Steve Madden Announces Second Quarter 2020 Results

July 29, 2020 at 6:59 AM EDT

LONG ISLAND CITY, N.Y., July 29, 2020 (GLOBE NEWSWIRE) -- Steve Madden (Nasdaq: SHOO), a leading designer and marketer of fashion-forward footwear, accessories and apparel for women, men and children, today announced financial results for the second quarter ended June 30, 2020.

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

The Company reclassified commission and licensing fee income to Total Revenue and reclassified 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.

Second Quarter 2020 Review

  • Revenue decreased 68.2% to $142.8 million compared to $449.6 million in the same period of 2019.
  • Gross margin was 39.1% compared to 37.8% in the same period last year.
  • Operating expenses as a percentage of revenue were 55.7% compared to 27.0% of revenue in the same period of 2019.  Adjusted operating expenses as a percentage of revenue were 53.8% compared to 26.9% of revenue in the same period of 2019.
  • Loss from operations totaled ($23.7) million, or (16.6%) of revenue, compared to income from operations of $44.6 million, or 9.9% of revenue, in the same period of 2019.  Adjusted loss from operations was ($21.0) million, or (14.7%) of revenue, compared to Adjusted income from operations of $49.1 million, or 10.9% of revenue, in the same period of 2019.
  • Net loss attributable to Steven Madden, Ltd. was ($16.6) million, or ($0.21) per diluted share, compared to net income attributable to Steven Madden, Ltd. of $36.6 million, or $0.44 per diluted share, in the prior year’s second quarter.  Adjusted net loss attributable to Steven Madden, Ltd. was ($14.7) million, or ($0.19) per diluted share, compared to Adjusted net income attributable to Steven Madden, Ltd. of $39.5 million, or $0.47 per diluted share, in the prior year’s second quarter.

Edward Rosenfeld, Chairman and Chief Executive Officer, commented, "The past few months have been challenging for all of us due to the COVID-19 pandemic.  At Steve Madden, we have prioritized the health and safety of our employees, customers and communities while also moving quickly to adapt to the current retail environment, mitigate the impact to our business, preserve liquidity and enhance financial flexibility.  We are encouraged by the strong performance we are seeing in digital commerce channels – including 88% revenue growth on stevemadden.com in the second quarter – which underscores the strength of our brands and the continued consumer demand for our products.  We know the path forward will continue to be bumpy in the near-term, but we are confident that our strengths – powerful brands, a fortress balance sheet, a proven business model and most of all, our talented and dedicated employees – will enable us to successfully navigate this crisis and return to profitable growth once conditions normalize."

Second Quarter 2020 Segment Results

Revenue for the wholesale business decreased 72.5% to $100.0 million in the second quarter of 2020, including a 72.8% decline in wholesale footwear and a 71.5% decline in wholesale accessories/apparel.  The revenue decline was driven by significant order cancellations resulting from the COVID-19 pandemic.  Gross margin in the wholesale business decreased to 26.6% compared to 32.1% in last year’s second quarter due primarily to a shift in sales mix to the lower-margin private label business.

Retail revenue in the second quarter decreased 49.2% to $41.4 million due to the closure of the vast majority of the Company's retail stores for most or all of the quarter as a result of the COVID-19 pandemic, partially offset by strong performance in the Company's e-commerce business.  Retail gross margin increased to 67.4% in the second quarter of 2020 compared to 59.7% in the second quarter of the prior year due primarily to a shift in sales mix to the higher-margin e-commerce business.

The Company ended the quarter with 225 company-operated retail stores, including eight Internet stores, as well as 17 company-operated concessions in international markets.

The Company’s effective tax rate for the second quarter of 2020 was 26.6% compared to 21.3% in the second quarter of 2019.  On an Adjusted basis, the effective tax rate for the second quarter of 2020 was 26.9% compared to 22.4% in the second quarter of 2019.

Balance Sheet and Cash Flow

As of June 30, 2020, cash, cash equivalents and marketable securities totaled $356.9 million.  Advances from factor totaled $42.7 million.

On July 22, 2020, the Company entered into a new $150 million, five-year asset-based revolving credit facility, which replaced the Company’s previous credit facility with its factor.

Fiscal Year 2020 Outlook

Given the continued disruption and uncertainty related to the COVID-19 pandemic, the Company is not providing guidance at this time.

Non-GAAP Adjustments

Amounts referred to as “Adjusted” exclude the items below.

For the second quarter 2020:

  • $5.4 million pre-tax ($4.1 million after-tax) expense in connection with restructuring and related charges, included in operating expenses.
  • $4.6 million pre-tax ($3.5 million after-tax) benefit in connection with a change in valuation of contingent considerations, included in operating expenses.
  • $1.2 million pre-tax ($0.9 million after-tax) expense in connection with the impairment of lease right-of-use assets, included in operating expenses.
  • $0.7 million pre-tax ($0.6 million after-tax) expense in connection with benefits provided to furloughed employees, included in operating expenses.
  • $0.02 million pre-tax ($0.01 million after-tax) expense associated with the impairment of store fixed assets, included in operating expenses.
  • $0.2 million loss in connection with the impairment of lease right-of-use assets, trademark and other attributable to noncontrolling interest.

For the second quarter 2019:

  • $1.8 million pre-tax ($1.7 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.

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 29, 2020, 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 two hours of the conclusion of the call and will remain available for 12 months following the live call.

About Steve Madden

Steve Madden designs, sources and markets fashion-forward footwear, accessories and apparel 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®, GREATS®, BB Dakota®, Mad Love® and Big Buddha®, Steve Madden is a licensee of various brands, including Anne Klein®,  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 225 retail stores (including eight 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 Statement Under the U.S. Private Securities Litigation Reform Act of 1995

This press release contains “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995.  Examples of forward-looking statements include, among others, statements regarding revenue and earnings guidance, plans, strategies, objectives, expectations and intentions.  Forward-looking statements can be identified by words such as: “may”, “will”, “expect”, “believe”, “should”, “anticipate”, “project”, “predict”, “plan”, “intend”, or “estimate”, and similar expressions or the negative of these expressions.  Forward-looking statements are neither historical facts nor assurances of future performance.  Instead, they represent the Company’s current beliefs, expectations and assumptions regarding anticipated events and trends affecting its business and industry based on information available as of the time such statements are made.  Investors are cautioned that such forward-looking statements are inherently subject to risks and uncertainties, many of which cannot be predicted with accuracy and some of which may be outside of the Company’s control.  The Company’s actual results and financial condition may differ materially from those indicated in these forward-looking statements.  As such, investors should not rely upon them.  Important risk factors include:

  • the Company's ability to maintain adequate liquidity when negatively impacted by unforeseen events such as an epidemic or pandemic (COVID-19), which may cause disruption to the Company's business operations and temporary closure of Company-operated and wholesale partner retail stores, resulting in a significant reduction in revenue for an indeterminable period of time;
  • 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.

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, 2020   June 30, 2019   June 30, 2020   June 30, 2019
                 
Net sales   $ 141,363     $ 444,974     $ 497,047     $ 855,914  
Commission and licensing fee income   1,449     4,655     4,933     9,503  
Total revenue   142,812     449,629     501,980     865,417  
Cost of sales   86,924     279,629     312,628     533,572  
Gross profit   55,888     170,000     189,352     331,845  
Operating expenses   79,590     121,317     229,784     238,502  
Trademark impairment charges       4,050     9,518     4,050  
(Loss) / income from operations   (23,702 )   44,633     (49,950 )   89,293  
Interest and other income, net   357     1,262     1,403     2,454  
(Loss) / income before provision for income taxes   (23,345 )   45,895     (48,547 )   91,747  
(Benefit) / provision for income taxes   (6,201 )   9,784     (13,602 )   20,371  
Net (loss) / income   (17,144 )   36,111     (34,945 )   71,376  
Less: net (loss) / income  attributable to noncontrolling interest   (558 )   (461 )   (908 )   279  
Net (loss) / income attributable to Steven Madden, Ltd.   $ (16,586 )   $ 36,572     $ (34,037 )   $ 71,097  
                 
Basic net (loss) / income per share   $ (0.21 )   $ 0.46     $ (0.43 )   $ 0.89  
                 
Diluted net (loss) / income per share   $ (0.21 )   $ 0.44     $ (0.43 )   $ 0.85  
                 
Basic weighted average common shares outstanding   78,517     79,951     78,696     80,241  
                 
Diluted weighted average common shares outstanding   78,517     83,869     78,696     84,064  
                 
Cash dividends declared per common share   $     $ 0.14     $ 0.15     $ 0.28  


STEVEN MADDEN, LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEET DATA

(In thousands)

      As of    
  June 30, 2020   December 31, 2019   June 30, 2019
  (Unaudited)       (Unaudited)
           
Cash and cash equivalents $ 318,101     $ 264,101     $ 212,664  
Marketable securities 38,837     40,521     36,096  
Accounts receivable, net 143,679     254,637     306,636  
Inventories 103,282     136,896     146,120  
Other current assets 32,022     22,724     39,287  
Property and equipment, net 49,594     65,504     61,654  
Operating lease right-of-use assets 120,489     155,700     179,320  
Goodwill and intangibles, net 315,742     334,058     286,129  
Other assets 10,646     4,506     13,654  
Total assets $ 1,132,392     $ 1,278,647     $ 1,281,560  
           
Accounts payable $ 42,474     $ 61,706     $ 107,436  
Operating leases (current & non-current) 151,520     171,796     193,295  
Advances from factor 42,662          
Other current liabilities 115,866     180,941     136,131  
Contingent payment liability 1,829     9,124      
Other long-term liabilities 10,921     13,856     17,142  
Total Steven Madden, Ltd. stockholders’ equity 755,084     828,501     818,354  
Noncontrolling interest 12,036     12,723     9,202  
Total liabilities and stockholders’ equity $ 1,132,392     $ 1,278,647     $ 1,281,560  
                       
                       

STEVEN MADDEN, LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED CASH FLOW DATA

(In thousands)

(Unaudited)

    Six Months Ended
    June 30, 2020   June 30, 2019
         
Net cash provided by operating activities   $ 57,867     $ 59,761  
         
Investing Activities        
Capital expenditures   (4,320 )   (6,214 )
(Purchases) / sales of marketable securities, net   (162 )   32,062  
Net cash (used in) / provided by investing activities   (4,482 )   25,848  
         
Financing Activities        
Common stock purchased for treasury   (29,678 )   (51,156 )
Investment of noncontrolling interest   359     1,283  
Distribution of noncontrolling interest earnings       (1,113 )
Proceeds from exercise of stock options   960     1,799  
Cash dividends paid   (12,459 )   (23,987 )
Advances from factor, net   42,662      
Net cash provided by / (used in) financing activities   1,844     (73,174 )
         
Effect of exchange rate changes on cash and cash equivalents   (1,229 )   198  
         
Net increase in cash and cash equivalents   54,000     12,633  
         
Cash and cash equivalents - beginning of period   264,101     200,031  
         
Cash and cash equivalents - end of period   $ 318,101     $ 212,664  
                 
                 

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 operating expenses to Adjusted operating expenses        
    Three Months Ended   Six Months Ended
    June 30, 2020   June 30, 2019   June 30, 2020   June 30, 2019
                 
GAAP operating expenses   $ 79,590     $ 121,317     229,784     $ 238,502  
                 
Expense in connection with restructuring and related charges   (5,414 )       (5,414 )    
                 
Benefit in connection with a change in valuation of contingent considerations   4,611         4,611      
                 
Expense in connection with impairment of lease right-of-use assets   (1,161 )       (17,987 )    
                 
Expense in connection with impairment of store fixed assets   (17 )       (12,012 )    
                 
Expense in connection with benefits provided to furloughed employees   (733 )       (1,991 )    
                 
Expense in connection with loan receivable           (697 )    
                 
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 early lease termination charges       (1,543 )   (142 )   (2,292 )
                 
Net recovery in connection with the Payless ShoeSource bankruptcy       1,811         259  
                 
Expense in connection with a divisional headquarters relocation       (669 )       (669 )
                 
Adjusted operating expenses   $ 76,876     $ 120,916     $ 196,152     $ 237,668  


Table 2 - Reconciliation of GAAP (loss) / income from operations to Adjusted (loss) / income from operations
    Three Months Ended   Six Months Ended
    June 30, 2020   June 30, 2019   June 30, 2020   June 30, 2019
                 
GAAP (loss) / income from operations   $ (23,702 )   $ 44,633     $ (49,950 )   $ 89,293  
                 
Expense in connection with restructuring and related charges   5,414         5,414      
                 
Benefit in connection with a change in valuation of contingent considerations   (4,611 )       (4,611 )    
                 
Expense in connection with impairment of lease right-of-use assets   1,161         17,987      
                 
Expense in connection with impairment of store fixed assets   17         12,012      
                 
Expense in connection with benefits provided to furloughed employees   733         1,991      
                 
Expense in connection with provision for loan receivable           697      
                 
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 early lease termination charges       1,543     142     2,292  
                 
Impairment of certain trademarks       4,050     9,518     4,050  
                 
Net recovery in connection with the Payless ShoeSource bankruptcy       (1,811 )       (259 )
                 
Expense in connection with a divisional headquarters relocation       669         669  
                 
Adjusted (loss) / income from operations   $ (20,988 )   $ 49,084     $ (6,800 )   $ 94,177  


Table 3 - Reconciliation of GAAP (benefit) / provision for income taxes to Adjusted (benefit) / provision for income taxes
    Three Months Ended   Six Months Ended
    June 30, 2020   June 30, 2019   June 30, 2020   June 30, 2019
                 
GAAP (benefit) / provision for income taxes   $ (6,201 )   $ 9,784     $ (13,602 )   $ 20,371  
                 
Tax effect of expense in connection with restructuring and related charges   1,284         1,284      
                 
Tax effect of benefit in connection with a change in valuation of contingent considerations   (1,092 )       (1,092 )    
                 
Tax effect of expense in connection with impairment of lease right-of-use assets   273         4,333      
                 
Tax effect of expense in connection with impairment of store fixed assets   4         2,910      
                 
Tax effect of expense in connection with benefits provided to furloughed employees   174         472      
                 
Tax effect of expense in connection with provision for loan receivable           165      
                 
Tax effect of 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 provision for early lease termination charges       387     34     575  
                 
Tax effect of impairment of certain trademarks       1,017     2,254     1,017  
                 
Tax effect of net recovery in connection with the Payless ShoeSource bankruptcy       (85 )       85  
                 
Tax effect of expense in connection with a divisional headquarters relocation       168         168  
                 
Adjusted (benefit) / provision for income taxes   $ (5,558 )   $ 11,271     $ (3,242 )   $ 21,747  


Table 4 - Reconciliation of GAAP net  (loss) / income attributable to noncontrolling interest to Adjusted net (loss) / income attributable to noncontrolling interest        
    Three Months Ended   Six Months Ended
    June 30, 2020   June 30, 2019   June 30, 2020   June 30, 2019
                 
GAAP net (loss) / income attributable to noncontrolling interest   $ (558 )   $ (461 )   $ (908 )   $ 279  
                 
Net loss in connection with impairment of lease right-of-use assets, trademark and other attributable to noncontrolling interest   163         470      
                 
Adjusted net (loss) / income attributable to noncontrolling interest   $ (395 )   $ (461 )   $ (438 )   $ 279  


Table 5 - Reconciliation of GAAP net (loss) / income attributable to Steven Madden, Ltd. to Adjusted net (loss) / income attributable to Steven Madden, Ltd.
    Three Months Ended   Six Months Ended
    June 30, 2020   June 30, 2019   June 30, 2020   June 30, 2019
                 
GAAP net (loss) / income attributable to Steven Madden, Ltd.   $ (16,586 )   $ 36,572     $ (34,037 )   $ 71,097  
                 
After-tax impact of expense in connection with restructuring and related charges   4,130         4,130      
                 
After-tax impact of benefit in connection with a change in valuation of contingent considerations   (3,519 )       (3,519 )    
                 
After-tax impact of expense in connection with impairment of lease right-of-use assets   887         13,653      
                 
After-tax impact of expense in connection with impairment of store fixed assets   13         9,102      
                 
After-tax impact of expense in connection with benefits provided to furloughed employees   560         1,520      
                 
After-tax impact of expense in connection with provision for loan receivable           532      
                 
After-tax impact of 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 provision for early lease termination charges       1,156     109     1,717  
                 
After-tax impact of impairment of certain trademarks       3,033     7,265     3,033  
                 
Less: Net loss in connection with impairment of lease right-of-use assets, trademark and other attributable to noncontrolling interest   (163 )       (470 )    
                 
After-tax impact of  net recovery in connection with the Payless ShoeSource bankruptcy       (1,727 )       (344 )
                 
After-tax impact of expense in connection with a divisional headquarters relocation       501         501  
                 
Adjusted net (loss) / income attributable to Steven Madden, Ltd.   $ (14,678 )   $ 39,535     $ (1,715 )   $ 74,605  
                 
GAAP diluted (loss) / income per share   $ (0.21 )   $ 0.44     $ (0.43 )   $ 0.85  
                 
GAAP diluted weighted average shares outstanding   78,517     83,869     78,696     84,064  
                 
Adjusted diluted (loss) / income per share   $ (0.19 )   $ 0.47     $ (0.02 )   $ 0.89  
                 
Adjusted diluted weighted average shares outstanding   78,517     83,869     78,696     84,064  

Contact

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


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Steve Madden