Steven Madden(SHOO) - 2019 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported a net sales growth of 5.6% to $410.9 million compared to $389 million in the prior year [16] - Diluted EPS increased by 15% to $0.42 per share from $0.36 per share in the first quarter of 2018 [22] - Consolidated gross margin improved by 200 basis points to 38.2% from 36.2% in the prior year [20] Business Line Data and Key Metrics Changes - Wholesale footwear net sales increased by 0.6% to $276.6 million, driven by strong growth in the core Steve Madden brand and the addition of Anne Klein [16] - Wholesale accessories saw a significant net sales growth of 27.5% to $71.5 million, with standout performances from Steve Madden handbags and private label handbags [17] - Retail segment net sales increased by 8.6% to $62.8 million, with comparable store sales rising by 6.3% [18] Market Data and Key Metrics Changes - The company experienced strong performance in e-commerce, marking the fourth consecutive quarter of sequential acceleration in sales and profitability [12] - International markets are expected to see double-digit percentage sales growth, driven by gains in SM Europe, SM Mexico, and a new joint venture in Israel [13] Company Strategy and Development Direction - The company is focused on leveraging its flagship brand's momentum and expanding newer brands like Anne Klein and Blondo [12] - There is an ongoing evaluation of opportunities to add to the brand portfolio through acquisition or licensing, particularly in the accessible luxury tier of the footwear market [15] - The company plans to continue enhancing its e-commerce capabilities and digital marketing strategies to drive further growth [35] Management's Comments on Operating Environment and Future Outlook - Management acknowledged a choppy retail environment but expressed confidence in the company's positioning due to strong product performance and market share gains [12] - The company raised its 2019 net sales and EPS guidance, expecting net sales growth of 5% to 7% and diluted EPS in the range of $1.78 to $1.86 [26] - Management noted that while the loss of the Kate Spade footwear license is not expected to significantly impact profitability, they are optimistic about the potential for new brand additions [14][80] Other Important Information - The company ended the quarter with $221.6 million in cash and marketable securities and no debt [23] - Inventory increased by 22.1% to $115.3 million, with a significant portion attributed to replenishment programs [23] - The Board of Directors approved a quarterly cash dividend of $0.14 per share, payable on June 28, 2019 [25] Q&A Session Summary Question: Strength of the Steve Madden business at wholesale level - Management confirmed strong performance in the U.S. wholesale footwear business, with double-digit growth driven by effective product assortments [30][31] Question: E-commerce initiatives and their impact - Management highlighted the importance of the transition to Shopify, free 2-day shipping, and Afterpay in driving e-commerce growth [35] Question: Gross margin progression and Payless impact - Management expects modest gross margin improvement for the full year, with some benefits from not recognizing sales to Payless [37] Question: Private label business and margin comparison - Management indicated that the private label business is expected to grow, with better margins than the lost Payless business [41] Question: Performance of full-priced vs outlet stores - Full-priced stores were reported to be weaker than outlet stores [91] Question: Update on the China business - The joint venture in China has not met expectations and is currently not profitable, with management evaluating alternatives [92] Question: Sustainability of sneaker category growth - Management does not see signs of slowdown in the sneaker category and remains optimistic about its importance for the brand [94] Question: E-commerce sustainability and future initiatives - Management believes they are in the early stages of benefiting from digital initiatives, with more growth expected in e-commerce [96]