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Steve Madden Announces Record Second Quarter 2019 Results

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LONG ISLAND CITY, N.Y., July 30, 2019 (GLOBE NEWSWIRE) -- 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 and six months ended June 30, 2019.

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

For the Second Quarter 2019:

  • Net sales increased 12.4% to $445.0 million compared to $395.8 million in the same period of 2018.
  • Gross margin was 37.2% compared to 37.3% in the same period last year, a decrease of 10 basis points.
  • Operating expenses as a percentage of net sales were 26.9% compared to 27.4% of net sales in the same period of 2018.  Adjusted operating expenses as a percentage of net sales were 26.8% compared to 26.8% of net sales in the same period of 2018.
  • Income from operations totaled $44.6 million, or 10.0% of net sales, compared to $41.6 million, or 10.5% of net sales, in the same period of 2018.  Adjusted income from operations was $49.1 million, or 11.0% of net sales, compared to Adjusted income from operations of $44.0 million, or 11.1% of net sales, in the same period of 2018.
  • Net income attributable to Steven Madden, Ltd. was $36.6 million, or $0.44 per diluted share, compared to $32.4 million, or $0.38 per diluted share, in the prior year's second quarter.  Adjusted net income attributable to Steven Madden, Ltd. was $39.5 million, or $0.47 per diluted share, compared to $35.2 million, or $0.41 per diluted share, in the prior year's second quarter.

Edward Rosenfeld, Chairman and Chief Executive Officer, commented, "We delivered a strong second quarter, with net sales growing 12% and Adjusted diluted EPS increasing 16% compared to the prior year period.  Our flagship Steve Madden brand was the highlight, with strong growth in the wholesale footwear and accessories businesses in both domestic and international markets, as well as exceptional growth on stevemadden.com.  Looking ahead, we remain on track to achieve our sales and Adjusted diluted EPS guidance for 2019 despite an estimated incremental headwind of approximately $0.05 per share related to the increase in the tariff on List 3 products from China from 10% to 25% in effect as of May 10.  Based on the strength of our brands and our business model – combined with our consistency in delivering on-trend product that resonates with consumers – we are confident that we can continue to drive sales and earnings growth and create value for shareholders over the long term."

Second Quarter 2019 Segment Results

Net sales for the wholesale business increased 13.1% to $363.5 million in the second quarter of 2019, with strong growth in both the wholesale footwear and accessories businesses.  Wholesale footwear net sales rose 13.5% as robust growth in Steve Madden, the addition of Anne Klein and a strong increase in the Company's private label business (excluding Payless ShoeSource) more than offset not recognizing sales to Payless ShoeSource in the current period.  Wholesale accessories net sales increased 11.5% driven by a robust gain in Steve Madden handbags as well as strong growth in the private label business.  Gross margin in the wholesale business increased to 32.1% compared to 31.4% in last year's second quarter driven by improvement in wholesale footwear.

Retail net sales in the second quarter rose 9.6% to $81.5 million compared to $74.3 million in the second quarter of the prior year.  Same store sales increased 6.2% in the quarter driven by strong performance in the Company's e-commerce business.  Retail gross margin declined to 59.7% in the second quarter of 2019 compared to 62.9% in the second quarter of the prior year due primarily to inventory liquidation and markdowns in connection with the wind-down of the Company's joint venture relationship in China as well as aggressive liquidation of slow-moving inventory in the Company's North American retail operations.

The Company ended the quarter with 224 company-operated retail locations, including six internet stores, as well as 31 company-operated concessions in international markets.

The Company's effective tax rate for the second quarter of 2019 was 21.3% compared to 23.9% in the second quarter of 2018.  On an Adjusted basis, the effective tax rate was 22.4% compared to 21.7% in the second quarter of the prior year.

Balance Sheet and Cash Flow

During the second quarter of 2019, the Company repurchased 1.1 million shares of the Company's common stock for approximately $34.0 million, which includes shares acquired through the net settlement of employee stock awards.

As of June 30, 2019, cash, cash equivalents and current marketable securities totaled $248.8 million.

Quarterly Dividend

The Company's Board of Directors approved a quarterly cash dividend of $0.14 per share.  The dividend will be paid on September 27, 2019, to stockholders of record at the close of business on September 17, 2019.

Fiscal Year 2019 Outlook

For fiscal year 2019, the Company continues to expect net sales will increase 5% to 7% over net sales in 2018.  The Company now expects diluted EPS for fiscal year 2019 will be in the range of $1.74 to $1.82.  The Company continues to expect Adjusted diluted EPS for fiscal year 2019 will be in the range of $1.78 to $1.86, despite an estimated incremental headwind of approximately $0.05 per share related to the increase in the tariff on List 3 products from 10% to 25% in effect as of May 10.

Non-GAAP Adjustments

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

For the second quarter 2019:

  • $0.1 million pre-tax ($0.1 million after-tax) recovery associated with the Payless ShoeSource bankruptcy, included in commission and licensing fee income, net and $1.7 million pre-tax ($1.6 million after-tax) recovery associated with the Payless ShoeSource bankruptcy, included in operating expenses.
  • $1.5 million pre-tax ($1.2 million after-tax) expense in connection with a provision for early lease termination charges, included in operating expenses.
  • $0.7 million pre-tax ($0.5 million after-tax) expense in connection with a divisional headquarters relocation, included in operating expenses.
  • $4.1 million pre-tax ($3.0 million after-tax) non-cash expense associated with the impairment of the Brian Atwood trademark.

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 in 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 fiscal year 2019:

  • $0.3 million pre-tax ($0.3 million after-tax) recovery, net of bad debt expense, associated with the Payless ShoeSource bankruptcy.
  • $2.3 million pre-tax ($1.7 million after-tax) in expense expected to be incurred in connection with early lease termination charges.
  • $0.7 million pre-tax ($0.5 million after-tax) expense in connection with a divisional headquarters relocation.
  • $4.1 million pre-tax ($3.0 million after-tax) non-cash expense associated with the impairment of the Brian Atwood trademark.
  • $1.9 million pre-tax ($1.4 million after-tax) net benefit associated with the change in a contingent liability and the acceleration of amortization related to the termination of the Kate Spade license agreement as of December 31, 2019.

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 30, 2019, at 8:30 a.m. Eastern Time.  The call will be broadcast live over the Internet and can be accessed by logging onto http://stevemadden.gcs-web.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.

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 Anne Klein®, Kate Spade®,  Superga® and DKNY®.  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 224 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, 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, fashion sneakers, 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   Six Months Ended
  June 30, 2019   June 30, 2018   June 30, 2019   June 30, 2018
               
Net sales $ 444,974     $ 395,753     $ 855,914     $ 784,767  
Cost of sales 279,629     247,979       533,572     496,260  
Gross profit 165,345     147,774       322,342     288,507  
Commission and licensing fee income, net 3,147     2,244       4,374     5,903  
Operating expenses 119,809     108,434       233,373     216,269  
Impairment charge 4,050           4,050      
Income from operations 44,633     41,584       89,293     78,141  
Interest and other income, net 1,262     1,033       2,454     1,630  
Income before provision for income taxes 45,895     42,617       91,747     79,771  
Provision for income taxes 9,784     10,172       20,371     18,128  
Net income 36,111     32,445       71,376     61,643  
Less: net (loss)/income attributable to noncontrolling interest       (461 )
    35         279       560    
Net income attributable to Steven Madden, Ltd. $ 36,572     $ 32,410     $   71,097     $ 61,083  
                         
Basic income per share $ 0.46     $ 0.40     $ 0.89     $ 0.75  
                                         
Diluted income per share $ 0.44     $ 0.38     $ 0.85     $ 0.71  
                                               
Basic weighted average common shares outstanding       79,951           81,681       80,241       81,885    
                                                     
Diluted weighted average common shares outstanding       83,869           86,258       84,064       86,123    
                                                     
Cash dividends declared per common share  $   0.14      $ 0.13      $   0.28      $ 0.26    


STEVEN MADDEN, LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEET DATA

(In thousands)

      As of    
  June 30, 2019   December 31, 2018   June 30, 2018
  (Unaudited)       (Unaudited)
           
Cash and cash equivalents $ 212,664     $ 200,031     $ 190,985  
Marketable securities (current & non-current) 36,096     66,968     66,449  
Accounts receivable, net 306,636     266,452     285,318  
Inventories 146,120     137,247     133,627  
Other current assets 39,287     32,427     37,772  
Property and equipment, net 61,654     64,807     67,378  
Operating lease right-of-use assets 179,320          
Goodwill and intangibles, net 286,129     291,423     295,454  
Other assets 13,654     13,215     10,659  
Total assets $ 1,281,560     $ 1,072,570     $ 1,087,642  
           
Accounts payable $ 107,436     $ 79,802     $ 100,463  
Contingent payment liability (current & non-current)     3,000     3,000  
Operating leases (current & non-current) 193,295          
Other current liabilities 136,131     141,887     130,963  
Other long-term liabilities 17,142     33,199     22,923  
Total Steven Madden, Ltd. stockholders' equity 818,354     805,814     823,622  
Noncontrolling interest 9,202     8,868     6,671  
Total liabilities and stockholders' equity $ 1,281,560     $ 1,072,570     $ 1,087,642  


STEVEN MADDEN, LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED CASH FLOW DATA

(In thousands)

(Unaudited)

  Six Months Ended
  June 30, 2019   June 30, 2018
       
Net cash provided by operating activities $ 59,761     $ 44,927  
       
Investing Activities      
Purchases of property and equipment (6,214 )   (5,251 )
Sales of marketable securities, net 32,062     24,896  
Net cash provided by investing activities 25,848     19,645  
       
Financing Activities      
Common stock share repurchases for treasury (51,156 )   (35,102 )
Investment of noncontrolling interest 1,283      
Distribution of noncontrolling interest earnings (1,113 )    
Payment of contingent liability     (7,000 )
Proceeds from exercise of stock options 1,799     11,115  
Cash dividends paid (23,987 )   (23,474 )
Net cash used in financing activities (73,174 )   (54,461 )
       
Effect of exchange rate changes on cash and cash equivalents 198     (340 )
       
Net increase in cash and cash equivalents 12,633     9,771  
       
Cash and cash equivalents - beginning of period 200,031     181,214  
       
Cash and cash equivalents - end of period $ 212,664     $ 190,985  


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 licensing and commission income, net to Adjusted licensing and commission income, net
          Three Months
Ended
          Six Months
Ended
          June 30, 2019           June 30, 2019
                       
GAAP commission and licensing fee income, net         $ 3,147             $ 4,374  
                       
(Recovery)/bad debt expense, net of recovery, associated with the Payless ShoeSource bankruptcy         (143 )           1,409  
                       
Adjusted licensing and commission income, net         $ 3,004             $ 5,783  


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, 2019   June 30, 2018   June 30, 2019   June 30, 2018
               
GAAP operating expenses $ 119,809     $ 108,434     $ 233,373     $ 216,269  
               
Recovery associated with the Payless ShoeSource bankruptcy 1,668         1,668      
               
Expense in connection with provision for early lease termination charges (1,543 )       (2,292 )    
               
Expense in connection with a divisional headquarters  relocation (669 )       (669 )    
               
Net benefit in connection with the change in a contingent liability and the acceleration of amortization related to the termination of the Kate Spade license agreement         1,868      
               
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 )       (1,381 )
               
Expense in connection with a warehouse consolidation     (1,241 )       (1,241 )
               
Adjusted operating expenses $ 119,265     $ 106,063     $ 233,948     $ 210,811  


Table 3 - Reconciliation of GAAP income from operations to Adjusted income from operations
  Three Months
Ended
  Three Months
Ended
  Six Months
Ended
  Six Months
Ended
  June 30, 2019   June 30, 2018   June 30, 2019   June 30, 2018
               
GAAP income from operations $ 44,633     $ 41,584     $ 89,293     $ 78,141  
               
Recovery, net of bad debt expense, associated with the Payless ShoeSource bankruptcy (1,811 )       (259 )    
               
Expense in connection with provision for early lease termination charges 1,543         2,292      
               
Expense in connection with a divisional headquarters relocation 669         669      
               
Net benefit in connection with the change in a contingent liability and the acceleration of amortization related to the termination of the Kate Spade license agreement
        (1,868 )    
               
Impairment of the Brian Atwood trademark 4,050         4,050      
               
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         1,381  
               
Expense in connection with a warehouse consolidation     1,241         1,241  
               
Adjusted income from operations $ 49,084     $ 43,956     $ 94,177     $ 83,600  


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, 2019   June 30, 2018   June 30, 2019   June 30, 2018
               
GAAP provision for income taxes $ 9,784     $ 10,172     $ 20,371     $ 18,128  
               
Tax effect of recovery, net of bad debt expense, associated with the Payless ShoeSource bankruptcy (85 )       85      
               
Tax effect of expense in connection with provision for early lease termination charges 387         575      
               
Tax effect of expense in connection with a divisional headquarters relocation 168         168      
               
Tax effect of the net benefit in connection with the change in a contingent liability and the acceleration of amortization related to the termination of the Kate Spade license agreement         (469 )    
               
Tax effect in connection with the impairment of the Brian Atwood trademark 1,017         1,017      
               
Tax expense in connection with the impairment of the preferred interest investment in Brian Atwood Italia Holding, LLC recorded in fourth quarter 2017     (1,028 )       (1,028 )
               
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         360  
               
Tax effect of expense in connection with a warehouse consolidation     327         327  
               
Adjusted provision for income taxes $ 11,271     $ 9,769     $ 21,747     $ 18,489  


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, 2019   June 30, 2018   June 30, 2019   June 30, 2018
               
GAAP net income attributable to Steven Madden, Ltd. $ 36,572     $ 32,410     $ 71,097     $ 61,083  
               
After-tax impact of a recovery, net of bad debt expense, associated with the Payless ShoeSource bankruptcy (1,727 )       (344 )    
               
After-tax impact of expense in connection with early lease termination charges 1,156         1,717      
               
After-tax impact of expense in connection with a divisional headquarters relocation 501         501      
               
After-tax impact of the net benefit in connection with the change in a contingent liability and the acceleration of amortization related to the termination of the Kate Spade license agreement         (1,399 )    
               
After-tax impact associated with the impairment related to the Brian Atwood trademark 3,033         3,033      
               
Tax expense in connection with the impairment of the preferred interest investment in Brian Atwood Italia Holding, LLC recorded in fourth quarter 2017     1,028         1,028  
               
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         1,021  
               
After-tax impact of expense in connection with a warehouse consolidation     914         914  
               
Adjusted net income attributable to Steven Madden, Ltd. $ 39,535     $ 35,185     $ 74,605     $ 66,181  
               
GAAP diluted income per share $ 0.44     $ 0.38     $ 0.85     $ 0.71  
               
Adjusted diluted income per share $ 0.47     $ 0.41     $ 0.89     $ 0.77  


Contact

Steven Madden, Ltd.
Director of Corporate Development & Investor Relations
Danielle McCoy
718-308-2611
InvestorRelations@stevemadden.com

 

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