.

For the second quarter 2017:

  • $0.4 million pre-tax ($0.3 million after-tax) in non-cash expense
    associated with the purchase accounting fair value adjustment of
    inventory acquired in the Schwartz & Benjamin acquisition, included in
    cost of sales.
  • $0.8 million pre-tax ($0.5 million after-tax) in expense in connection
    with the integration of the Schwartz & Benjamin acquisition and the
    related restructuring, included in operating expenses.

For the fiscal year 2018:

  • $2.8 million pre-tax ($2.1 million after-tax) expense in connection
    with a provision for legal charges, included in operating expenses.
  • $1.8 million pre-tax ($1.3 million after-tax) expense in connection
    with the integration of the Schwartz & Benjamin acquisition and the
    related restructuring, included in operating expenses.
  • $1.2 million pre-tax ($0.9 million after-tax) expense in connection
    with a warehouse consolidation, included in operating expenses.
  • $1.0 million tax expense in connection with the impairment of the
    preferred interest investment in Brian Atwood Italia Holding, LLC
    recorded in fourth quarter 2017.

Reconciliations of amounts on a GAAP basis to Adjusted amounts are
presented in the Non-GAAP Reconciliation tables at the end of this
release and identify and quantify all excluded items.

Conference Call Information

Interested stockholders are invited to listen to the second quarter
earnings conference call scheduled for today, July 31, 2018, at 8:30
a.m. Eastern Time. The call will be broadcast live over the Internet and
can be accessed by logging onto http://www.stevemadden.com.
An online archive of the broadcast will be available within one hour of
the conclusion of the call and will be accessible for a period of 30
days following the call. Additionally, a replay of the call can be
accessed by dialing 1-844-512-2921 (U.S.) and 1-412-317-6671
(international), passcode 9506885, and will be available until August
31, 2018.

About Steve Madden

Steve Madden designs, sources and markets fashion-forward footwear and
accessories for women, men and children. In addition to marketing
products under its own brands including Steve
Madden
®, Dolce
Vita
®, Betsey
Johnson
®, Blondo®,
Report®,
Brian
Atwood
®, Cejon®, Mad Love® and Big Buddha®, Steve Madden is a
licensee of various brands, including Kate Spade®, Superga®
and Anne Klein®. Steve Madden also designs and sources products under
private label brand names for various retailers. Steve Madden's
wholesale distribution includes department stores, specialty stores,
luxury retailers, national chains and mass merchants. Steve Madden also
operates 208 retail stores (including Steve Madden's six Internet
stores). Steve Madden licenses certain of its brands to third parties
for the marketing and sale of certain products, including ready-to-wear,
outerwear, intimate apparel, eyewear, hosiery, jewelry, fragrance,
luggage and bedding and bath products. For local store information and
the latest Steve Madden booties, pumps, men's and women's boots, dress
shoes, sandals and more, visit http://www.stevemadden.com.

Safe Harbor

This press release and oral statements made from time to time by
representatives of the Company contain certain "forward looking
statements" as that term is defined in the federal securities laws. The
events described in forward looking statements may not occur. Generally,
these statements relate to business plans or strategies, projected or
anticipated benefits or other consequences of the Company's plans or
strategies, projected or anticipated benefits from acquisitions to be
made by the Company, or projections involving anticipated revenues,
earnings or other aspects of the Company's operating results. The words
"may," "will," "expect," "believe," "anticipate," "project," "plan,"
"intend," "estimate," and "continue," and their opposites and similar
expressions are intended to identify forward looking statements. The
Company cautions you that these statements concern current expectations
about the Company's future results and condition and are not guarantees
of future performance or events and are subject to a number of
uncertainties, risks and other influences, many of which are beyond the
Company's control, that may influence the accuracy of the statements and
the projections upon which the statements are based. Factors which may
affect the Company's results include, but are not limited to, the risks
and uncertainties discussed in the Company's Annual Report on Form 10-K,
Quarterly Reports on Form 10-Q and Current Reports on Form 8-K filed
with the Securities and Exchange Commission. Any one or more of these
uncertainties, risks and other influences could materially affect the
Company's results of operations and financial condition and whether
forward looking statements made by the Company ultimately prove to be
accurate and, as such, the Company's actual results, performance and
achievements could differ materially from those expressed or implied in
these forward looking statements. The Company undertakes no obligation
to publicly update or revise any forward looking statements, whether as
a result of new information, future events or otherwise.

     

STEVEN MADDEN, LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF
OPERATIONS DATA



(In thousands, except per share amounts)



(Unaudited)

 
Three Months Ended

June 30, 2018

 

June 30, 2017

 
Net sales $ 395,753 $ 374,148
Cost of sales   247,979   234,751
Gross profit 147,774 139,397
Commission and licensing fee income, net 2,244 2,166
Operating expenses   108,434   99,666
Income from operations 41,584 41,897
Interest and other income, net   1,033   708
Income before provision for income taxes 42,617 42,605
Provision for income taxes   10,172   13,582
Net income 32,445 29,023
Net income attributable to noncontrolling interest   35   59
Net income attributable to Steven Madden, Ltd. $ 32,410 $ 28,964
 
 
Basic income per share $ 0.60 $ 0.53
Diluted income per share $ 0.56 $ 0.50
 
Basic weighted average common shares
outstanding 54,454 55,161
Diluted weighted average common shares
outstanding 57,505 57,750
 
           

STEVEN MADDEN, LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEET DATA



(In thousands)

 
As of
June 30, 2018 December 31, 2017 June 30, 2017
(Unaudited) (Unaudited)
Cash and cash equivalents $ 190,985 $ 181,214 $ 99,411
Marketable securities (current & non current) 66,449 93,550 99,195
Accounts receivable, net 285,318 240,909 255,260
Inventories 133,627 110,324 121,213
Other current assets 37,772 49,044 49,210
Property and equipment, net 67,378 71,498 74,129
Goodwill and intangibles, net 295,454 299,842 305,155
Other assets   10,659   10,780   9,091
Total assets $ 1,087,642 $ 1,057,161 $ 1,012,664
 
Accounts payable $ 100,463 $ 66,955 $ 101,447
Contingent payment liability (current & non current) 3,000 10,000 24,923
Other current liabilities 130,963 132,657 99,373
Other long term liabilities 22,923 38,617 37,191
Total Steven Madden, Ltd. stockholders' equity 823,622 802,821 748,036
Noncontrolling interest   6,671   6,111   1,694
Total liabilities and stockholders' equity $ 1,087,642 $ 1,057,161 $ 1,012,664
 
     

STEVEN MADDEN, LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED CASH FLOW DATA



(In thousands)



(Unaudited)

 

 
Six Months Ended

June 30, 2018

June 30, 2017

 
 
Net cash provided by operating activities $ 44,927 $ 49,474
 

Investing Activities

Purchases of property and equipment (5,251 ) (7,672 )
Sales of marketable securities, net 24,896 11,641
Repayment of notes receivable - 221
Acquisition, net of cash acquired   -     (17,396 )
Net cash provided by (used in) investing activities 19,645 (13,206 )
 

Financing Activities

Common stock share repurchases for treasury (35,102 ) (63,941 )
Payment of contingent liability (7,000 ) (5,321 )
Proceeds from exercise of stock options 11,115 5,649
Cash dividends paid   (23,474 )   -  
Net cash used in financing activities (54,461 ) (63,613 )
 
Effect of exchange rate changes on cash and cash equivalents (340 ) 641
 
Net decrease in cash and cash equivalents 9,771 (26,704 )
 
Cash and cash equivalents - beginning of period 181,214 126,115
   
Cash and cash equivalents - end of period $ 190,985   $ 99,411  
 

STEVEN MADDEN, LTD. AND SUBSIDIARIES

NON-GAAP RECONCILIATION

(In thousands, except per share amounts)

(Unaudited)

The Company uses non-GAAP financial information to evaluate its
operating performance and in order to represent the manner in which the
Company conducts and views its business. Additionally, the Company
believes the information assists investors in comparing the Company's
performance across reporting periods on a consistent basis by excluding
items that are not indicative of its core business. The non-GAAP
financial information is provided in addition to, and not as an
alternative to, the Company's reported results prepared in accordance
with GAAP.

                       

Table 1 - Reconciliation of GAAP gross
profit to Adjusted gross profit

             
Three Months Ended Six Months Ended
June 30, 2017 June 30, 2017

Consolidated

GAAP gross profit $ 139,397 $ 272,115
 
Non-cash expense associated with the purchase accounting fair value
adjustment of inventory acquired in the Schwartz & Benjamin
acquisition
  413     1,653  
 
Adjusted gross profit $ 139,810 $ 273,768
 

Wholesale

GAAP gross profit $ 96,519 $ 197,950
 
Non-cash expense associated with the purchase accounting fair value
adjustment
of inventory acquired in the Schwartz & Benjamin acquisition   413     1,653  
 
Adjusted gross profit           $ 96,932             $ 199,603  
                         

Table 2 - Reconciliation of GAAP operating
expenses to Adjusted operating expenses

Three Months Ended Three Months Ended Six Months Ended Six Months Ended
June 30, 2018 June 30, 2017 June 30, 2018 June 30, 2017
 
GAAP operating expenses $ 108,434 $ 99,666 $ 216,269 $ 205,531
 
Expense in connection with provision for legal charges - - (2,837 ) -
 
Expense in connection with the integration of the Schwartz & Benjamin
acquisition and the related restructuring (1,131 ) (767 ) (1,381 ) (767 )
 
Expense in connection with a warehouse consolidation (1,241 ) - (1,241 ) -
 
Bad debt expense associated with the Payless ShoeSource bankruptcy   -     -     -     (7,500 )
 
Adjusted operating expenses     $ 106,063       $ 98,899       $ 210,811       $ 197,264  
 
 

Table 3 - Reconciliation of GAAP operating
income to Adjusted operating income

    Three Months Ended     Three Months Ended     Six Months Ended     Six Months Ended
June 30, 2018 June 30, 2017 June 30, 2018 June 30, 2017
 
GAAP operating income $ 41,584 $ 41,897 $ 78,141 $ 72,676
 
Non-cash expense associated with the purchase accounting fair value
adjustment of inventory acquired in the Schwartz & Benjamin
acquisition
- 413 - 1,653
 
Expense in connection with provision for legal charges - - 2,837 -
 
Expense in connection with the integration of the Schwartz & Benjamin
acquisition and the related restructuring 1,131 767 1,381 767
 
Expense in connection with a warehouse consolidation 1,241 - 1,241 -
 
Bad debt expense associated with the Payless ShoeSource bankruptcy   -     -   -     7,500
 
Adjusted operating income       $ 43,956       $ 43,077     $ 83,600       $ 82,596
                           
 

Table 4 - Reconciliation of GAAP provision
for income taxes to Adjusted provision for income taxes

Three Months Ended Three Months Ended Six Months Ended Six Months Ended
June 30, 2018 June 30, 2017 June 30, 2018 June 30, 2017
 
GAAP provision for income taxes $ 10,172 $ 13,582 $ 18,128 $ 24,523
 
Tax effect of non-cash expense associated with the purchase
accounting fair
value adjustment of inventory acquired in the Schwartz & Benjamin
acquisition
- 153 - 578
 
Tax effect of expense in connection with provision for legal charges - - 702 -
 
Tax effect of expense in connection with the integration of the
Schwartz &
Benjamin acquisition and the related restructuring 298 284 360 284
 
Tax effect of expense in connection with a warehouse consolidation 327 - 327 -
 
Tax expense in connection with the impairment of the preferred
interest
investment in Brian Atwood Italia Holiding, LLC recorded in fourth
quarter 2017 (1,028 ) - (1,028 ) -
 
Tax effect of bad debt expense associated with the Payless ShoeSource
bankruptcy   -     -   -     964
 
Adjusted provision for income taxes       $ 9,769       $ 14,019     $ 18,489       $ 26,349
                           
 

Table 5 - Reconciliation of GAAP net income
to Adjusted net income

Three Months Ended Three Months Ended Six Months Ended Six Months Ended
June 30, 2018 June 30, 2017 June 30, 2018 June 30, 2017
 
GAAP net income attributable to Steven Madden, Ltd. $ 32,410 $ 28,964 $ 61,083 $ 49,122
 
After-tax impact of non-cash expense associated with the purchase
accounting fair value adjustment of inventory acquired in the
Schwartz &
Benjamin acquisition - 260 - 1,075
 
After-tax impact of expense in connection with provision for legal
charges
- - 2,135 -
 
After-tax impact of expense in connection with the integration of
the Schwartz &
Benjamin acquisition and the related restructuring 833 483 1,021 483
 
After-tax impact of expense in connection with a warehouse
consolidation
914 - 914 -
 
Tax expense in connection with the impairment of the preferred
interest
investment in Brian Atwood Italia Holiding, LLC recorded in fourth
quarter 2017 1,028 - 1,028 -
 
After-tax impact of bad debt expense associated with the Payless
ShoeSource bankruptcy - - - 6,536
       
Adjusted net income attributable to Steven Madden, Ltd. $ 35,185 $ 29,707 $ 66,181 $ 57,216
 
GAAP diluted income per share $ 0.56 $ 0.50 $ 1.06 $ 0.85
Adjusted diluted income per share       $ 0.61       $ 0.51     $ 1.15       $ 0.99

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