Steve Madden Announces First Quarter 2017 Results

LONG ISLAND CITY, N.Y.--(BUSINESS WIRE)--Apr. 21, 2017-- 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 first quarter ended March 31, 2017.

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

For the First Quarter 2017:

• Net sales increased 11.2% to $366.4 million compared to $329.4 million in the same period of 2016.
• Gross margin was 36.2%. Adjusted gross margin was 36.6% as compared to 35.3% in the same period last year, an increase of 130 basis points.
• Operating expenses as a percentage of sales were 28.9%. Adjusted operating expenses as a percentage of sales were 26.8% as compared to 26.9% of sales in the same period of 2016.
• Operating income totaled $30.8 million, or 8.4% of net sales. Adjusted operating income was $39.5 million, or 10.8% of net sales, compared with operating income of $29.9 million, or 9.1% of net sales, in the same period of 2016.
• Net income was $20.2 million, or $0.35 per diluted share. Adjusted net income was $27.5 million, or $0.47 per diluted share, compared to $23.7 million, or $0.39 per diluted share, in the prior year's first quarter.

Edward Rosenfeld, Chairman and Chief Executive Officer, commented, “We are pleased to have started off 2017 with a strong first quarter. The highlight was our Steve Madden Women’s wholesale footwear division, where we had another quarter of outstanding growth in a challenging retail environment. Steve and his design team have created an exceptional product assortment that is enabling us to outperform the competition and take market share with our flagship brand. As we look ahead to the balance of the year, we are taking a prudent approach to planning our business in light of retail industry headwinds. That said, the strength in our core business gives us confidence that we are well-positioned to navigate the uncertain environment.”

First Quarter 2017 Segment Results

Net sales for the wholesale business increased 13.6% to $313.3 million in the first quarter of 2017. Excluding the results of the recently acquired Schwartz & Benjamin, wholesale net sales increased 8.5% to $299.2 million from $275.8 million in the first quarter of 2016, with strong gains in both wholesale footwear and wholesale accessories. Gross margin in the wholesale business was 32.4%. Excluding the non-cash expense associated with the purchase accounting fair value adjustment of inventory acquired in the Schwartz & Benjamin acquisition, Adjusted gross margin in the wholesale business was 32.8% compared to 31.2% in last year’s first quarter, driven by an increase in the wholesale footwear segment.

Retail net sales in the first quarter were $53.1 million compared to $53.6 million in the first quarter of the prior year. Same store sales decreased 6.0% in the quarter compared to a 10.7% same store sales increase in the first quarter of 2016. Retail gross margin increased to 58.7% in the first quarter of 2017 compared to 56.2% in the first quarter of the prior year, due to a lower level of promotional activity.

During the first quarter, the Company opened one full price store and one outlet location, and closed one full price store. The Company ended the quarter with 190 company-operated retail locations, including four Internet stores.

The Company’s effective tax rate for the first quarter of 2017 was 34.8%. Excluding the tax impact of the non-cash expense associated with the purchase accounting fair value adjustment of inventory acquired in the Schwartz & Benjamin acquisition and the estimated bad debt expense associated with the Payless ShoeSource bankruptcy, the Adjusted effective tax rate was 30.7% compared to 19.6% in the first quarter of the prior year.

Balance Sheet and Cash Flow

During the first quarter of 2017, the Company repurchased 912,050 shares of the Company’s common stock for approximately $33.2 million, which includes shares acquired through the net settlement of employee stock awards.

As of March 31, 2017, cash, cash equivalents, and current and non-current marketable securities totaled $193.2 million.

Company Outlook

The Company continues to expect that net sales in fiscal year 2017 will increase 8% to 10% over net sales in 2016. The Company expects that diluted EPS on a GAAP basis for fiscal year 2017 will be in the range of $1.97 to $2.03. The Company continues to expect that Adjusted diluted EPS for fiscal year 2017 will be in the range of $2.12 to $2.18.

Non-GAAP Adjustments

Amounts referred to as Adjusted exclude the items below.

For the first quarter 2017:

• $1.2 million pre-tax ($0.8 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.
• $7.5 million pre-tax ($6.5 million after-tax) in estimated bad debt expense associated with the Payless ShoeSource bankruptcy, included in operating expenses.

For the fiscal year 2017:

• $1.7 million pre-tax ($1.0 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.
• $1.5 million pre-tax ($1.0 million after-tax) in expense expected to be incurred in connection with the integration of the Schwartz & Benjamin acquisition and the related restructuring, included in operating expenses.
• $7.5 million pre-tax ($6.5 million after-tax) in estimated bad debt expense associated with the Payless ShoeSource bankruptcy, included in operating expenses.

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 first quarter earnings conference call scheduled for today, April 21, 2017, 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 4443584, and will be available until May 21, 2017.

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®, Report®, Big Buddha®, Brian Atwood®, Cejon®, Blondo® and Mad Love®, Steve Madden is a licensee of various brands, including Kate Spade®, Superga® and Avec Les Filles®. 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 190 retail stores (including Steve Madden's four Internet stores). Steve Madden licenses certain of its brands to third parties for the marketing and sale of certain products, including for 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 STATEMENTS OF OPERATIONS DATA
(In thousands, except per share amounts)
(Unaudited)
			Three Months Ended
			March 31, 2017				March 31, 2016
Net sales			$	366,387			$	329,357
Cost of sales				233,669				213,155
Gross profit				132,718				116,202
Commission and licensing fee income, net				3,927				2,171
Operating expenses				105,865				88,493
Income from operations				30,780				29,880
Interest and other income (expense), net				684				(176	)
Income before provision for income taxes				31,464				29,704
Provision for income taxes				10,942				5,808
Net income				20,522				23,896
Net income attributable to noncontrolling interest				364				237
Net income attributable to Steven Madden, Ltd.			$	20,158			$	23,659
Basic income per share			$	0.36			$	0.41
Diluted income per share			$	0.35			$	0.39
Basic weighted average common shares outstanding				55,828				57,709
Diluted weighted average common shares outstanding				58,203				60,253

STEVEN MADDEN, LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET DATA
(In thousands)
				As of
				March 31, 2017				December 31, 2016				March 31, 2016
				(Unaudited)								(Unaudited)
Cash and cash equivalents				$	94,261			$	126,115			$	70,905
Marketable securities (current & non current)					98,980				110,054				121,994
Accounts receivables, net					232,466				200,958				217,136
Inventories					96,973				119,824				80,356
Other current assets					47,038				56,264				56,089
Property and equipment, net					74,747				72,381				72,727
Goodwill and intangibles, net					304,327				280,097				288,642
Other assets					7,308				7,354				7,651
Total assets				$	956,100			$	973,047			$	915,500
Accounts payable				$	70,896			$	80,584			$	86,831
Contingent payment liability (current & non current)					31,830				7,948				21,292
Other current liabilities					65,720				94,595				49,183
Other long term liabilities					48,832				48,848				54,528
Total Steven Madden, Ltd. stockholders' equity					737,187				740,867				703,319
Noncontrolling interest					1,635				205				347
Total liabilities and stockholders' equity				$	956,100			$	973,047			$	915,500

STEVEN MADDEN, LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED CASH FLOW DATA
(In thousands)
(Unaudited)
				Three Months Ended
				March 31, 2017				March 31, 2016
Net cash provided by operating activities				$	8,513			$	15,245
Investing Activities
Purchases of property and equipment					(3,293	)			(4,384	)
Sales of marketable securities, net					11,292				1,037
Acquisition, net of cash acquired					(17,396	)			-
Net cash used in investing activities					(9,397	)			(3,347	)
Financing Activities
Common stock share repurchases for treasury					(33,161	)			(14,034	)
Payment of contingent liability					-				(3,483	)
Proceeds from exercise of stock options					1,812				3,678
Net cash used in financing activities					(31,349	)			(13,839	)
Effect of exchange rate changes on cash and cash equivalents					379				432
Net decrease in cash and cash equivalents					(31,854	)			(1,509	)
Cash and cash equivalents - beginning of period					126,115				72,414
Cash and cash equivalents - end of period				$	94,261			$	70,905

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
			March 31, 2017
Consolidated
GAAP gross profit			$	132,718
Non-cash expense associated with the purchase accounting fair value
adjustment of inventory acquired in the Schwartz & Benjamin acquisition				1,240
Adjusted gross profit			$	133,958
Wholesale
GAAP gross profit			$	101,560
Non-cash expense associated with the purchase accounting fair value adjustment
of inventory acquired in the Schwartz & Benjamin acquisition				1,240
Adjusted gross profit			$	102,800
Table 2 - Reconciliation of GAAP operating expenses to Adjusted operating expenses
			Three Months Ended
			March 31, 2017
GAAP operating expenses			$	105,865
Bad debt expense associated with the Payless ShoeSource bankruptcy				(7,500	)
Adjusted operating expenses			$	98,365
Table 3 - Reconciliation of GAAP operating income to Adjusted operating income
			Three Months Ended
			March 31, 2017
GAAP operating income			$	30,780
Non-cash expense associated with the purchase accounting fair value
adjustment of inventory acquired in the Schwartz & Benjamin acquisition				1,240
Bad debt expense associated with the Payless ShoeSource bankruptcy				7,500
Adjusted operating income			$	39,520
Table 4 - Reconciliation of GAAP provision for income taxes to Adjusted provision for income taxes
			Three Months Ended
			March 31, 2017
GAAP provision for income taxes			$	10,942
Tax effect of non-cash expense associated with the purchase accounting fair
value adjustment of inventory acquired in the Schwartz & Benjamin acquisition				425
Tax effect of bad debt expense associated with the Payless ShoeSource
bankruptcy				964
Adjusted provision for income taxes			$	12,331
Table 5 - Reconciliation of GAAP net income to Adjusted net income
			Three Months Ended
			March 31, 2017
GAAP net income attributable to Steven Madden, Ltd.			$	20,158
After-tax impact of non-cash expense associated with the purchase
accounting fair value adjustment of inventory acquired in the Schwartz &
Benjamin acquisition				815
After-tax impact of bad debt expense associated with the Payless
ShoeSource bankruptcy				6,536
Adjusted net income attributable to Steven Madden, Ltd.			$	27,509
GAAP diluted income per share			$	0.35
Adjusted diluted income per share			$	0.47

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Source: Steve Madden

ICR, Inc.
Investor Relations
Jean Fontana/Megan Crudele
203-682-8200
www.icrinc.com