Group 1 - The investment strategy focuses on long-only investment, evaluating companies from an operational and buy-and-hold perspective [1] - The approach does not prioritize market-driven dynamics or future price action, instead emphasizing long-term earnings power and competitive dynamics [1] - The majority of recommendations will be holds, indicating a cautious approach to market conditions and a belief that only a small fraction of companies are suitable for buying at any given time [1] Group 2 - The articles aim to provide important information for future investors and introduce skepticism in a generally bullish market [1] - There is a clear distinction made between the author's opinions and professional investment advice, emphasizing the need for readers to conduct their own due diligence [2][3]

Company Performance - Steven Madden, Ltd. (SHOO) reported a sharp revenue decline in Q2, leading to a decrease in profitability and a drop in stock price [1] - The footwear company's performance has raised concerns among investors regarding its financial health [1] Market Reaction - The stock experienced a decline on the day of the earnings report, reflecting market apprehension about the company's future prospects [1]

Core Viewpoint - Steven Madden's Q2 2025 earnings report highlighted challenges from new tariffs on U.S. imports and the integration of the Kurt Geiger acquisition, leading to operational headwinds and margin compression, with management withdrawing guidance for fiscal 2025 due to macroeconomic uncertainty [1][18]. Financial Performance - Adjusted earnings per share were $0.20, a significant decline of 64.9% from $0.57 in Q2 2024 [2] - GAAP revenue increased by 6.8% year-over-year to $559.0 million, but fell short of analyst estimates of $578.94 million [2] - Non-GAAP net income dropped to $13.9 million, down 66.3% from $41.2 million in Q2 2024 [2][8] - Gross profit margin was 41.9%, slightly up from 41.5% in Q2 2024, while operating margin fell sharply to 4.0% from 10.4% [2][7] Business Overview - Steven Madden is known for its trend-focused footwear, handbags, and accessories, with a diverse brand portfolio including Steve Madden, Dolce Vita, Betsey Johnson, and Kurt Geiger [3] - The company emphasizes creative design, rapid market response, and a mix of wholesale and direct-to-consumer channels [3] Strategic Focus - Recent priorities include accelerating product design, expanding international markets, and managing a multi-channel distribution network [4] - Key success factors involve staying close to consumer trends, maintaining supply chain flexibility, and managing costs [4] Acquisition Impact - The acquisition of Kurt Geiger contributed to top-line growth but introduced complexities, particularly due to its reliance on China for sourcing [6][12] - Management believes Kurt Geiger will be a long-term growth driver despite the challenges posed by tariffs [6] Revenue Breakdown - Wholesale revenue declined by 6.4%, with a 12.8% drop when excluding Kurt Geiger; DTC revenue surged 43.3% including Kurt Geiger, but organic DTC revenue fell 3% [5] - Licensing fee income grew 57.8% to $2.9 million year-over-year [5] Margin and Cost Analysis - Gross profit margin compressed due to rising input costs and tariffs, with wholesale adjusted gross margin falling to 30.9% from 33.1% in Q2 2024 [7] - Operating expenses rose to 47.2% of revenue, driven by acquisition-related costs, with a reported loss from operations of $40.3 million [8] Supply Chain Adjustments - The company is shifting sourcing away from China, expecting U.S. imports from China to fall to the mid-teens percentage of total production by fall 2025 [14] - New sourcing locations include Vietnam, Cambodia, Mexico, and Brazil, which may increase costs due to higher FOB prices [14] Brand Strategy - The integration of Kurt Geiger into Steven Madden's portfolio is a major focus, leveraging international and U.S. retail networks to scale the brand [17] Outlook - Management did not provide financial guidance for fiscal 2025 due to ongoing uncertainty regarding tariffs and trade conditions [18]

Core Insights - Steven Madden reported revenue of $559 million for the quarter ended June 2025, reflecting a 6.8% increase year-over-year, but fell short of the Zacks Consensus Estimate of $575.92 million by 2.94% [1] - The company's EPS was $0.20, down from $0.57 in the same quarter last year, resulting in an EPS surprise of -16.67% against the consensus estimate of $0.24 [1] Revenue Breakdown - Total Revenue (Net Sales) was $556.09 million, compared to the estimated $573.58 million, marking a 6.6% increase year-over-year [4] - Total Wholesale revenue was $360.6 million, below the estimated $395.65 million, representing a decline of 6.4% year-over-year [4] - Direct-to-Consumer revenue reached $195.5 million, exceeding the estimate of $142.39 million, with a significant year-over-year increase of 43.3% [4] - Licensing fee income totaled $2.91 million, surpassing the estimated $2.36 million, and showed a year-over-year growth of 57.8% [4] Stock Performance - Over the past month, Steven Madden's shares returned +4.4%, outperforming the Zacks S&P 500 composite's +3.4% change [3] - The stock currently holds a Zacks Rank 5 (Strong Sell), indicating potential underperformance relative to the broader market in the near term [3]

Financial Data and Key Metrics Changes - Consolidated revenue for Q2 2025 was $559 million, a 6.8% increase compared to 2024. Excluding the newly acquired Kurt Geiger, consolidated revenue decreased by 10% [9] - Wholesale revenue was $360.6 million, down 6.4% compared to Q2 2024, and down 12.8% excluding Kurt Geiger [10] - Direct-to-consumer (DTC) segment revenue increased by 43.3% to $195.5 million, but decreased by 3% excluding Kurt Geiger [10] - Consolidated gross margin was 41.9%, compared to 41.5% in Q2 2024, with tariffs impacting gross margin by approximately 230 basis points [12] - Operating income for the quarter was $22.6 million, or 4% of revenue, compared to $54.5 million, or 10.4% of revenue in the prior year [13] - Net income attributable to Steve Madden Limited was $13.9 million, or $0.20 per diluted share, compared to $41.2 million, or $0.57 per diluted share in 2024 [13] Business Line Data and Key Metrics Changes - Wholesale footwear revenue was $220.1 million, a 7.1% decrease from Q2 2024, or down 11.7% excluding Kurt Geiger [10] - Wholesale accessories and apparel revenue was $140.4 million, down 5.3% compared to the prior year, or down 14.6% excluding Kurt Geiger [10] - The apparel business saw revenue growth, being one of the few segments that performed well during the quarter [38] Market Data and Key Metrics Changes - The company ended the quarter with 392 company-operated retail stores, including 98 outlets, and 130 company-operated concessions in international markets [11] - Licensing royalty income was $2.9 million in the quarter, compared to $1.8 million in 2024 [11] - International business, excluding Kurt Geiger, was up about 8% in revenue or about 10% in constant currency [88] Company Strategy and Development Direction - The company is focused on diversifying sourcing out of China due to tariff impacts, with plans to source approximately 30% of US imports from China for fall 2025, down from 71% in 2024 [5] - The integration of the newly acquired Kirk Geiger is progressing well, with strong momentum and potential for significant growth [8] - Marketing efforts are being amplified to deepen consumer connections, particularly targeting Gen Z and millennials through various channels [7] Management's Comments on Operating Environment and Future Outlook - Management acknowledged that the second quarter was challenging due to new tariffs, leading to order cancellations and lost sales [4] - The company expects continued impacts from tariff-related disruptions in Q3, but anticipates improvements in Q4 [20] - Management remains optimistic about long-term growth, citing strong brand positioning and a robust balance sheet [8] Other Important Information - The company did not repurchase any shares during the quarter and declared a quarterly cash dividend of $0.21 per share [14] - Due to ongoing uncertainties regarding tariffs, the company will not provide financial guidance for 2025 [15] Q&A Session Summary Question: Which wholesale channels saw significant order cancellations? - The mass and off-price channels experienced the most significant order cancellations, with approximately 95% of the wholesale revenue shortfall coming from these areas [18] Question: What is the expected gross margin pressure for Q3 and Q4? - Continued pressure on gross margins is expected in Q3, with hopes for improvement by Q4 [20] Question: How has consumer response been to price increases? - The company is seeing a positive consumer response to average price increases of about 10%, particularly in trending categories like dress shoes and summer boots [26] Question: What is the current margin profile for Kurt Geiger? - Kurt Geiger's EBIT margins were about 9.3% prior to acquisition, expected to decrease slightly this year due to tariff pressures [71] Question: How did the Nordstrom anniversary sale perform? - The Nordstrom anniversary event performed very well, indicating strong sell-through and optimism for future sales [93]

Company Performance - Steven Madden reported quarterly earnings of $0.20 per share, missing the Zacks Consensus Estimate of $0.24 per share, and down from $0.57 per share a year ago, representing an earnings surprise of -16.67% [1] - The company posted revenues of $559 million for the quarter ended June 2025, missing the Zacks Consensus Estimate by 2.94%, compared to year-ago revenues of $523.55 million [2] - Over the last four quarters, Steven Madden has surpassed consensus EPS estimates three times and topped consensus revenue estimates two times [2] Stock Performance - Steven Madden shares have lost approximately 38.1% since the beginning of the year, while the S&P 500 has gained 8.3% [3] - The current status of estimate revisions has resulted in a Zacks Rank 5 (Strong Sell) for the stock, indicating expected underperformance in the near future [6] Future Outlook - The current consensus EPS estimate for the coming quarter is $0.42 on revenues of $715.74 million, and for the current fiscal year, it is $1.47 on revenues of $2.52 billion [7] - The outlook for the Shoes and Retail Apparel industry is currently in the bottom 24% of over 250 Zacks industries, which may impact the performance of Steven Madden's stock [8] Industry Comparison - Wolverine World Wide, another company in the same industry, is expected to report quarterly earnings of $0.22 per share, reflecting a year-over-year change of +46.7%, with revenues expected to be $446.48 million, up 5% from the year-ago quarter [9][10]

[Second Quarter 2025 Financial Results](index=1&type=section&id=Second%20Quarter%202025%20Financial%20Results) [Executive Summary](index=1&type=section&id=Executive%20Summary) Q2 2025 was challenging due to new U.S. tariffs, resulting in a net loss despite revenue growth driven by the Kurt Geiger acquisition - Q2 performance was significantly impacted by new U.S. tariffs[4](index=4&type=chunk) - Integration of Kurt Geiger is smooth, expected to drive future growth[4](index=4&type=chunk) - Company focuses on core strategies and consumer connections to navigate current environment[4](index=4&type=chunk) [Financial Performance](index=1&type=section&id=Financial%20Performance) Q2 2025 revenue grew 6.8% to **$559.0 million**, but GAAP net loss was **$39.5 million** due to tariffs and acquisition costs [Consolidated Results](index=1&type=section&id=Consolidated%20Results) Q2 2025 Consolidated Financial Highlights (GAAP) | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Total Revenue | $559.0M | $523.6M | +6.8% | | Gross Profit Margin | 40.4% | 41.5% | -110 bps | | (Loss) / Income from Operations | ($40.3M) | $46.9M | N/A | | Net (Loss) / Income | ($39.5M) | $35.4M | N/A | | Diluted (Loss) / EPS | ($0.56) | $0.49 | N/A | Q2 2025 Consolidated Financial Highlights (Adjusted) | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Adjusted Gross Profit Margin | 41.9% | N/A | N/A | | Adjusted Income from Operations | $22.6M | $54.5M | -58.5% | | Adjusted Net Income | $13.9M | $41.2M | -66.3% | | Adjusted Diluted EPS | $0.20 | $0.57 | -64.9% | [Channel Performance](index=1&type=section&id=Channel%20Performance) - **Wholesale revenue decreased 6.4% to $360.6 million**, with gross margin contracting to **30.0%** due to tariffs[5](index=5&type=chunk) - **DTC revenue grew 43.3% to $195.5 million** driven by Kurt Geiger, though gross margin fell to **58.7%** due to tariffs[7](index=7&type=chunk) - Company ended Q2 with **392** company-operated stores and **130** concessions, including Kurt Geiger additions[8](index=8&type=chunk) [Balance Sheet and Cash Flow](index=2&type=section&id=Balance%20Sheet%20and%20Cash%20Flow) As of June 30, 2025, cash was **$111.9 million**, total debt **$293.5 million**, resulting in **$181.6 million** net debt Balance Sheet Summary (as of June 30, 2025) | Metric | Amount | | :--- | :--- | | Cash, Cash Equivalents & Short-term Investments | $111.9M | | Total Debt Outstanding | $293.5M | | Net Debt | $181.6M | - No share repurchases were made during Q2 2025[10](index=10&type=chunk) [Shareholder Returns](index=2&type=section&id=Shareholder%20Returns) Board approved a quarterly cash dividend of **$0.21 per share**, payable in September 2025 - A quarterly cash dividend of **$0.21 per share** was approved, payable September 23, 2025[11](index=11&type=chunk) [Business Outlook](index=2&type=section&id=Business%20Outlook) Company refrains from providing 2025 financial outlook due to ongoing macroeconomic uncertainty and new U.S. tariffs - No 2025 financial guidance provided due to macroeconomic uncertainty and new tariffs[12](index=12&type=chunk) [Financial Statements](index=4&type=section&id=Financial%20Statements) [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q2 2025 revenue grew to **$559.0 million**, but increased operating expenses led to a **$40.3 million** operating loss and **$39.5 million** net loss Q2 Statement of Operations Highlights (In thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Total revenue | $559,000 | $523,553 | | Gross profit | $226,027 | $217,129 | | (Loss) / income from operations | $(40,258) | $46,870 | | Net (loss) / income attributable to Steven Madden, Ltd. | $(39,477) | $35,376 | | Diluted (loss) / income per share | $(0.56) | $0.49 | [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets grew to **$1.90 billion** as of June 30, 2025, with liabilities rising to **$1.03 billion** due to acquisition-related debt Balance Sheet Highlights (In thousands) | Metric | June 30, 2025 | June 30, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $111,714 | $180,457 | | Inventories | $436,968 | $241,643 | | Total Assets | $1,895,078 | $1,375,064 | | Long-term debt | $287,865 | $— | | Total Liabilities | $1,031,715 | $542,708 | | Total stockholders' equity | $863,363 | $832,356 | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operations was **$62.5 million**, while investing activities used **$392.8 million** for acquisitions, resulting in a **$78.2 million** cash decrease Six-Month Cash Flow Summary (In thousands) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $62,530 | $93,801 | | Net cash used in investing activities | $(392,751) | $(10,185) | | Net cash provided by / (used in) financing activities | $249,466 | $(105,508) | | Net decrease in cash and cash equivalents | $(78,210) | $(24,183) | [Non-GAAP Reconciliation](index=7&type=section&id=Non-GAAP%20Reconciliation) [Reconciliation Summary](index=7&type=section&id=Reconciliation%20Summary) Non-GAAP adjustments for Q2 2025, primarily acquisition-related, reconciled GAAP loss to **$22.6 million** adjusted operating income Q2 2025 GAAP to Non-GAAP Reconciliation (In thousands) | Metric | GAAP | Adjustments | Non-GAAP (Adjusted) | | :--- | :--- | :--- | :--- | | Gross Profit | $226,027 | $8,251 | $234,278 | | (Loss) / Income from Operations | $(40,258) | $62,887 | $22,629 | | Net (Loss) / Income Attributable to Steven Madden, Ltd. | $(39,477) | $53,357 | $13,880 | [Detailed Non-GAAP Adjustments](index=8&type=section&id=Detailed%20Non-GAAP%20Adjustments) Q2 2025 pre-tax adjustments included **$38.8 million** for acquisition compensation and **$8.3 million** for inventory fair value - Key pre-tax adjustments for Q2 2025 included: - **$38.8 million** in acquisition-related compensation expense - **$8.3 million** expense for purchase accounting fair value adjustment of inventory - **$8.1 million** expense for acquisition and joint venture formation - **$9.3 million** benefit from the settlement of a foreign exchange hedging contract[26](index=26&type=chunk) - Q2 2024 adjustments were smaller, including a **$6.6 million** pre-tax expense for contingent consideration valuation change[27](index=27&type=chunk)

Core Insights - Steven Madden, Ltd. reported challenging financial results for Q2 2025, primarily due to new tariffs impacting imported goods [3][4][11] - The company is focused on long-term growth through strategic consumer engagement and the integration of Kurt Geiger, which is expected to drive future growth [3][4] Financial Performance - Total revenue for Q2 2025 increased by 6.8% to $559.0 million compared to $523.6 million in Q2 2024 [8] - Gross profit as a percentage of revenue decreased to 40.4% from 41.5% in the same period last year [8] - The company reported a net loss of $39.5 million, or $0.56 per diluted share, compared to a net income of $35.4 million, or $0.49 per diluted share, in Q2 2024 [8][27] Revenue Breakdown - Wholesale revenue was $360.6 million, a decrease of 6.4% year-over-year, with a 12.8% decline when excluding Kurt Geiger [4] - Direct-to-consumer revenue rose by 43.3% to $195.5 million, although it decreased by 3.0% when excluding Kurt Geiger [5] Operational Metrics - The company ended the quarter with 392 retail stores, including 98 outlets, and seven e-commerce websites [6] - Operating expenses as a percentage of revenue increased to 47.2% from 31.3% in Q2 2024 [8] Balance Sheet and Cash Flow - As of June 30, 2025, total debt was $293.5 million, with cash and short-term investments totaling $111.9 million, resulting in net debt of $181.6 million [9] - The company did not repurchase any shares during the quarter [9] Dividend Announcement - The Board of Directors approved a quarterly cash dividend of $0.21 per share, payable on September 23, 2025 [10] Future Outlook - Due to ongoing macroeconomic uncertainties related to tariffs, the company is not providing financial guidance for 2025 [11]

Core Viewpoint - Steven Madden, Ltd. is set to release its second quarter 2025 earnings results on July 30, 2025, with a conference call scheduled for 8:30 a.m. Eastern Time to discuss the results [1]. Company Overview - Steven Madden, Ltd. is a prominent designer and marketer of fashion-forward footwear, accessories, and apparel, operating under various brands including Steve Madden, Kurt Geiger London, and Dolce Vita [4]. - The company engages in wholesale distribution through department stores, mass merchants, and online retailers, while also operating its own retail stores and e-commerce platforms [4]. - Additionally, Steven Madden licenses certain brands for marketing and sales in apparel, accessory, and home categories [4].

[PART I – FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) [Item 1. Condensed Consolidated Financial Statements (Unaudited)](index=3&type=section&id=ITEM%201.%20Condensed%20Consolidated%20Financial%20Statements%20(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](index=8&type=section&id=Note%203%20%E2%80%93%20Joint%20Ventures%20and%20Acquisitions) 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](index=21&type=chunk) - 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](index=22&type=chunk) - 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](index=23&type=chunk) [Note 7 – Share Repurchase Program](index=12&type=section&id=Note%207%20%E2%80%93%20Share%20Repurchase%20Program) 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](index=37&type=chunk) - During the three months ended March 31, 2024, the company repurchased **773,000 shares** for approximately **$32.6 million**[37](index=37&type=chunk) - As of March 31, 2025, approximately **$85.31 million** remained available for future repurchases under the program[37](index=37&type=chunk) - 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](index=38&type=chunk) [Note 14 – Operating Segment Information](index=20&type=section&id=Note%2014%20%E2%80%93%20Operating%20Segment%20Information) 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](index=72&type=chunk) [Note 18 – Subsequent Event](index=25&type=section&id=Note%2018%20%E2%80%93%20Subsequent%20Event) 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](index=90&type=chunk)[92](index=92&type=chunk) - The acquisition was funded with borrowings under a new Amended and Restated Credit Agreement and cash on hand[94](index=94&type=chunk)[95](index=95&type=chunk) - 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](index=95&type=chunk)[96](index=96&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=27&type=section&id=ITEM%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) 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](index=114&type=chunk) 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](index=110&type=chunk)[111](index=111&type=chunk)[113](index=113&type=chunk) - 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](index=109&type=chunk)[147](index=147&type=chunk)[150](index=150&type=chunk) [Results of Operations](index=31&type=section&id=Results%20of%20Operations) 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](index=124&type=chunk) - 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](index=125&type=chunk) - 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](index=135&type=chunk)[136](index=136&type=chunk) - 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](index=138&type=chunk)[139](index=139&type=chunk)[140](index=140&type=chunk) [Liquidity and Capital Resources](index=34&type=section&id=Liquidity%20and%20Capital%20Resources) 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](index=143&type=chunk) - 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](index=152&type=chunk) - 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](index=154&type=chunk) - 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](index=150&type=chunk)[157](index=157&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=36&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) 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](index=162&type=chunk) - 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](index=164&type=chunk)[165](index=165&type=chunk) - 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](index=166&type=chunk) - 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](index=167&type=chunk) [Item 4. Controls and Procedures](index=38&type=section&id=ITEM%204.%20Controls%20and%20Procedures) 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](index=169&type=chunk) - 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](index=170&type=chunk) [PART II – OTHER INFORMATION](index=39&type=section&id=PART%20II%20%E2%80%93%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=39&type=section&id=ITEM%201.%20Legal%20Proceedings) 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](index=173&type=chunk) - Management does not expect these legal proceedings to have a material impact on the company's financial condition or results[173](index=173&type=chunk) [Item 1A. Risk Factors](index=39&type=section&id=ITEM%201A.%20Risk%20Factors) 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](index=175&type=chunk) - A substantial amount of products are sourced from China, Vietnam, Cambodia, and other Asian countries impacted by reciprocal tariffs[175](index=175&type=chunk) - The company is analyzing mitigation strategies like diversifying sourcing, negotiating with suppliers, and adjusting pricing, but their success is not guaranteed[176](index=176&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=40&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) 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](index=180&type=chunk) [Item 5. Other Information](index=40&type=section&id=ITEM%205.%20Other%20Information) 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](index=181&type=chunk) [Item 6. Exhibits](index=41&type=section&id=ITEM%206.%20Exhibits) 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](index=182&type=chunk)