Steve Madden reported sales increased 9.2 percent in the first quarter, to $304.6 million compared to $278.9 million in the same period of 2013.
Gross margin was 35.6 percent as compared to 36.8 percent in the same period last year due primarily to increased promotional activity in the retail segment.
Operating expenses as a percentage of sales were 24.8 percent compared to 25.3 percent of sales in the same period of 2013 due to operating expense leverage on growing sales in the wholesale segment.
Operating income totaled $36.0 million, or 11.8 percent of net sales, compared with operating income of $36.4 million, or 13.1 percent of net sales, in the same period of 2013.
Net income increased to $23.6 million, or 36 cents per diluted share, compared to $23.4 million, or 35 cents per diluted share in the prior year's first quarter, adjusted for the three-for-two stock split effective October 2, 2013.
Edward Rosenfeld, Chairman and Chief Executive Officer, commented, “We were pleased to deliver solid overall financial results in the first quarter in a difficult environment. While a lack of fashion footwear trends and the soft overall retail climate continued to challenge our retail segment, our wholesale business was outstanding. Wholesale net sales increased 13.3 percent, led by strong growth across all Steve Madden brands. We also added a luxury brand to our portfolio in the quarter with our acquisition of majority ownership in the Brian Atwood® intellectual property. Looking ahead, we remain on track to meet our sales and earnings targets for the year.”
First Quarter 2014 Segment Results
Net sales from the wholesale business grew 13.3 percent to $265.0 million in the first quarter compared to $233.9 million in the first quarter of 2013, including double-digit percentage gains in the Steve Madden Women’s, Steve Madden Men’s and Madden Girl wholesale footwear divisions. Gross margin in the wholesale business was 32.6 percent compared to 32.3 percent in last year’s first quarter, driven by improvement in both branded and private label wholesale footwear margins. Retail net sales decreased 12.1 percent to $39.6 million compared to $45.1 million in the first quarter of the prior year. The increase in net sales resulting from the net opening of 13 new stores since the end of the first quarter last year was more than offset by a same store sales decrease of 17.2 percent for the first quarter of 2014. Increased promotional activity resulted in retail gross margin of 55.7 percent in the first quarter of 2014 compared to 60.3 percent in the first quarter of 2013.
During the first quarter, the Company opened one full-price store and three outlet stores and closed two full-price stores. The Company ended the quarter with 123 company-operated retail locations, including 20 outlets and four Internet stores.
The effective tax rate for the quarter of 35.1 percent compares to 37.0 percent in the first quarter of the prior year. The decline in the rate is driven by the Company’s reinvestment of foreign earnings in foreign locations.
Balance Sheet and Cash Flow
During the quarter, the Company repurchased approximately 0.9 million shares of the Company’s common stock for $29.3 million. On April 29, 2014, the Company’s Board of Directors approved a continuation of the Company’s stock repurchase program for up to $150 million of the Company’s common stock.
As of March 31, 2014, cash, cash equivalents, and current and non-current marketable securities totaled $275.7 million.
Company Outlook
For fiscal year 2014, the Company continues to expect that net sales will increase 5 percent to 7 percent over net sales in 2013. Diluted EPS for fiscal year 2014 is expected to be in the range of $2.05 to $2.15, unchanged from previous guidance.
In addition to marketing products under its owned brands including Steve Madden®, Steven by Steve Madden®, Madden Girl®, Freebird by Steven®, Stevies®, Betsey Johnson®, Betseyville®, Brian Atwood®, B Brian Atwood®, Report Signature®, Report®, Big Buddha®, Wild Pair®, Cejon® and Mad Love®, the Company is the licensee of various brands, including Olsenboye® for footwear, handbags and belts and Superga® and l.e.i.® for footwear.
