Steve Madden Announces Third Quarter Results

~ Narrows Full Year 2018 Guidance to the High End ~
~ Increases Quarterly Dividend ~

LONG ISLAND CITY, N.Y., Oct. 30, 2018 (GLOBE NEWSWIRE) -- 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 third quarter ended September 30, 2018.

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

All share and per share data provided herein is adjusted retroactively for the three-for-two stock split effective October 12, 2018.

For the Third Quarter 2018:

• Net sales increased 3.9% to $458.5 million compared to $441.2 million in the same period of 2017.
  
  
• Gross margin was 38.2% compared to 37.6% in the same period last year, an increase of 60 basis points.
  
  
• Operating expenses as a percentage of sales were 24.0% compared to 23.8% of sales in the same period of 2017.  Adjusted operating expenses as a percentage of sales were 23.9% compared to 23.7% in the same period of 2017.
  
  
• Income from operations totaled $70.2 million, or 15.3% of net sales, compared to $65.4 million, or 14.8% of net sales, in the same period of 2017.  Adjusted income from operations was $70.6 million, or 15.4% of net sales, compared to Adjusted income from operations of $65.9 million, or 14.9% of net sales, in the same period of 2017.
  
  
• Net income attributable to Steven Madden, Ltd. was $55.6 million, or $0.64 per diluted share, compared to $44.2 million, or $0.51 per diluted share, in the prior year's third quarter.  Adjusted net income attributable to Steven Madden, Ltd. was $55.9 million, or $0.65 per diluted share, compared to $44.5 million, or $0.51 per diluted share, in the prior year's third quarter.

Edward Rosenfeld, Chairman and Chief Executive Officer, commented, “We are pleased with our performance in the third quarter, which included strong financial results as well as progress on a number of our key strategic initiatives.  In addition to robust growth in our core Steve Madden Women’s wholesale business, we saw strong gains in international markets, outstanding performance in Blondo and a significant acceleration in our e-commerce business.  The momentum in these areas – combined with the power of our brands and the strength of our business model – bolsters our confidence that we can continue to deliver long-term growth and value creation going forward.”

Third Quarter 2018 Segment Results

Net sales for the wholesale business increased 3.1% to $388.5 million in the third quarter of 2018, as a strong gain in wholesale accessories was partially offset by a modest decline in wholesale footwear driven by the transition of the Company’s business with one of its private label customers from the wholesale model to the buying agency model.  Gross margin in the wholesale business increased to 34.3% compared to 33.9% in last year’s third quarter, with gross margin improvement in both wholesale footwear and wholesale accessories.

Retail net sales in the third quarter rose 8.8% to $69.9 million compared to $64.3 million in the third quarter of the prior year.  Same store sales increased 5.5% in the quarter, including a solid gain in bricks and mortar locations and a strong increase in the Company’s e-commerce business.  Retail gross margin rose to 60.1% in the third quarter of 2018, up 80 basis points compared to 59.3% in the third quarter of the prior year due to improved gross margin in the Company’s e-commerce business.

The Company ended the quarter with 210 company-operated retail locations, including seven Internet stores, as well as 46 company-operated concessions in international markets.

The Company’s effective tax rate for the third quarter of 2018 was 20.8% compared to 32.1% in the third quarter of 2017.  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 third quarter of 2018, the Company repurchased 416,264 shares of the Company’s common stock for approximately $15.8 million, which includes shares acquired through the net settlement of employee stock awards.

As of September 30, 2018, cash, cash equivalents, and current marketable securities totaled $230.4 million.

Increased Quarterly Dividend

The Company’s Board of Directors approved a quarterly cash dividend of $0.14 per share, reflecting a 5% increase over the previous quarterly dividend.  The dividend will be paid on December 31, 2018, to stockholders of record at the close of business on December 21, 2018.

Updated Fiscal Year 2018 Outlook

For fiscal year 2018, the Company now expects net sales will increase 6% to 7% over net sales in 2017, the high end of the previous range of 5% to 7%.  The Company expects diluted EPS for fiscal year 2018 will be in the range of $1.70 to $1.72, the high end of the previous range of $1.67 to $1.72.  The Company expects Adjusted diluted EPS for fiscal year 2018 will be in the range of $1.76 to $1.78, the high end of the previous range of $1.73 to $1.78.

Non-GAAP Adjustments

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

For the third quarter 2018:

• $0.4 million pre-tax ($0.3 million after-tax) expense in connection with the integration of the Schwartz & Benjamin acquisition and the related restructuring, included in operating expenses.

For the third quarter 2017:

• $0.5 million pre-tax ($0.3 million after-tax) expense in connection with the integration of the Schwartz & Benjamin acquisition and the related restructuring, 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.
  
  
• $1.8 million pre-tax ($1.3 million after-tax) expense in connection with the integration of the Schwartz & 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 in Brian Atwood Italia Holding, LLC recorded in fourth quarter 2017.

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 third quarter earnings conference call scheduled for today, October 30, 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.  

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® and Anne Klein®. 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 210 retail stores (including Steve Madden's seven 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, fashion sneakers, 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						Nine  Months Ended
		September 30, 2018			September 30, 2017			September 30, 2018			September 30, 2017
	Net sales	$	458,482		$	441,193		$	1,243,249		$	1,181,728
	Cost of sales		283,265			275,302			779,525			743,723
	Gross profit		175,217			165,891			463,724			438,005
	Commission and licensing fee income, net		4,994			4,746			10,897			10,838
	Operating expenses		110,007			105,194			326,276			310,725
	Income from operations		70,204			65,443			148,345			138,118
	Interest and other income, net		872			564			2,502			1,956
	Income before provision for income taxes		71,076			66,007			150,847			140,074
	Provision for income taxes		14,757			21,181			32,885			45,703
	Net income		56,319			44,826			117,962			94,371
	Less: Net income attributable to noncontrolling interest		756			596			1,316			1,019
	Net income attributable to Steven Madden, Ltd.	$	55,563		$	44,230		$	116,646		$	93,352
	Basic income per share	$	0.68		$	0.54		$	1.43		$	1.13
	Diluted income per share	$	0.64		$	0.51		$	1.35		$	1.07
	Basic weighted average common shares
	outstanding		81,727			82,356			81,832			82,935
	Diluted weighted average common shares
	outstanding		86,574			86,627			86,273			86,841

 

STEVEN MADDEN, LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET DATA
(In thousands)

		As of
		September 30, 2018			December 31, 2017			September 30, 2017
		(Unaudited)						(Unaudited)
	Cash and cash equivalents	$	172,537		$	181,214		$	92,080
	Marketable securities		57,896			93,550			84,815
	Accounts receivable, net		332,049			240,909			337,200
	Inventories		147,491			110,324			124,117
	Other current assets		43,966			49,044			44,621
	Property and equipment, net		65,472			71,498			73,922
	Goodwill and intangibles, net		295,269			299,842			305,622
	Other assets		10,379			10,780			9,026
	Total assets	$	1,125,059		$	1,057,161		$	1,071,403
	Accounts payable	$	94,636		$	66,955		$	102,906
	Contingent payment liability (current & non current)		3,000			10,000			23,050
	Other current liabilities		121,894			132,657			106,485
	Other long term liabilities		38,332			38,617			35,961
	Total Steven Madden, Ltd. stockholders' equity		859,770			802,821			797,061
	Noncontrolling interest		7,427			6,111			5,940
	Total liabilities and stockholders' equity	$	1,125,059		$	1,057,161		$	1,071,403

 

STEVEN MADDEN, LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED CASH FLOW DATA
(In thousands)
(Unaudited)

				Nine  Months Ended
				September 30, 2018				September 30, 2017
	Net cash provided by operating activities			$	46,467			$	35,010
	Investing Activities
	Purchases of property and equipment				(8,164	)			(11,710	)
	Sales of marketable securities, net				33,842				28,290
	Repayment of notes receivable				-				221
	Acquisition, net of cash acquired				-				(17,396	)
	Net cash provided by (used in) investing activities				25,678				(595	)
	Financing Activities
	Common stock share repurchases for treasury				(50,881	)			(73,226	)
	Payment of contingent liability				(7,000	)			(7,359	)
	Proceeds from exercise of stock options				12,801				11,312
	Cash dividends paid				(35,147	)			-
	Net cash used in financing activities				(80,227	)			(69,273	)
	Effect of exchange rate changes on cash and cash equivalents				(595	)			823
	Net decrease in cash and cash equivalents				(8,677	)			(34,035	)
	Cash and cash equivalents - beginning of period				181,214				126,115
	Cash and cash equivalents - end of period			$	172,537			$	92,080

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
															Nine Months Ended
															September 30, 2017
	Consolidated
	GAAP gross profit														$	438,005
	Non-cash expense associated with the purchase accounting fair value
	adjustment of inventory acquired in the Schwartz & Benjamin acquisition															1,654
	Adjusted gross profit														$	439,659
	Wholesale
	GAAP gross profit														$	325,717
	Non-cash expense associated with the purchase accounting fair value adjustment
	of inventory acquired in the Schwartz & Benjamin acquisition															1,654
	Adjusted gross profit														$	327,371
	Table 2 - Reconciliation of GAAP operating expenses to Adjusted operating expenses
			Three Months Ended				Three Months Ended				Nine Months Ended				Nine Months Ended
			September 30, 2018				September 30, 2017				September 30, 2018				September 30, 2017
	GAAP operating expenses		$	110,007			$	105,194			$	326,276			$	310,725
	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			(406	)			(488	)			(1,787	)			(1,255	)
	Expense in connection with a warehouse consolidation			-				-				(1,241	)			-
	Bad debt expense associated with the Payless ShoeSource bankruptcy			-				-				-				(7,500	)
	Adjusted operating expenses		$	109,601			$	104,706			$	320,411			$	301,970
	Table 3 - Reconciliation of GAAP income from operations to Adjusted income from operations
			Three Months Ended				Three Months Ended				Nine Months Ended				Nine Months Ended
			September 30, 2018				September 30, 2017				September 30, 2018				September 30, 2017
	GAAP Income from Operations		$	70,204			$	65,443			$	148,345			$	138,118
	Non-cash expense associated with the purchase accounting fair value
	adjustment of inventory acquired in the Schwartz & Benjamin acquisition			-				-				-				1,654
	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			406				488				1,787				1,255
	Expense in connection with a warehouse consolidation			-				-				1,241				-
	Bad debt expense associated with the Payless ShoeSource bankruptcy			-				-				-				7,500
	Adjusted Income from Operations		$	70,610			$	65,931			$	154,210			$	148,527
	Table 4 - Reconciliation of GAAP provision for income taxes to Adjusted provision for income taxes
			Three Months Ended				Three Months Ended				Nine Months Ended				Nine Months Ended
			September 30, 2018				September 30, 2017				September 30, 2018				September 30, 2017
	GAAP provision for income taxes		$	14,757			$	21,181			$	32,885			$	45,703
	Tax effect of non-cash expense associated with the purchase accounting fair
	value adjustment of inventory acquired in the Schwartz & Benjamin acquisition			-				-				-				579
	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			102				181				462				465
	Tax effect of expense in connection with a warehouse consolidation			-				-				327				-
	Tax expense in connection with the impairment of the preferred interest
	investment in Brian Atwood Italia Holding, LLC recorded in fourth
	quarter 2017			-				-				(1,028	)			-
	Tax effect of bad debt expense associated with the Payless ShoeSource
	bankruptcy			-				-				-				964
	Adjusted provision for income taxes		$	14,859			$	21,362			$	33,348			$	47,711
	Table 5 - Reconciliation of GAAP net income to Adjusted net income
			Three Months Ended				Three Months Ended				Nine Months Ended				Nine Months Ended
			September 30, 2018				September 30, 2017				September 30, 2018				September 30, 2017
	GAAP net income attributable to Steven Madden, Ltd.		$	55,563			$	44,230			$	116,646			$	93,352
	After-tax impact of non-cash expense associated with the purchase
	accounting fair value adjustment of inventory acquired in the Schwartz &
	Benjamin acquisition			-				-				-				1,075
	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			304				307				1,325				790
	After-tax impact of expense in connection with a warehouse consolidation			-				-				914				-
	Tax expense in connection with the impairment of the preferred interest
	investment in Brian Atwood Italia Holding, LLC recorded in fourth
	quarter 2017			-				-				1,028				-
	After-tax impact of bad debt expense associated with the Payless
	ShoeSource bankruptcy			-				-				-				6,536
	Adjusted net income attributable to Steven Madden, Ltd.		$	55,867			$	44,537			$	122,048			$	101,753
	GAAP diluted income per share		$	0.64			$	0.51			$	1.35			$	1.07
	Adjusted diluted income per share		$	0.65			$	0.51			$	1.41			$	1.17

Contact

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

Steve Madden