Steven Madden (SHOO) Q3 2025 Earnings Transcript

Core Insights - The company believes the worst impacts from tariffs are behind them, with order patterns from wholesale customers normalizing and strong underlying consumer demand for their brands [1][2] - The third quarter of 2025 was challenging due to new tariffs on Chinese imports, leading to reduced orders and shipment delays, which negatively affected revenue and earnings [2][9] - The company is seeing strong performance in its flagship Steve Madden brand, particularly in boots and dress shoes, supported by effective marketing strategies targeting Gen Z and millennials [4][5] Financial Performance - Consolidated revenue for Q3 2025 was $667.9 million, a 6.9% increase compared to 2024, but a 14.8% decrease when excluding the newly acquired Kurt Geiger [9] - Wholesale revenue decreased by 10.7% to $442.7 million, with footwear revenue down 10.9% and accessories and apparel down 10.3% [9][10] - Direct-to-consumer revenue increased by 76.6% to $221.5 million, with a 1.5% increase when excluding Kurt Geiger [10] Gross Margin and Operating Expenses - Consolidated gross margin improved to 43.4% from 41.6% in the prior year, primarily due to the higher mix of direct-to-consumer sales from Kurt Geiger [11] - Wholesale gross margin decreased to 33.6% from 35.5% due to tariff pressures, while direct-to-consumer gross margin fell to 61.9% from 64% [11] - Operating expenses rose to $243.4 million, or 36.4% of revenue, compared to 27.9% in 2024, leading to operating income of $46.3 million [12] Future Outlook - The company expects revenue growth of 27% to 30% in Q4 2025 compared to 2024, with earnings per share projected between $0.41 and $0.46 [14] - The integration of Kurt Geiger is on track, with mid-teens comp sales growth and plans for expansion in international markets [5][30] - The company aims to recover gross margins over time, with expectations of improved performance in 2026 [49][65] Brand Performance and Marketing - The Steve Madden brand is experiencing strong sell-through rates, particularly in boots and dress shoes, with a focus on fashion-forward products [4][16] - The marketing strategy includes increased investment in social media platforms, driving awareness and conversion among younger consumers [4][60] - The company is seeing improved performance in full-price channels compared to value price channels, which have been more affected by tariff-related disruptions [60] Inventory and Supply Chain - Inventory at the end of Q3 was $476 million, a significant increase from $268.7 million in 2024, with efforts to manage stock levels amid supply chain disruptions [13] - The company is diversifying its sourcing strategy to reduce reliance on any single country, particularly in light of tariff changes [24] - The ability to chase demand has been impacted by supply chain disruptions, but the company has managed to front-load merchandise effectively [22][23]