01 Nov Steve Madden’s Q3 Profits Jump 16 Percent
Steve Madden reported sales increased 10.6 percent to $394.8 million compared to $356.9 million in the same period of 2012. Retail comparable store sales decreased 3.5 percent.
Gross margin declined to 35.4 percent as compared to 36.8 percent in the same period last year due primarily to a sales mix shift to the lower-margin private label footwear business.
Consolidated operating expenses as a percentage of sales were 19.4 percent compared to 20.6 percent of sales in the same period of 2012 due to strong cost control and operating expense leverage on growing sales.
Operating income totaled $68.1 million, or 17.2 percent of net sales, compared with operating income of $56.4 million, or 15.8 percent of net sales, in the same period of 2012. Operating income in the third quarter of 2012 included a $5.1 million impairment charge and a $0.9 million charge for bad debt, both related to the bankruptcy of Bakers Footwear Group. Excluding these charges, operating income for the third quarter of 2012 was $62.4 million, or 17.5 percent of net sales.
Net income increased 16.1 percent to $44.0 million, or $0.66 per diluted share, compared to $37.9 million, or $0.57 per diluted share in the prior year’s third quarter, adjusted for the three-for-two stock split effective October 2, 2013. Net income for the third quarter of 2012 included the aforementioned charges for impairment and bad debt related to the bankruptcy of Bakers Footwear Group. On an after-tax basis, these charge negatively impacted net income by $3.7 million, or $0.06 per diluted share.
Edward Rosenfeld, Chairman and Chief Executive Officer, commented, “We delivered a solid quarter in a difficult retail environment. Our wholesale footwear business exhibited broad-based strength, with 11 percent growth in branded footwear and 38 percent growth in private label footwear. Our accessories business was more challenging, with a sales decline due primarily to weakness in the cold weather accessories and belt categories. Our retail business was also softer than expected, due in large part to weak retail traffic trends. Despite these challenges, we believe that this quarter demonstrated that our flagship Steve Madden brand is stronger than ever. We recorded double-digit percentage gains in our Steve Madden wholesale business in both footwear and accessories, both domestically and abroad, as well as in our Steve Madden Men’s and Madden Girl wholesale footwear businesses. With Steve and his design team continuing to create on-trend merchandise assortments and the core brand gaining market share, we are confident we can continue to advance our growth objectives.”
Third Quarter 2013 Segment Results
Net sales from the wholesale business grew 11.0 percent to $345.9 million in the third quarter compared to $311.5 million in the third quarter of 2012, with particular strength in the Steve Madden Women’s, Steve Madden Men’s, Madden Girl and International divisions, in addition to outstanding growth in the private label footwear business. Gross margin in the wholesale business was 31.9 percent compared to 33.3 percent in last year’s third quarter, due primarily to a sales mix shift toward the lower-margin private label footwear business.
Retail net sales rose 7.8 percent to $48.9 million compared to $45.3 million in the third quarter of the prior year driven by the net opening of 18 new stores since the end of the third quarter last year. Same store sales for the third quarter of 2013 decreased 3.5 percent. Increased promotional activity resulted in retail gross margin of 60.2 percent in the third quarter of 2013 compared to 60.7 percent in the third quarter of 2012.
The Company opened one Steve Madden full-price store and four Steve Madden outlet stores and closed its Report store in the third quarter. The Company ended the quarter with 117 company-operated retail locations, including 16 outlets and three Internet stores.
Balance Sheet and Cash Flow
During the quarter, the Company repurchased 1,042,644 shares of the Company’s common stock for $36.7 million.
At the end of the third quarter, cash, cash equivalents, and current and non-current marketable securities totaled $234.7 million.
The Company reaffirms fiscal year 2013 guidance that net sales are expected to increase 6 – 8 percent from 2012, and diluted EPS is expected to be in the range of $1.97 – $2.03, adjusted for the three-for-two stock split.