Steve Madden Announces Second Quarter 2020 Results

LONG ISLAND CITY, N.Y., July 29, 2020 (GLOBE NEWSWIRE) -- Steve Madden (Nasdaq: SHOO), a leading designer and marketer of fashion-forward footwear, accessories and apparel for women, men and children, today announced financial results for the second quarter ended June 30, 2020.

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

The Company reclassified commission and licensing fee income to Total Revenue and reclassified its respective expenses into Operating Expenses from previously labeled Commission and Licensing Fee Income - Net on the Company's Consolidated Statement of Operations for each period provided.

Second Quarter 2020 Review

  • Revenue decreased 68.2% to $142.8 million compared to $449.6 million in the same period of 2019.
  • Gross margin was 39.1% compared to 37.8% in the same period last year.
  • Operating expenses as a percentage of revenue were 55.7% compared to 27.0% of revenue in the same period of 2019.  Adjusted operating expenses as a percentage of revenue were 53.8% compared to 26.9% of revenue in the same period of 2019.
  • Loss from operations totaled ($23.7) million, or (16.6%) of revenue, compared to income from operations of $44.6 million, or 9.9% of revenue, in the same period of 2019.  Adjusted loss from operations was ($21.0) million, or (14.7%) of revenue, compared to Adjusted income from operations of $49.1 million, or 10.9% of revenue, in the same period of 2019.
  • Net loss attributable to Steven Madden, Ltd. was ($16.6) million, or ($0.21) per diluted share, compared to net income attributable to Steven Madden, Ltd. of $36.6 million, or $0.44 per diluted share, in the prior year’s second quarter.  Adjusted net loss attributable to Steven Madden, Ltd. was ($14.7) million, or ($0.19) per diluted share, compared to Adjusted net income attributable to Steven Madden, Ltd. of $39.5 million, or $0.47 per diluted share, in the prior year’s second quarter.

Edward Rosenfeld, Chairman and Chief Executive Officer, commented, "The past few months have been challenging for all of us due to the COVID-19 pandemic.  At Steve Madden, we have prioritized the health and safety of our employees, customers and communities while also moving quickly to adapt to the current retail environment, mitigate the impact to our business, preserve liquidity and enhance financial flexibility.  We are encouraged by the strong performance we are seeing in digital commerce channels – including 88% revenue growth on stevemadden.com in the second quarter – which underscores the strength of our brands and the continued consumer demand for our products.  We know the path forward will continue to be bumpy in the near-term, but we are confident that our strengths – powerful brands, a fortress balance sheet, a proven business model and most of all, our talented and dedicated employees – will enable us to successfully navigate this crisis and return to profitable growth once conditions normalize."

Second Quarter 2020 Segment Results

Revenue for the wholesale business decreased 72.5% to $100.0 million in the second quarter of 2020, including a 72.8% decline in wholesale footwear and a 71.5% decline in wholesale accessories/apparel.  The revenue decline was driven by significant order cancellations resulting from the COVID-19 pandemic.  Gross margin in the wholesale business decreased to 26.6% compared to 32.1% in last year’s second quarter due primarily to a shift in sales mix to the lower-margin private label business.

Retail revenue in the second quarter decreased 49.2% to $41.4 million due to the closure of the vast majority of the Company's retail stores for most or all of the quarter as a result of the COVID-19 pandemic, partially offset by strong performance in the Company's e-commerce business.  Retail gross margin increased to 67.4% in the second quarter of 2020 compared to 59.7% in the second quarter of the prior year due primarily to a shift in sales mix to the higher-margin e-commerce business.

The Company ended the quarter with 225 company-operated retail stores, including eight Internet stores, as well as 17 company-operated concessions in international markets.

The Company’s effective tax rate for the second quarter of 2020 was 26.6% compared to 21.3% in the second quarter of 2019.  On an Adjusted basis, the effective tax rate for the second quarter of 2020 was 26.9% compared to 22.4% in the second quarter of 2019.

Balance Sheet and Cash Flow

As of June 30, 2020, cash, cash equivalents and marketable securities totaled $356.9 million.  Advances from factor totaled $42.7 million.

On July 22, 2020, the Company entered into a new $150 million, five-year asset-based revolving credit facility, which replaced the Company’s previous credit facility with its factor.

Fiscal Year 2020 Outlook

Given the continued disruption and uncertainty related to the COVID-19 pandemic, the Company is not providing guidance at this time.

Non-GAAP Adjustments

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

For the second quarter 2020:

  • $5.4 million pre-tax ($4.1 million after-tax) expense in connection with restructuring and related charges, included in operating expenses.
  • $4.6 million pre-tax ($3.5 million after-tax) benefit in connection with a change in valuation of contingent considerations, included in operating expenses.
  • $1.2 million pre-tax ($0.9 million after-tax) expense in connection with the impairment of lease right-of-use assets, included in operating expenses.
  • $0.7 million pre-tax ($0.6 million after-tax) expense in connection with benefits provided to furloughed employees, included in operating expenses.
  • $0.02 million pre-tax ($0.01 million after-tax) expense associated with the impairment of store fixed assets, included in operating expenses.
  • $0.2 million loss in connection with the impairment of lease right-of-use assets, trademark and other attributable to noncontrolling interest.

For the second quarter 2019:

  • $1.8 million pre-tax ($1.7 million after-tax) recovery associated with the Payless ShoeSource bankruptcy, included in operating expenses.
  • $1.5 million pre-tax ($1.2 million after-tax) expense in connection with a provision for early lease termination charges, included in operating expenses.
  • $0.7 million pre-tax ($0.5 million after-tax) expense in connection with a divisional headquarters relocation, included in operating expenses.
  • $4.1 million pre-tax ($3.0 million after-tax) non-cash expense associated with the impairment of the Brian Atwood trademark.

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, July 29, 2020, at 8:30 a.m. Eastern Time.  The call will be broadcast live over the Internet and can be accessed by logging onto http://stevemadden.gcs-web.com.  An online archive of the broadcast will be available within two hours of the conclusion of the call and will remain available for 12 months following the live call.

About Steve Madden

Steve Madden designs, sources and markets fashion-forward footwear, accessories and apparel 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®, GREATS®, BB Dakota®, Mad Love® and Big Buddha®, Steve Madden is a licensee of various brands, including Anne Klein®,  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 eight 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 Statement Under the U.S. Private Securities Litigation Reform Act of 1995

This press release contains “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995.  Examples of forward-looking statements include, among others, statements regarding revenue and earnings guidance, plans, strategies, objectives, expectations and intentions.  Forward-looking statements can be identified by words such as: “may”, “will”, “expect”, “believe”, “should”, “anticipate”, “project”, “predict”, “plan”, “intend”, or “estimate”, and similar expressions or the negative of these expressions.  Forward-looking statements are neither historical facts nor assurances of future performance.  Instead, they represent the Company’s current beliefs, expectations and assumptions regarding anticipated events and trends affecting its business and industry based on information available as of the time such statements are made.  Investors are cautioned that such forward-looking statements are inherently subject to risks and uncertainties, many of which cannot be predicted with accuracy and some of which may be outside of the Company’s control.  The Company’s actual results and financial condition may differ materially from those indicated in these forward-looking statements.  As such, investors should not rely upon them.  Important risk factors include:

  • the Company's ability to maintain adequate liquidity when negatively impacted by unforeseen events such as an epidemic or pandemic (COVID-19), which may cause disruption to the Company's business operations and temporary closure of Company-operated and wholesale partner retail stores, resulting in a significant reduction in revenue for an indeterminable period of time;
  • the Company’s ability to accurately anticipate fashion trends and promptly respond to consumer demand;
  • the Company’s ability to compete effectively in a highly competitive market;
  • the Company’s ability to adapt its business model to rapid changes in the retail industry;
  • the Company’s dependence on the retention and hiring of key personnel;
  • the Company’s ability to successfully implement growth strategies and integrate acquired businesses;
  • the Company’s reliance on independent manufacturers to produce and deliver products in a timely manner, especially when faced with adversities such as work stoppages, transportation delays, public health emergencies, social unrest, changes in local economic conditions, and political upheavals as well as meet the Company’s quality standards;
  • changes in trade policies and tariffs imposed by the United States government and the governments of other nations in which the Company manufactures and sells products;
  • disruptions to product delivery systems and the Company’s ability to properly manage inventory;
  • the Company’s ability to adequately protect its trademarks and other intellectual property rights;
  • legal, regulatory, political and economic risks that may affect the Company’s sales in international markets;
  • changes in U.S. and foreign tax laws that could have an adverse effect on the Company’s financial results;
  • additional tax liabilities resulting from audits by various taxing authorities;
  • the Company’s ability to achieve operating results that are consistent with prior financial guidance; and
  • other risks and uncertainties indicated from time to time in the Company’s filings with the Securities and Exchange Commission.

The Company does not undertake any obligation to publicly update any forward-looking statement, including, without limitation, any guidance regarding revenue or earnings, whether as a result of new information, future developments or otherwise.

STEVEN MADDEN, LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS DATA

(In thousands, except per share amounts)

(Unaudited)

  Three Months Ended Six Months Ended
  June 30, 2020 June 30, 2019 June 30, 2020 June 30, 2019
         
Net sales $141,363  $444,974  $497,047  $855,914 
Commission and licensing fee income 1,449  4,655  4,933  9,503 
Total revenue 142,812  449,629  501,980  865,417 
Cost of sales 86,924  279,629  312,628  533,572 
Gross profit 55,888  170,000  189,352  331,845 
Operating expenses 79,590  121,317  229,784  238,502 
Trademark impairment charges   4,050  9,518  4,050 
(Loss) / income from operations (23,702) 44,633  (49,950) 89,293 
Interest and other income, net 357  1,262  1,403  2,454 
(Loss) / income before provision for income taxes (23,345) 45,895  (48,547) 91,747 
(Benefit) / provision for income taxes (6,201) 9,784  (13,602) 20,371 
Net (loss) / income (17,144) 36,111  (34,945) 71,376 
Less: net (loss) / income  attributable to noncontrolling interest (558) (461) (908) 279 
Net (loss) / income attributable to Steven Madden, Ltd. $(16,586) $36,572  $(34,037) $71,097 
         
Basic net (loss) / income per share $(0.21) $0.46  $(0.43) $0.89 
         
Diluted net (loss) / income per share $(0.21) $0.44  $(0.43) $0.85 
         
Basic weighted average common shares outstanding 78,517  79,951  78,696  80,241 
         
Diluted weighted average common shares outstanding 78,517  83,869  78,696  84,064 
         
Cash dividends declared per common share $  $0.14  $0.15  $0.28 


STEVEN MADDEN, LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEET DATA

(In thousands)

   As of  
 June 30, 2020 December 31, 2019 June 30, 2019
 (Unaudited)   (Unaudited)
      
Cash and cash equivalents$318,101  $264,101  $212,664 
Marketable securities38,837  40,521  36,096 
Accounts receivable, net143,679  254,637  306,636 
Inventories103,282  136,896  146,120 
Other current assets32,022  22,724  39,287 
Property and equipment, net49,594  65,504  61,654 
Operating lease right-of-use assets120,489  155,700  179,320 
Goodwill and intangibles, net315,742  334,058  286,129 
Other assets10,646  4,506  13,654 
Total assets$1,132,392  $1,278,647  $1,281,560 
      
Accounts payable$42,474  $61,706  $107,436 
Operating leases (current & non-current)151,520  171,796  193,295 
Advances from factor42,662     
Other current liabilities115,866  180,941  136,131 
Contingent payment liability1,829  9,124   
Other long-term liabilities10,921  13,856  17,142 
Total Steven Madden, Ltd. stockholders’ equity755,084  828,501  818,354 
Noncontrolling interest12,036  12,723  9,202 
Total liabilities and stockholders’ equity$1,132,392  $1,278,647  $1,281,560 
            
            

STEVEN MADDEN, LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED CASH FLOW DATA

(In thousands)

(Unaudited)

  Six Months Ended
  June 30, 2020 June 30, 2019
     
Net cash provided by operating activities $57,867  $59,761 
     
Investing Activities    
Capital expenditures (4,320) (6,214)
(Purchases) / sales of marketable securities, net (162) 32,062 
Net cash (used in) / provided by investing activities (4,482) 25,848 
     
Financing Activities    
Common stock purchased for treasury (29,678) (51,156)
Investment of noncontrolling interest 359  1,283 
Distribution of noncontrolling interest earnings   (1,113)
Proceeds from exercise of stock options 960  1,799 
Cash dividends paid (12,459) (23,987)
Advances from factor, net 42,662   
Net cash provided by / (used in) financing activities 1,844  (73,174)
     
Effect of exchange rate changes on cash and cash equivalents (1,229) 198 
     
Net increase in cash and cash equivalents 54,000  12,633 
     
Cash and cash equivalents - beginning of period 264,101  200,031 
     
Cash and cash equivalents - end of period $318,101  $212,664 
         
         

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 operating expenses to Adjusted operating expenses    
  Three Months Ended Six Months Ended
  June 30, 2020 June 30, 2019 June 30, 2020 June 30, 2019
         
GAAP operating expenses $79,590  $121,317  229,784  $238,502 
         
Expense in connection with restructuring and related charges (5,414)   (5,414)  
         
Benefit in connection with a change in valuation of contingent considerations 4,611    4,611   
         
Expense in connection with impairment of lease right-of-use assets (1,161)   (17,987)  
         
Expense in connection with impairment of store fixed assets (17)   (12,012)  
         
Expense in connection with benefits provided to furloughed employees (733)   (1,991)  
         
Expense in connection with loan receivable     (697)  
         
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 early lease termination charges   (1,543) (142) (2,292)
         
Net recovery in connection with the Payless ShoeSource bankruptcy   1,811    259 
         
Expense in connection with a divisional headquarters relocation   (669)   (669)
         
Adjusted operating expenses $76,876  $120,916  $196,152  $237,668 


Table 2 - Reconciliation of GAAP (loss) / income from operations to Adjusted (loss) / income from operations
  Three Months Ended Six Months Ended
  June 30, 2020 June 30, 2019 June 30, 2020 June 30, 2019
         
GAAP (loss) / income from operations $(23,702) $44,633  $(49,950) $89,293 
         
Expense in connection with restructuring and related charges 5,414    5,414   
         
Benefit in connection with a change in valuation of contingent considerations (4,611)   (4,611)  
         
Expense in connection with impairment of lease right-of-use assets 1,161    17,987   
         
Expense in connection with impairment of store fixed assets 17    12,012   
         
Expense in connection with benefits provided to furloughed employees 733    1,991   
         
Expense in connection with provision for loan receivable     697   
         
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 early lease termination charges   1,543  142  2,292 
         
Impairment of certain trademarks   4,050  9,518  4,050 
         
Net recovery in connection with the Payless ShoeSource bankruptcy   (1,811)   (259)
         
Expense in connection with a divisional headquarters relocation   669    669 
         
Adjusted (loss) / income from operations $(20,988) $49,084  $(6,800) $94,177 


Table 3 - Reconciliation of GAAP (benefit) / provision for income taxes to Adjusted (benefit) / provision for income taxes
  Three Months Ended Six Months Ended
  June 30, 2020 June 30, 2019 June 30, 2020 June 30, 2019
         
GAAP (benefit) / provision for income taxes $(6,201) $9,784  $(13,602) $20,371 
         
Tax effect of expense in connection with restructuring and related charges 1,284    1,284   
         
Tax effect of benefit in connection with a change in valuation of contingent considerations (1,092)   (1,092)  
         
Tax effect of expense in connection with impairment of lease right-of-use assets 273    4,333   
         
Tax effect of expense in connection with impairment of store fixed assets 4    2,910   
         
Tax effect of expense in connection with benefits provided to furloughed employees 174    472   
         
Tax effect of expense in connection with provision for loan receivable     165   
         
Tax effect of 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 early lease termination charges   387  34  575 
         
Tax effect of impairment of certain trademarks   1,017  2,254  1,017 
         
Tax effect of net recovery in connection with the Payless ShoeSource bankruptcy   (85)   85 
         
Tax effect of expense in connection with a divisional headquarters relocation   168    168 
         
Adjusted (benefit) / provision for income taxes $(5,558) $11,271  $(3,242) $21,747 


Table 4 - Reconciliation of GAAP net  (loss) / income attributable to noncontrolling interest to Adjusted net (loss) / income attributable to noncontrolling interest    
  Three Months Ended Six Months Ended
  June 30, 2020 June 30, 2019 June 30, 2020 June 30, 2019
         
GAAP net (loss) / income attributable to noncontrolling interest $(558) $(461) $(908) $279 
         
Net loss in connection with impairment of lease right-of-use assets, trademark and other attributable to noncontrolling interest 163    470   
         
Adjusted net (loss) / income attributable to noncontrolling interest $(395) $(461) $(438) $279 


Table 5 - Reconciliation of GAAP net (loss) / income attributable to Steven Madden, Ltd. to Adjusted net (loss) / income attributable to Steven Madden, Ltd.
  Three Months Ended Six Months Ended
  June 30, 2020 June 30, 2019 June 30, 2020 June 30, 2019
         
GAAP net (loss) / income attributable to Steven Madden, Ltd. $(16,586) $36,572  $(34,037) $71,097 
         
After-tax impact of expense in connection with restructuring and related charges 4,130    4,130   
         
After-tax impact of benefit in connection with a change in valuation of contingent considerations (3,519)   (3,519)  
         
After-tax impact of expense in connection with impairment of lease right-of-use assets 887    13,653   
         
After-tax impact of expense in connection with impairment of store fixed assets 13    9,102   
         
After-tax impact of expense in connection with benefits provided to furloughed employees 560    1,520   
         
After-tax impact of expense in connection with provision for loan receivable     532   
         
After-tax impact of 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 early lease termination charges   1,156  109  1,717 
         
After-tax impact of impairment of certain trademarks   3,033  7,265  3,033 
         
Less: Net loss in connection with impairment of lease right-of-use assets, trademark and other attributable to noncontrolling interest (163)   (470)  
         
After-tax impact of  net recovery in connection with the Payless ShoeSource bankruptcy   (1,727)   (344)
         
After-tax impact of expense in connection with a divisional headquarters relocation   501    501 
         
Adjusted net (loss) / income attributable to Steven Madden, Ltd. $(14,678) $39,535  $(1,715) $74,605 
         
GAAP diluted (loss) / income per share $(0.21) $0.44  $(0.43) $0.85 
         
GAAP diluted weighted average shares outstanding 78,517  83,869  78,696  84,064 
         
Adjusted diluted (loss) / income per share $(0.19) $0.47  $(0.02) $0.89 
         
Adjusted diluted weighted average shares outstanding 78,517  83,869  78,696  84,064 

Contact

Steven Madden, Ltd.
Director of Corporate Development & Investor Relations
Danielle McCoy
718-308-2611
InvestorRelations@stevemadden.com

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