Steven Madden(SHOO) - 2024 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported consolidated revenue of $523.6 million, a 17.6% increase compared to Q2 2023, with adjusted diluted EPS rising 23% [4][12] - Consolidated gross margin was 41.5%, down from 42.6% in the same period last year, while direct-to-consumer gross margin increased to 64.3%, up 60 basis points year-over-year [14][15] - Operating income for the quarter was$ 54.5 million, or 10.4% of revenue, up from $44.5 million or 10% of revenue in the prior year [15] Business Line Data and Key Metrics Changes - Accessories and apparel revenue rose 74%, or 27% excluding the newly acquired Almost Famous business, with handbag revenue increasing more than 30% [7][12] - Direct-to-consumer revenue grew 6%, including a 4% increase on a comparable basis, with brick-and-mortar comp growth at 7% and digital at 1% [8][13] - Wholesale revenue was$ 385.3 million, up 22.5% compared to Q2 2023, with wholesale accessories and apparel revenue up 86% [12] Market Data and Key Metrics Changes - International revenue grew 13% in Q2, with the EMEA region expected to see over 20% growth in 2024 [5][6] - The Americas region saw a rebound in Canada and continued strong momentum in Mexico, with expectations for double-digit revenue growth [6] Company Strategy and Development Direction - The company aims to expand its international business, grow outside of footwear, and strengthen its direct-to-consumer channels [5][9] - The strategy includes diversifying revenue sources, reducing reliance on U.S. wholesale footwear, which is expected to account for less than 40% of overall business in 2024 [10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in meeting financial goals for 2024 despite a challenging operating environment, with expectations for revenue growth of 11% to 13% [10][16] - The company is prepared to adapt to potential tariff increases by diversifying sourcing away from China [38][39] Other Important Information - The company has no debt and ended the quarter with $192.2 million in cash and equivalents [16] - A quarterly cash dividend of$ 0.21 per share was approved, payable on September 23, 2024 [16] Q&A Session Summary Question: Changes to revenue growth guidance composition - Management confirmed no changes to the revenue growth guidance composition, maintaining expectations for low-to-mid singles in wholesale and high singles in direct-to-consumer [18] Question: Organic growth rate in accessories and apparel - Management indicated a slowdown in growth for accessories and apparel in the back half of the year due to tougher comparisons [19] Question: Breakdown of direct-to-consumer revenue growth - Management clarified that brick-and-mortar comp growth was 7%, while digital was 1%, with overall DTC revenue growth at 6.4% [22][23] Question: Inventory levels in the wholesale channel - Management noted that inventory levels in the channel are reasonably controlled, with cautious sales forecasts from major wholesale customers [28] Question: Freight costs and impact on margins - Management stated that freight costs are expected to impact gross margins by about 40 basis points, with a heavier impact anticipated in the fall [32] Question: Performance of Almost Famous acquisition - Management reported that Almost Famous is tracking well, with revenue and profitability exceeding initial expectations [46] Question: Growth drivers in EMEA - Management highlighted strong growth in Continental Europe and the Middle East, with fashion sneakers and handbags being key products [48] Question: Boot business outlook for Q4 - Management expressed caution regarding the boot category, with conservative planning from wholesale customers [52] Question: Anticipated improvement in branded footwear - Management expects the branded wholesale footwear business to improve in the back half of the year, particularly in Q4 [56]