Steven Madden Ltd
NASDAQ:SHOO
| US |
|
Fubotv Inc
NYSE:FUBO
|
Media
|
| US |
|
Bank of America Corp
NYSE:BAC
|
Banking
|
| US |
|
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
| US |
C
|
C3.ai Inc
NYSE:AI
|
Technology
|
| US |
|
Uber Technologies Inc
NYSE:UBER
|
Road & Rail
|
| CN |
|
NIO Inc
NYSE:NIO
|
Automobiles
|
| US |
|
Fluor Corp
NYSE:FLR
|
Construction
|
| US |
|
Jacobs Engineering Group Inc
NYSE:J
|
Professional Services
|
| US |
|
TopBuild Corp
NYSE:BLD
|
Consumer products
|
| US |
|
Abbott Laboratories
NYSE:ABT
|
Health Care
|
| US |
|
Chevron Corp
NYSE:CVX
|
Energy
|
| US |
|
Occidental Petroleum Corp
NYSE:OXY
|
Energy
|
| US |
|
Matrix Service Co
NASDAQ:MTRX
|
Construction
|
| US |
|
Automatic Data Processing Inc
NASDAQ:ADP
|
Technology
|
| US |
|
Qualcomm Inc
NASDAQ:QCOM
|
Semiconductors
|
| US |
|
Ambarella Inc
NASDAQ:AMBA
|
Semiconductors
|
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
37.38
49.7
|
| Price Target |
|
We'll email you a reminder when the closing price reaches USD.
Choose the stock you wish to monitor with a price alert.
|
|
Fubotv Inc
NYSE:FUBO
|
US |
|
|
Bank of America Corp
NYSE:BAC
|
US |
|
|
Palantir Technologies Inc
NYSE:PLTR
|
US |
|
C
|
C3.ai Inc
NYSE:AI
|
US |
|
|
Uber Technologies Inc
NYSE:UBER
|
US |
|
|
NIO Inc
NYSE:NIO
|
CN |
|
|
Fluor Corp
NYSE:FLR
|
US |
|
|
Jacobs Engineering Group Inc
NYSE:J
|
US |
|
|
TopBuild Corp
NYSE:BLD
|
US |
|
|
Abbott Laboratories
NYSE:ABT
|
US |
|
|
Chevron Corp
NYSE:CVX
|
US |
|
|
Occidental Petroleum Corp
NYSE:OXY
|
US |
|
|
Matrix Service Co
NASDAQ:MTRX
|
US |
|
|
Automatic Data Processing Inc
NASDAQ:ADP
|
US |
|
|
Qualcomm Inc
NASDAQ:QCOM
|
US |
|
|
Ambarella Inc
NASDAQ:AMBA
|
US |
This alert will be permanently deleted.
Steven Madden Ltd
You don't have any saved screeners yet
Good morning, everyone, and welcome to Steve Madden Earnings Conference for 2023. I will now turn the call over to Danielle McCoy.
Thanks, Savannah, and good morning, everyone. Thank you for joining our second quarter 2023 earnings call and webcast. Before we begin, I'd like to remind you that our remarks that follow, including answers to your questions, contain statements that we believe to be forward-looking statements within the meaning of the Private Securities Litigation Reform Act. These forward-looking statements are subject to risks that could cause actual results to materially differ from those expressed or implied by such forward-looking statements. These risks include, among others, matters that we have described in our press release issued earlier today and filings we make with the SEC. We disclaim any obligation to update these forward-looking statements, which may not be updated until our next quarterly earnings conference call, if at all.
The financial results discussed on today's call are on an adjusted basis, unless otherwise noted. A reconciliation to the most directly comparable GAAP financial measure and other associated disclosures are contained in our earnings release.
Joining me on the call today is Ed Rosenfeld, Chairman and Chief Executive Officer; and Zine Mazouzi, Chief Financial Officer. With that, I'll turn the call over to Ed. Ed?
Well, thanks, Danielle, and good morning, everyone, and thank you for joining us to review Steve Madden's second quarter 2023 results. As expected, we faced a challenging operating environment in the second quarter. In light of the difficult market conditions, in particular, the cautious approach to orders by many of our wholesale customers in the United States, we were pleased to deliver earnings results in line with expectations for the quarter. And while we are never satisfied with financial performance that falls short of what we achieved in the prior year, I'm proud of how our team controlled what we can control in the quarter, as we; one, drove strong gross margin performance despite the promotional retail landscape; two, managed our inventory with discipline, delivering a 32% reduction in inventory at the end of Q2 compared to the prior year; and three, controlled expenses and drove cost efficiencies even as we continue to invest in product innovation, consumer engagement and our long-term growth initiatives.
As we move forward, we will remain focused on executing our strategy for long-term growth, the foundation of which is driving closer connections with consumers through the combination of consistently trend-right product assortments and effective consumer engagement, which in turn will enable success with our four key long-term business drivers: one, driving our direct-to-consumer business led by digital; two, expanding in categories outside of footwear like handbags and apparel; three, growing in international markets; and four, strengthening our core U.S. wholesale footwear business.
Now turning to our performance by channel in Q2. In wholesale, revenue remained under pressure, declining 21% versus the second quarter of 2022. As expected, our private label business was again a significant drag on the top line as our mass merchant customers have reduced orders in an effort to right-size overall inventory levels in our categories. Our branded business was also down, though not as dramatically as private label as our branded customers also continue to take a conservative approach to orders.
Despite strong sell-through in several key styles, our wholesale customers did not chase business in those styles the way they normally would, and reorders were significantly lower than we would see in a more typical retail environment.
Looking ahead, while our wholesale customers remain cautious, we expect to see significant improvement in the balance of the year relative to the first half. Even if similar to spring, we see limited chase business from wholesale customers in fall, we still believe we can be flat or close to flat to last year's wholesale revenue in the back half.
In our direct-to-consumer business, revenue in the second quarter declined 5% compared to the same period in the prior year, with decreases in both the brick-and-mortar and e-commerce channels. While consumer demand trends remain choppy, we have seen improvement in the year-over-year revenue performance over the last couple of months as comparisons have eased, and we expect to return to year-over-year growth in DTC in the back half.
Overall, while we are planning for the operating environment to remain choppy in the near term, we are poised to see significant improvement in our financial performance beginning in Q3. We knew coming into the year that the first half would be tough, and I'm proud of how our team weathered the storm and excited about our prospects for the balance of the year.
Looking out further, I'm confident that with our strong brands, proven business model and multiple significant growth opportunities, we are well positioned to drive top and bottom line gains for years to come.
Now I'll turn it over to Zine to review our second quarter financial results in more detail and provide our outlook for 2023.
Thanks, Ed, and good morning, everyone. Our consolidated revenue in the second quarter was $445.3 million, a 16.8% decrease compared to the second quarter of 2022. Our wholesale revenue was $314.6 million, down 20.8% compared to the same period in the prior year. As Ed discussed, private label was particularly soft. Wholesale revenue in the branded business declined 13% versus Q2 2022, while revenue in the private label business decreased 40% compared to the same period last year.
Wholesale footwear revenue was $234.9 million, a 19.4% decrease from the second quarter of 2022. Wholesale accessories and apparel revenue was $79.7 million, down 24.6% to the same period last year. In our direct-to-consumer segment, revenue was $128.2 million, decreasing 5.4% compared to the same period last year. On a relative basis, e-commerce outperformed brick-and-mortar and international outperformed the United States.
We ended the quarter with 242 brick-and-mortar retail stores, including 69 outlets as well as five e-commerce websites and 22 company-operated concessions in international markets.
In our licensing segment, royalty income was $2.5 million in the quarter compared to $2.2 million in Q2 last year.
Turning to gross margin. Consolidated gross margin was 42.6% in the quarter, expanding 190 basis points from the same period last year. Wholesale gross margin was 33.6%, a 200-basis-point improvement compared to the same period last year, driven by an improvement in gross margin in the wholesale accessories and apparel business. While wholesale gross margin benefited from a mix shift to the branded business, we also drove like-for-like gross margin improvement in both the branded and private label businesses.
Direct-to-consumer gross margin was 63.7% versus 66.4% in the comparable period last year, driven by increased promotional activity.
Operating expenses in the second quarter were $145.3 million, a 3.6% decrease compared to the second quarter of 2022, reflecting our ability to control costs while continuing to invest in marketing and other long-term growth initiatives.
Operating income for the quarter was $44.5 million or 10% of revenue compared to $67 million or 12.5% of revenue in the same period last year. Our effective tax rate for the quarter was 23.8% compared to 23.5% in Q2 of 2022.
Finally, net income attributable to Steve Madden Limited for the quarter was $34.9 million or $0.47 per diluted share versus $49.8 million or $0.63 per diluted share in the second quarter of 2022.
Moving to the balance sheet. Our financial foundation remains very strong. And as of June 30, 2023, we had $274.4 million of cash, cash equivalents and short-term investments and no debt. Inventory totaled $207.8 million compared to $306.5 million at the end of the second quarter in 2022, a reduction of $98.7 million or 32.2%. Our CapEx in the quarter was $4 million.
During the quarter, we spent $25.8 million on repurchases of the company's common stock, which includes shares acquired through the net settlement of employee stock awards, bringing the total spend on share repurchases to $64.2 million for the first half of 2023. Our Board of Directors approved a quarterly cash dividend of $0.21 per share. The dividend will be payable on September 25, 2023, to the stockholders of record as of the close of business on September 15, 2023.
Turning to our outlook. We are reiterating our revenue and earnings per share guidance. We continue to expect revenue for 2023 to decrease 6.5% to 8% compared to 2022, and we continue to expect diluted EPS to be in the range of $2.40 to $2.50.
Now I'd like to turn the call over to the operator for questions. Savanna?
[Operator Instructions] Our first question comes from Aubrey Tianello from BNP.
Wanted to start off first with the revenue guidance. Within the updated guide for revenues to be down 6.5% to 8% that you reiterated, just curious what you're embedding there for wholesale and DTC for the year, whether that's changed versus last quarter?
Yes. For wholesale, where we have embedded down low double digits, and for DTC up low single digits.
Great. Got it. Okay. And then if I could just follow up on the DTC side. I think in the last call, you mentioned that the DTC was down about 8% in March, and then it was kind of trending similar through April and into May. Just curious how that kind of progressed month-to-month through 2Q and then so far, what you're seeing into 3Q on DTC?
Yes. We did see DTC revenue trends year-over-year improve as we move throughout the quarter. It didn't improve quite as much as we had anticipated, and that's why we've adjusted the revenue guidance modestly compared to what we were forecasting last quarter. But we have seen improvement. And this month to date -- or excuse me, this quarter to date, we're running about flat.
Our next question comes from Samuel Poser from Williams Trading Company.
I think that was a record of prepared remarks at 11 minutes, so thank you. Couple of just details and then I have a broader question. So Ed, you mentioned -- can you just give us what the international revenue growth was and what the domestic revenue growth was or decreases?
Yes. International grew 4% in the quarter. I don't have the domestic off the top of my head, but a little bit worse than the overall. Go ahead...
You talked about sort of the appetite of the retailers. So when we're thinking things are going to get less, worse, better as we -- you're expecting that to happen as we proceed through the year. Can you give us some context into -- are you expecting it more out of, let's say, department stores than you are out of the math, or your private label versus branded? And what kind of a variance was there between the two in the quarter -- in the second quarter?
Sure. Yes. So I think Zine provided the branded versus private label and wholesale. So branded was down 13% in the quarter and private label was down 40% in the quarter on a wholesale basis. So clearly, much bigger drag from private label. As we go into the back half, I want to be clear. We're really not assuming any significant improvement in the overall approach from the wholesale customers. We still assume that they are cautious. We haven't built in a big chase business in Q4, for instance. But really, what you're seeing here is that we're expecting an improvement compared to the first half just because of the easing comparisons.
And the big place where we get much easier comparisons is in private label because that was, if you'll recall, where we felt the pullback first. And so once we get into Q3, we really anniversary some big declines in that business.
And then I just want to verify, you -- the other piece is the operating margin, the gross margin that you talked about earlier in the year at around 43.5% for the gross margin and operating margin of just over 12% or a little higher. Those numbers remain in place?
Yes. Sam, for the gross margin, we revised that down just a little bit to 43%, so down about 50 bps, and just reflecting a lower mix of DTC and also some potential pressure and promo pressure in fall that were reflected in our forecast in retail.
And then for op margin, I would say, close to 12% is what we're looking at now.
And is that because with the DTC business being slightly less, the requirement for sort of that support of SG&A there just won't be there to keep it in that range kind of thing?
Yes. For the SG&A, the assumption that we have is that we'll be at 3% growth dollar against dollars from last year for Q3 and Q4.
But to your point, Sam, yes, we have -- given what we've seen on the top line and particularly in DTC, we have tightened our belt a little bit. And we've looked for savings wherever we can find them, while obviously not pulling back on marketing or other -- or our other long-term growth initiatives.
And then lastly, your inventory levels are clean on a forward basis. You guys -- how quickly if somebody came to you post back-to-school because there's going to be a lot of activity in the next, call it, through September 15, we're going to see a lot of acceleration that could change a lot of outlooks. I mean if people come to you with orders and like by mid-October, you can still respond to holiday, even though you're not necessarily expecting that. Is that a fair...
Mid-October would be late for that. But the good news is, our transit times basically are back -- and our lead times overall are basically back to normal. We do have the Mexico capability, and we use Mexico more in fall. So yes, we still -- if we get reads and get customers that are willing to step up, we can still chase into goods for fourth quarter. I wouldn't say all the way until mid-October, but certainly over the next month or two.
And then are we -- nobody has brought up the Nordstrom anniversary sale. I think we're in it or just passed. What have you seen from that?
Yes. I think we were pleased with what we saw in the event. Our sell-through percentage was essentially right in line with what it was a year ago, which I think in this environment is a win. And just as importantly, I think we got some good reads on early fall product, particularly in REBOOTED category, which is encouraging and gives us confidence going into fall.
Our next question comes from Laura Champine from Loop Capital.
It's really also about the back half revenue trend where you expect to see improvement. I hear you on easier comps. But how much visibility do you have in that? Meaning, is this an improved prebooking story? Or is it more about replenishment? And maybe talk about how that mix works in private label versus branded since that's driving most of the decline.
So in terms of our wholesale business, look, we've got Q3 97% or 98% booked. We have essentially almost all of Q3 booked. In Q4, that's probably sitting at just a little bit less than half of Q4 is already booked. And as I mentioned, we have not built in an aggressive reorder or chase business into Q4 given the behavior of our wholesale customers so far this year. So I think, all in all, we know quite a lot about where wholesale will fall. There's obviously still work to do, but we're tracking towards the numbers that we've guided to.
And to your question about branded versus private label, private label obviously books much further out. So we know a lot about what the private label business is going to look like in the back half. Branded is where there's more variance from here based on what Reorders and Chase does end up looking like.
Our next question comes from Tom Nikic from Wedbush Securities.
[Austin Marina] on for Tom Nikic. I just want to get a quick idea about gross margins for the quarter. How much of the improvement in Q2 gross margin was driven by channel mix compared to like other factors such as freight product mix? And can you expand upon your comment regarding promotional activity on the full year gross margin guide in the back half?
Yes. So as far as gross margin is concerned, I think it's the best to look at it wholesale versus retail. So in wholesale, we had a 200-basis-point improvement in margin and a little bit more than half of that was mix related.
And then in terms of the promo activity, we have -- I think, I don't know how much more we can elaborate. We built in a little bit more promo activity into the plan for the back half in DTC, relatively modest change from where we were before.
Our next question comes from Jay Sole with UBS.
Great. I'm just curious about the sneakers business. So there's a lot of talk about excess sneaker inventory in the channel. Is that something that's impacting your our sneaker business? And how much do you expect sneakers to be a big percentage of the business this year in back-to-school and holiday?
Look, it's hard to say how much we're feeling some of that excess sneaker inventory from the big sneaker players. The sneaker category has been down for us overall over the last few quarters, but we're actually quite optimistic about sneakers going forward. We've got some new sneakers that we're delivering that we feel very good about, some very good early reads in that category, and we think that we're actually going to be on the upswing in the fashion sneaker category moving forward.
Got it. And then if you could just talk more broadly about trends. Are you seeing obviously return to sort of events in '21 and return to work in '22. This year, it seems like the trends, for the first half of the year, are a little bit low. Are you seeing new fashion trends emerge in the address side of the business?
In dress shoes specifically or in the business overall?
Well, I guess in the business overall. Yes, the business overall.
Yes. Yes, we are -- we've got some -- as I mentioned, we've got some good early reads on things for fall. I called out feeling good about the new sneakers that we're delivering as well as some excitement around the boot and booties category. I don't want to get -- this early in the season don't want to get too specific about what those specific trends are. But we do see some newness, which we're excited about.
Got it. And maybe just last one for me. Just on the top of the call, you talked about some of the growth initiatives that you're excited about. You continued -- it sounds like you're continuing to invest behind those. Can you just maybe rank order or not mean you just list some of the top growth opportunities that you see, whether it's international or DTC or whatever, just for apparel, just to remind people what you're focused on and what you think is going to drive some nice growth beyond 2023?
Yes, absolutely. I think first, the one I would put at the top of the list is international. That's been the fastest-growing part of the business over the last few years. And we anticipate that, that will be the fastest growing part of the business over the next few years. And we're just really excited about the momentum that we have in a lot of the markets around the world. Obviously, EMEA has been the fastest-growing region for us, and we think that will probably drive the most growth over the next few years, but excited about what we're seeing in other places in the Americas and in APAC as well.
I would say #2 is continuing -- we've obviously seen tremendous growth in direct-to-consumer, led by digital over the last few years. Obviously, a little bit of a pullback over the first couple of quarters here, but we still see that as an important growth driver going forward. And it's related to the international growth as well because that business is much more penetrated to DTC. We're already about 40% DTC in international, and we see that heading north over the next few years.
And then after that, I would put accessories and apparel. We've got tremendous momentum in Steve Madden handbags. That's been a real bright spot. That business was 1 of the few businesses that grew for us in Q2, and we're seeing that perform really in all channels, wholesale, DTC and particularly in international markets as well. And then longer term, we're obviously -- it's early days with apparel, but feel very good about the start that we're off to there and the opportunity and the runway that we have in that business. So that's how I would sort of rank the top 3 growth drivers.
Our next question comes from -- oh, we're actually back with Same Poser from Williams Trading Company.
Just a quick one, sorry. Are you have any early reads on back-to-school?
It's pretty early, Sam. I mean nothing that I think would be worth calling out at this moment.
Our next question comes from Corey Tarlowe with Jefferies.
I just wanted to double-click on the handbag commentary that you made. Would be curious to get a little bit more color as to what's really driving the growth in that segment specifically?
Yes. I think we've been on a multiyear growth journey here in Steve Madden Handbags. We've invested a lot in upgrading the product there. And I think we've just made a lot of progress. And feel really good about what the design team is delivering in that category. And I think the customer is responding. And as I said, what's nice about it is that we're seeing really perform across all the different channels and businesses in which we operate, both wholesale and DTC, both domestic and international. So it's really Steve Madden handbags that's driving that.
Great. And then just also double-click on apparel. It sounds like that's an area where you see opportunity. What do you anticipate? Or how do you expect to continue to execute upon expanding that segment and more profitably growing it ahead?
Yes. Well, look, it's -- we're just getting started there, but we're off to a very good start. I think the spring performance, frankly, exceeded my expectations in terms of sell-through. We're very pleased about the performance we had in some key customers like Bloomingdale's, Dillard's, Macy's, et cetera. And we feel even better about the fall products. We feel like the fall product is really a significant step-up even from what we had in spring and is the line that really best represents what we want Steve Madden apparel to be. And so we're just getting that out now, but we're really excited about what that's going to look like. But, look, for us, it always starts with the products.
So the most important initiative right now is just continuing to make even better products and products that more accurately reflects the Steve Madden brand DNA. And if we do that, we obviously have the distribution channels to get that out to market and to drive a lot of growth.
Our next question comes from Paul from Citi..
This is Kelly on for Paul. I just wanted to drill down on the back half sales guidance. Could you talk about 3Q versus 4Q in terms of total sales growth? And then maybe elaborate on how that should look by wholesale versus DTC in 3Q versus 4Q? That's my first question.
Yes. I think that overall, Q4 should grow a little bit faster than Q3. That's on a consolidated basis. In terms of wholesale, well, that's -- and that's primarily driven by, I think, wholesale doing a little bit better or seeing a little bit better growth in Q4 than in Q3. And also the higher mix of DTC in Q4, which we have growing a little faster than wholesale in the back half.
So just to clarify that, in the wholesale side of the business, your comparison eased significantly in the fourth quarter, but I guess you're saying that you're not going to see that much of a step-up in growth in 3Q versus 4Q, it's a little bit more consistent than what we're looking at on a one-year comparison basis?
Yes. And that's because Q4 is -- Q3 is more of a sell-in quarter, Q4, more of a reorder and chase quarter. And we've got a relatively cautious forecast in there given how our wholesale customers have been approaching that.
And on that note, actually, so you saw your branded wholesale partners really kind of frees up on the reorders back after the consumer -- we saw the broad consumer slowdown in March. I guess how are those conversations going with your retail partners? I mean, is there a chance that -- I mean are they feeling a little bit better about the business? Is there a saying that there could be some opportunities to chase into product in the back half of the year? And how are inventory levels looking for you within the retail channel?
Yes. I mean I think the answer is, is there an opportunity that, that could get better and that they could chase? Yes. But in terms of how those conversations are going, we're still -- the overall sentiment is still very cautious and the overall approach is still very cautious. So that's how we're -- we've built our forecast.
In terms of our inventory levels in the channel, though, they're low. We think they're too low. And so we're certainly encouraging them to step up and get those inventory levels back where they should be.
Got it. And then just lastly from me, on the private label, I guess -- I mean I guess the private label business is going to be up in the back half of the year. Is that fair? And then the brand is still down maybe similar to the first half of the year?
No. I think both of them will be relatively similar to what we've said about the overall wholesale, which is flat or close to flat.
And we are back with Tom Nikic from Wedbush.
Just wanted to confirm, you guys are seeing in the back half, like the split between Q3 and Q4, similar to how you're seeing revenue for those periods, correct, based on the wholesale dynamics in the back half?
I'm not sure I understand the question. Could you...
Like, I guess, the thing you're not seeing any major like SG&A, like deleverage in -- like Q3 compared to like Q4, correct?
The SG&A -- again, the SG&A growth, I think that Zine provided really is about 3%. That really goes for both Q3 and Q4, if that helps?
If there are no further questions, I will turn the call back over to Ed Rosenfeld.
Great. Well, thank you very much for joining us for today's call. Enjoy the rest of your summer. We look forward to speaking with you on the next call.
This concludes the meeting. You may now disconnect.