Financial Data and Key Metrics Changes - Consolidated revenue for Q1 2025 was $553.5 million, a 0.2% increase compared to Q1 2024 [13] - Net income attributable to the company was $42.4 million or $0.60 per diluted share, down from $47 million or $0.65 per diluted share in Q1 2024 [17] - Operating income for the quarter was $56.1 million or 10.1% of revenue, compared to $61 million or 11% of revenue in the prior year [16] Business Line Data and Key Metrics Changes - Wholesale revenue was $439.3 million, up 0.2% compared to Q1 2024, with wholesale footwear revenue at $296.1 million, also a 0.2% increase [13][14] - Direct to consumer segment revenue declined 0.2% to $112.1 million, with a modest increase in digital sales offset by a decline in brick-and-mortar [15] - Licensing royalty income increased to $2.2 million from $1.8 million in Q1 2024 [15] Market Data and Key Metrics Changes - The company sourced 71% of US imports from China in 2024, expected to drop to mid-teens for fall 2025 and mid-single digits by spring 2026 [8] - Inventory was $238.6 million, significantly higher than $200 million in Q1 2024, driven by longer lead times and accelerated shipments [18] Company Strategy and Development Direction - The acquisition of Kurt Geiger was highlighted as a significant investment, with an enterprise value of £289 million and expected to enhance growth in international markets and accessories [10] - The company is shifting production out of China to countries like Vietnam, Cambodia, Mexico, and Brazil to mitigate tariff impacts and improve operational efficiency [7][26] - The company plans to selectively raise prices to offset increased costs, with an average increase around 10% [50] Management Comments on Operating Environment and Future Outlook - Management acknowledged meaningful headwinds due to new tariffs but expressed confidence in the company's agility and strong balance sheet to navigate challenges [11] - The company is withdrawing its 2025 financial guidance due to uncertainty related to tariffs [19] - Management noted that consumer demand remains stable but is being monitored closely due to declining consumer confidence [68] Other Important Information - The company completed a reduction in force resulting in over $12 million in annual savings [9] - The effective tax rate for the quarter was 24%, slightly up from 23.6% in Q1 2024 [17] Q&A Session Summary Question: How is the company handling orders from China? - The company is taking most production that is far along but has negotiated price concessions to mitigate damage and keep goods flowing [24] Question: What is the impact of moving production to other countries? - The company is replacing production in other countries and expects to see a revenue impact due to cancellations and delayed deliveries [28] Question: How are gross margins expected to trend? - Gross margins were better than anticipated in Q1, but significant impacts from tariffs are expected in Q2 [38] Question: What is the strategy for mitigating tariffs? - The company is moving production out of China, negotiating factory cost concessions, and raising prices [101] Question: What are the expectations for the Kirk Geiger acquisition? - The company expects a more conservative revenue outlook for both the existing business and Kirk Geiger due to current market conditions [102] Question: How is consumer behavior changing in response to price increases? - Consumer demand is holding steady, but management is cautious about potential impacts from rising prices [68]
Steven Madden(SHOO) - 2025 Q1 - Earnings Call Transcript