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 first
quarter ended March 31, 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.
First Quarter 2020 Review
- Revenue decreased 13.6% to
$359.2 million compared to $415.8 million in the same period
of 2019.
- Gross margin was 37.2% compared to
38.9% in the same period last year.
- Operating expenses as a percentage
of revenue were 41.8% compared to 28.2% of revenue in the same
period of 2019. Adjusted operating expenses as a percentage
of revenue were 33.2% compared to 28.1% of revenue in the same
period of 2019.
- Loss from operations totaled
($26.2) million, or (7.3%) of revenue, compared to income from
operations of $44.7 million, or 10.7% of revenue, in the same
period of 2019. Adjusted income from operations was $14.2
million, or 4.0% of revenue, compared to $45.1 million, or 10.8% of
revenue, in the same period of 2019.
- Net loss attributable to Steven
Madden, Ltd. was ($17.5) million, or ($0.22) per diluted share,
compared to net income attributable to Steven Madden, Ltd. of $34.5
million, or $0.41 per diluted share, in the prior year’s first
quarter. Adjusted net income attributable to Steven Madden,
Ltd. was $13.0 million, or $0.16 per diluted share, compared to
$35.1 million, or $0.42 per diluted share, in the prior year’s
first quarter.
Edward Rosenfeld, Chairman and Chief Executive
Officer, commented, "After a strong 2019, we got off to a good
start to 2020, with revenue and earnings trending above plan
through the first two months of the year and very positive consumer
reaction to the Spring product in our flagship Steve Madden
brand. Beginning in March, however, our business weakened
materially due to the effects of the COVID-19 pandemic. Since
then, our top priority has been protecting the safety and
well-being of our employees and the broader community, followed by
ensuring the long-term viability and strength of our
business. We entered this crisis with an exceptionally strong
balance sheet, but we have nonetheless taken a number of
precautionary but significant measures to preserve liquidity and
enhance financial flexibility. As we look ahead, we are
confident that our strengths – including our brands, business model
and balance sheet – will enable us to navigate this crisis and to
thrive once conditions normalize."
Actions Taken In Response to
COVID-19
In response to the COVID-19 pandemic, the
Company has taken the following precautionary measures to maintain
ample liquidity and financial flexibility:
- Suspended share repurchases;
- Suspended the quarterly cash
dividend;
- Significantly reduced payroll,
non-essential operating expenses, capital expenditures and planned
inventory receipts; and
- Drew down $50 million from its
existing credit facility as of May.
First Quarter 2020 Segment
Results
Revenue for the wholesale business decreased
13.0% to $302.7 million in the first quarter of 2020, including a
15.0% decline in wholesale footwear and a 5.4% decline in wholesale
accessories/apparel. The revenue decline was driven by
significant order cancellations in March resulting from the
COVID-19 pandemic. Gross margin in the wholesale business
decreased to 32.5% compared to 34.5% in last year’s first quarter
due to inventory reserves taken as a result of the COVID-19
pandemic.
Retail revenue in the first quarter decreased
15.8% to $52.9 million compared to $62.8 million in the first
quarter of the prior year due to the closure in March of all the
Company's retail stores outside of China as a result of the
COVID-19 pandemic. Retail gross margin increased to 59.8% in
the first quarter of 2020 compared to 58.5% in the first quarter of
the prior year due to a benefit recognized in connection with the
modification of the Company's loyalty program, partially offset by
inventory reserves taken as a result of the COVID-19 pandemic.
The Company ended the quarter with 224
company-operated retail stores, including eight Internet stores, as
well as 30 company-operated concessions in international
markets.
The Company’s effective tax rate for the first
quarter of 2020 was 29.4% compared to 23.1% in the first quarter of
2019. On an Adjusted basis, the effective tax rate for the
first quarter of 2020 was 15.2% compared to 22.6% in the first
quarter of 2019.
Balance Sheet and Cash Flow
Prior to the suspension of share repurchases,
the Company repurchased 878,817 shares of the Company’s common
stock during the first quarter of 2020 for approximately $29.1
million, which includes shares acquired through the net settlement
of employee stock awards.
As of March 31, 2020, cash, cash
equivalents and marketable securities totaled $245.4 million.
Advances from factor totaled $29.1 million.
Fiscal Year 2020 Outlook
Given the continued disruption and uncertainty
related to the COVID-19 pandemic, the Company previously withdrew
its 2020 revenue and earnings guidance and is not providing
guidance at this time.
Non-GAAP Adjustments
Amounts referred to as “Adjusted” exclude the
items below.
For the first quarter 2020:
- $16.8 million pre-tax ($12.8
million after-tax) expense in connection with the impairment of
lease right-of-use assets, included in operating expenses.
- $12.0 million pre-tax ($9.1 million
after-tax) expense associated with the impairment of store fixed
assets, included in operating expenses.
- $1.3 million pre-tax ($1.0 million
after-tax) expense in connection with benefits provided to
furloughed employees, included in operating expenses.
- $0.7 million pre-tax ($0.5 million
after-tax) expense in connection with a provision for a loan
receivable, included in operating expenses.
- $0.1 million pre-tax ($0.1 million
after-tax) expense in connection with a provision for early lease
termination charges, included in operating expenses.
- $9.5 million pre-tax ($7.3 million
after-tax) expense associated with the impairment of certain
trademarks.
- $0.3 million loss in connection
with the impairment of lease right-of-use assets and trademark
attributable to noncontrolling interest.
For the first quarter 2019:
- $0.7 million pre-tax ($0.6 million
after-tax) expense in connection with a provision for early lease
termination charges, included in operating expenses.
- $1.6 million pre-tax ($1.4 million
after-tax) bad debt expense associated with the Payless ShoeSource
bankruptcy, included in operating expenses.
- $1.9 million pre-tax ($1.4 million
after-tax) net benefit associated with the change in a contingent
liability and the acceleration of amortization related to the
termination of the Kate Spade license agreement as of December 31,
2019, 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 first quarter earnings conference call scheduled for today, May
28, 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 224 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 |
|
March 31, 2020 |
|
March 31, 2019 |
|
|
|
|
Net sales |
$ |
355,684 |
|
|
$ |
410,940 |
|
Commission and licensing fee
income |
3,484 |
|
|
4,848 |
|
Total revenue |
359,168 |
|
|
415,788 |
|
Cost of sales |
225,704 |
|
|
253,943 |
|
Gross profit |
133,464 |
|
|
161,845 |
|
Operating expenses |
150,194 |
|
|
117,185 |
|
Trademark impairment
charges |
9,518 |
|
|
— |
|
(Loss) / income from
operations |
(26,248 |
) |
|
44,660 |
|
Interest and other income,
net |
1,046 |
|
|
1,192 |
|
(Loss) / income before
provision for income taxes |
(25,202 |
) |
|
45,852 |
|
(Benefit) / provision for
income taxes |
(7,401 |
) |
|
10,587 |
|
Net (loss) / income |
(17,801 |
) |
|
35,265 |
|
Less: net (loss) /
income attributable to noncontrolling interest |
(350 |
) |
|
740 |
|
Net (loss) / income
attributable to Steven Madden, Ltd. |
$ |
(17,451 |
) |
|
$ |
34,525 |
|
|
|
|
|
Basic net (loss) / income per
share |
$ |
(0.22 |
) |
|
$ |
0.43 |
|
|
|
|
|
Diluted net (loss) / income
per share |
$ |
(0.22 |
) |
|
$ |
0.41 |
|
|
|
|
|
Basic weighted average common
shares outstanding |
78,875 |
|
|
80,534 |
|
|
|
|
|
Diluted weighted average
common shares outstanding |
78,875 |
|
|
84,255 |
|
|
|
|
|
Cash dividends declared per
common share |
$ |
0.15 |
|
|
$ |
0.14 |
|
|
|
|
|
|
|
|
|
STEVEN MADDEN, LTD. AND SUBSIDIARIES |
|
CONDENSED CONSOLIDATED BALANCE SHEET DATA |
|
(In thousands) |
|
|
|
|
As of |
|
|
|
March 31, 2020 |
|
December 31, 2019 |
|
March 31, 2019 |
|
(Unaudited) |
|
|
|
(Unaudited) |
|
|
|
|
|
|
Cash and cash equivalents |
$ |
211,138 |
|
|
$ |
264,101 |
|
|
$ |
160,256 |
|
Marketable securities |
34,271 |
|
|
40,521 |
|
|
61,383 |
|
Accounts receivable, net |
261,551 |
|
|
254,637 |
|
|
295,880 |
|
Inventories |
102,265 |
|
|
136,896 |
|
|
115,260 |
|
Other current assets |
31,567 |
|
|
22,724 |
|
|
28,285 |
|
Property and equipment,
net |
52,206 |
|
|
65,504 |
|
|
63,657 |
|
Operating lease right-of-use
assets |
127,187 |
|
|
155,700 |
|
|
181,896 |
|
Goodwill and intangibles,
net |
314,852 |
|
|
334,058 |
|
|
289,965 |
|
Other assets |
10,867 |
|
|
4,506 |
|
|
13,172 |
|
Total assets |
$ |
1,145,904 |
|
|
$ |
1,278,647 |
|
|
$ |
1,209,754 |
|
|
|
|
|
|
|
Accounts payable |
$ |
76,284 |
|
|
$ |
61,706 |
|
|
$ |
62,564 |
|
Operating leases (current
& non-current) |
158,704 |
|
|
171,796 |
|
|
195,798 |
|
Advances from factor |
29,100 |
|
|
— |
|
|
— |
|
Other current liabilities |
89,811 |
|
|
180,941 |
|
|
103,584 |
|
Contingent payment
liability |
6,440 |
|
|
9,124 |
|
|
— |
|
Other long-term
liabilities |
11,941 |
|
|
13,856 |
|
|
17,262 |
|
Total Steven Madden, Ltd.
stockholders’ equity |
761,207 |
|
|
828,501 |
|
|
819,695 |
|
Noncontrolling interest |
12,417 |
|
|
12,723 |
|
|
10,851 |
|
Total liabilities and
stockholders’ equity |
$ |
1,145,904 |
|
|
$ |
1,278,647 |
|
|
$ |
1,209,754 |
|
|
STEVEN MADDEN, LTD. AND SUBSIDIARIES |
|
CONDENSED CONSOLIDATED CASH FLOW DATA |
|
(In thousands) |
|
(Unaudited) |
|
|
Three Months Ended |
|
March 31, 2020 |
|
March 31, 2019 |
|
|
|
|
Net cash (used in) operating activities |
$ |
(39,609 |
) |
|
$ |
(15,754 |
) |
|
|
|
|
Investing Activities |
|
|
|
Capital expenditures |
(3,301 |
) |
|
(3,399 |
) |
Sales of marketable
securities, net |
3,074 |
|
|
6,165 |
|
Net cash (used in) / provided
by investing activities |
(227 |
) |
|
2,766 |
|
|
|
|
|
Financing Activities |
|
|
|
Common stock purchased for
treasury |
(29,139 |
) |
|
(17,154 |
) |
Investment of noncontrolling
interest |
— |
|
|
1,283 |
|
Proceeds from exercise of
stock options |
874 |
|
|
722 |
|
Cash dividends paid |
(12,459 |
) |
|
(12,042 |
) |
Advances from factor, net |
29,100 |
|
|
— |
|
Net cash (used in) financing
activities |
(11,624 |
) |
|
(27,191 |
) |
|
|
|
|
Effect of exchange rate
changes on cash and cash equivalents |
(1,503 |
) |
|
404 |
|
|
|
|
|
Net decrease in cash and cash
equivalents |
(52,963 |
) |
|
(39,775 |
) |
|
|
|
|
Cash and cash equivalents -
beginning of period |
264,101 |
|
|
200,031 |
|
|
|
|
|
Cash and cash equivalents -
end of period |
$ |
211,138 |
|
|
$ |
160,256 |
|
|
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 |
|
March 31, 2020 |
|
March 31, 2019 |
|
|
|
|
GAAP operating expenses |
$ |
150,194 |
|
|
$ |
117,185 |
|
|
|
|
|
Expense
in connection with impairment of lease right-of-use assets |
(16,826 |
) |
|
— |
|
|
|
|
|
Expense
in connection with impairment of store fixed assets |
(11,995 |
) |
|
— |
|
|
|
|
|
Expense
in connection with benefits provided to furloughed employees |
(1,258 |
) |
|
— |
|
|
|
|
|
Expense
in connection with provision for loan receivable |
(697 |
) |
|
— |
|
|
|
|
|
Expense
in connection with provision for early lease termination
charges |
(142 |
) |
|
(749 |
) |
|
|
|
|
Bad debt
expense in connection with the Payless ShoeSource bankruptcy |
— |
|
|
(1,552 |
) |
|
|
|
|
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 |
|
|
|
|
|
Adjusted operating expenses |
$ |
119,276 |
|
|
$ |
116,752 |
|
Table 2 - Reconciliation of GAAP (loss) / income from operations to
Adjusted income from operations |
|
Three Months Ended |
|
March 31, 2020 |
|
March 31, 2019 |
|
|
|
|
GAAP (loss) / income from operations |
$ |
(26,248 |
) |
|
$ |
44,660 |
|
|
|
|
|
Expense
in connection with impairment of lease right-of-use assets |
16,826 |
|
|
— |
|
|
|
|
|
Expense
in connection with impairment of store fixed assets |
11,995 |
|
|
— |
|
|
|
|
|
Expense
in connection with benefits provided to furloughed employees |
1,258 |
|
|
— |
|
|
|
|
|
Expense
in connection with provision for loan receivable |
697 |
|
|
— |
|
|
|
|
|
Expense
in connection with provision for early lease termination
charges |
142 |
|
|
749 |
|
|
|
|
|
Impairment of certain trademarks |
9,518 |
|
|
— |
|
|
|
|
|
Bad debt
expense in connection with the Payless ShoeSource bankruptcy |
— |
|
|
1,552 |
|
|
|
|
|
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 |
) |
|
|
|
|
Adjusted income from operations |
$ |
14,188 |
|
|
$ |
45,093 |
|
Table 3 - Reconciliation of GAAP (benefit) / provision for income
taxes to Adjusted provision for income taxes |
|
Three Months Ended |
|
March 31, 2020 |
|
March 31, 2019 |
|
|
|
|
GAAP (benefit) / provision for income taxes |
$ |
(7,401 |
) |
|
$ |
10,587 |
|
|
|
|
|
Tax
effect of expense in connection with impairment of lease
right-of-use assets |
4,060 |
|
|
— |
|
|
|
|
|
Tax
effect of expense in connection with impairment of store fixed
assets |
2,906 |
|
|
— |
|
|
|
|
|
Tax
effect of expense in connection with benefits provided to
furloughed employees |
298 |
|
|
— |
|
|
|
|
|
Tax
effect of expense in connection with provision for loan
receivable |
165 |
|
|
— |
|
|
|
|
|
Tax
effect of expense in connection with provision for early lease
termination charges |
34 |
|
|
188 |
|
|
|
|
|
Tax
effect of impairment of certain trademarks |
2,254 |
|
|
— |
|
|
|
|
|
Tax
effect of bad debt expense in connection with the Payless
ShoeSource bankruptcy |
— |
|
|
170 |
|
|
|
|
|
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 |
) |
|
|
|
|
Adjusted provision for income taxes |
$ |
2,316 |
|
|
$ |
10,476 |
|
Table 4 - Reconciliation of GAAP net income / (loss) attributable
to noncontrolling interest to Adjusted net income / (loss)
attributable to noncontrolling interest |
|
Three Months Ended |
|
March 31, 2020 |
|
March 31, 2019 |
|
|
|
|
GAAP net income / (loss) attributable to noncontrolling
interest |
$ |
(350 |
) |
|
$ |
740 |
|
|
|
|
|
Net loss
in connection with impairment of lease right-of-use assets and
trademark attributable to noncontrolling interest |
307 |
|
|
— |
|
|
|
|
|
Adjusted net income / (loss) attributable to noncontrolling
interest |
$ |
(43 |
) |
|
$ |
740 |
|
Table 5 - Reconciliation of GAAP net (loss) / income attributable
to Steven Madden, Ltd. to Adjusted net income attributable to
Steven Madden, Ltd. |
|
Three Months Ended |
|
March 31, 2020 |
|
March 31, 2019 |
|
|
|
|
GAAP net (loss) / income attributable to Steven Madden, Ltd. |
$ |
(17,451 |
) |
|
$ |
34,525 |
|
|
|
|
|
After-tax
impact of expense in connection with impairment of lease
right-of-use assets |
12,766 |
|
|
— |
|
|
|
|
|
After-tax
impact of expense in connection with impairment of store fixed
assets |
9,089 |
|
|
— |
|
|
|
|
|
After-tax
impact of expense in connection with benefits provided to
furloughed employees |
960 |
|
|
— |
|
|
|
|
|
After-tax
impact of expense in connection with provision for loan
receivable |
532 |
|
|
— |
|
|
|
|
|
After-tax
impact of expense in connection with provision for early lease
termination charges |
109 |
|
|
561 |
|
|
|
|
|
After-tax
impact of impairment of certain trademarks |
7,265 |
|
|
— |
|
|
|
|
|
Less: Net
loss in connection with impairment of lease right-of-use assets and
trademark attributable to noncontrolling interest |
(307 |
) |
|
— |
|
|
|
|
|
After-tax
impact of bad debt expense in connection with the Payless
ShoeSource bankruptcy |
— |
|
|
1,383 |
|
|
|
|
|
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 |
) |
|
|
|
|
Adjusted
net income attributable to Steven Madden, Ltd. |
$ |
12,963 |
|
|
$ |
35,070 |
|
|
|
|
|
GAAP
diluted (loss) / income per share |
$ |
(0.22 |
) |
|
$ |
0.41 |
|
|
|
|
|
GAAP
diluted weighted average shares outstanding |
78,875 |
|
|
84,255 |
|
|
|
|
|
Adjusted
diluted income per share |
$ |
0.16 |
|
|
$ |
0.42 |
|
|
|
|
|
Adjusted diluted weighted average shares outstanding |
82,121 |
|
|
84,255 |
|
Contact
Steven Madden, Ltd.Director of Corporate Development &
Investor RelationsDanielle
McCoy718-308-2611InvestorRelations@stevemadden.com
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