UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
-------------------------------
Date of Report: April 27, 2004
STEVEN MADDEN, LTD.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-23702 13-3588231
- ---------------------------- ------------------------ ----------------------
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification Number)
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
--------------
Item 7(c). Exhibits.
--------
99.1 Press Release of Steven Madden, Ltd. dated April 27, 2004,
reporting financial results for the first quarter of 2004.
99.2 Transcript of April 27, 2004, Steven Madden, Ltd. conference call.
Item 12. Results of Operations and Financial Condition.
---------------------------------------------
On April 27, 2004, Steven Madden, Ltd. issued a press release and held a
conference call announcing its financial results for the first quarter of 2004.
A copy of the press release is furnished as Exhibit 99.1 to this report and is
incorporated herein by reference. A copy of the transcript of the conference
call is furnished as Exhibit 99.2 to this report and also is incorporated herein
by reference.
The information in this report, including exhibits attached hereto, is being
furnished and shall not be deemed "filed" for the purposes of Section 18 of the
Securities Exchange Act of 1934, as amended, or otherwise subject to the
liabilities of that Section. The information in this report shall not be
incorporated by reference into any registration statement or other document
pursuant to the Securities Act of 1933, except as otherwise expressly stated in
such filing.
-2-
SIGNATURE
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.
STEVEN MADDEN, LTD.
By: /s/ JAMIESON A. KARSON
------------------------------
Name: Jamieson A. Karson
Title: Chief Executive Officer
Date: April 29, 2004
-3-
Exhibit 99.1
Company Contact: Richard Olicker
President, Chief Operating Officer
Arvind Dharia
Chief Financial Officer
Steven Madden, Ltd.
(718) 446-1800
Investor Relations: Cara O'Brien/Lila Sharifian
Press: Stephanie Sampiere
Financial Dynamics
(212) 850-5600
FOR IMMEDIATE RELEASE
- ---------------------
STEVEN MADDEN, LTD. ANNOUNCES FIRST QUARTER RESULTS
~ Comparable Store Sales Increase 8% ~
~ Company Reaffirms 2004 Outlook ~
LONG ISLAND CITY, N.Y. - April 27, 2004 - Steven Madden, Ltd. (NASDAQ: SHOO), a
leading designer, wholesaler and marketer of fashion footwear for women, men and
children, today announced financial results for the first quarter ended March
31, 2004.
Net sales were $78.8 million compared with $78.7 million in the first quarter
last year. Net income was $4.1 million, or $0.29 per diluted share on 14,374,000
diluted weighted average shares outstanding, which is in line with the current
analyst estimate. In the prior year period, net income was $5.0 million, or
$0.36 per diluted share on 13,872,000 diluted weighted average shares
outstanding.
Retail revenues increased 12% to $23.7 million from $21.1 million in the same
period last year. Same-store sales increased 8% over the comparable period last
year primarily due to an improved product mix and higher unit sales. The Company
ended the first quarter with 83 Company-owned retail locations, including the
Internet store, and remains on schedule to open approximately 8 to 12 new stores
this year.
Revenues from the wholesale division, comprising the Company's seven brands,
Steve Madden Womens, Steve Madden Mens, Stevies, l.e.i., Steven, Candie's, and
UNIONBAY, were $55.1 million versus $57.6 million in the year-ago period. As
previously announced, in response to changing footwear industry trends and
consumer preferences, the Company is implementing a shift in product focus from
its traditional casual base into broader categories. Although the benefits of
this shift have not yet been fully realized in all of the Company's wholesale
businesses, the trends are positive. Furthermore, the strategy towards brand
diversification is reaping positive results, as evidenced by strong performance
in the Steven and Candie's lines.
Arvind Dharia, Chief Financial Officer, said, "We are proud of our ability to
grow and diversify the Company while managing the business effectively. In
addition, our financial position remains strong with $72.6 million in cash, cash
equivalents, and investment securities, no short- or long-term debt, and $164.0
million in total stockholder equity."
"Our first quarter results were in line with our expectations," commented
Richard Olicker, President and Chief Operating Officer. "We achieved solid
retail results, demonstrating the fact that our shift in product focus is
proceeding as planned and that the popularity of our brands remains sound
despite a sustained promotional and competitive market. Of note, during the
quarter we fully rolled out our Candie's brand and made investments across the
business, including additional personnel, to support our various divisions. We
also incurred higher expenses related to efforts to swiftly deliver the most
current trends to our customers as well as increased advertising to promote
awareness of all of our brands."
Company Outlook
- ---------------
Although the transition into new categories and the integration of new divisions
will require continued investments in the business, the Company is encouraged by
the progress made during the first quarter and believes it is well positioned to
execute the strategies outlined at the outset of the year. That said, the
Company is comfortable with the outlook provided previously and reaffirms its
expectations for 2004. The Company anticipates net sales will increase in the
low-single digits over 2003 and expects diluted earnings per share to be in the
range of $1.35 to $1.40.
Jamieson Karson, Chief Executive Officer, concluded, "Overall, we are cautiously
optimistic as we look to the remainder of the year and believe we are on track
to achieving our growth and profitability objectives for 2004. We are confident
that the core elements of our business - significant brand equity, a flexible
business model, a healthy balance sheet - will help us continue to generate
industry-leading performance as we move forward. By leveraging the brand through
entering new licensing opportunities and expanding the retail division of our
business as well as considering strategic acquisitions, we aim to deliver
enhanced shareholder value over the long-term."
Interested shareholders are invited to listen to the first quarter earnings
conference call scheduled for today, Tuesday, April 27, 2004, at 10 a.m. Eastern
Time. The call will be broadcast live over the Internet and can be accessed by
logging onto http://www.firstcallevents.com/service/ajwz405058436gf12.html. An
online archive will be available shortly after the call and will be accessible
until May 10, 2004. Additionally, a replay of the call can be accessed by
dialing (800) 839-8389 and will be available through April 30, 2004.
Steven Madden, Ltd. designs and markets fashion-forward footwear for women, men
and children. The shoes are sold through Steve Madden Retail Stores, Department
Stores, Apparel and Footwear Specialty Stores, and on-line at
www.stevemadden.com. The Company has several licenses for the Steve Madden and
Stevies brands - including eyewear, hosiery, and belts -- owns and operates one
retail store under its Steven brand, and is the licensee for l.e.i Footwear,
Candie's Footwear and UNIONBAY Men's Footwear.
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.
(tables to follow)
-2-
CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except per share data)
(Unaudited)
Three months ended
--------------------------------
March 31, 2004 March 31, 2003
-------------- --------------
Net Sales $78,768 $78,698
Cost of Sales 47,496 47,733
------- -------
Gross Profit 31,272 30,965
Commission and licensing fee income 1,416 1,690
Operating Expenses 26,108 24,392
------- -------
Income from Operations 6,580 8,263
Interest and Other Income Net 534 442
------- -------
Income Before provision for Income Taxes 7,114 8,705
Provision for Income Tax 2,988 3,656
------- -------
Net Income $ 4,126 $ 5,049
======= =======
Basic income per share $ 0.31 $ 0.39
======= =======
Diluted income per share $ 0.29 $ 0.36
======= =======
Weighted average common shares
outstanding - Basic 13,254 12,789
======= =======
Weighted average common shares
outstanding - Diluted 14,374 13,872
======= =======
-3-
CONSOLIDATED BALANCE SHEET HIGHLIGHTS
(in thousands)
March 31, 2004 December 31, 2003 March 31, 2003
-------------- ----------------- --------------
(Unaudited) (Unaudited)
Cash and cash equivalents $ 22,302 $ 53,073 $ 44,614
Investment Securities 50,296 32,659 26,789
Total Current Assets 111,339 121,995 114,939
Total Assets 181,013 177,870 159,061
Total Current Liabilities 15,143 16,855 20,885
Total Stockholder Equity 163,953 159,187 136,541
-4-
Exhibit 99.2
- --------------------------------------------------------------------------------
Final Transcript
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CCBNStreetEvents ==>
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CCBN StreetEvents Conference Call Transcript
SHOO - Q1 2004 Steven Madden Earnings Conference Call
Event Date/Time: Apr. 27. 2004 / 10:00AM ET
Event Duration: N/A
- --------------------------------------------------------------------------------
CORPORATE PARTICIPANTS PRESENTATION
Cara O'Brien
Financial Dynamics - IR Contact ----------------------------------------
Operator
Jamie Karson
Steven Madden - CEO Good morning, ladies and gentlemen,
and welcome to the Steven Madden Limited
Richard Olicker conference call sponsored by Financial
Steven Madden - President, COO Dynamics. At this time, all participants
are in a listen-only mode. Later, we
Arvind Dharia will conduct a question-and-answer
Steven Madden - CFO session. (OPERATOR INSTRUCTIONS). Any
reproduction of this call in whole or in
part is not permitted without prior,
expressed, written authorization from
CONFERENCE CALL PARTICIPANTS the Company. As a reminder, ladies and
Scott Krasik gentlemen, this conference is being
C.L. King & Assoc. - Analyst recorded on April 27, 2004.
Sam Poser I would now like to introduce your host
Mosaic Research - Analyst for today's conference, Ms. Cara O'Brien
of Financial Dynamics. Please go ahead.
Ezra Fallowman
J.L. Advisors (ph) - Analyst ----------------------------------------
Cara O'Brien - Financial Dynamics -
John Shanley IR Contact
Wells Fargo Securities - Analyst
Good morning, everyone, and thank you
Mark Cooper for joining this discussion of Steven
Wells Capital - Analyst Madden Limited's first-quarter results.
By now, you should've received a copy of
the press release, but if you have not,
please call our offices at 212-850-5776
and we will send one out to you
immediately.
Before we begin, I would like to remind
you that statements in this conference
call that are not statements of
historical or current fact constitute
forward-looking statements within the
meanings 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 with the historical
results or from any future results
expressed or implied by such
forward-looking statements. The
statements contained herein are also
subject to other risks and uncertainties
that are described from time to time in
the Company's reports and registration
statements filed with the SEC. Also,
please refer to the earnings release for
more information on risk factors that
could cause actual results to differ.
Finally, please note that any
forward-looking statements used in this
call should not be relied upon as
current after today's date.
I would now like to turn the call over
to Jamie Karson, Chief Executive Officer
of Steven Madden Limited. Jamie, go
ahead please.
----------------------------------------
Jamie Karson - Steven Madden - CEO
Thanks, Cara. Good morning and thank
you for joining us to a few Steven
Madden Limited's results for the first
quarter that ended March 31, 2004.
-2-
With me to discuss the business We believe that this proves the health
are Richard Olicker, our and viability of our business, as we
President and Chief Operating have an enormously strong foundation on
Officer, and Arvind Dharia, our which to build.
Chief Financial Officer.
Now, I'd like to turn the call over to
As discussed when we reported Richard, who will go through the
fourth-quarter results, we were quarter's results in more detail.
cautious as we entered fiscal
2004, since we were continuing to ----------------------------------------
integrate new wholesale divisions Richard Olicker - Steven Madden -
as well as transition into new President, COO
categories in the fashion
footwear landscape. As discussed Thanks, Jamie. Let's review what
in detail on the last conference happened in the quarter.
call, there are a number of
factors that must be considered Net sales were essentially flat at 78.8
part of this evolution -- greater million versus 78.7 million in the first
pricing pressure and a demanding quarter of '03. Gross margin for the
mark-down environment in first quarter increased 40 basis points
wholesale, increased advertising to 39.7 percent, versus 39.3 percent
to support our brands, and last year. This was primarily
additional personnel to support attributable to margin improvement in
existing and new divisions. wholesale. Also, our retail division,
which generates higher gross margin than
All of this said, we're quite wholesale, represented 30 percent of our
pleased with our overall total, versus 27 percent of the total in
first-quarter results. Despite the first quarter of '03.
the anticipated challenges, we
generated a 12 percent sales As we had anticipated and detailed on
increase at retail, achieved a our last call, operating expenses were
comp-store sales increase of 8 higher than last year in the comparable
percent, and posted net income of period. This was due primarily to a few
29 cents, which is exactly in things, including higher air freight
line with our internal plan as expenses incurred in bringing fresh,
well as the current analyst time-sensitive product to market,
estimate. Moreover, this keeps us anticipated operating expense increases
on target to achieve our associated with the support of our newer
previously stated expectations wholesale division, a continuation of
for earnings in the range of high levels of mark-down and allowance
$1.35 to $1.40 for fiscal 2004. activity, increased advertising expense,
and increased occupancy expense. This
To give you a brief overview of translated into net income of 4.1
the quarter's divisional million, versus 5 million last year, and
performance before I turn the diluted earnings per share of 29 cents
call over to Richard, as outlined per share versus 36 cents per share in
on the last call, in response to the same period of '03. Importantly,
changes in industry trends and this met both our internal plan and the
shifts in customer demand, we are analysts' estimate.
aggressively evolving our
business from its traditional Let's review what happened in each
casual base into broader division during the quarter. For the
categories, including dress and Company's Wholesale division, which is
tailored items. Importantly, this comprised of seven brands, Steve Madden
shift in direction is being taken Women's, Steve Madden Men's, l.e.i.,
as a result of listing to our Stevies, Steven, Candie's and UNIONBAY,
customers, and it was our revenues were 55.1 million versus 57.6
reactive model that enabled us to million last year. It is important to
move quickly and immediately to note that in 2003's first quarter,
meet the new demand. Wholesale revenues increased 20 percent.
As expected and planned, first to Net sales of Steve Madden Women's
benefit from this strategy was wholesale were 25.5 million versus 28.9
our retail division, where our million in '03. As Jamie mentioned, this
flexibility and speed enabled us was primarily a result of more
to achieve strong overall as well conservative initial spring buying
as same-store sales increases. patterns among our Wholesale customers,
as Steve Madden established its
At wholesale, however, this viability in new categories. While this
transition was initially met with did result in lower sales, it also had
conservative buying patterns for the effect of reducing initial spring
spring, 2004, as our brands inventory positions with our wholesale
needed to establish their customers. Against these reduced
viability as successful resources inventories and lower sales plans, Steve
in these new categories. Against Madden Women's achieved strong early
reduced plans, we achieved strong spring sales and improved sales-to-stock
early spring sales and improved performance. In turn, this has set a
sales-to-stock performance, strong foundation for the remainder of
providing a good foundation for spring. Our product is performing well,
the remainder of spring with our our inventories are lean, and reorders
product performing well, our are in the pipeline. Successes have
inventories lean and reorders in included pointy-toe and rounded-toe
the pipeline. The effect of this single-sole pumps and City sandals.
conservative initial buying for
spring is reflected in the L.e.i. sales were 11.1 million, versus
wholesale sales generated in the 14.9 million in '03. Two issues need to
first quarter which, when taken be considered in connection with this
together with retail, resulted in performance.
flat total net sales versus the
first quarter last year.
Finally, I'd like to mention that
we remain in excellent financial
health. We ended the quarter with
a solid debt free balance sheet
with approximately 72.6 million
in cash, cash equivalents and
marketable securities, and total
stockholders equity of 164
million.
-3-
First, in 2003, l.e.i.'s net denim-friendly dress shoes. Success
sales increased 28.4 percent over within the dress category was an
those of 2002. Second, we important achievement for the brand this
anticipated and planned for quarter, creating opportunity for
declines in l.e.i. because their additional new placements and wider
earlier buying patterns and distribution this fall. Madden Men's is
longer production leadtimes made being managed for a healthy season with
it extremely challenging to our product performing well and our
redirect this brand in the midst inventories lean, positioning us for a
of a fashion shift that was strong back-to-school in fall.
quickly evolving away from
l.e.i.'s traditional casual base. As announced last month, we've also
In response, the l.e.i. team has hired a new President of Madden Men's to
introduced fresher, more lead the division into the back half and
colorful, and more dress and the years ahead.
tailored product, as well as more
ornament details, to energize the Net sales of UNIONBAY, our license for
product assortment. While these young men's footwear, were 49,000 in the
product initiatives are working, quarter. Disappointing fall '03
we anticipate continued net sales performance, together with a change in
challenges, going forward, as product direction and the division's
l.e.i. establishes its viability executive management team in the fourth
with customers in new categories. quarter of '03, led us to bypass
shipments of spring UNIONBAY product.
Sales of Stevies, our children's While prospects for fall '04 are
brand, increased 9.6 percent to somewhat-improved, we're cautious in our
3.3 million, versus 3 million in outlook for contribution from UNIONBAY
'03. The increase was partly for the remainder of '04.
anticipated as a result of the
commencement of shipping of Steve Candie's, our newest division, was fully
Madden Kids to higher end rolled out during the quarter and
department and better children's generated net sales of 3.2 million.
independent shoe stores. Major department and specialty store
customers included select locations at
We recently announced the Belk, Macy's West, Rich's, Bon Marche,
promotion of a new President to Robinsons, Filene's, Carson's and
our Children's division, and Nordstrom. Candie's achieved some very
we've also invested in additional strong sell-throughs across the board
human resources in new sales and from closed-up shoes to casual sandals
product development personnel to novel foot-bed thongs.
focused exclusively on Children's
products. With this direct focus, Moving onto our Retail division, as of
our plan is to turn our March 31, 2004, there were 83 stores in
Children's business into more operation, including our Internet store.
significant sales and profit Revenues increased 12.3 percent to 23.7
generators in the back half, million, versus 21.1 million in 2003. We
despite continued price pressure are very pleased with these results, in
from discount channels. light of the fact that we did not open
any new stores in the first quarter. We
The Steven Collection posted a do have two stores planned for opening
sales increase of 114 percent to in the current quarter.
5.2 million in the first quarter,
versus sales of 2.5 million in During the quarter, Retail was 30
2003. We have now fully percent of the total business, versus 27
positioned this business under percent of the total last year. At the
the Steven label, where we will end of the quarter, there were 79
enjoy marketing leverage as a comp-stores, versus 71 last year.
Steve Madden division. Customers Same-store sales rose 8 percent, a
reacted well to patterns performance we are extremely pleased
delivered late in the fourth with. This increase was achieved through
quarter, and we were able to our immediate reaction to at-once demand
replenish key styles and increase for boots late in the fourth quarter and
door count throughout the first early into the first quarter. Fashion
quarter. We also initiated boot and dress classifications accounted
Steven's open stock program this for over 45 percent of our total
quarter, enabling customers to business this quarter, representing a
generate weekly reorders with significant shift away from the casual
improved turn and profitability. closed-up shoes and booties that
represented about the same proportion of
Feminine dress shoes and color our business last year.
were the dominant trends for the
quarter. The Steven division At the same time as generating strong
added Parisian to its customer total and comp-store sales gains, this
roster in the first quarter, and year, we planned and executed the
continued to add to its liquidation of most of our
independent store base. This underperforming fall retail inventory
division continues to exceed through our own stores instead of
internal expectations and to help jobbing this product out at lower prices
sustain this momentum, we've as we had in 2003. We also timed our
recently invested in stronger transition to spring later this year in
sales management by promoting a our Northeast and Midwest stores to more
sales manager for the division closely reflect seasonal weather
and hiring sales executives to patterns that saw very cold weather
represent the line in both the persist throughout the first quarter in
Midwest and the West Coast. those regions.
Sale of Madden Men's were 6.6
million versus 8.3 million in
2003. As we communicated on our
February call, the men's business
was planned down for spring, and
we also elected to cut back on
door count this season to focus
on more productive doors. This
had the anticipated effect of
reducing our net sales, but our
customers' inventories are now
down dramatically and their sales
have been exceeding plan. Our
current performance, supported by
open-stock replenishment of newer
goods, has enabled us to
introduce new product during the
first quarter. This has included
a very strong sport casual item,
new casuals that match dressier
uppers with casual bottoms, and
-4-
Our retail stores remain among more and more strongly that the
the industry leaders in association, with this music icons and
productivity, generating $650 in her promotion of Steve Madden through
sales per square foot for the radio and print media as well as other
twelve months trailing March 31, tie-ins around the country, is exceeding
'04. our expectations for success.
Moving to our Other Income line, With respect to our overall financial
in the first quarter, the condition, we maintained a pristine
Company's Other Income line was balance sheet, which speaks volumes to
1.4 million versus 1.7 million the health and viability of our company.
during the same period last year. As of March 31, 2004, our cash, cash
This includes the commission equivalents and investment securities
income from our private-label was 72.6 million. Inventories were at 26
division, Adesso-Madden, and million, up from 24 million last year.
trademark royalties earned from The reasons for the increase in
our licenses. inventory included two new stores coming
on in the second quarter, our retail
Private-label income was 896,000, ramping up in response to very strong
versus 1.1 million last year. The first-quarter sales, the carry-forward
decrease was a result of the of some fall '03 patterns in to fall
shift in receipts by '04, mostly boots, seasonal boots, and
private-label customers into on the wholesale side, our need to
their second quarter and the support our new Candie's division. These
migration of certain businesses inventory levels, while somewhat
from a direct-from-factory to a elevated, are not outside normal
landed-purchasing format. parameters, all factors considered,
including current business trend,
Licensing income was 520,000, backorder and growth plan.
versus 572,000 for the same
period last year, due to a our Our inventory turn was eight times for
termination of our handbag the trailing 12-month period.
license. We are in negotiations
with a strong player to replace Accounts Receivable were 47.4 million.
this important accessory
category, and we're committed to Working capital was at 96.2 million.
broadening our brand beyond the
footwear classification and to Total shareholders equity was at 164
finding suitable transactions and million. Cash per share was $5.45 cents.
arrangements that will serve to Book value was $12.31.
leverage our unique identity into
broader product categories. We have no long or short-term debt.
Turning to the operations side, Diluted shares outstanding were
early in the quarter, we moved to 14,374,000 shares.
a larger, modernized third-party
distribution facility in Southern Now, let me turn the call back to Jamie,
California, adopting a proven who will provide some closing remarks.
warehouse operating system and
assembling a full organization of
warehouse professionals to ----------------------------------------
service our specific needs. These Jamie Karson - Steven Madden - CEO
upgrades make use of the latest
available technologies, prepare Thank you, Richard. We are encouraged
us for handling our anticipated by the progress made during the first
future growth and provide us with quarter and are well positioned to
superior inventory management execute the strategies outlined at the
capabilities. outset of the year. That said, we
believe we are on track to achieving our
Finally, from a marketing growth and profitability objectives for
perspective, it was a strong 2004 and are therefore comfortable with
quarter for brand reinforcement, the outlook previously provided.
recognition and visibility. We
enjoyed terrific editorial We continue to anticipate net sales will
coverage and product placement in increase in the low single digits over
the first quarter. We embarked on 2003 and expect diluted earnings per
an expanded mall advertising share to be in the range of $1.35 to
campaign. Millions across from $1.40.
Macy's Herald Square on 34th
Street and Seventh Avenue viewed Overall, we have a great foundation on
our provocative Steven Billboard, which to build and are optimistic as we
and we continue to display our move forward. We are confident that the
Steve Madden Billboard on Houston core elements of our business,
Street in Soho before some of the significant brand equity, a flexible
most concentrated retail foot business model and a healthy balance
traffic in the world. sheet, will help us continue to generate
industry-leading performance. Our plan
Our spring print campaign, for future growth envisions a
appearing in April books that
were delivered in March, included
ads for Steve Madden in Cosmo
Girl, Lucky, Seventeen, Teen
People and YM, and Steven ads
appeared in Gotham, In Style,
Cosmo and Marie Claire, among
others.
From a highlight standpoint,
during the Super Bowl in Houston,
we hosted a meet-and-greet in our
store with NFL stores that
brought greater awareness toward
men's brand. We were also
prominently featured and
mentioned in the hit TV show,
"America's Next Top Model".
Finally, we sponsored Beyonce in
the Ladies First Tour, which
began its first leg in March with
Alicia Keyes and Missy Elliott.
As the tour continues, we feel
-5-
coordinated, methodical approach QUESTION AND ANSWER
to expanding and further
diversifying the business and ----------------------------------------
leveraging the strength of our Operator
brands, all in an effort to
evolve into a true lifestyle Thank you. (OPERATOR INSTRUCTIONS).
brand and experience for our Scott Krasik from C.L. King.
customers.
----------------------------------------
As stated before, we are Scott Krasik - C.L. King & Assoc. -
considering new licensing Analyst
opportunities. We will focus on
expanding our retail base, and we Hi, guys. Good morning. Can you give
will considers strategic an idea of what of this 8 percent comp
acquisitions. However, we're -- how much of that was the fur-lined
carefully weighing our options, ug-type boot? I know you don't really
mindful of the importance of give comp guidance, but do you see
selecting the right partners and positive comps for the rest of the year?
developing the right strategic I mean, you have some fairly easier
opportunities in order to be comparisons in the back half.
successful in this endeavor.
----------------------------------------
Above all, we aim to deliver Richard Olicker - Steven Madden -
enhanced shareholder value over President, COO
the long-term and believe we're
taking the right steps to do so. A fair amount was involved in what we
will call the fashion boot category,
I hope that this call has been where it took on dramatic growth in
informative. Thank you for your January and I would say the first three
time and your interest. Now, we weeks in February. But I wouldn't say
will turn the call back to the that that was it because starting with
operator to take any of your the third week in February, we started
business questions. to pick up dramatically in our dress
category and sandal category, closed-up
dress leading. So, it was a combination
really, I would say, Scott, of fashion
boots and the coming-on of closed-up
dress and then opened-up sandals late in
the quarter.
----------------------------------------
Scott Krasik - C.L. King & Assoc. -
Analyst
Do you expect the comps to be
positive for the rest of the year?
----------------------------------------
Richard Olicker - Steven Madden -
President, COO
Well, as you said, we don't comment
on our monthly comps. We are encouraged
by early April results, and we're moving
forward with our store-opening strategy.
----------------------------------------
Scott Krasik - C.L. King & Assoc. -
Analyst
Okay. Maybe if you give us an idea of
what sort of sales level you have to get
to for UNIONBAY and Candie's to get
positive expense leverage and maybe when
will you get there, especially in
Candie's? Will you get there in '04, or
is it an '05 thing?
----------------------------------------
Richard Olicker - Steven Madden -
President, COO
We really don't comment to that level
of specificity. We do have detailed
plants, which roll out to a
profitability model as quickly as
reasonable. We are falling a little bit
behind that model as it relates
-6-
to UNIONBAY, obviously, and we ----------------------------------------
believe we can reach model as it Sam Poser - Mosaic Research - Analyst
relates to Candie's.
Your gross margin improvement of the
- --------------------------------- 40 basis points, is that something that
Scott Krasik - C.L. King & Assoc. will continue -- you expect to continue
- - Analyst to improve throughout the year?
Okay. I'm sure on beating ----------------------------------------
somebody to the punch, but Richard Olicker - Steven Madden -
anything in the next quarter or President, COO
two that you can comment on on
the licensing front? Well as you know, gross margin is a
focus, but we have to say that it's a
- --------------------------------- focus within the context of a heightened
Jamie Karson - Steven Madden - markdown and allowance demand at
CEO wholesale. Also, as I referenced, as we
self-liquidate inventories as opposed to
Well, we're working on several job (ph) them out at retail, that will
initiatives. Whether they happen have gross margin effects on our Retail
in this quarter or the following gross margins.
quarter or the fourth quarter, we
are working very hard on several ----------------------------------------
different things to expand our Sam Poser - Mosaic Research - Analyst
brand into other categories,
whether they be licenses or Right. Then are you looking to do any
acquisitions. share buybacks with the cash?
- --------------------------------- ----------------------------------------
Scott Krasik - C.L. King & Assoc. Jamie Karson - Steven Madden - CEO
- - Analyst
As we've previously stated, Sam, we
Are you saying that something have the Board authorization to do that,
is going to happen in 2004, then? and we are constantly weighing that as
an option. As you know, there are many
- --------------------------------- competing areas for our allocation of
Jamie Karson - Steven Madden - cash, and we will continue to evaluate
CEO that as a possibility.
You know, I can't say with ----------------------------------------
certainty. All I can tell you is Sam Poser - Mosaic Research - Analyst
that we are optimistic and we're
working on it. One last question, just on -- excuse
me, on your Steven line and on Men's and
- --------------------------------- l.e.i. -- Stevens was very, very strong,
Scott Krasik - C.L. King & Assoc. but the l.e.i. and Men's have been
- - Analyst tough. Do you think that Steven is
gaining momentum and the other two are
Okay, thanks, guys. going to not quite be as bad, going
forward, or are we looking at the same
- --------------------------------- -- do you think we're looking at similar
Operator kinds of numbers throughout the rest of
the year?
Sam Poser (ph) from Mosaic
Research. ----------------------------------------
Richard Olicker - Steven Madden -
- --------------------------------- President, COO
Sam Poser - Mosaic Research -
Analyst Well, I think that there are two
questions, really. One is, is the
Good morning. Going back to -- momentum turning in a business like
in shopping around, it sounds Men's? I believe the answer to that
like your momentum at retail -- question is yes, although we are up
can you talk about the momentum against comps that we can't really say
through the quarter? You for sure what we -- although we have a
mentioned briefly, you mentioned plan -- where we will end up as against
it into April -- and then talk comps to last year.
all about your wholesale momentum
through the quarter? The good news is that, on much lower
sales plans and much lower inventory in
- --------------------------------- the marketplace, our sales-to-stock
Richard Olicker - Steven Madden - performance is strong enough to warrant
President, COO not only reorder business but the
placement of an open stock program in
Well, as we stated on the call, new products. Also, the traction, if you
the retail -- you can look at will, in our dress product in Men's
retail in our business as kind of bodes well for the future for a broader
a leading indicator. Momentum assortment within Men's and also toward
started early and is continuing.
We're starting to see that
momentum, or have seen that
momentum picked up against lower
sales plan and lower inventory
levels at wholesale. So, I would
say that the chase is on and the
reorder chase to the wholesale
channel -- we're in the midst of
that right now.
-7-
the trend that is working today, ----------------------------------------
namely dress-type shoes in men's Richard Olicker - Steven Madden -
and dress-uppers on casual President, COO
bottoms in particular.
I have the inventory and Arvind will
So, we're feeling good about the give you the CapEx. It was 26 million
worm turning as it relates to this year versus 24 last year.
Men's. I see it really a
continued challenge throughout ----------------------------------------
the rest of the year but Unidentified Speaker
improving as we move through the
back half. That was the inventory?
As to l.e.i. I really believe ----------------------------------------
that we will start to see some of Richard Olicker - Steven Madden -
the benefits from having President, COO
redefined that brand away from
its casual roots towards a Yes.
dressier model. But I don't see
that happening in terms of really ----------------------------------------
performance and sales until, Arvind Dharia - Steven Madden - CFO
again, the back half.
Back-to-school is going to be a (indiscernible) back in the first
real challenge there because quarter '04 2 million.
there was a lot of volume and a
lot of basic casual-type footwear ----------------------------------------
that is going to need to be Unidentified Speaker
partially replaced and not fully
replaceable with dress-type That's the operating -- I'm sorry,
shoes, more tailored-type shoes the CapEx. What was the operating cash
and casual shoes that are going flow?
to be planned down as much as 40
to 50 percent. ----------------------------------------
Arvind Dharia - Steven Madden - CFO
- ---------------------------------
Sam Poser - Mosaic Research - Operating cash flow is decreased 11
Analyst million.
Just one follow-up on your ----------------------------------------
comment about the gross margins Unidentified Speaker
and the markdown allowances and
so on -- with you playing Eleven million, okay, great. Then
catch-up and your inventories with regards to the women's business, it
being in so much better position seems like you have some pretty positive
than they were, or in very good momentum and gaining traction in some of
position, and you are chasing the new styles out there. Is it a fair
down business, wouldn't that assumption that, during the next quarter
reduce the necessity of the and throughout the rest of the year,
markdown allowances and so on? performance in that division may exceed
on both the sales and the margin
- --------------------------------- component, compared to last year?
Richard Olicker - Steven Madden -
President, COO ----------------------------------------
Richard Olicker - Steven Madden -
In theory, yes, but you've got President, COO
to have your inventories very
well-managed and you have got to I think that it would be very
make sure you don't deliver too aggressive to say that, because we're
much, too late, so that you would looking at a 2003 net sales numbers
have sufficient time at (sic) that were built on a very
sufficiently high retail to have aggressive and successful '02, so -- and
a high enough sell-through as to then, in fact, if I could do it all over
not generate a late markdown. again, I would have delivered a lot less
That's why I'm saying that the in fall '03 than we actually did. So
spotlight remains on; hot product part of the challenge is the comp.
delivered to deliver to
sell-through at full retail is a What I think we're focused on doing now,
challenge. So, it's a challenge what I know we are focused on doing is
of quantity and scale. delivering the right product at the
right time, not too much of the wrong
- --------------------------------- product.
Sam Poser - Mosaic Research -
Analyst So, we have a plan; it is an aggressive
plan but it's not really aimed at
Great, thanks. blowing the cover off the ball; it's
getting as much product out there as is
- --------------------------------- right and can be absorbed through the
Operator retail channel.
(indiscernible) Kearny (ph) from
Royal Capital.
- ---------------------------------
Unidentified Speaker
Good morning. A couple of
quick questions -- one, I'm
sorry, I couldn't hear on the
inventory numbers. Could you just
give me the inventory number
again? Also, if you have them,
the operating cash flow and the
CapEx for the quarter?
-8-
- --------------------------------- (OPERATOR INSTRUCTIONS). John Shanley,
Unidentified Speaker Wells Fargo Securities.
Great, thanks very much. ----------------------------------------
John Shanley - Wells Fargo Securities -
- --------------------------------- Analyst
Operator
Good morning. Richard, I wonder if
Ezra Fallowman (ph) from J.L. you can give us an indication whether
Advisors (ph). there has been a significant shift
during the spring selling season in
- --------------------------------- terms of the channels of distribution
Ezra Fallowman - J.L. Advisors you are selling in most of your
(ph) - Analyst wholesale product, from what you may
have done in the spring of '03. What's
Hi, guys. Good quarter. I just the indication that you have in terms of
wanted to follow-up on in terms channel fill for the back half of the
of the free cash flow guidance year, based on whatever orders you may
for the year, what was that have gotten in from WSA or from Fanny or
number again? Can you remind me? some of the other trade shows?
- --------------------------------- ----------------------------------------
Arvind Dharia - Steven Madden - Richard Olicker - Steven Madden -
CFO President, COO
Thirteen million. For the most part, there hasn't been
a dramatic shift in channels by
- --------------------------------- division. As you know, we really
Ezra Fallowman - J.L. Advisors organize ourselves vertically by brand,
(ph) - Analyst directing distribution by retail
channel.
Thirteen million? Great. So,
as you think about the cash ----------------------------------------
balance and expecting another 13 John Shanley - Wells Fargo Securities -
million or so of free cash flow Analyst
incoming this year -- and this is
kind of a follow-up on an earlier If you looked at all of the brands
question -- you guys had said on collectively, Richard, has there been
the last call that you take a more movement into department stores,
more aggressive look at some of less into the specialty guys like
the options for use of cash, Kearney's and some of the other guys
including buybacks. Can you kind that you do a lot of business with?
of update us on what's happened
since the last call and when ----------------------------------------
should we expect a decision to be Richard Olicker - Steven Madden -
made on the use of cash? President, COO
- --------------------------------- I would say, you know, with the
Jamie Karson - Steven Madden - addition of Candie's, which was
CEO predominantly a department store launch,
and with some of the reduction in l.e.i.
Well, as we said earlier, you coming from the department stores, it's
know, we have our Board kind of awash from an overall wholesale
authorization in place to buy standpoint. But I would say that we are
back shares, and a strong cash still pretty much equally distributed in
position, as you know, is the specialty channels and department
critical to our business, and it store channels.
allows us to do certain things
and pursue certain opportunities, ----------------------------------------
which we are doing. It's hard to John Shanley - Wells Fargo Securities -
say for sure; I can't say to you Analyst
today that we are aggressively in
the market buying back shares. We Okay, and that's likely to be the
are weighing that as an case in the back half as well?
opportunity. We are certainly
opportunistic there. We're going ----------------------------------------
to be opening up stores this Richard Olicker - Steven Madden -
year; that's going to take up President, COO
some of our money, and we are
always pursuing strategic Yes.
acquisitions.
----------------------------------------
- --------------------------------- John Shanley - Wells Fargo Securities -
Ezra Fallowman - J.L. Advisors Analyst
(ph) - Analyst
Okay, great. Just on the store
Okay, great. Thanks, guys. portion of your business, can you give
us a store count at the end of Q1 and
- --------------------------------- also what your expectations are in terms
Operator of number of stores you'll have open at
the end of the fiscal year?
-9-
- --------------------------------- ----------------------------------------
Richard Olicker - Steven Madden - Richard Olicker - Steven Madden -
President, COO President, COO
We had 83 at the end of -- Primarily option-related.
total store count, John?
----------------------------------------
- --------------------------------- Operator
John Shanley - Wells Fargo
Securities - Analyst Scott Krasik, C.L. King.
Yes, total store count. ----------------------------------------
Scott Krasik - C.L. King & Assoc. -
- --------------------------------- Analyst
Richard Olicker - Steven Madden -
President, COO Yes, just a quick follow-up on the
store opening -- do you have any leases
Total stores were 83 at the signed for the fourth quarter, or
end of the first quarter. letters of intent for new stores?
- --------------------------------- ----------------------------------------
John Shanley - Wells Fargo Richard Olicker - Steven Madden -
Securities - Analyst President, COO
Do you have a break-out Let's just see, hold on.
between the outlet and the
in-line stores? ----------------------------------------
Scott Krasik - C.L. King & Assoc. -
- --------------------------------- Analyst
Richard Olicker - Steven Madden -
President, COO Not necessarily locations, but --?
Yes, I do; let me grab it. We ----------------------------------------
have 76 Steve Madden retail Richard Olicker - Steven Madden -
concept shops, one outlet, one President, COO
Steven store, four Shoe-Biz
stores, which we count inside our We have two leases signed --
outlets, and one Internet store. (Multiple Speakers) -- the fourth
quarter.
- ---------------------------------
John Shanley - Wells Fargo ----------------------------------------
Securities - Analyst Jamie Karson - Steven Madden - CEO
Great. Expectations for the Right.
end of the fiscal year?
----------------------------------------
- --------------------------------- Scott Krasik - C.L. King & Assoc. -
Jamie Karson - Steven Madden - Analyst
CEO
Okay. Just sort of and how you would
For the second quarter, we're rake the licensing opportunities?
going to open up four stores, Obviously finding a handbag partner is a
Pentagon City, Bay Terrace, priority, but can you just sort of list
Christiana Mall in Delaware, and out ranking in terms of priorities of
Sterling Heights in Michigan. The what licensing deals you'd like to get
third quarter, we're planning to involved with maybe?
open four more stores in
Riverchase, Birmingham, Oak Park, ----------------------------------------
Kansas City, North Point in Richard Olicker - Steven Madden -
Atlanta and South Park in President, COO
Charlotte. For fourth quarter, we
will have to get that to you; I Our first interest is in replacing
don't have that handy. natural accessory item to footwear,
which is handbags. We're working on that
- --------------------------------- as we speak. We see some other accessory
John Shanley - Wells Fargo product categories as ripe and strong
Securities - Analyst opportunities for us, namely in the
areas, for example such as winter
Jamie, are those all accessory items, scarves, ear muffs,
anticipated being concept shops? hats, things like that. So, those are
two areas that we're working on now.
- ---------------------------------
Jamie Karson - Steven Madden - ----------------------------------------
CEO Scott Krasik - C.L. King & Assoc. -
Analyst
Yes.
- ---------------------------------
John Shanley - Wells Fargo
Securities - Analyst
Okay, fine. The last question
I had is the amount of diluted
shares outstanding was up about
0.5 million. Was that
option-related or was there
something else going on?
-10-
Okay. Then, you know, probably okay. Then talking about the
not this year, but then you could opportunities for some of the other
see watches and belts and -- brands in, like, the Famous Footwears of
(multiple speakers). the world -- I mean, would you see a
correlation, a pick-up, as
- --------------------------------- (indiscernible) Famous Footwear, for
Jamie Karson - Steven Madden - example, has just gone positive, that
CEO comps -- I mean, does that --?
I think the more meaningful ----------------------------------------
category would be apparel, and Richard Olicker - Steven Madden -
there's no timetable on that but President, COO
we are pursuing several
opportunities. As it relates to Children's?
- --------------------------------- ----------------------------------------
Scott Krasik - C.L. King & Assoc. Scott Krasik - C.L. King & Assoc. -
- - Analyst Analyst
Just two more quick ones -- at Yes.
what price level does it -- is it
still accretive for you to buy ----------------------------------------
back shares at 21, 20 -- in that Richard Olicker - Steven Madden -
range? President, COO
- --------------------------------- Yes.
Jamie Karson - Steven Madden -
CEO ----------------------------------------
Operator
Yes.
One final question from Mark Cooper
- --------------------------------- (ph), Wells Capital.
Scott Krasik - C.L. King & Assoc.
- - Analyst ----------------------------------------
Mark Cooper - Wells Capital - Analyst
Okay. Are there any areas of
distribution or maybe changing Good morning. I'm looking at the
for your kid's business that you fully diluted share count. Somebody
are either getting into this year mentioned this a minute ago. It looks
or moving away from? like, in the last three years, it's gone
up about 20 percent, and cash has also
- --------------------------------- continued to rise. I look at your
Richard Olicker - Steven Madden - industry and it just seems to me it's
President, COO pretty mature. I don't see how you can
deploy that capital. It's hard for me to
As I said on the call, we've contemplate what sort of strategic
hired a new President of the decisions you could make that would eat
Children's division, and we are up the cash balance that you have and
really organizing ourselves along why that shouldn't be deployed to buying
a similar branding strategy for in the dilution that's been put on the
all of our brands in Children's, Company through options in the last
as we have in our other couple of years. It's hard for me to
divisions. So, for example, one contemplate, with your free cash flow
of the areas of new distribution and the cash on the balance sheet, what
is higher-end for Steve Madden in the world could Steve Madden possibly
Children's product, meaning Steve do that would require that cash?
Madden in the sock label
distributed at better department ----------------------------------------
stores and higher-end specialty Richard Olicker - Steven Madden -
independent shoe stores, of which President, COO
it's a small business but we want
the best product -- leather I think the best answer, Mark, is
uppers, leather linings -- for that we could do some of a lot of
Steve Madden-branded products in things. One could be a share repurchase;
the high-end -- Stevies and another could be an intelligent,
Candie's taking lower accretive acquisition; another could be
distribution channels, although a more aggressive expansion strategy as
Candie's mimicking the it relates to our own retail stores;
distribution channels of Candie's another could be the opening of our own
women's product in department business, outside of footwear, or an
stores below, say, a Nordstrom acquisition outside of juniors in
level. footwear.
We think that by tiering the So, I disagree with you in your
distribution channel within assumption that there's nothing that we
Children's, we're going to absorb can find to do with our cash.
more marketshare. With the hiring
of specific product-development ----------------------------------------
people for the Children's Mark Cooper - Wells Capital - Analyst
product, we're going to be
incorporating more fit and
comfort features within the
product itself, so we're really
focused a little bit more
directly into the Children's
businesses from a distribution,
from a sales and from a product
development standpoint. We
believe that that should pay
dividends over the next year.
- ---------------------------------
Scott Krasik - C.L. King & Assoc.
- - Analyst
-11-
I didn't say that there was ----------------------------------------
nothing; I was saying it is hard
for me to contemplate because Disclaimer
certainly, in the last three to
four years as a company, you CCBN reserves the right to make changes
haven't done anything with it; to documents, content, or other
you've continued to accumulate information on this web site without
capital and not be a net spender obligation to notify any person of such
of capital. So, it's basically a changes.
drain on the return on the equity
of the Company. That's just In the conference calls upon which Event
reading straight from the numbers Transcripts are based, companies may
that you publish. So, I think the make projections or other
industry is not growing enough forward-looking statements regarding a
for you to make those kinds of variety of items. Such forward-looking
things - -those decisions you're statements are based upon current
talking about. I think that we've expectations and involve risks and
diluted the EPS by issuing the uncertainties. Actual results may differ
shares and the options, which I'm materially from those stated in any
fine for, but the Company could forward-looking statement based on a
easily use its capital right now number of important factors and risks,
to rein in that dilution. which are more specifically identified
in the companies' most recent SEC
- --------------------------------- filings. Although the companies may
Jamie Karson - Steven Madden - indicate and believe that the
CEO assumptions underlying the
forward-looking statements are
You are correct. reasonable, any of the assumptions could
prove inaccurate or incorrect and,
- --------------------------------- therefore, there can be no assurance
Arvind Dharia - Steven Madden - that the results contemplated in the
CFO forward-looking statements will be
realized.
Let me let you know, in 2001,
we bought back 900,000 shares -- THE INFORMATION CONTAINED IN EVENT
(Multiple Speakers) -- right now, TRANSCRIPTS IS A TEXTUAL REPRESENTATION
Company-owned 1.2 million OF THE APPLICABLE COMPANY'S CONFERENCE
treasury stocks. If we bought CALL AND WHILE EFFORTS ARE MADE TO
back -- not like the last four PROVIDE AN ACCURATE TRANSCRIPTION, THERE
years, (indiscernible) last two MAY BE MATERIAL ERRORS, OMISSIONS, OR
years, we are (indiscernible). INACCURACIES IN THE REPORTING OF THE
SUBSTANCE OF THE CONFERENCE CALLS. IN NO
- --------------------------------- WAY DOES CCBN OR THE APPLICABLE COMPANY
Mark Cooper - Wells Capital - ASSUME ANY RESPONSIBILITY FOR ANY
Analyst INVESTMENT OR OTHER DECISIONS MADE BASED
UPON THE INFORMATION PROVIDED ON THIS
Okay. WEB SITE OR IN ANY EVENT TRANSCRIPT.
USERS ARE ADVISED TO REVIEW THE
- --------------------------------- APPLICABLE COMPANY'S CONFERENCE CALL
Operator ITSELF AND THE APPLICABLE COMPANY'S SEC
FILINGS BEFORE MAKING ANY INVESTMENT OR
At this time, it appears there OTHER DECISIONS.
are no further questions. Please
continue with any closing (C)2004, CCBN, Inc. All Rights Reserved.
comments.
----------------------------------------
- ---------------------------------
Jamie Karson - Steven Madden -
CEO
Well, we thank you for
participating in the call, and we
look forward to speaking with you
on the next call. Thank you.
- ---------------------------------
Operator
Ladies and gentlemen, that
does conclude our conference call
for today. You may all disconnect
and thank you for participating.
-12-