02 Mar Steve Madden’s Q4 Profits Boosted By Fatter Margins
Steve Madden reported earnings rose 11.7 percent in the fourth quarter as improved margins offset a modest sales decline.
For the Fourth Quarter 2016:
- Net sales decreased 2.3 percent to $336.4 million compared to $344.3 million in the same period of 2015.
- Gross margin expanded 260 basis points to 38.7 percent as compared to 36.1 percent in the same period last year.
- Operating expenses as a percentage of sales were 27.4 percent compared to 25.7 percent of sales in the same period of 2015.
- Operating income totaled $39.6 million, or 11.8 percent of net sales, compared with operating income of $38.7 million, or 11.2 percent of net sales, in the same period of 2015.
- Net income was $28.7 million, or 49 cents per diluted share, compared to $25.7 million, or 43 cents per diluted share, in the prior year’s fourth quarter.
Edward Rosenfeld, chairman and chief executive officer, commented, “We are pleased to have delivered solid earnings results in the fourth quarter, with EPS at the high end of our guidance range, despite a challenging retail environment. While overall sales declined modestly due primarily to softness in our private label footwear and cold weather accessories businesses, we had outstanding top line growth in our core Steve Madden Women’s wholesale business, and we also achieved strong gross margin improvement in both the wholesale footwear and wholesale accessories segments. As we look ahead, while we are cautious about the overall environment, we are pleased with the momentum in our core business and confident we can drive top and bottom line growth in 2017 and beyond.”
Fourth Quarter 2016 Segment Results
Net sales for the wholesale business were $251.5 million in the fourth quarter of 2016 compared to $265 million in the fourth quarter of 2015. Sales declines in private label footwear, cold weather accessories and the international business were partially offset by strong growth in the Steve Madden Women’s division. Gross margin in the wholesale business increased to 31.4 percent compared to 28.2 percent in last year’s fourth quarter, driven by strong improvement in both the wholesale footwear and wholesale accessories segments.
Retail net sales in the fourth quarter were $84.9 million compared to $79.3 million in the fourth quarter of the prior year. Same-store sales increased 1.1 percent for the fourth quarter. Retail gross margin decreased to 60.5 percent in the fourth quarter of 2016 compared to 62.3 percent in the fourth quarter of 2015 due to the decision to proactively clear through slower-moving product, primarily casual boots and booties, as well as the negative impact of a stronger U.S. dollar on the company’s international business.
During the fourth quarter, the company opened two full-price stores and one outlet location. It ended the quarter with 189 company-operated retail locations, including four internet stores.
The effective tax rate for the fourth quarter of 2016 was 28.5 percent compared to 34.1 percent in the fourth quarter of the prior year.
Full Year Ended December 31, 2016
For the full year ended December 31, 2016, net sales decreased 0.4 percent to $1.40 billion from $1.41 billion in the prior year.
Net income was $120.9 million, or $2.03 per diluted share, for the year ended December 31, 2016, compared to net income of $112.9 million, or $1.85 per diluted share, for the year ended December 31, 2015. Net income in 2015 included an after-tax net benefit of $2 million related to early lease termination of the company’s 5th Avenue store location, as well as an after-tax loss of $2 million related to the partial impairment of the company’s Wild Pair trademark.
Balance Sheet And Cash Flow
During the fourth quarter of 2016, the company repurchased 515,837 shares of its common stock for approximately $19.6 million, which includes shares acquired through the net settlement of employee stock awards.
As of December 31, 2016, cash, cash equivalents and current and non-current marketable securities totaled $236.2 million.
For fiscal year 2017, the company expects that net sales will increase 8 percent to 10 percent over net sales in 2016. Diluted EPS for fiscal year 2017 is expected to be in the range of $2.12 to $2.18.
In addition to marketing products under its own brands including Steve Madden, Dolce Vita, Betsey Johnson, Report, Big Buddha, Brian Atwood, Cejon, Blondo and Mad Love, Steve Madden is the licensee of various brands, including Superga for footwear in North America.