Steven Madden(SHOO) - 2018 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported a 13% increase in net sales for Q4 2018, with diluted EPS rising by 31% compared to the prior year [9] - For the full year 2018, net sales grew by 7% to $1.65 billion, and net income increased by 22% to $157.7 million [10][44] - Consolidated gross margin decreased by 100 basis points to 37.1% in Q4 2018 compared to 38.1% in the prior year [40] Business Line Data and Key Metrics Changes - In the wholesale footwear segment, net sales increased by 7.4% to $233.9 million, driven by growth in Steve Madden Women's and Blondo [36][37] - The wholesale accessories segment saw a significant increase of 37.9% in net sales to $83.4 million, benefiting from strong growth in Steve Madden handbags and private label handbags [38][22] - Retail segment net sales increased by 7.9% to $93 million, with same-store sales rising by 4% [39] Market Data and Key Metrics Changes - International net sales increased by 22% in 2018, with strong growth in owned markets like Canada and Mexico, and over 40% growth in the SM Europe joint venture [14][101] - The company transitioned another key market, Israel, from a distributor model to a joint venture, aiming to expand its presence and productivity in that market [15][16] Company Strategy and Development Direction - The company aims to continue growing its international business and sees it as a top priority for 2019 and beyond [16] - New brand additions like Anne Klein and Blondo are expected to drive growth, with Anne Klein projected to achieve $80 million to $90 million in net sales in its first year [20][21] - The company is focusing on enhancing its e-commerce capabilities and has migrated its sites to the Shopify Plus platform to improve operational efficiency [26][110] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the underlying strength of the business despite facing headwinds from the Payless bankruptcy and a higher tax rate [30][35] - The company anticipates a net sales growth of 4% to 6% for 2019, with diluted EPS guidance reflecting a negative impact from the Payless bankruptcy and higher tax rates [49] - Management noted that while the Payless bankruptcy poses challenges, they are well-positioned to capture market share from competitors [55][66] Other Important Information - The company repurchased approximately 3.4 million shares for $106 million in 2018 and initiated a quarterly cash dividend of $0.14 per share [28][48] - The company is managing tariff impacts by moving production out of China and negotiating price concessions with factory partners [94] Q&A Session Summary Question: Impact of Payless bankruptcy on business - Management acknowledged the negative headwinds from losing Payless as a customer but is actively engaging with Walmart and Target to capture market share [55][56] Question: Retail store count increase - The increase in store count was primarily due to the consummation of the Israel joint venture, adding 14 stores [77] Question: International growth expectations - International growth is expected to moderate but remain a double-digit grower, with strong performance anticipated from the SM Europe joint venture and the new Israel joint venture [100] Question: E-commerce growth and initiatives - The e-commerce business is accelerating, with significant improvements expected from the transition to Shopify Plus and new marketing initiatives [110] Question: Tariff impact on EPS - Management indicated that the impact of the 10% tariff has been largely mitigated, but a potential increase to 25% would pose a different challenge [95]