Steven Madden(SHOO) - 2024 Q2 - Quarterly Report

PART I – FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements (Unaudited) The unaudited condensed consolidated financial statements for Q2 2024 show total assets at $1.38 billion, revenue at $523.6 million, and net income at $35.4 million, reflecting acquisitions and joint ventures Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2024 (unaudited) | December 31, 2023 | June 30, 2023 (unaudited) | | :--- | :--- | :--- | :--- | | Assets | | | | | Cash and cash equivalents | $180,457 | $204,640 | $258,056 | | Factor accounts receivable | $341,967 | $320,723 | $256,627 | | Inventories | $241,643 | $228,990 | $207,839 | | Goodwill | $183,374 | $180,003 | $168,967 | | Total Assets | $1,375,064 | $1,347,943 | $1,270,245 | | Liabilities & Equity | | | | | Accounts payable | $189,772 | $161,140 | $130,417 | | Total current liabilities | $405,930 | $377,624 | $317,642 | | Total Liabilities | $542,708 | $499,911 | $428,528 | | Total stockholders' equity | $832,356 | $848,032 | $841,717 | Condensed Consolidated Statements of Income Condensed Consolidated Statements of Income (in thousands, except per share data) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | Total revenue | $523,553 | $445,302 | $1,075,934 | $909,136 | | Gross profit | $217,129 | $189,870 | $441,944 | $384,962 | | Income from operations | $46,870 | $44,040 | $103,616 | $90,551 | | Net income attributable to Steven Madden, Ltd. | $35,376 | $34,529 | $79,310 | $71,259 | | Diluted net income per share | $0.49 | $0.46 | $1.09 | $0.95 | | Cash dividends declared per common share | $0.21 | $0.21 | $0.42 | $0.42 | Condensed Consolidated Statements of Comprehensive Income - For the three months ended June 30, 2024, the company reported a total other comprehensive loss of $(6,032) thousand, primarily driven by a foreign currency translation adjustment loss of $(5,939) thousand, contrasting with a total other comprehensive income of $3,784 thousand in the same period of 2023[6][7] - For the six months ended June 30, 2024, total other comprehensive loss was $(8,226) thousand, compared to a total other comprehensive income of $4,434 thousand in the prior year period[6][7] Condensed Consolidated Statements of Changes in Stockholder' Equity - Total stockholders' equity decreased from $848.0 million at December 31, 2023, to $832.4 million at June 30, 2024[11] - Key activities impacting stockholders' equity in the first six months of 2024 include net income of $81.5 million, common stock repurchases of $75.4 million, and payment of dividends totaling $30.7 million[11] Condensed Consolidated Statements of Cash Flows Condensed Consolidated Statements of Cash Flows (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $93,801 | $82,257 | | Net cash used in investing activities | $(10,185) | $(8,754) | | Net cash used in financing activities | $(105,508) | $(90,678) | | Net decrease in cash and cash equivalents | $(24,183) | $(16,657) | | Cash and cash equivalents – end of period | $180,457 | $258,056 | Notes to Condensed Consolidated Financial Statements - Unaudited - Acquisitions: The company acquired Almost Famous in October 2023 for $73.2 million in cash plus a contingent payment liability. In March 2024, it acquired the Steve Madden and Betsey Johnson hosiery business from Gina Group LLC for $4.3 million[19][25] - Joint Ventures: In 2024, the company formed two new joint ventures to act as exclusive distributors: SM Fashion d.o.o. Beograd for Southeastern Europe (50.01% ownership) and SM Distribution Latin America S. de R.L. for Latin America (51.0% ownership)[26][27] - Share Repurchase: During the six months ended June 30, 2024, the company repurchased 1,641 thousand shares for approximately $70.2 million. As of June 30, 2024, approximately $105.3 million remained available for future repurchases[41] - Goodwill and Intangibles: In Q1 2024, the company recorded a pre-tax non-cash impairment charge of $1.7 million related to the GREATS® trademark, recognized in the Direct-to-Consumer segment[62][65] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management reports a 17.6% increase in Q2 2024 total revenue to $523.6 million, driven by growth across all segments, notably 86.0% in Wholesale Accessories/Apparel due to acquisition, while maintaining strong liquidity Results of Operations Q2 2024 vs Q2 2023 Segment Revenue (in thousands) | Segment | Q2 2024 Revenue | Q2 2023 Revenue | % Change | | :--- | :--- | :--- | :--- | | Wholesale Footwear | $237,024 | $234,908 | +0.9% | | Wholesale Accessories/Apparel | $148,276 | $79,723 | +86.0% | | Direct-to-Consumer | $136,409 | $128,205 | +6.4% | | Total Revenue | $523,553 | $445,302 | +17.6% | - The 86.0% increase in Wholesale Accessories/Apparel revenue was primarily driven by incremental revenue from the Almost Famous acquisition, along with strength in the Steve Madden handbag and apparel businesses[108] - Consolidated gross profit margin for Q2 2024 decreased to 41.5% from 42.6% in Q2 2023, mainly due to the impact of the Almost Famous acquisition[106] - Direct-to-Consumer operating income for Q2 2024 increased to $15.1 million (11.1% of segment revenue) from $10.3 million (8.1% of segment revenue) in the prior year, driven by higher revenue and improved gross margin from reduced promotional activity[109] Liquidity and Capital Resources - As of June 30, 2024, the company had a strong liquidity position with $192.2 million in cash, cash equivalents, and short-term investments, and no debt[123] - Working capital was $454.2 million as of June 30, 2024, compared to $510.3 million as of June 30, 2023[103] - For the first six months of 2024, cash provided by operations was $93.8 million, cash used in investing was $10.2 million (including a $4.3 million acquisition), and cash used in financing was $105.5 million (including $75.5 million in share repurchases and $30.7 million in dividends)[125][126][127] - On July 30, 2024, the Board of Directors approved a quarterly cash dividend of $0.21 per share, payable on September 23, 2024[134] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company faces market risks from interest rates, foreign currency, and inflation, with minimal interest rate exposure, managed foreign currency risk via $68.4 million in forward contracts, and ongoing efforts to mitigate inflationary pressures - The company had no cash borrowings under its variable-rate credit facility as of June 30, 2024, making the impact of a 10% change in interest rates immaterial[138] - To mitigate foreign currency risk, the company uses forward foreign exchange contracts, with a total notional amount of $68.4 million outstanding as of June 30, 2024[141] - The company is exposed to translation risk from its foreign operations in Canada, Mexico, Europe, and other regions, as their financial results are translated into U.S. dollars for reporting[142] - Inflationary pressures pose a risk by potentially reducing consumer spending and increasing labor, overhead, and product costs[135][143] Item 4. Controls and Procedures Management concluded disclosure controls and procedures were effective as of June 30, 2024, with the assessment of internal control over financial reporting excluding the recently acquired Almost Famous business - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the fiscal quarter covered by the report[145] - The assessment of internal control over financial reporting did not include the internal controls of Almost Famous, acquired in October 2023, in accordance with SEC guidance[146] - There were no other changes in internal controls over financial reporting during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[147] PART II – OTHER INFORMATION Item 1. Legal Proceedings The company is involved in various ordinary course legal proceedings, which management believes will not materially impact its financial condition, results of operations, or liquidity - The company has various pending legal cases from the normal course of business, including contractual disputes, employee matters, and intellectual property claims[149] - Management does not expect these legal proceedings to have a material impact on the company's financial condition or results of operations[149] Item 1A. Risk Factors No material changes occurred to the risk factors previously disclosed in the 2023 Form 10-K during the quarter ended June 30, 2024 - During the three months ended June 30, 2024, there were no material changes from the risk factors previously disclosed in the 2023 Form 10-K[151] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds In Q2 2024, the company repurchased 902 thousand shares at an average price of $43.19, with $105.3 million remaining for future repurchases under the program Share Repurchases for the Three Months Ended June 30, 2024 | Period | Total Shares Purchased (thousands) | Average Price Paid per Share | Shares Purchased Under Program (thousands) | Approx. Value Remaining Under Program (in thousands) | | :--- | :--- | :--- | :--- | :--- | | April 2024 | 3 | $41.57 | — | $142,818 | | May 2024 | 567 | $42.40 | 542 | $119,826 | | June 2024 | 332 | $44.55 | 326 | $105,302 | | Total | 902 | $43.19 | 868 | $105,302 | Item 5. Other Information No directors or officers adopted, modified, or terminated Rule 10b5-1 trading plans or other trading arrangements during Q2 2024 - No directors or officers adopted, modified, or terminated any Rule 10b5-1 trading plans or other trading arrangements during the three months ended June 30, 2024[154] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including corporate governance documents, incentive plans, and CEO/CFO certifications - Key exhibits filed include the Amended and Restated Certificate of Incorporation, the amended 2019 Incentive Compensation Plan, and CEO/CFO certifications under Sections 302 and 906 of the Sarbanes-Oxley Act[156]