Steven Madden(SHOO) - 2020 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Consolidated revenue decreased 13.6% to $359.2 million compared to $415.8 million in the prior year [32] - Diluted EPS decreased 62% [14] - Operating income totaled $14.2 million, or 4% of total revenue, compared to $45.1 million, or 10.8% of total revenue in the prior year [40] - Consolidated gross margin was 37.2%, down from 38.9% in the prior year, impacted by $11.7 million in inventory reserves due to COVID-19 [37] Business Segment Data and Key Metrics Changes - Wholesale revenue declined 13% to $302.7 million, with footwear down 15% to $235.1 million and accessories and apparel down 5.4% to $67.7 million [32][33] - Retail revenue decreased 15.8% to $52.9 million due to store closures, although e-commerce revenue was up mid-teens for the quarter [34] - E-commerce revenue saw a strong rebound, up approximately 75% for the quarter to date [18][26] Market Data and Key Metrics Changes - In April and May, wholesale revenue was trending down approximately 75% [17] - Retail segment revenue quarter-to-date was down nearly 60%, with most sales occurring in the e-commerce channel [18] - As of the call, approximately 50% of wholesale customer doors were open, with expectations for more openings in the coming weeks [97] Company Strategy and Development Direction - The company aims to maintain a strong financial position to navigate the crisis and position itself for future growth [11][21] - Focus on e-commerce growth initiatives, including increased investments in digital marketing and new features like try-before-you-buy [26] - The company plans to leverage its strong brand and inventory management to capture market share as the retail landscape changes [24][27] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to navigate the crisis and emerge stronger, citing a strong balance sheet and brand strength [20][21] - The company anticipates that consumer preferences will shift towards value-oriented products and mass merchants, which aligns with its private label business [24] - Management noted that while there are challenges, there are also opportunities for growth in e-commerce and digital channels [25][28] Other Important Information - The company suspended its quarterly cash dividend and share repurchases to preserve liquidity [12][42] - Inventory totaled $102.3 million, down 11.3% compared to the prior year [41] - The company withdrew its 2020 revenue and earnings guidance due to uncertainty related to COVID-19 [43] Q&A Session Summary Question: Update on current inventory position - The company acknowledged some excess inventory but believes it is in a better position than most vendors due to its inventory turnover rate [46] Question: How are fall orders unfolding? - Fall inventory deliveries are expected to be pushed back by about a month, with a focus on managing excess spring/summer inventory [49] Question: How to meet consumer needs with fewer social events? - The company plans to adapt its product offerings based on current trends and consumer preferences, leveraging its ability to respond quickly to market changes [55] Question: Traffic and conversion post-store openings - Initial sales were down about 60%, but there was improvement in the last two days, with some stores performing better than others [60] Question: Impact of reopening on labor and expenses - The company has managed to reopen stores with appropriate staffing levels while incurring additional expenses for safety measures [63] Question: Performance of private label business - The private label business initially saw a significant decrease in sales but has shown gradual improvement and is now in line with last year's performance [82] Question: E-commerce penetration and marketing strategy - E-commerce penetration was around 20% last year, expected to be significantly higher this year, with increased digital marketing investments [72][74] Question: Inventory management strategies - The company plans to use various strategies to move excess inventory, including promotions and off-price channels [109]