Steve Madden Announces Fourth Quarter and Full Year 2019 Results and Provides Initial Fiscal Year 2020 Revenue and EPS Guidance
Amounts referred to as “Adjusted” exclude the items that are described under the heading “Non-GAAP Adjustments.”
The Company reclassed commission and licensing fee income to Total Revenue and reclassed its respective expenses into Operating Expenses from previously labeled Commission and Licensing Fee Income - Net on the Company's Consolidated Statement of Operations for each period provided.
For the Fourth Quarter 2019:
- Revenue increased 0.7% to
$419.6 million compared to$416.8 million in the same period of 2018. - Gross margin was 37.7% compared to 38.1% in the same period last year. Adjusted gross margin was 37.8% in 2019.
- Operating expenses as a percentage of revenue were 33.1% compared to 32.1% in the same period of 2018. Adjusted operating expenses as a percentage of revenue were 30.0% compared to 29.0% in the same period of 2018.
- Income from operations totaled
$19.5 million , or 4.6% of revenue, compared to$25.0 million , or 6.0% of revenue, in the same period of 2018. Adjusted income from operations was$33.0 million , or 7.9% of revenue, compared to Adjusted income from operations of$37.9 million , or 9.1% of revenue, in the same period of 2018. - Net income attributable to
Steven Madden, Ltd. was$17.8 million , or$0.21 per diluted share, compared to$12.5 million , or$0.15 per diluted share, in the prior year’s fourth quarter. Adjusted net income attributable toSteven Madden, Ltd. was$32.2 million , or$0.39 per diluted share, compared to$35.7 million , or$0.42 per diluted share, in the prior year’s fourth quarter.
“Looking ahead, while we are cautious on the near-term outlook due to additional headwinds from the coronavirus outbreak,
Fourth Quarter 2019 Segment Results
Revenue for the wholesale business decreased 1.1% to
Retail revenue in the fourth quarter rose 8.7% to
The Company ended the quarter with 227 company-operated retail locations, including eight Internet stores, as well as 31 company-operated concessions in international markets.
The Company’s effective tax rate for the fourth quarter of 2019 was 15.9% compared to 52.7% in the fourth quarter of 2018. On an Adjusted basis, the effective tax rate was 6.3% compared to 9.2% in the fourth quarter of the prior year due to the impact of the year-over-year benefit resulting from the exercising and vesting of share-based awards.
Full Year Ended
For the full year ended
Net income attributable to
Balance Sheet and Cash Flow
During the fourth quarter of 2019, the Company repurchased 589,809 shares of the Company’s common stock for approximately
As of
Quarterly Dividend
The Company’s Board of Directors approved a quarterly cash dividend of
Fiscal Year 2020 Outlook
For fiscal year 2020, the Company expects revenue will increase 0% to 1% over revenue in 2019. The Company expects diluted EPS for fiscal year 2020 will be in the range of
Non-GAAP Adjustments
Amounts referred to as “Adjusted” exclude the items below.
For the fourth quarter 2019:
$8.9 million pre-tax ($8.9 million after-tax) vendor support associated with the Payless ShoeSource bankruptcy, included in operating expenses.$4.0 million pre-tax ($3.0 million after-tax) expense in connection with a provision for a legal settlement and related fees, included in operating expenses.$0.4 million pre-tax ($0.3 million after-tax) expense in connection with the termination of a joint venture, included in cost of goods sold;$0.2 million pre-tax ($0.1 million after-tax) expense in connection with the termination of a joint venture, included in operating expenses; and$0.2 million after-tax income in connection with the termination of a joint venture, included in net loss attributable to noncontrolling interest.$0.04 million pre-tax ($0.03 million after-tax) expense in connection with the acquisitions of GREATS and BB Dakota, included in operating expenses.$2.2 million tax expense in connection with deferred tax and other tax adjustments.
For the fourth quarter 2018:
$12.1 million pre-tax ($11.5 million after-tax) in bad debt expense and write-off of an unamortized buying agency agreement support payment associated with the Payless ShoeSource bankruptcy, included in operating expenses.$0.5 million pre-tax ($0.3 million after-tax) expense in connection with a provision for early lease termination charges, included in operating expenses.$0.3 million pre-tax ($0.2 million after-tax) expense in connection with the integration of theSchwartz & Benjamin acquisition and the related restructuring, included in operating expenses.$11.1 million tax expense resulting from the Tax Cuts and Jobs Act transition tax and prepaid tax adjustments related to prior years.
For the fiscal year 2019:
$8.7 million pre-tax ($8.6 million after-tax) vendor support, net of recovery of bad debt expense associated with the Payless ShoeSource bankruptcy, included in operating expenses.$5.4 million pre-tax ($4.1 million after-tax) expense in connection with early lease termination charges and the impairment of lease right-of-use assets.$4.1 million pre-tax ($3.0 million after-tax) non-cash expense associated with the impairment of the Brian Atwood trademark.$4.0 million pre-tax ($3.0 million after-tax) expense in connection with provision for a legal settlement and related fees, included in operating expenses.$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 ofDecember 31, 2019 .$1.1 million pre-tax ($0.8 million after-tax) expense in connection with the acquisitions of GREATS and BB Dakota, included in operating expenses.$0.7 million pre-tax ($0.5 million after-tax) expense in connection with a divisional headquarters relocation.$0.4 million pre-tax ($0.3 million after-tax) expense in connection with the termination of a joint venture, included in cost of goods sold;$0.2 million pre-tax ($0.1 million after-tax) expense in connection with the termination of a joint venture, included in operating expenses; and$0.2 million after-tax income in connection with the termination of a joint venture, included in net income attributable to noncontrolling interest.$2.6 million tax expense in connection with deferred tax and other tax adjustments.
For the fiscal year 2018:
$12.1 million pre-tax ($11.5 million after-tax) in bad debt expense and write-off of an unamortized buying agency agreement support payment associated with the Payless ShoeSource bankruptcy, included in operating expenses.$2.8 million pre-tax ($2.1 million after-tax) expense in connection with a provision for a settlement, included in operating expenses.$2.1 million pre-tax ($1.5 million after-tax) expense in connection with the integration of theSchwartz & 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 inBrian Atwood Italia Holding, LLC recorded in fourth quarter 2017.$0.5 million pre-tax ($0.3 million after-tax) expense in connection with a provision for early lease termination charges, included in operating expenses.$11.1 million tax expense resulting from the Tax Cuts and Jobs Act transition tax and prepaid tax adjustments related to prior years.
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 fourth quarter and fiscal year 2019 earnings conference call scheduled for today,
About
Safe Harbor Statement Under the
This press release contains “forward-looking statements” within the meaning of the safe harbor provisions of the
- the Company’s ability to accurately anticipate fashion trends and promptly respond to consumer demand;
- the Company’s ability to compete effectively in a highly competitive market;
- the Company’s ability to adapt its business model to rapid changes in the retail industry;
- the Company’s dependence on the retention and hiring of key personnel;
- the Company’s ability to successfully implement growth strategies and integrate acquired businesses;
- the Company’s reliance on independent manufacturers to produce and deliver products in a timely manner, especially when faced with adversities such as work stoppages, transportation delays, public health emergencies, social unrest, changes in local economic conditions, and political upheavals as well as meet the Company’s quality standards;
- changes in trade policies and tariffs imposed by
the United States government and the governments of other nations in which the Company manufactures and sells products; - disruptions to product delivery systems and the Company’s ability to properly manage inventory;
- the Company’s ability to adequately protect its trademarks and other intellectual property rights;
- legal, regulatory, political and economic risks that may affect the Company’s sales in international markets;
- changes in
U.S. and foreign tax laws that could have an adverse effect on the Company’s financial results; - additional tax liabilities resulting from audits by various taxing authorities;
- the Company’s ability to achieve operating results that are consistent with prior financial guidance; and
- other risks and uncertainties indicated from time to time in the Company’s filings with the
Securities and Exchange Commission .
The Company does not undertake any obligation to publicly update any forward-looking statement, including, without limitation, any guidance regarding revenue or earnings, whether as a result of new information, future developments or otherwise.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS DATA
(In thousands, except per share amounts)
Three Months Ended | Twelve Months Ended | |||||||||||||||
(Unaudited) | (Unaudited) | (Unaudited) | ||||||||||||||
Net sales | $ | 414,912 | $ | 410,360 | $ | 1,768,135 | $ | 1,653,609 | ||||||||
Commission and licensing fee income | 4,713 | 6,485 | 19,022 | 24,125 | ||||||||||||
Total revenue | 419,625 | 416,845 | 1,787,157 | 1,677,734 | ||||||||||||
Cost of sales | 261,291 | 258,046 | 1,101,140 | 1,037,571 | ||||||||||||
Gross profit | 158,334 | 158,799 | 686,017 | 640,163 | ||||||||||||
Operating expenses | 138,855 | 133,762 | 505,153 | 466,781 | ||||||||||||
Impairment charges | — | — | 4,050 | — | ||||||||||||
Income from operations | 19,479 | 25,037 | 176,814 | 173,382 | ||||||||||||
Interest and other income, net | 998 | 1,456 | 4,412 | 3,958 | ||||||||||||
Income before provision for income taxes | 20,477 | 26,493 | 181,226 | 177,340 | ||||||||||||
Provision for income taxes | 3,247 | 13,956 | 39,504 | 46,841 | ||||||||||||
Net income | 17,230 | 12,537 | 141,722 | 130,499 | ||||||||||||
Less: net income / (loss) attributable to noncontrolling interest | (521 | ) | 47 | 411 | 1,363 | |||||||||||
Net income attributable to |
$ | 17,751 | $ | 12,490 | $ | 141,311 | $ | 129,136 | ||||||||
Basic income per share | $ | 0.23 | $ | 0.15 | $ | 1.78 | $ | 1.58 | ||||||||
Diluted income per share | $ | 0.21 | $ | 0.15 | $ | 1.69 | $ | 1.50 | ||||||||
Basic weighted average common shares outstanding | 78,754 | 81,151 | 79,577 | 81,664 | ||||||||||||
Diluted weighted average common shares outstanding | 83,381 | 85,376 | 83,646 | 86,097 | ||||||||||||
Cash dividends declared per common share | $ | 0.15 | $ | 0.14 | $ | 0.57 | $ | 0.53 |
CONDENSED CONSOLIDATED BALANCE SHEET DATA
(In thousands)
As of | ||||||||
(Unaudited) | ||||||||
Cash and cash equivalents | $ | 264,101 | $ | 200,031 | ||||
Marketable securities | 40,521 | 66,968 | ||||||
Accounts receivable, net | 254,637 | 266,452 | ||||||
Inventories | 136,896 | 137,247 | ||||||
Other current assets | 22,724 | 32,427 | ||||||
Property and equipment, net | 65,504 | 64,807 | ||||||
Operating lease right-of-use assets | 155,700 | — | ||||||
334,058 | 291,423 | |||||||
Other assets | 4,506 | 13,215 | ||||||
Total assets | $ | 1,278,647 | $ | 1,072,570 | ||||
Accounts payable | $ | 61,706 | $ | 79,802 | ||||
Operating leases (current & non-current) | 171,796 | — | ||||||
Other current liabilities | 180,941 | 141,887 | ||||||
Contingent payment liability (current & non-current) | 9,124 | 3,000 | ||||||
Other long-term liabilities | 13,856 | 33,199 | ||||||
828,501 | 805,814 | |||||||
Noncontrolling interest | 12,723 | 8,868 | ||||||
Total liabilities and stockholders’ equity | $ | 1,278,647 | $ | 1,072,570 |
CONDENSED CONSOLIDATED CASH FLOW DATA
(In thousands)
Twelve Months Ended | ||||||||
(Unaudited) | ||||||||
Net cash provided by operating activities | $ | 233,780 | $ | 154,376 | ||||
Investing Activities | ||||||||
Purchases of property and equipment | (18,311 | ) | (12,450 | ) | ||||
Sales of marketable securities, net | 27,736 | 23,515 | ||||||
Acquisitions, net of cash acquired | (37,173 | ) | — | |||||
Net cash (used in) / provided by investing activities | (27,748 | ) | 11,065 | |||||
Financing Activities | ||||||||
Common stock share repurchases for treasury | (101,768 | ) | (105,924 | ) | ||||
Investment of noncontrolling interest | 3,248 | 2,577 | ||||||
Distribution of noncontrolling interest earnings | (1,444 | ) | (1,183 | ) | ||||
Payment of contingent liability | — | (7,000 | ) | |||||
Proceeds from exercise of stock options | 6,212 | 13,036 | ||||||
Cash dividends paid | (48,426 | ) | (47,316 | ) | ||||
Net cash used in financing activities | (142,178 | ) | (145,810 | ) | ||||
Effect of exchange rate changes on cash and cash equivalents | 216 | (814 | ) | |||||
Net increase in cash and cash equivalents | 64,070 | 18,817 | ||||||
Cash and cash equivalents - beginning of year | 200,031 | 181,214 | ||||||
Cash and cash equivalents - end of year | $ | 264,101 | $ | 200,031 |
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 | Twelve Months Ended | |||||||||||||||
GAAP gross profit | $ | 158,334 | $ | 158,799 | $ | 686,017 | $ | 640,163 | ||||||||
Loss in connection with the termination of a joint venture |
386 | — | 386 | — | ||||||||||||
Adjusted gross profit | $ | 158,720 | $ | 158,799 | $ | 686,403 | $ | 640,163 |
Table 2 - Reconciliation of GAAP operating expenses to Adjusted operating expenses | ||||||||||||||||
Three Months Ended | Twelve Months Ended | |||||||||||||||
GAAP operating expenses | $ | 138,855 | $ | 133,761 | $ | 505,153 | $ | 466,781 | ||||||||
Vendor support, net of recovery of bad debt expense, and write-off of an unamortized buying agency agreement support payment associated with the Payless ShoeSource bankruptcies | (8,946 | ) | (12,123 | ) | (8,687 | ) | (12,123 | ) | ||||||||
Expense in connection with a provision for legal settlement and related fees | (3,977 | ) | — | (3,977 | ) | (2,837 | ) | |||||||||
Expense in connection with the termination of a joint venture | (158 | ) | — | (158 | ) | — | ||||||||||
Expense in connection with the acquisitions of GREATS and BB Dakota | (42 | ) | — | (1,120 | ) | — | ||||||||||
Expense in connection with a divisional headquarters relocation | — | — | (669 | ) | — | |||||||||||
Expense in connection with a provision for early lease termination charges and the impairment of lease right-of-use assets | — | (452 | ) | (5,424 | ) | (452 | ) | |||||||||
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 the integration of the |
— | (278 | ) | — | (2,065 | ) | ||||||||||
Expense in connection with a warehouse consolidation | — | — | — | (1,241 | ) | |||||||||||
Adjusted operating expenses | $ | 125,732 | $ | 120,908 | $ | 486,986 | $ | 448,063 |
Table 3 - Reconciliation of GAAP income from operations to Adjusted income from operations | ||||||||||||||||
Three Months Ended | Twelve Months Ended | |||||||||||||||
GAAP income from operations | $ | 19,479 | $ | 25,037 | $ | 176,814 | $ | 173,382 | ||||||||
Vendor support, net of recovery of bad debt expense, and write-off of an unamortized buying agency agreement support payment associated with the Payless ShoeSource bankruptcies |
8,946 | 12,123 | 8,687 | 12,123 | ||||||||||||
Expense in connection with a provision for legal settlement and related fees | 3,977 | — | 3,977 | 2,837 | ||||||||||||
Loss in connection with the termination of a joint venture | 544 | — | 544 | — | ||||||||||||
Expense in connection with the acquisitions of GREATS and BB Dakota | 42 | — | 1,120 | — | ||||||||||||
Expense in connection with a divisional headquarters relocation | — | — | 669 | — | ||||||||||||
Expense in connection with a provision for early lease termination charges and the impairment of lease right-of-use assets | — | 452 | 5,424 | 452 | ||||||||||||
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 the integration of the |
— | 278 | — | 2,065 | ||||||||||||
Expense in connection with a warehouse consolidation | — | — | — | 1,241 | ||||||||||||
Impairment of the Brian Atwood trademark | — | — | 4,050 | — | ||||||||||||
Adjusted income from operations | $ | 32,988 | $ | 37,890 | $ | 199,417 | $ | 192,100 |
Table 4 - Reconciliation of GAAP provision for income taxes to Adjusted provision for income taxes | ||||||||||||||||
Three Months Ended | Twelve Months Ended | |||||||||||||||
GAAP provision for income taxes | $ | 3,247 | $ | 13,956 | $ | 39,504 | $ | 46,841 | ||||||||
Tax effect of vendor support, net of recovery of bad debt expense, and write-off of an unamortized buying agency agreement support payment associated with the Payless ShoeSource bankruptcies | — | 642 | 85 | 642 | ||||||||||||
Tax effect of expense in connection with a provision for legal settlement and related fees | 961 | — | 961 | 702 | ||||||||||||
Tax effect of the loss in connection with the termination of a joint venture | 136 | — | 136 | — | ||||||||||||
Tax effect of expense in connection with the acquisitions of GREATS and BB Dakota | 10 | — | 281 | — | ||||||||||||
Tax effect of expense in connection with a divisional headquarters relocation | — | — | 168 | — | ||||||||||||
Tax effect of expense in connection with a provision for early lease termination charges and the impairment of lease right-of-use assets | — | 109 | 1,361 | 109 | ||||||||||||
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 of expense in connection with the integration of the |
— | 67 | — | 529 | ||||||||||||
Tax effect of expense in connection with a warehouse consolidation | — | — | — | 327 | ||||||||||||
Tax effect in connection with the impairment of the Brian Atwood trademark | — | — | 1,017 | — | ||||||||||||
Tax expense in connection with the impairment of the preferred interest investment in |
— | — | — | (1,028 | ) | |||||||||||
Tax expense in connection with deferred tax and other tax adjustments | (2,207 | ) | — | (2,590 | ) | — | ||||||||||
Tax expense resulting from the Tax Cuts and Jobs Act transition tax and taxing authorities audit and prepaid tax adjustment related to prior years | — | (11,136 | ) | — | (11,136 | ) | ||||||||||
Adjusted provision for income taxes | $ | 2,147 | $ | 3,637 | 40,454 | $ | 36,985 |
Table 5 - Reconciliation of GAAP net income / (loss) attributable to noncontrolling interest to Adjusted net income / (loss) attributable to noncontrolling interest | ||||||||||||||||
Three Months Ended | Twelve Months Ended | |||||||||||||||
GAAP net income / (loss) attributable to noncontrolling interest | $ | (521 | ) | $ | 47 | $ | 411 | $ | 1,363 | |||||||
Net loss attributable to noncontrolling interest related to the termination of a joint venture | 204 | — | 204 | — | ||||||||||||
Adjusted net income / (loss) attributable to noncontrolling interest | $ | (317 | ) | $ | 47 | $ | 615 | $ | 1,363 |
Table 6 - Reconciliation of GAAP net income attributable to |
||||||||||||||||
Three Months Ended | Twelve Months Ended | |||||||||||||||
GAAP net income attributable to |
$ | 17,751 | $ | 12,490 | $ | 141,311 | $ | 129,136 | ||||||||
After-tax impact of vendor support, net of recovery of bad debt expense, and write-off of an unamortized buying agency agreement support payment associated with the Payless ShoeSource bankruptcies | 8,946 | 11,481 | 8,602 | 11,481 | ||||||||||||
After-tax impact of expense in connection with a provision for legal settlement and related fees | 3,016 | — | 3,016 | 2,135 | ||||||||||||
After-tax impact of loss in connection with the termination of a joint venture | 204 | — | 204 | — | ||||||||||||
After-tax impact of expense in connection with the acquisitions of GREATS and BB Dakota | 32 | — | 839 | — | ||||||||||||
After-tax impact of expense in connection with a divisional headquarters relocation | — | — | 501 | — | ||||||||||||
After-tax impact of expense in connection with early lease termination charges and the impairment of lease right-of-use assets | — | 343 | 4,063 | 343 | ||||||||||||
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 of expense in connection with the integration of the |
— | 211 | — | 1,536 | ||||||||||||
After-tax impact of expense in connection with a warehouse consolidation | — | — | — | 914 | ||||||||||||
After-tax impact associated with the impairment related to the Brian Atwood trademark | — | — | 3,033 | — | ||||||||||||
Tax expense in connection with the impairment of the preferred interest investment in |
— | — | — | 1,028 | ||||||||||||
Tax expense in connection with deferred tax and other tax adjustments | 2,207 | — | 2,590 | — | ||||||||||||
Tax expense resulting from the Tax Cuts and Jobs Act transition tax and taxing authorities audit and prepaid tax adjustment related to prior years |
— | 11,136 | — | 11,136 | ||||||||||||
Adjusted net income attributable to |
$ | 32,156 | $ | 35,661 | $ | 162,760 | $ | 157,710 | ||||||||
GAAP diluted income per share | $ | 0.21 | $ | 0.15 | $ | 1.69 | $ | 1.50 | ||||||||
Adjusted diluted income per share | $ | 0.39 | $ | 0.42 | $ | 1.95 | $ | 1.83 |
Contact
Director of Corporate Development & Investor Relations
718-308-2611
InvestorRelations@stevemadden.com