Steven Madden(US:SHOO)2022-07-27 18:12Financial Data and Key Metrics Changes - Revenue increased by 35% year-over-year, reaching $535 million in Q2 2022 [8][14] - Diluted EPS rose by 31% compared to the prior year, amounting to $0.63 per share [19] - Consolidated gross margin decreased to 40.7% from 42.7% in the prior year, primarily due to a shift from direct-to-consumer to wholesale sales [17] - Operating income totaled $67 million, representing 12.5% of revenue, compared to $51 million or 12.8% of revenue last year [19] Business Segment Data and Key Metrics Changes - Wholesale footwear revenue increased by 47% year-over-year, totaling $291.4 million [14][9] - Wholesale accessories and apparel revenue grew by 65% compared to the prior year, driven by strong performance in handbags and private label accessories [10][15] - Direct-to-consumer revenue increased by 2% year-over-year, reaching $135.5 million, despite tough comparisons from the previous year [10][16] - International revenue surged by 82% compared to Q2 2021, now representing 15% of total revenue, up from 11% a year ago [11] Market Data and Key Metrics Changes - The company observed a moderation in consumer demand and sales trends beginning in June, which continued into July [12] - The pullback in demand was noted across various channels, with a more significant impact on low-income consumer-targeting partners [26] Company Strategy and Development Direction - The company focuses on four key business drivers: enhancing direct-to-consumer business, expanding into non-footwear categories, growing in international markets, and strengthening the U.S. wholesale footwear business [8] - Management remains confident in leveraging core strengths to drive long-term growth despite current macroeconomic pressures [12] Management's Comments on Operating Environment and Future Outlook - Management acknowledged a deterioration in macro conditions during the quarter, leading to a more cautious approach for the second half of the year [12] - Despite the challenges, management expressed confidence in the company's ability to create significant value for stakeholders over the long term [13] Other Important Information - The company ended the quarter with $180.5 million in cash and no debt, while inventory levels increased to $306.5 million due to supply chain disruptions [20][21] - A quarterly cash dividend of $0.21 per share was approved, payable on September 26, 2022 [21] Q&A Session Summary Question: Can you provide more details on the deceleration in business observed in June and July? - Management noted a slowdown across channels, with direct-to-consumer comp sales dropping from over 70% to 57% compared to 2019 [25] Question: What are the trends in demand as you head into the back half of the year? - Management indicated that boots and booties are performing well, and improvements in transit times will allow better inventory management [28][29] Question: How are freight costs expected to change moving forward? - Freight rates remain higher than pre-COVID levels, but some improvements are anticipated, potentially becoming a tailwind in 2023 [30][33] Question: How is the performance of private label versus branded sales? - Branded sales are growing faster than private label, with Steve Madden driving significant growth [44] Question: What is the outlook for promotional activity in the back half of the year? - Increased promotional activity is expected, although it was already factored into the company's plans [49][56] Question: How does the company view its inventory levels? - The company has approximately 40 days more supply than pre-COVID levels, but expects inventory levels to decrease starting in Q4 [20][35]