Steven Madden(SHOO) - 2025 Q1 - Quarterly Report

PART I – FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements (Unaudited) The unaudited condensed consolidated financial statements detail the company's financial position, operations, and cash flows for Q1 2025, showing total assets of $1.43 billion and a net income decrease to $40.4 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 (unaudited) | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $144,762 | $189,924 | | Inventories | $238,641 | $257,625 | | Total current assets | $886,013 | $894,695 | | Total Assets | $1,427,201 | $1,411,771 | | Total current liabilities | $394,554 | $413,721 | | Total Liabilities | $523,525 | $535,774 | | Total stockholders' equity | $903,676 | $875,997 | Condensed Consolidated Statement of Income Highlights (in thousands, except per share data) | Metric | Three Months Ended Mar 31, 2025 | Three Months Ended Mar 31, 2024 | | :--- | :--- | :--- | | Total revenue | $553,534 | $552,381 | | Gross profit | $226,267 | $224,815 | | Income from operations | $53,499 | $56,746 | | Net income attributable to Steven Madden, Ltd. | $40,423 | $43,934 | | Diluted net income per share | $0.57 | $0.60 | Condensed Consolidated Statement of Cash Flows Highlights (in thousands) | Cash Flow Activity | Three Months Ended Mar 31, 2025 | Three Months Ended Mar 31, 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | ($18,832) | ($15,705) | | Net cash used in investing activities | ($1,005) | ($4,618) | | Net cash used in financing activities | ($25,902) | ($52,531) | | Net decrease in cash and cash equivalents | ($45,162) | ($73,139) | Note 3 – Joint Ventures and Acquisitions The company expanded its distribution in Q1 2025 by forming a new joint venture in Australia and gaining control of its Malaysia joint venture, alongside a March 2024 hosiery business acquisition - In January 2025, the Company formed a joint venture in Australia by acquiring a 50.1% controlling interest in SM Fashion Australia Pty Ltd. for a capital contribution of $1,899, resulting in $1,393 of goodwill[21] - In January 2025, the Company increased its equity interest in its Malaysia joint venture to 51.0% for $5, gaining a controlling financial interest and consolidating its results, which resulted in goodwill of $1,829[22] - In March 2024, the Company acquired the Steve Madden and Betsey Johnson hosiery business from Gina Group LLC for $4,259 in cash, including inventories, reacquired rights, and goodwill[23] Note 7 – Share Repurchase Program No shares were repurchased under the Share Repurchase Program in Q1 2025, with $85.3 million remaining available, though shares were withheld for employee tax obligations - No shares were repurchased under the Share Repurchase Program during the three months ended March 31, 2025[37] - During the three months ended March 31, 2024, the company repurchased 773,000 shares for approximately $32.6 million[37] - As of March 31, 2025, approximately $85.31 million remained available for future repurchases under the program[37] - In Q1 2025, 201,000 shares were withheld to satisfy employee tax-withholding requirements on vested restricted stock, at an aggregate price of approximately $7.8 million[38] Note 14 – Operating Segment Information In Q1 2025, Wholesale Footwear led revenue and operating income, while Wholesale Accessories/Apparel saw increased operating income, and Direct-to-Consumer reported a wider operating loss Segment Revenue (in thousands) | Segment | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Wholesale Footwear | $296,145 | $295,660 | | Wholesale Accessories/Apparel | $143,173 | $142,576 | | Direct-to-Consumer | $112,064 | $112,331 | | Licensing | $2,152 | $1,814 | | Total | $553,534 | $552,381 | Segment Income/(Loss) from Operations (in thousands) | Segment | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Wholesale Footwear | $63,088 | $63,115 | | Wholesale Accessories/Apparel | $22,412 | $18,171 | | Direct-to-Consumer | ($6,228) | ($2,225) | | Licensing | $1,825 | $1,314 | - Total revenue from international operations increased to $102.8 million in Q1 2025 from $97.6 million in Q1 2024[72] Note 18 – Subsequent Event Post-quarter, on May 6, 2025, the company acquired Kurt Geiger for approximately £289 million, funded by a new $300 million term loan and $250 million revolving credit facility - On May 6, 2025, the Company completed the acquisition of Kurt Geiger for an enterprise value of approximately £289 million[90][92] - The acquisition was funded with borrowings under a new Amended and Restated Credit Agreement and cash on hand[94][95] - The new credit agreement provides for a $300 million term loan facility and a $250 million revolving credit facility, maturing on May 6, 2030[95][96] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2025 financial performance, noting a 0.2% revenue increase to $553.5 million, improved gross margin, but decreased operating income and diluted EPS due to higher expenses and macroeconomic challenges - Key strategic initiatives include winning with product, investing in marketing, expanding internationally, growing non-footwear categories, and expanding the direct-to-consumer business led by digital[114] Q1 2025 Key Financial Highlights (in thousands, except per share data) | Metric | Q1 2025 | Q1 2024 | Change | | :--- | :--- | :--- | :--- | | Total Revenue | $553,534 | $552,381 | +0.2% | | Net Income (attributable to SHOO) | $40,423 | $43,934 | -8.0% | | Diluted EPS | $0.57 | $0.60 | -5.0% | - The company is navigating macroeconomic challenges including new tariffs across key sourcing jurisdictions, elevated inflation, high interest rates, and geopolitical instability[110][111][113] - On May 6, 2025, the company acquired Kurt Geiger and entered into a new credit agreement with a $300 million term loan and a $250 million revolving credit facility to fund the transaction[109][147][150] Results of Operations Q1 2025 saw a 0.2% consolidated revenue increase, with wholesale segments showing growth and margin expansion, while Direct-to-Consumer experienced a wider operating loss due to lower gross margin and higher expenses - Consolidated gross margin increased to 40.9% from 40.7%, driven by margin expansion in both wholesale segments[124] - Operating expenses increased to 32.0% of revenue from 29.8%, due to investments in marketing, higher IT expenses, acquisition costs ($3.2 million), severance ($2.4 million), and legal settlements ($1.2 million)[125] - Wholesale Accessories/Apparel operating income grew to $22.4 million from $18.2 million, aided by a $4.5 million benefit from a change in valuation of contingent payment liabilities[135][136] - Direct-to-Consumer operating loss widened to $6.2 million from $2.2 million, driven by lower gross margin and higher operating expenses, including marketing and occupancy costs[138][139][140] Liquidity and Capital Resources As of March 31, 2025, the company maintained $147.2 million in cash with no debt, and subsequently funded the Kurt Geiger acquisition via a new $300 million term loan and $250 million revolving credit facility - Cash, cash equivalents, and short-term investments totaled $147.2 million at March 31, 2025, down from $203.4 million at December 31, 2024[143] - Cash used in operating activities was $18.8 million for the quarter, an increase from $15.7 million in the prior-year period, primarily due to a decline in net income[152] - Cash used in financing activities was $25.9 million, mainly for dividends ($15.2 million) and net settlements of stock awards ($7.8 million)[154] - Subsequent to quarter-end, the company entered into a new credit agreement with a $300 million term loan and a $250 million revolving facility to finance the Kurt Geiger acquisition[150][157] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company manages market risks from interest rates, foreign currency, and inflation, with minimal interest rate exposure and $282.1 million in forward exchange contracts to mitigate currency risk - Interest rate risk is low as the company had no cash borrowings under its credit facility as of March 31, 2025[162] - The company uses forward foreign exchange contracts to mitigate currency risk on inventory purchases, with a notional amount of $282.1 million as of March 31, 2025[164][165] - The company is exposed to translation risk from its foreign subsidiaries and joint ventures, as their financial results are translated into U.S. dollars for reporting[166] - Inflationary factors can reduce consumer spending and increase costs; the company attempts to mitigate these impacts through price adjustments, cost negotiations, and operational efficiencies[167] Item 4. Controls and Procedures The CEO and CFO concluded that disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal control over financial reporting during the quarter - Management, including the CEO and CFO, evaluated disclosure controls and procedures and concluded they were effective as of March 31, 2025[169] - No changes occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[170] PART II – OTHER INFORMATION Item 1. Legal Proceedings The company is involved in various ordinary course legal proceedings, which management does not expect to materially impact its financial condition or results - The company is involved in various legal matters including contractual disputes, employment matters, and intellectual property infringement[173] - Management does not expect these legal proceedings to have a material impact on the company's financial condition or results[173] Item 1A. Risk Factors A material risk factor is the potential imposition of additional tariffs on imported goods, which could significantly increase costs, reduce margins, and lower consumer demand - A key risk is the imposition of additional tariffs on products imported to the U.S. and retaliatory trade actions, which could materially increase costs and reduce margins[175] - A substantial amount of products are sourced from China, Vietnam, Cambodia, and other Asian countries impacted by reciprocal tariffs[175] - The company is analyzing mitigation strategies like diversifying sourcing, negotiating with suppliers, and adjusting pricing, but their success is not guaranteed[176] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds In Q1 2025, no shares were repurchased under the Share Repurchase Program, but 201,000 shares worth $7.8 million were withheld for employee tax obligations, with $85.3 million remaining for future repurchases Issuer Purchases of Equity Securities (Q1 2025, in thousands) | Period | Total Shares Purchased | Average Price Paid per Share | Shares Purchased as Part of Program | Approx. Dollar Value Remaining in Program | | :--- | :--- | :--- | :--- | :--- | | Jan 2025 | 121,000 | $41.95 | 0 | $85,310,000 | | Feb 2025 | 16,000 | $37.57 | 0 | $85,310,000 | | Mar 2025 | 64,000 | $32.49 | 0 | $85,310,000 | | Total | 201,000 | $38.58 | 0 | $85,310,000 | - No shares were repurchased under the Share Repurchase Program in Q1 2025. The 201,000 shares purchased represent shares withheld to satisfy employee tax obligations on vested stock awards[180] Item 5. Other Information No directors or officers adopted, modified, or terminated any Rule 10b5-1 or other trading arrangements during Q1 2025 - No director or officer adopted, modified, or terminated a Rule 10b5-1 trading plan or other non-Rule 10b5-1 trading arrangement during Q1 2025[181] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including the Kurt Geiger acquisition deed, CEO/CFO certifications, and iXBRL data files - Lists exhibits filed with the Form 10-Q, including CEO/CFO certifications (31.1, 31.2, 32.1, 32.2) and iXBRL data files (101, 104)[182]