Steve Madden Announces First Quarter Results

LONG ISLAND CITY, N.Y.--(BUSINESS WIRE)--Apr. 20, 2018-- 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, 2018.

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

For the First Quarter 2018:

• Net sales increased 6.2% to $389.0 million compared to $366.4 million in the same period of 2017.
• Gross margin was 36.2%. Gross margin in the first quarter of 2017 was 36.2%. Adjusted gross margin in the first quarter of 2017 was 36.6%.
• Operating expenses as a percentage of sales were 27.7% compared to 28.9% of sales in the same period of 2017. Adjusted operating expenses as a percentage of sales were 26.9% compared to 26.8% in the same period of 2017.
• Operating income totaled $36.6 million, or 9.4% of net sales, compared to $30.8 million, or 8.4% of net sales, in the same period of 2017. Adjusted operating income was $39.6 million, or 10.2% of net sales, compared to Adjusted operating income of $39.5 million, or 10.8% of net sales, in the same period of 2017.
• Net income was $28.7 million, or $0.50 per diluted share, compared to $20.2 million, or $0.35 per diluted share, in the prior year's first quarter. Adjusted net income was $31.0 million, or $0.54 per diluted share, compared to $27.5 million, or $0.47 per diluted share, in the prior year's first quarter.

Edward Rosenfeld, Chairman and Chief Executive Officer, commented, “We are off to a good start in 2018, with first quarter results that exceeded our expectations. Our on-trend product assortments and speed-to-market capability continue to set us apart from the competition. We are particularly pleased with the strong growth we saw in international markets in the first quarter, as the investments we have made in our flagship Steve Madden brand and our international infrastructure bear fruit. As we look ahead, we are confident that, based on the power of our brands and the strength of our business model, we are well-positioned to drive sales and earnings growth in 2018 and beyond.”

First Quarter 2018 Segment Results

Net sales for the wholesale business increased 5.8% to $331.2 million in the first quarter of 2018, with strong gains in both the wholesale footwear and wholesale accessories businesses. Gross margin in the wholesale business was 32.6%. Gross margin in the wholesale business in last year’s first quarter was 32.4%. Adjusted gross margin in the wholesale business in last year’s first quarter was 32.8%. The modest decline in wholesale gross margin compared to the prior year’s first quarter Adjusted gross margin was the result of strong growth in the Company’s private label business, which carries a lower gross margin.

Retail net sales in the first quarter increased 8.6% to $57.9 million compared to $53.3 million in the first quarter of the prior year. Same store sales decreased 1.2% in the quarter as the result of a decline in the boot category. Retail gross margin decreased to 56.7% in the first quarter of 2018 as compared to 58.7% in the first quarter of the prior year due primarily to deep discounting of slow-selling inventory in the boot category.

During the first quarter, the Company opened two stores and closed five stores in the United States. The Company also opened one store in Mexico and one store in China. The Company ended the quarter with 207 company-operated retail locations, including six Internet stores. In addition, during the first quarter, the Company opened two concessions in China and ended the quarter with 40 company-operated concessions in international markets.

The Company’s effective tax rate for the first quarter of 2018 was 21.4% compared to 34.8% in the first quarter of 2017. On an Adjusted basis, the effective tax rate in the first quarter of 2018 was 21.7% compared to 30.7% 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 first quarter of 2018, the Company repurchased 566,516 shares of the Company’s common stock for approximately $25.7 million, which includes shares acquired through the net settlement of employee stock awards.

As of March 31, 2018, cash, cash equivalents, and current and non-current marketable securities totaled $200.6 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 June 29, 2018, to shareholders of record at the close of business on June 12, 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 $2.55 to $2.62. 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 first quarter 2018:

• $2.8 million pre-tax ($2.1 million after-tax) expense in connection with a provision for legal charges, included in operating expenses.
• $0.3 million pre-tax ($0.2 million after-tax) expense in connection with the integration of the Schwartz & Benjamin acquisition and the related restructuring, included in operating expenses.

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 2018:

• $2.8 million pre-tax ($2.1 million after-tax) expense in connection with a provision for legal charges, included in operating expenses.
• $1.3 million pre-tax ($1.0 million after-tax) expense in connection with the integration of the Schwartz & Benjamin acquisition and the related restructuring, 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 20, 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 2570358, and will be available until May 20, 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®, Anne Klein® 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 207 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 STATEMENTS OF OPERATIONS DATA
(In thousands, except per share amounts)
(Unaudited)
				Three Months Ended
				March 31, 2018				March 31, 2017
Net sales				$	389,014			$	366,387
Cost of sales					248,281				233,669
Gross profit					140,733				132,718
Commission and licensing fee income, net					3,659				3,927
Operating expenses					107,835				105,865
Income from operations					36,557				30,780
Interest and other income, net					597				684
Income before provision for income taxes					37,154				31,464
Provision for income taxes					7,956				10,942
Net income					29,198				20,522
Net income attributable to noncontrolling interest					525				364
Net income attributable to Steven Madden, Ltd.				$	28,673			$	20,158
Basic income per share				$	0.52			$	0.36
Diluted income per share				$	0.50			$	0.35
Basic weighted average common shares
outstanding					54,728				55,828
Diluted weighted average common shares
outstanding					57,287				58,203

STEVEN MADDEN, LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET DATA
(In thousands)
				As of
				March 31, 2018				December 31, 2017				March 31, 2017
				(Unaudited)								(Unaudited)
Cash and cash equivalents				$	125,383			$	181,214			$	94,261
Marketable securities (current & non current)					75,176				93,550				98,980
Accounts receivables, net					296,546				240,909				232,466
Inventories					94,367				110,324				96,973
Other current assets					47,975				49,044				33,095
Property and equipment, net					69,599				71,498				74,747
Goodwill and intangibles, net					298,539				299,842				304,327
Other assets					10,802				10,780				9,121
Total assets				$	1,018,387			$	1,057,161			$	943,970
Accounts payable				$	65,296			$	66,955			$	70,896
Contingent payment liability (current & non current)					3,000				10,000				31,830
Other current liabilities					103,477				132,657				65,720
Other long term liabilities					38,392				38,617				36,702
Total Steven Madden, Ltd. stockholders' equity					801,586				802,821				737,187
Noncontrolling interest					6,636				6,111				1,635
Total liabilities and stockholders' equity				$	1,018,387			$	1,057,161			$	943,970

STEVEN MADDEN, LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED CASH FLOW DATA
(In thousands)
(Unaudited)
				Three Months Ended
				March 31, 2018				March 31, 2017
Net cash (used in) provided by operating activities				$	(27,217)			$	8,513
Investing Activities
Purchases of property and equipment					(2,946)				(3,293)
Sales of marketable securities, net					16,888				11,292
Acquisition, net of cash acquired					-				(17,396)
Net cash provided by (used in) investing activities					13,942				(9,397)
Financing Activities
Common stock share repurchases for treasury					(25,677)				(33,161)
Payment of contingent liability					(7,000)				-
Proceeds from exercise of stock options					1,519				1,812
Cash dividends paid					(11,758)				-
Net cash used in financing activities					(42,916)				(31,349)
Effect of exchange rate changes on cash and cash equivalents					360				379
Net decrease in cash and cash equivalents					(55,831)				(31,854)
Cash and cash equivalents - beginning of period					181,214				126,115
Cash and cash equivalents - end of period				$	125,383			$	94,261

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				Three Months Ended
				March 31, 2018				March 31, 2017
GAAP operating expenses				$	107,835			$	105,865
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					(250)				-
Bad debt expense associated with the Payless ShoeSource bankruptcy					-				(7,500)
Adjusted operating expenses				$	104,748			$	98,365

Table 3 - Reconciliation of GAAP operating income to Adjusted operating income
				Three Months Ended				Three Months Ended
				March 31, 2018				March 31, 2017
GAAP operating income				$	36,557			$	30,780
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					250				-
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				$	39,644			$	39,520

Table 4 - Reconciliation of GAAP provision for income taxes to Adjusted provision for income taxes
				Three Months Ended				Three Months Ended
				March 31, 2018				March 31, 2017
GAAP provision for income taxes				$	7,956			$	10,942
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					62				-
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				$	8,720			$	12,331

Table 5 - Reconciliation of GAAP net income to Adjusted net income
				Three Months Ended				Three Months Ended
				March 31, 2018				March 31, 2017
GAAP net income attributable to Steven Madden, Ltd.				$	28,673			$	20,158
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					188				-
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.				$	30,996			$	27,509
GAAP diluted income per share				$	0.50			$	0.35
Adjusted diluted income per share				$	0.54			$	0.47

View source version on businesswire.com: https://www.businesswire.com/news/home/20180420005071/en/

Source: Steve Madden, Ltd.

Steven Madden, Ltd.
Danielle McCoy, 718-308-2611
Director of Corporate Development & Investor Relations
daniellemccoy@stevemadden.com
or
Investor Relations
ICR, Inc.
Jean Fontana/Megan Crudele, 203-682-8200
www.icrinc.com