SHOO Steven Madden Ltd

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 second quarter ended June 30, 2017.

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

For the Second Quarter 2017:

• Net sales increased 15.0% to $374.1 million compared to $325.4 million in the same period of 2016.
• Gross margin was 37.3%. Adjusted gross margin was 37.4% as compared to 37.2% in the same period last year, an increase of 20 basis points.
• Operating expenses as a percentage of sales were 26.6%. Adjusted operating expenses as a percentage of sales were 26.4% as compared to 27.0% of sales in the same period of 2016.
• Operating income totaled $41.9 million, or 11.2% of net sales. Adjusted operating income was $43.1 million, or 11.5% of net sales, compared with operating income of $35.9 million, or 11.0% of net sales, in the same period of 2016.
• Net income was $29.0 million, or $0.50 per diluted share. Adjusted net income was $29.7 million, or $0.51 per diluted share, compared to $24.7 million, or $0.41 per diluted share, in the prior year's second quarter.

Edward Rosenfeld, Chairman and Chief Executive Officer, commented, “The strong momentum in our business continued into the second quarter, as we delivered another quarter of robust sales and earnings growth despite the challenging retail environment. Once again, we saw outstanding performance in our core Steve Madden Women’s wholesale footwear division, where our trend-right product assortment continues to resonate with consumers and drive market share gains. As we look ahead to the balance of the year, we are taking a prudent approach to planning our business in light of industry headwinds. That said, the strength of our brands and our business model gives us confidence that we are well-positioned to navigate the uncertain environment.”

Second Quarter 2017 Segment Results

Net sales for the wholesale business increased 16.3% to $305.6 million in the second quarter of 2017. Excluding the results of the recently acquired Schwartz & Benjamin, wholesale net sales increased 8.4% to $284.9 million from $262.9 million in the second quarter of 2016, driven by a strong increase in the wholesale footwear business. Gross margin in the wholesale business was 31.6%. Excluding the non-cash expense associated with the purchase accounting fair value adjustment of inventory acquired in the Schwartz & Benjamin acquisition, Adjusted gross margin in the wholesale business was 31.7% compared to 31.1% in last year’s second quarter, driven by strong margin improvement in the Steve Madden Women’s wholesale footwear division.

Retail net sales in the second quarter increased 9.6% to $68.5 million compared to $62.5 million in the second quarter of the prior year. Same store sales increased 2.2% in the quarter compared to a 5.4% same store sales increase in the second quarter of 2016. Retail gross margin decreased slightly to 62.6% in the second quarter of 2017 as compared to 62.8% in the second quarter of the prior year.

During the second quarter, the Company opened one full price store and one outlet store in the U.S. as well as one full price store in Canada, and converted one U.S. full price store to an outlet location. The Company ended the quarter with 193 company-operated retail locations, including four Internet stores.

The Company’s effective tax rate for the second quarter of 2017 was 31.9%. Excluding the tax impact of the non-cash expense associated with the purchase accounting fair value adjustment of inventory acquired in the Schwartz & Benjamin acquisition and the expense in connection with the integration of the Schwartz & Benjamin acquisition and the related restructuring, the Adjusted effective tax rate was 32.0% compared to 31.8% in the second quarter of the prior year.

Balance Sheet and Cash Flow

During the second quarter of 2017, the Company repurchased 820,848 shares of the Company’s common stock for approximately $30.8 million, which includes shares acquired through the net settlement of employee stock awards.

As of June 30, 2017, cash, cash equivalents, and current and non-current marketable securities totaled $198.6 million.

Company Outlook

The Company now expects that net sales in fiscal year 2017 will increase 9% to 11% over net sales in 2016. The Company now 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 now 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 second quarter 2017:

• $0.4 million pre-tax ($0.3 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.
• $0.8 million pre-tax ($0.5 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.
• $1.5 million pre-tax ($1.0 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, August 1, 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 2298337, and will be available until September 1, 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 193 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 STATEMENTS OF OPERATIONS DATA

(In thousands, except per share amounts) (Unaudited)   Three Months Ended Six Months Ended June 30, 2017 June 30, 2016 June 30, 2017 June 30, 2016   Net sales $ 374,148 $ 325,402 $ 740,535 $ 654,759 Cost of sales   234,751   204,357   468,420   417,512 Gross profit 139,397 121,045 272,115 237,247 Commission and licensing fee income, net 2,166 2,784 6,092 4,955 Operating expenses   99,666   87,939   205,531   176,432 Income from operations 41,897 35,890 72,676 65,770 Interest and other income, net   708   546   1,392   370 Income before provision for income taxes 42,605 36,436 74,068 66,140 Provision for income taxes   13,582   11,594   24,523   17,402 Net income 29,023 24,842 49,545 48,738 Net income attributable to noncontrolling interest   59   105   423   342 Net income attributable to Steven Madden, Ltd. $ 28,964 $ 24,737 $ 49,122 $ 48,396     Basic income per share $ 0.53 $ 0.43 $ 0.89 $ 0.84 Diluted income per share $ 0.50 $ 0.41 $ 0.85 $ 0.81   Basic weighted average common shares outstanding 55,161 57,430 55,487 57,572 Diluted weighted average common shares outstanding 57,750 59,739 57,969 59,998           STEVEN MADDEN, LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEET DATA

(In thousands)     As of June 30, 2017 December 31, 2016 June 30, 2016 (Unaudited) (Unaudited) Cash and cash equivalents $ 99,411 $ 126,115 $ 76,271 Marketable securities (current & non current) 99,195 110,054 122,690 Accounts receivables, net 255,260 200,958 216,564 Inventories 121,213 119,824 116,369 Other current assets 49,209 42,279 41,255 Property and equipment, net 74,129 72,381 73,485 Goodwill and intangibles, net 305,155 280,097 286,187 Other assets   9,091   9,167   8,366 Total assets $ 1,012,663 $ 960,875 $ 941,187   Accounts payable $ 101,447 $ 80,584 $ 101,473 Contingent payment liability (current & non current) 24,923 7,948 20,012 Other current liabilities 99,372 94,595 79,199 Other long term liabilities 37,191 36,676 39,725 Total Steven Madden, Ltd. stockholders' equity 748,036 740,867 700,437 Noncontrolling interest   1,694   205   341 Total liabilities and stockholders' equity $ 1,012,663 $ 960,875 $ 941,187           STEVEN MADDEN, LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED CASH FLOW DATA

(In thousands) (Unaudited)   Six Months Ended June 30, 2017 June 30, 2016     Net cash provided by operating activities $ 49,474 $ 58,491  

Investing Activities

Purchases of property and equipment (7,672 ) (8,402 ) Sales of marketable securities, net 11,641 842 Repayment of notes receivable 221 - Acquisition, net of cash acquired   (17,396 )   -   Net cash used in investing activities (13,206 ) (7,560 )

 

Financing Activities

Common stock share repurchases for treasury (63,941 ) (41,070 ) Purchase of noncontrolling interest - (3,759 ) Payment of contingent liability (5,321 ) (6,281 ) Proceeds from exercise of stock options   5,649     3,708   Net cash used in financing activities (63,613 ) (47,402 )   Effect of exchange rate changes on cash and cash equivalents 641 328   Net (decrease) increase in cash and cash equivalents (26,704 ) 3,857   Cash and cash equivalents - beginning of period 126,115 72,414     Cash and cash equivalents - end of period $ 99,411   $ 76,271      

STEVEN MADDEN, LTD. AND SUBSIDIARIESNON-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

Three Months Ended Six Months Ended June 30, 2017 June 30, 2017

Consolidated

GAAP gross profit $ 139,397 $ 272,115   Non-cash expense associated with the purchase accounting fair value adjustment of inventory acquired in the Schwartz & Benjamin acquisition 413 1,653   Adjusted gross profit $ 139,810 $ 273,768  

Wholesale

GAAP gross profit $ 96,519 $ 197,950   Non-cash expense associated with the purchase accounting fair value adjustment adjustment of inventory acquired in the Schwartz & Benjamin acquisition 413 1,653  

Adjusted gross profit

    $ 96,932     $ 199,603              

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

Three Months Ended Six Months Ended June 30, 2017 June 30, 2017   GAAP operating expenses $ 99,666 $ 205,531   Expense incurred in connection with the integration of the Schwartz & Benjamin 767 767 acquisition and the related restructuring   Bad debt expense associated with the Payless ShoeSource bankruptcy - 7,500   Adjusted operating expenses     $ 98,899     $ 197,264              

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

Three Months Ended Six Months Ended June 30, 2017 June 30, 2017   GAAP operating income $ 41,897 $ 72,676   Non-cash expense associated with the purchase accounting fair value adjustment of inventory acquired in the Schwartz & Benjamin acquisition 413 1,653   Expense incurred in connection with the integration of the Schwartz & Benjamin 767 767 acquisition and the related restructuring   Bad debt expense associated with the Payless ShoeSource bankruptcy - 7,500   Adjusted operating income     $ 43,077     $ 82,596              

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

Three Months Ended Six Months Ended June 30, 2017 June 30, 2017   GAAP provision for income taxes $ 13,582 $ 24,523   Tax effect of non-cash expense associated with the purchase accounting fair value adjustment of inventory acquired in the Schwartz & Benjamin acquisition 153 578   Tax effect of expense incurred in connection with the integration of the 284 284 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     $ 14,019     $ 26,349              

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

Three Months Ended Six Months Ended June 30, 2017 June 30, 2017   GAAP net income attributable to Steven Madden, Ltd. $ 28,964 $ 49,122   After-tax impact of non-cash expense associated with the purchase accounting fair value adjustment of inventory acquired in the Schwartz & Benjamin acquisition 260 1,075   After-tax impact of expense incurred in connection with the integration of the 483 483 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. $ 29,707 $ 57,216   GAAP diluted income per share $ 0.50 $ 0.85 Adjusted diluted income per share     $ 0.51     $ 0.99  

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ICR, Inc.Investor RelationsJean Fontana/Megan Crudele203-682-8200www.icrinc.com