UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report:
April 25, 2019
(Date of earliest event reported)
STEVEN MADDEN,
LTD.
(Exact Name of Registrant as Specified in Charter)
| Delaware | 000-23702 | 13-3588231 | ||
| (State or Other Jurisdiction
of Incorporation) |
(Commission File Number) | (IRS Employer Identification No.) |
| 52-16 Barnett Avenue, Long Island City, New York 11104 |
| (Address of Principal Executive Offices) (Zip Code) |
Registrant’s telephone number, including area code: (718) 446-1800
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
| Item 2.02. | Results of Operations and Financial Condition. |
On April 25, 2019, Steven Madden, Ltd. (the “Company”) issued a press release, furnished as Exhibit 99.1 and incorporated in this Item 2.02 by reference, announcing the Company’s financial results for the quarter ended March 31, 2019.
| Item 8.01. | Other Events. |
The Company’s press release on April 25, 2019 also announced that the Company’s Board of Directors has declared a quarterly cash dividend of $.14 per share on the Company’s outstanding shares of common stock. The dividend is payable on June 28, 2019, to the stockholders of record as of the close of business on June 18, 2019.
The Company’s press release on April 25, 2019 also announced that the Company's Board of Directors approved the extension of the Company's share repurchase program for up to an additional $124 million in repurchases of the Company's common stock, bringing the total authorization up to $200 million. Repurchases will be made from time to time on the open market at prevailing market prices or in privately negotiated transactions at such prices and times as are determined to be in the best interest of the Company. Repurchased shares will be used for general corporate purposes, such as acquisitions and the Company's incentive compensation plan. The share repurchase program does not have a fixed expiration or termination date and may be modified or terminated by the Board of Directors at any time.
The full text of the press release is attached as Exhibit 99.1 to this Current Report on Form 8-K.
The information contained in this Current Report on Form 8-K, including Exhibit 99.1, is being furnished, and shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of Section 18. Furthermore, the information contained in this Current Report on Form 8-K, including Exhibit 99.1, shall not be incorporated by reference into any registration statement filed by the Company under the Securities Act of 1933, as amended, unless specifically identified therein as being incorporated therein by reference. The furnishing of the information in this Current Report is not intended to, and does not, constitute a determination or admission by the Company that the information in this Current Report is material or complete, or that investors should consider this information before making an investment decision with respect to any security of the Company.
| Item 9.01. | Financial Statements and Exhibits. |
| (d) | Exhibits: |
| Exhibit | Description | |
| 99.1 | Press Release, dated April 25, 2019, issued by Steven Madden, Ltd. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Dated: April 26, 2019
| STEVEN MADDEN, LTD. | ||
| By: | /s/ Edward R. Rosenfeld | |
| Edward R. Rosenfeld | ||
| Chief Executive Officer | ||
Exhibit 99.1
Steve Madden Announces Record First Quarter 2019 Results
~ Raises Full Year 2019 Guidance ~
LONG ISLAND CITY, N.Y., April 25, 2019 – 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, 2019.
Amounts referred to as “Adjusted” exclude the items that are described under the heading “Non-GAAP Adjustments.”
For the First Quarter 2019:
| • | Net sales increased 5.6% to $410.9 million compared to $389.0 million in the same period of 2018. |
| • | Gross margin was 38.2% compared to 36.2% in the same period last year, an increase of 200 basis points. |
| • | Operating expenses as a percentage of net sales were 27.6% compared to 27.7% of net sales in the same period of 2018. Adjusted operating expenses as a percentage of net sales were 27.9% compared to 26.9% of net sales in the same period of 2018. |
| • | Income from operations totaled $44.7 million, or 10.9% of net sales, compared to $36.6 million, or 9.4% of net sales, in the same period of 2018. Adjusted income from operations was $45.1 million, or 11.0% of net sales, compared to Adjusted income from operations of $39.6 million, or 10.2% of net sales, in the same period of 2018. |
| • | Net income attributable to Steven Madden, Ltd. was $34.5 million, or $0.41 per diluted share, compared to $28.7 million, or $0.33 per diluted share, in the prior year’s first quarter. Adjusted net income attributable to Steven Madden, Ltd. was $35.1 million, or $0.42 per diluted share, compared to $31.0 million, or $0.36 per diluted share, in the prior year’s first quarter. |
Edward Rosenfeld, Chairman and Chief Executive Officer, commented, “We are off to a strong start in 2019, with first quarter results exceeding our expectations. Our flagship Steve Madden brand was the highlight in the quarter with robust increases in the wholesale footwear and accessories businesses as well as outstanding performance on stevemadden.com. Given the strong performance in the first quarter and the encouraging trends we are seeing in the business, we are raising our net sales and Adjusted EPS guidance for 2019. Looking ahead, we are confident that, based on our strong brand portfolio, consistency in delivering on-trend product and proven business model, we are well-positioned to drive sustainable growth and shareholder value over the long term.”
First Quarter 2019 Segment Results
Net sales for the wholesale business increased 5.1% to $348.1 million in the first quarter of 2019, driven by strong growth in wholesale accessories. Wholesale footwear net sales increased slightly, as strong growth in Steve Madden and the addition of Anne Klein were mostly offset by not recognizing sales to Payless ShoeSource in the current period. Gross margin in the wholesale business increased to 34.5% compared to 32.6% in last year’s first quarter, with gross margin improvement in wholesale footwear partially offset by a decline in wholesale accessories due to sales mix.
Retail net sales in the first quarter rose 8.6% to $62.8 million compared to $57.9 million in the first quarter of the prior year. Same store sales increased 6.3% in the quarter driven by strong performance in the Company’s e-commerce business. Retail gross margin rose to 58.5% in the first quarter of 2019, up 180 basis points compared to 56.7% in the first quarter of the prior year due to improved gross margin in the Company’s e-commerce business.
The Company ended the quarter with 225 company-operated retail locations, including seven internet stores, as well as 33 company-operated concessions in international markets.
The Company’s effective tax rate for the first quarter of 2019 was 23.1% compared to 21.4% in the first quarter of 2018. On an Adjusted basis, the effective tax rate was 22.6% compared to 21.7% in the first quarter of the prior year.
Balance Sheet and Cash Flow
During the first quarter of 2019, the Company repurchased 525,491 shares of the Company’s common stock for approximately $17.2 million, which includes shares acquired through the net settlement of employee stock awards. On April 24, 2019, the Board of Directors approved an increase in the Company’s share repurchase authorization of $124.0 million, bringing the total authorization up to $200.0 million.
As of March 31, 2019, cash, cash equivalents and current marketable securities totaled $221.6 million.
Quarterly Dividend
The Company’s Board of Directors approved a quarterly cash dividend of $0.14 per share. The dividend will be paid on June 28, 2019, to stockholders of record at the close of business on June 18, 2019.
Updated Fiscal Year 2019 Outlook
The Company is raising its fiscal year 2019 guidance. For fiscal year 2019, the Company now expects net sales will increase 5% to 7% over net sales in 2018 compared to the previous guidance of a 4% to 6% increase over net sales in 2018. The Company now expects diluted EPS for fiscal year 2019 will be in the range of $1.76 to $1.84 compared to the prior range of $1.70 to $1.78. The Company now expects Adjusted diluted EPS for fiscal year 2019 will be in the range of $1.78 to $1.86 compared to the prior range of $1.75 to $1.83.
Non-GAAP Adjustments
Amounts referred to as “Adjusted” exclude the items below.
For the first quarter 2019:
| • | $1.6 million pre-tax ($1.4 million after-tax) bad debt expense associated with the Payless ShoeSource bankruptcy, included in licensing and commission income, net. |
| • | $0.7 million pre-tax ($0.6 million after-tax) expense in connection with a provision for early lease termination charges, 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 of December 31, 2019, included in operating expenses. |
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 fiscal year 2019:
| • | $2.0 million pre-tax ($1.6 million after-tax) in expense expected to be incurred in connection with early lease termination charges. |
| • | $1.6 million pre-tax ($1.4 million after-tax) bad debt expense associated with the Payless ShoeSource bankruptcy. |
| • | $0.6 million pre-tax ($0.4 million after-tax) in expense expected to be incurred in connection with an office consolidation. |
| • | $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 of December 31, 2019. |
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, April 25, 2019, 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.gcs-web.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 Anne Klein®, Kate Spade®, 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 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, 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 STATEMENT OF OPERATIONS DATA
(In thousands, except per share amounts)
(Unaudited)
| Three Months Ended | ||||||||
| March 31, 2019 | March 31, 2018 | |||||||
| Net sales | $ | 410,940 | $ | 389,014 | ||||
| Cost of sales | 253,943 | 248,281 | ||||||
| Gross profit | 156,997 | 140,733 | ||||||
| Commission and licensing fee income, net | 1,227 | 3,659 | ||||||
| Operating expenses | 113,564 | 107,835 | ||||||
| Income from operations | 44,660 | 36,557 | ||||||
| Interest and other income, net | 1,192 | 597 | ||||||
| Income before provision for income taxes | 45,852 | 37,154 | ||||||
| Provision for income taxes | 10,587 | 7,956 | ||||||
| Net income | 35,265 | 29,198 | ||||||
| Less: Net income attributable to noncontrolling interest | 740 | 525 | ||||||
| Net income attributable to Steven Madden, Ltd. | $ | 34,525 | $ | 28,673 | ||||
| Basic income per share | $ | 0.43 | $ | 0.35 | ||||
| Diluted income per share | $ | 0.41 | $ | 0.33 | ||||
| Basic weighted average common shares outstanding | 80,534 | 82,092 | ||||||
| Diluted weighted average common shares outstanding | 84,255 | 85,989 | ||||||
STEVEN MADDEN, LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET DATA
(In thousands)
| As of | ||||||||||||
| March 31, 2019 | December 31, 2018 | March 31, 2018 | ||||||||||
| (Unaudited) | (Unaudited) | |||||||||||
| Cash and cash equivalents | $ | 160,256 | $ | 200,031 | $ | 125,383 | ||||||
| Marketable securities (current & non current) | 61,383 | 66,968 | 75,176 | |||||||||
| Accounts receivable, net | 295,880 | 266,452 | 300,092 | |||||||||
| Inventories | 115,260 | 137,247 | 94,367 | |||||||||
| Other current assets | 28,285 | 32,427 | 47,975 | |||||||||
| Property and equipment, net | 63,657 | 64,807 | 69,599 | |||||||||
| Operating lease right-of-use assets | 181,896 | — | — | |||||||||
| Goodwill and intangibles, net | 289,965 | 291,423 | 298,539 | |||||||||
| Other assets | 13,172 | 13,215 | 10,802 | |||||||||
| Total assets | $ | 1,209,754 | $ | 1,072,570 | $ | 1,021,933 | ||||||
| Accounts payable | $ | 62,564 | $ | 79,802 | $ | 65,296 | ||||||
| Contingent payment liability (current & non current) | — | 3,000 | 3,000 | |||||||||
| Operating leases (current & non current) | 195,798 | — | — | |||||||||
| Other current liabilities | 103,584 | 141,887 | 107,023 | |||||||||
| Other long-term liabilities | 17,262 | 33,199 | 38,392 | |||||||||
| Total Steven Madden, Ltd. stockholders’ equity | 819,695 | 805,814 | 801,586 | |||||||||
| Noncontrolling interest | 10,851 | 8,868 | 6,636 | |||||||||
| Total liabilities and stockholders’ equity | $ | 1,209,754 | $ | 1,072,570 | $ | 1,021,933 | ||||||
STEVEN MADDEN, LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED CASH FLOW DATA
(In thousands)
(Unaudited)
| Three Months Ended | ||||||||
| March 31, 2019 | March 31, 2018 | |||||||
| Net cash used in operating activities | $ | (15,754 | ) | $ | (27,217 | ) | ||
| Investing Activities | ||||||||
| Purchases of property and equipment | (3,399 | ) | (2,946 | ) | ||||
| Sales of marketable securities, net | 6,165 | 16,888 | ||||||
| Net cash provided by investing activities | 2,766 | 13,942 | ||||||
| Financing Activities | ||||||||
| Common stock share repurchases for treasury | (17,154 | ) | (25,677 | ) | ||||
| Investment of noncontrolling interest | 1,283 | — | ||||||
| Payment of contingent liability | — | (7,000 | ) | |||||
| Proceeds from exercise of stock options | 722 | 1,519 | ||||||
| Cash dividends paid | (12,042 | ) | (11,758 | ) | ||||
| Net cash used in financing activities | (27,191 | ) | (42,916 | ) | ||||
| Effect of exchange rate changes on cash and cash equivalents | 404 | 360 | ||||||
| Net decrease in cash and cash equivalents | (39,775 | ) | (55,831 | ) | ||||
| Cash and cash equivalents - beginning of period | 200,031 | 181,214 | ||||||
| Cash and cash equivalents - end of period | $ | 160,256 | $ | 125,383 | ||||
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 licensing and commission income, net to Adjusted licensing and commission income, net | ||||||||
| Three Months Ended | ||||||||
| March 31, 2019 | ||||||||
| GAAP licensing and commission income, net | $ | 1,227 | ||||||
| Bad debt expense associated with the Payless ShoeSource bankruptcy | 1,552 | |||||||
| Adjusted licensing and commission income, net | $ | 2,779 | ||||||
| Table 2 - Reconciliation of GAAP operating expenses to Adjusted operating expenses | ||||||||
| Three Months Ended | Three Months Ended | |||||||
| March 31, 2019 | March 31, 2018 | |||||||
| GAAP operating expenses | $ | 113,564 | $ | 107,835 | ||||
| Expense in connection with provision for early lease termination charges | (749 | ) | — | |||||
| 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 legal charges | — | (2,837 | ) | |||||
| Expense in connection with the integration of the Schwartz & Benjamin acquisition and the related restructuring | — | (250 | ) | |||||
| Adjusted operating expenses | $ | 114,683 | $ | 104,748 | ||||
| Table 3 - Reconciliation of GAAP income from operations to Adjusted income from operations | ||||||||
| Three Months Ended | Three Months Ended | |||||||
| March 31, 2019 | March 31, 2018 | |||||||
| GAAP income from operations | $ | 44,660 | $ | 36,557 | ||||
| Bad debt expense associated with the Payless ShoeSource bankruptcy | 1,552 | — | ||||||
| Expense in connection with provision for early lease termination charges | 749 | — | ||||||
| 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 legal charges | — | 2,837 | ||||||
| Expense in connection with the integration of the Schwartz & Benjamin acquisition and the related restructuring | — | 250 | ||||||
| Adjusted income from operations | $ | 45,093 | $ | 39,644 | ||||
| Table 4 - Reconciliation of GAAP provision for income taxes to Adjusted provision for income taxes | ||||||||
| Three Months Ended | Three Months Ended | |||||||
| March 31, 2019 | March 31, 2018 | |||||||
| GAAP provision for income taxes | $ | 10,587 | $ | 7,956 | ||||
| Tax effect of bad debt expense associated with the Payless ShoeSource bankruptcy | 170 | — | ||||||
| Tax effect of expense in connection with provision for early lease termination charges | 188 | — | ||||||
| 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 provision for legal charges | — | 702 | ||||||
| Tax effect of expense in connection with the integration of the Schwartz & Benjamin acquisition and the related restructuring | — | 62 | ||||||
| Adjusted provision for income taxes | $ | 10,476 | $ | 8,720 | ||||
| Table 5 - Reconciliation of GAAP net income to Adjusted net income | ||||||||
| Three Months Ended | Three Months Ended | |||||||
| March 31, 2019 | March 31, 2018 | |||||||
| GAAP net income attributable to Steven Madden, Ltd. | $ | 34,525 | $ | 28,673 | ||||
| After-tax impact of bad debt expense associated with the Payless ShoeSource bankruptcy | 1,383 | — | ||||||
| After-tax impact of expense in connection with early lease termination charges | 561 | — | ||||||
| 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 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 | ||||||
| Adjusted net income attributable to Steven Madden, Ltd. | $ | 35,070 | $ | 30,996 | ||||
| GAAP diluted income per share | $ | 0.41 | $ | 0.33 | ||||
| Adjusted diluted income per share | $ | 0.42 | $ | 0.36 | ||||
Contact
Steven Madden, Ltd.
Director of Corporate Development & Investor Relations
Danielle McCoy
718-308-2611
InvestorRelations@stevemadden.com