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 third quarter ended September 30, 2017.

Amounts referred to as “Adjusted” exclude the items that are described under the heading “Non-GAAP Adjustments.”

For the Third Quarter 2017:

  • Net sales increased 8.0% to $441.2 million compared to $408.4 million in the same period of 2016.
  • Gross margin was 37.6% as compared to 37.8% in the same period last year, a decrease of 20 basis points.
  • Operating expenses as a percentage of sales were 23.8%. Adjusted operating expenses as a percentage of sales were 23.7% as compared to 23.5% of sales in the same period of 2016.
  • Operating income totaled $65.4 million, or 14.8% of net sales. Adjusted operating income was $65.9 million, or 14.9% of net sales, compared with operating income of $63.8 million, or 15.6% of net sales, in the same period of 2016.
  • Net income was $44.2 million, or $0.77 per diluted share. Adjusted net income was $44.5 million, or $0.77 per diluted share, compared to $43.8 million, or $0.74 per diluted share, in the prior year's third quarter.

Edward Rosenfeld, Chairman and Chief Executive Officer, commented, “We recorded solid sales and EPS growth in the quarter despite the challenging retail environment, led by strong performance across our Steve Madden wholesale footwear businesses, including Steve Madden Women’s, Men’s and Kids’ as well as Madden Girl. As we look ahead, we expect that we will continue to face industry headwinds, and as a result, we are planning our business prudently. That said, we believe that our strong brands, proven business model and on-trend product offerings position us well to meet our financial targets for the year and continue to enhance shareholder value over the long-term.”

Third Quarter 2017 Segment Results

Net sales for the wholesale business increased 8.7% to $376.9 million in the third quarter of 2017. Excluding the results of recently acquired Schwartz & Benjamin, wholesale net sales increased 1.6% to $352.0 million from $346.6 million in the third quarter of 2016, as an increase in the wholesale footwear business was partially offset by a decline in wholesale accessories. Gross margin in the wholesale business was 33.9%, flat compared to last year’s third quarter.

Retail net sales in the third quarter increased 4.0% to $64.3 million compared to $61.8 million in the third quarter of the prior year. Same store sales decreased 3.8% in the quarter compared to a 1.3% same store sales increase in the third quarter of 2016. Retail gross margin decreased to 59.3% in the third quarter of 2017 as compared to 59.9% in the third quarter of the prior year.

During the third quarter, the Company opened one full price store and three outlet stores in the U.S. as well as five full price stores in international markets. The Company ended the quarter with 202 company-operated retail locations, including four Internet stores. In addition, during the third quarter the Company opened 15 concessions in Asia and ended the quarter with 32 company-operated concessions in international markets.

The Company’s effective tax rate for the third quarter of 2017 was 32.1% on both a GAAP and Adjusted basis compared to 32.3% in the third quarter of the prior year.

Balance Sheet and Cash Flow

During the third quarter of 2017, the Company repurchased 228,562 shares of the Company’s common stock for approximately $9.3 million, which includes shares acquired through the net settlement of employee stock awards.

As of September 30, 2017, cash, cash equivalents, and current and non-current marketable securities totaled $176.9 million.

Company Outlook

The Company is maintaining its full-year outlook and expects that net sales in fiscal year 2017 will increase 9% to 11% over net sales in 2016. The Company expects that diluted EPS on a GAAP basis for fiscal year 2017 will be in the range of $2.03 to $2.09. The Company expects that Adjusted diluted EPS for fiscal year 2017 will be in the range of $2.18 to $2.24.

Non-GAAP Adjustments

Amounts referred to as “Adjusted” exclude the items below.

For the third quarter 2017:

  • $0.5 million pre-tax ($0.3 million after-tax) in expense in connection with the integration of the Schwartz & Benjamin acquisition and the related restructuring, included in operating expenses.

For the fiscal year 2017:

  • $1.7 million pre-tax ($1.1 million after-tax) in non-cash expense associated with the purchase accounting fair value adjustment of inventory acquired in the Schwartz & Benjamin acquisition, included in cost of sales.
  • $1.7 million pre-tax ($1.1 million after-tax) in expense incurred in connection with the integration of the Schwartz & Benjamin acquisition and the related restructuring, included in operating expenses.
  • $7.5 million pre-tax ($6.5 million after-tax) in estimated bad debt expense associated with the Payless ShoeSource bankruptcy, included in operating expenses.

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 second quarter earnings conference call scheduled for today, October 31, 2017, 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.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. Additionally, a replay of the call can be accessed by dialing 1-844-512-2921 (U.S.) and 1-412-317-6671 (international), passcode 8203375, and will be available until November 30, 2017.

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®, Report®, Big Buddha®, Brian Atwood®, Cejon®, Blondo® and Mad Love®, Steve Madden is a licensee of various brands, including Kate Spade®, Superga® and Avec Les Filles®. 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 202 retail stores (including Steve Madden's four Internet stores). Steve Madden licenses certain of its brands to third parties for the marketing and sale of certain products, including for ready-to-wear, outerwear, intimate apparel, 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, 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 Nine Months Ended
September 30, 2017   September 30, 2016 September 30, 2017   September 30, 2016
 
Net sales $ 441,193 $ 408,384 $ 1,181,728 $ 1,063,143
Cost of sales   275,302   253,876     743,723   671,388
Gross profit 165,891 154,508 438,005 391,755
Commission and licensing fee income, net 4,746 5,304 10,838 10,259
Operating expenses   105,194   96,046     310,725   272,478
Income from operations 65,443 63,766 138,118 129,536
Interest and other income, net   564   747     1,956   1,117
Income before provision for income taxes 66,007 64,513 140,074 130,653
Provision for income taxes   21,181   20,810     45,703   38,212
Net income 44,826 43,703 94,371 92,441
Net income (loss) attributable to noncontrolling interest   596   (64 )   1,019   278
Net income attributable to Steven Madden, Ltd. $ 44,230 $ 43,767   $ 93,352 $ 92,163
 
Basic income per share $ 0.81 $ 0.77 $ 1.69 $ 1.61
Diluted income per share $ 0.77 $ 0.74 $ 1.61 $ 1.54

 

Basic weighted average common shares outstanding

54,904 56,869 55,290 57,334

Diluted weighted average common shares outstanding

57,751 59,329 57,894 59,772
 
         
STEVEN MADDEN, LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEET DATA

(In thousands)

 

As of

September 30, 2017 December 31, 2016 September 30, 2016
(Unaudited) (Unaudited)
Cash and cash equivalents $ 92,080 $ 126,115 $ 62,723
Marketable securities (current & non current) 84,815 110,054 120,737
Accounts receivables, net 337,200 200,958 269,853
Inventories 124,117 119,824 111,952
Other current assets 44,621 42,279 31,602
Property and equipment, net 73,922 72,381 74,382
Goodwill and intangibles, net 305,622 280,097 282,920
Other assets   9,026   9,167   8,220
Total assets $ 1,071,403 $ 960,875 $ 962,389
 
Accounts payable $ 102,906 $ 80,584 $ 102,095
Contingent payment liability (current & non current) 23,050 7,948 16,682
Other current liabilities 106,485 94,595 78,994
Other long term liabilities 35,961 36,676 40,978
Total Steven Madden, Ltd. stockholders' equity 797,061 740,867 723,363
Noncontrolling interest   5,940   205   277
Total liabilities and stockholders' equity $ 1,071,403 $ 960,875 $ 962,389
 
     
STEVEN MADDEN, LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED CASH FLOW DATA

(In thousands)

Unaudited

 

 
Nine Months Ended
September 30, 2017   September 30, 2016
 
 
Net cash provided by operating activities $ 35,010 $ 73,464
 

Investing Activities

Purchases of property and equipment (11,710 ) (12,908 )
Sales of marketable securities, net 28,290 2,736
Repayment of notes receivable 221 249
Acquisition, net of cash acquired   (17,396 )   -  
Net cash used in investing activities (595 ) (9,923 )
 

Financing Activities

Common stock share repurchases for treasury (73,226 ) (66,394 )
Purchase of noncontrolling interest - (3,759 )
Payment of contingent liability (7,359 ) (8,048 )
Proceeds from exercise of stock options   11,312     4,869  
Net cash used in financing activities (69,273 ) (73,332 )
 
Effect of exchange rate changes on cash and cash equivalents 823 100
 
Net (decrease) in cash and cash equivalents (34,035 ) (9,691 )
 
Cash and cash equivalents - beginning of period 126,115 72,414
   
Cash and cash equivalents - end of period $ 92,080   $ 62,723  
 

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 gross profit to Adjusted gross profit

        
Nine Months Ended
September 30, 2017

Consolidated

GAAP gross profit $ 438,005
 
Non-cash expense associated with the purchase accounting fair value
adjustment of inventory acquired in the Schwartz & Benjamin acquisition 1,654
 
Adjusted gross profit $ 439,659
 

Wholesale

GAAP gross profit $ 325,717
 
Non-cash expense associated with the purchase accounting fair value adjustment
adjustment of inventory acquired in the Schwartz & Benjamin acquisition 1,654
 
Adjusted gross profit           $ 327,371
             

Table 2 - Reconciliation of GAAP operating expenses to Adjusted operating expenses

Three Months Ended Nine Months Ended
September 30, 2017 September 30, 2017
 
GAAP operating expenses $ 105,194 $ 310,725
 
Expense incurred in connection with the integration of the Schwartz & Benjamin 488 1,255
acquisition and the related restructuring
 
Bad debt expense associated with the Payless ShoeSource bankruptcy - 7,500
 
Adjusted operating expenses       $ 104,706   $ 301,970
             

Table 3 - Reconciliation of GAAP operating income to Adjusted operating income

Three Months Ended Nine Months Ended
September 30, 2017 September 30, 2017
 
GAAP operating income $ 65,443 $ 138,118
 
Non-cash expense associated with the purchase accounting fair value
adjustment of inventory acquired in the Schwartz & Benjamin acquisition - 1,654
 
Expense incurred in connection with the integration of the Schwartz & Benjamin 488 1,255
acquisition and the related restructuring
 
Bad debt expense associated with the Payless ShoeSource bankruptcy - 7,500
 
Adjusted operating income       $ 65,931   $ 148,527
             

Table 4 - Reconciliation of GAAP provision for income taxes to Adjusted provision for income taxes

Three Months Ended Nine Months Ended
September 30, 2017 September 30, 2017
 
GAAP provision for income taxes $ 21,181 $ 45,703
 
Tax effect of non-cash expense associated with the purchase accounting fair
value adjustment of inventory acquired in the Schwartz & Benjamin acquisition - 579
 
Tax effect of expense incurred in connection with the integration of the 181 465
Schwartz & Benjamin acquisition and the related restructuring
 
Tax effect of bad debt expense associated with the Payless ShoeSource
bankruptcy - 964
 
Adjusted provision for income taxes       $ 21,362   $ 47,711
             

Table 5 - Reconciliation of GAAP net income to Adjusted net income

Three Months Ended Nine Months Ended
September 30, 2017 September 30, 2017
 
GAAP net income attributable to Steven Madden, Ltd. $ 44,230 $ 93,352
 
After-tax impact of non-cash expense associated with the purchase
accounting fair value adjustment of inventory acquired in the Schwartz &
Benjamin acquisition - 1,075
 
After-tax impact of expense incurred in connection with the integration of the 307 790
Schwartz & Benjamin acquisition and the related restructuring
 
After-tax impact of bad debt expense associated with the Payless
ShoeSource bankruptcy - 6,536
 
Adjusted net income attributable to Steven Madden, Ltd. $ 44,537 $ 101,753
 
GAAP diluted income per share $ 0.77 $ 1.61
Adjusted diluted income per share       $ 0.77   $ 1.76