Steven Madden(US:SHOO)2024-03-04 11:06Revenue Segments - Wholesale Footwear segment represented 52.9% of total revenue during 2023[21] - Wholesale Accessories/Apparel segment represented 21.0% of total revenue during 2023[22] - Direct-to-Consumer segment represented 25.6% of total revenue during 2023[24] - Wholesale and Direct-to-Consumer businesses generated revenue of approximately $1,464,980 and $506,494, or 73.9% and 25.6% of total revenue, respectively, for the year ended December 31, 2023[35] - Wholesale Footwear segment revenue decreased by 12.3% to $1,048,448 in 2023, accounting for 52.9% of total revenue, down from 56.3% in 2022[139] - Wholesale Accessories/Apparel segment revenue increased by 5.5% to $416,532 in 2023, driven by strong performance in branded handbag business and the acquisition of Almost Famous[140] - Direct-to-Consumer segment revenue decreased by 2.9% to $506,494 in 2023, with a decline in e-commerce and brick-and-mortar comparable store sales, partially offset by international expansion[141] Retail Operations - The company added 38 brick-and-mortar stores and closed 15 brick-and-mortar stores and one e-commerce site in 2023, ending the year with 255 brick-and-mortar retail stores[23] - The company operates five branded e-commerce sites: www.stevemadden.com, www.dolcevita.com, www.betseyjohnson.com, www.blondo.com, and www.greats.com[24] - The company operates 255 brick-and-mortar retail stores, including 135 located outside of the U.S., as of December 31, 2023[39] - As of December 31, 2023, the company had 255 brick-and-mortar retail stores and five e-commerce websites, compared to 232 stores and six websites in 2022[132] Financial Performance - Total revenue for 2023 decreased by 6.6% to $1,981,582 from $2,122,009 in 2022[131] - Net income attributable to Steven Madden, Ltd. was $171,554 in 2023 compared to $216,061 in 2022[131] - The company's effective tax rate for 2023 decreased to 21.1% compared to 23.1% in 2022[131] - Diluted earnings per share in 2023 was $2.30 per share on 74,565 diluted weighted average shares outstanding[131] - Total revenue decreased by 6.6% to $1,981,582 in 2023 compared to $2,122,009 in 2022, driven by declines in Wholesale Footwear and Direct-to-Consumer segments, partially offset by increases in Wholesale Accessories/Apparel and Licensing segments[138] - Net income attributable to Steven Madden, Ltd. decreased to $171,554 in 2023 from $216,061 in 2022[138] - Cash and cash equivalents decreased to $219,813 in 2023 from $289,798 in 2022, with 61% held in foreign subsidiaries[145] Supply Chain and Manufacturing - 79% of the company's total purchases in 2023 were manufactured in China, exposing it to supply chain risks[75] - Global inflation has increased freight costs, negatively impacting gross margin and profitability in 2023[74] - Changes in U.S. and international trade policies, including tariffs, could materially affect business operations, especially with 79% of products sourced from China[80] - The expiration of the Generalized System of Preferences (GSP) could impose additional tariffs of 6% to 20% on handbags manufactured in certain countries[81] Cybersecurity and IT - The company has transitioned its e-commerce platform to a major cloud-based provider and maintains integrated systems for ERP, warehouse management, and retail inventory management[42] - The company conducts annual network and application penetration tests and maintains network security and cyber liability insurance to mitigate cybersecurity risks[43][44] - The company is heavily dependent on its information technology systems, and any disruption could adversely affect financial results and business reputation[87] - Cybersecurity risks are managed through a comprehensive program that includes prevention, detection, and mitigation measures, overseen by the Chief Information Security Officer and the Information Security Steering Committee[102][103] - The company conducts periodic phishing simulation campaigns and mandatory cybersecurity training for all employees, with specialized training for certain roles[104] - The company engages third-party experts for annual tabletop exercises to rehearse incident response plans and improve cybersecurity controls[104] - The CISO, with 24 years of experience, oversees cybersecurity risk management and provides quarterly reports to the ISSC and Audit Committee[107] - The Incident Response Team (IRT) assesses security incidents and escalates to the ISSC or Audit Committee as needed[109] Legal and Compliance - The company is subject to the U.S. Foreign Corrupt Practices Act and anti-corruption laws in foreign countries, with potential violations leading to sanctions or penalties[85] - The company is involved in various legal proceedings, which could divert management resources and result in significant costs[95] - The company may face additional tax liabilities due to audits by various taxing authorities, potentially impacting operating results and cash flows[96] - Compliance with Section 404 of the Sarbanes-Oxley Act requires significant accounting expense and management effort, with potential material weaknesses in internal controls affecting investor confidence[100] - The company's internal control over financial reporting was deemed effective as of December 31, 2023, based on the COSO framework[190] - The company's independent auditor, Ernst & Young LLP, confirmed the effectiveness of internal controls over financial reporting as of December 31, 2023[192] - No changes in internal control over financial reporting materially affected the company during the fiscal quarter ended December 31, 2023[193] Employee and Executive Matters - The company employs approximately 4,200 employees globally, with 2,200 in the United States and 2,000 internationally, including 2,900 full-time and 1,300 part-time employees[48] - The company has implemented diversity and inclusion initiatives, including the formation of employee resource groups and the addition of diverse members to the Board of Directors[55] - The loss of Steve Madden or key executives could severely disrupt the company's business and have a material adverse effect[63] - Edward R. Rosenfeld's new employment agreement includes an annual base salary of $1,172 starting March 1, 2024, with potential increases annually[196] - Rosenfeld will receive a restricted stock grant valued at $3,400 on March 15, 2024, vesting in five equal annual installments[197] - Rosenfeld is eligible for annual performance share grants with a target value of $3,600, tied to the company's return on capital relative to a peer group[198] - In the event of termination without cause or resignation for good reason, Rosenfeld is entitled to 12 months of base salary and pro-rated performance shares[200][201] - If termination occurs within 90 days before or 180 days after a change of control, Rosenfeld is entitled to a cash payment of 2.5 times his annual base salary plus the average bonus from the prior three years[202] Dividends and Share Repurchases - The company paid a quarterly cash dividend of $0.21 per share in 2023, totaling $63,177 for the year[118] - The company repurchased 3,127 shares of common stock in 2023 at a weighted average price of $34.89 per share, totaling $109,118[119] - The company repurchased shares and paid dividends totaling $205,525 in 2023, including $142,348 in share repurchases and $63,177 in cash dividends[151] - Quarterly cash dividend of $0.21 per share declared for Q3 2023, with total cash dividends paid amounting to $15,698[158] - Quarterly cash dividend of $0.21 per share declared for Q4 2023, with total cash dividends paid amounting to $15,584[159] - Future dividend payments are subject to board discretion and contingent on earnings, financial condition, and other factors[161] Risks and Challenges - The company faces intense competition from established and new entrants in the fashion footwear, accessories, and apparel industry, which could impact market share and financial performance[61] - The company's success depends on its ability to adapt to changes in the retail industry, including the shift to e-commerce and mobile commerce[62] - Significant customers reducing or stopping purchases could materially affect sales and profits[65] - Quarterly financial results are subject to fluctuations due to factors like product mix, market acceptance, and external economic conditions[66] - Extreme weather conditions and climate change risks could disrupt operations and reduce demand for seasonal products[68] - Credit risks with wholesale customers could adversely affect financial results, especially if customers face liquidity shortages[69] - Geopolitical tensions, particularly the ongoing conflict between Israel and Hamas, could significantly disrupt the company's operations in the Middle East, impacting joint ventures, financial markets, and supply chains[83] - The company faces risks from foreign exchange rate fluctuations, as it sources products overseas and uses forward foreign exchange contracts to hedge against adverse currency changes[86] - Approximately 63% of the company's net royalties in fiscal year 2023 were derived from its top five licensed product lines, making it vulnerable to declines in demand for these products[93] - Changes in economic conditions, such as inflation, interest rates, and consumer confidence, could negatively impact the company's sales and results of operations[94] - Inflationary pressures and geopolitical risks may negatively impact consumer spending and sales[162] Acquisitions and Investments - The company acquired Almost Famous for a total purchase price of $86,528, with a maximum consideration of $68,000 over four years[130] - The acquisition of Almost Famous in October 2023 accounted for 8.8% of consolidated total assets and 1.9% of consolidated total revenue as of December 31, 2023[191] Financial Reserves and Hypothetical Scenarios - A hypothetical 5% increase in the allowance for doubtful accounts as of December 31, 2023, would increase operating expenses by approximately $200[165] - A hypothetical 5% increase in the reserve balance for markdowns and chargeback allowances as of December 31, 2023, would decrease revenue by approximately $1,500[167] - A hypothetical 5% increase in the return reserve as of December 31, 2023, would decrease revenue by approximately $200[168] - A hypothetical 5% increase to inventory reserves at December 31, 2023, would decrease gross profit by approximately $400[170] Trademarks and Licensing - The company's trademarks, including Steve Madden, Madden Girl, and Betsey Johnson, are registered in 150 countries and are licensed for use in apparel, accessories, and home categories[45][46] - The GREATS trademark was written down from $12,670 to $6,150, resulting in a pre-tax non-cash impairment charge of $6,520[176] Corporate Social Responsibility - The company made charitable contributions of $1 million each in 2023 and 2022 through The Steve Madden Corporate Foundation[54] Stockholder Information - As of February 22, 2024, there are 154 holders of record and 33,453 beneficial owners of the company's common stock[117] - The company's cumulative total stockholder return from December 31, 2018, to December 31, 2023, was 151.14%, outperforming the Russell 2000 Index[124] Credit Facilities and Agreements - The company has a $150,000 asset-based revolving credit facility, providing additional liquidity and flexibility for long-term financial commitments[148] - Credit Agreement dated July 22, 2020, among Steven Madden, Ltd., subsidiary borrowers, lenders, and Citizens Bank, N.A., as administrative agent[216] - First Amendment to Credit Agreement dated March 25, 2022, involving Steven Madden, Ltd., other loan parties, lenders, and Citizens Bank, N.A.[216] - Amended and Restated Deferred Purchase Factoring Agreement dated July 22, 2020, among Steven Madden, Ltd., certain subsidiaries, and Rosenthal & Rosenthal, Inc.[216] - Third Amendment to Credit Agreement dated October 23, 2023, among Steven Madden, Ltd., other loan parties, lenders, and Citizens Bank, N.A.[216] - Notification Factoring Rider to the Credit Approved Receivables Purchasing Agreement dated October 23, 2023, involving Steven Madden, Ltd., Daniel M. Friedman & Associates, Inc., and The CIT Group/Commercial Services, Inc.[216] Employment Agreements - Employment Agreement dated May 15, 2023, between the Company and Karla Frieders[216] - Employment Agreement dated February 27, 2024, between the Company and Edward R. Rosenfeld[216] - Employment Agreement dated December 21, 2022, between the Company and Amelia Newton Varela[216] Historical Agreements - Equity Purchase Agreement dated January 30, 2017, involving the Company, Schwartz & Benjamin, Inc., B.D.S., Inc., Quinby Ridge Enterprises LLC, DANIELBARBARA Enterprises LLC, and Daniel Schwartz as agent for the Sellers[215] - First Amendment to Equity Purchase Agreement dated November 21, 2017, amending the original agreement from January 30, 2017[215]