Steven Madden, Ltd. Announces Fourth Quarter and Full Year Results
Fourth quarter net sales increased 24.8% to $114.1 million from $91.4 million reported in the comparable period of 2005. Gross margin declined to 40.8% from 42.6% primarily reflecting soft gross margin at the Company's Daniel M. Friedman & Associates accessories division. Operating expenses as a percent of sales improved to 29.6% versus 30.8% in the same period of the prior year due to leverage on sales as the Company controlled costs while building the business.
Operating income increased to $16.7 million, or 14.6% of sales, compared with operating income of $12.7 million, or 13.9% of sales, in the same period of 2005. Net income increased 35.1% to $10.0 million, or $0.45 per diluted share, compared to $7.4 million, or $0.34 per diluted share, in the prior year's fourth quarter.
Revenues from the wholesale business increased 31.8% to $76.6 million from $58.1 million in the fourth quarter of 2005. The increase was largely driven by continued strength in the Steve Madden Women's and Steven by Steve Madden divisions as well as the contribution from Daniel M. Freidman & Associates and SM New York. Gross margin in the wholesale business declined to 31.5% from 36.0% in the prior year's fourth quarter primarily reflecting soft gross margin at Daniel M. Friedman & Associates due to poor performance of the Betsey Johnson handbags and gross margin declines in Steve Madden Men's and Candie's. This was partially offset by improved gross margin in the Steve Madden Women's and Steven by Steve Madden divisions.
Retail revenues increased 12.3% to $37.5 million compared to $33.4 million in the fourth quarter of the prior year. Same store sales increased 11.8% versus a 6.3% decrease in the fourth quarter of 2005. Retail gross margin increased 590 basis points to 59.9% from 54.0% in the comparable period of the prior year. During the fourth quarter of 2006, the Company opened one new Steve Madden retail store.
"Our fourth quarter performance reflects continued momentum in a year during which we generated record financial results for our Company," commented Jamieson Karson, Chairman and Chief Executive Officer. "We achieved strong sales growth in both our wholesale and retail divisions, with particular strength in our Steve Madden Women's and Steven brands. While our Daniel M. Friedman division negatively impacted wholesale gross margin, we achieved a significant increase in gross margin at retail compared to the same quarter of 2005. We are pleased to have delivered a 35% increase in net income for the fourth quarter, which highlights the ongoing ability of Steve and our design team to produce inspired, trend-right styles as well as our efforts to create an efficient, streamlined operating platform to support our future growth. Overall, our efforts to diversify our business by entering licensing agreements in new merchandise categories as well as developing and growing new wholesale brands is proving successful."
Net sales for the full year increased 26.4% to $475.2 million from $375.8 million in 2005. Net income increased 141.1% to $46.3 million, or $2.09 per diluted share, from $19.2 million, or $0.92 per diluted share, reported for 2005. The Company opened four stores and closed six stores during 2006, ending the year with 96 retail locations, including the Internet store.
Arvind Dharia, Chief Financial Officer, commented, "We ended the year with $108.9 million in cash, cash equivalents, and marketable securities, no debt, and total stockholders' equity of $211.9 million, which represents a very strong foundation for our business as we continue to grow. We are pleased that while maintaining a pristine balance sheet, in 2006, we also returned a total of $29.4 million to our shareholders by repurchasing a total of 349,000 shares and paying a special one-time cash dividend of $1.00 per outstanding share of common stock."
Company Outlook
The Company also reported today that it has updated its previously announced outlook for 2007. Based on trends to date this year, the Company expects sales and margin pressure in the first quarter primarily due to the weaker than anticipated performance in boots in both wholesale and retail, sport fusion product in Steve Madden Men's, and Betsey Johnson handbags in Daniel M. Friedman. As a result, the Company currently expects net sales in the first quarter of 2007 will be approximately flat with the same period last year and earnings per diluted share will range between $0.40 to $0.43.
Further, based on current visibility, the Company is estimating 2007 net sales will increase approximately 3% to 5% from 2006. Earnings per diluted share for 2007 are now expected to range between $2.00 and $2.10.
Reflecting management's confidence in the Company's long-term prospects and its longstanding commitment to return capital to shareholders, the Company also plans to continue its stock repurchase program in 2007. The Company's Board of Directors has authorized an increase in the stock repurchase program of $30 million, bringing the authorization up to a total of $59 million.
Mr. Karson concluded, "As we close a record setting year for Steve Madden, we are intent on leveraging the successes we achieved in 2006. While we have tempered our outlook for 2007 due primarily to the performance of our boot collection at wholesale and retail as well as the Betsey Johnson handbag line at Daniel M. Friedman, we have great confidence in the strength of our business as we move forward. We continue to be very excited about our future growth opportunities and believe we are better positioned than ever before to continue building the business for long-term success. We have successfully diversified our model and our product offerings and have elevated our brands in the minds of business partners and consumers alike. Further, we are making serious strides towards becoming a true global branded lifestyle company."
Conference Call Information
Interested shareholders are invited to listen to the fourth quarter earnings conference call scheduled for today, Thursday, March 1, 2006, at 10 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 until March 15, 2007. Additionally, a replay of the call can be accessed by dialing 877-519-4471, passcode 8454594, and will be available until March 8, 2007.
Steven Madden, Ltd. designs and markets fashion-forward footwear and accessories for women, men and children. The shoes and accessories are sold through company-owned retail stores, department stores, apparel and footwear specialty stores, and online at www.stevemadden.com. The Company has several licenses for its brands, including dresses, watches, outerwear, eyewear, girls apparel, and hosiery and owns and operates 96 retail stores, including its online store. The Company is also the licensee for Candie's Footwear and through its wholly-owned subsidiary, Daniel M. Friedman & Associates, is the licensee for Betsey Johnson handbags and belts, Ellen Tracy belts, and Tracy Reese handbags and belts.
Statements in this press release that are not statements of historical or current fact constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other unknown factors that could cause the actual results of the Company to be materially different from the historical results or from any future results expressed or implied by such forward-looking statements. In addition to statements which explicitly describe such risks and uncertainties readers are urged to consider statements labeled with the terms "believes", "belief", "expects", "intends", "anticipates" or "plans" to be uncertain and forward-looking. The forward looking statements contained herein are also subject generally to other risks and uncertainties that are described from time to time in the Company's reports and registration statements filed with the Securities and Exchange Commission.
STEVEN MADDEN, LTD.
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CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share data)
Three Months Ended Twelve Months Ended
Consolidated: Dec 31, Dec 31, Dec 31, Dec 31,
2006 2005 2006 2005
------------------------------ --------- --------- --------- ---------
Net Sales $114,108 $ 91,425 $475,163 $375,786
Cost of Sales 67,540 52,494 276,734 236,631
--------- --------- --------- ---------
Gross Profit 46,568 38,931 198,429 139,155
Commission and licensing fee
income 3,809 1,878 14,246 7,119
Operating Expenses 33,723 28,118 134,377 114,185
Impairment of cost in Excess
of Fair Value of net assets
acquired 0 0 0 519
--------- --------- --------- ---------
Income from Operations 16,654 12,691 78,298 31,570
Interest and other Income, Net 1,008 492 2,636 1,890
--------- --------- --------- ---------
Income Before provision for
Income Taxes 17,662 13,183 80,934 33,460
Provision for Income Tax 7,615 5,744 34,684 14,260
--------- --------- --------- ---------
Net Income $ 10,047 $ 7,439 $ 46,250 $ 19,200
========= ========= ========= =========
Basic income per share $ 0.48 $ 0.36 $ 2.21 $ 0.95
========= ========= ========= =========
Diluted income per share $ 0.45 $ 0.34 $ 2.09 $ 0.92
========= ========= ========= =========
Weighted average common shares
outstanding - Basic 21,071 20,716 20,906 20,112
========= ========= ========= =========
Weighted average common shares
outstanding - Diluted 22,318 21,673 22,101 20,918
========= ========= ========= =========
BALANCE SHEET HIGHLIGHTS
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Dec 31, 2006 Dec 31, 2005
Consolidated Consolidated
------------ ------------
Cash and cash equivalents $ 19,204 $ 42,842
Investment Securities 89,681 66,249
Total Current Assets 188,043 140,972
Total Assets 251,392 211,728
Total Current Liabilities 36,332 26,906
Total Stockholder Equity 211,924 182,065
SOURCE: Steven Madden, Ltd.
Steven Madden, Ltd.
Ed Rosenfeld, 718-446-1800
Senior Vice President, Strategic Planning and Finance
or
Financial Dynamics
Investor Relations:
Cara O'Brien/Leigh Parrish, 212-850-5600
Press:
Melissa Merrill, 212-850-5600