Steve Madden reported net sales increased 3.1 percent to $297.6 million compared to $288.7 million in the same period of 2012.
Retail comparable store sales increased 2.5 percent.
Gross margin expanded 110 basis points to 37.2 percent compared to 36.1 percent in the same period last year as a result of gross margin expansion across both the wholesale and retail businesses.
Consolidated operating expenses as a percentage of sales were flat at 23.1 percent.
Operating income totaled $45.6 million, or 15.3 percent of net sales, compared with operating income of $37.5 million, or 13.0 percent of net sales, in the same period of 2012. Operating income in the second quarter of 2012 included a $2.5 million charge for a class action lawsuit related to unauthorized text messaging and a $1.8 million charge for impairment of a note receivable from the company's former licensee for Betsey Johnson retail and apparel. Excluding these charges, operating income for the second quarter of 2012 was $41.8 million, or 14.5 percent of net sales.
Net income increased 7.6 percent to $29.0 million, or $0.65 per diluted share, compared to $26.9 million, or $0.61 per diluted share in the prior year's second quarter. Net income for the second quarter of 2012 included the aforementioned charges related to a class action lawsuit and note receivable impairment. On an after-tax basis, these charges negatively impacted net income by $2.6 million, or $0.06 per diluted share. During the second quarter of 2012, the company also recorded a $2.8 million, or $0.06 per diluted share, tax benefit for the year-to-date impact of a portion of earnings from the company's foreign operations that were reinvested indefinitely.
Edward Rosenfeld, Chairman and Chief Executive Officer, commented, “We achieved solid sales and earnings results in the second quarter despite a challenging retail environment. Through careful inventory management, we recorded gross margin increases in both the wholesale and retail businesses. The gross margin improvement, combined with well-controlled expenses, enabled us to deliver a robust year-over-year gain in operating profit margin. We believe these results underscore the power of our brands and our business model, and we remain confident about our long term growth prospects.”
Second Quarter 2013 Segment Results
Net sales from the wholesale business grew 1.3 percent to $251.4 million in the second quarter compared to $248.1 million in the second quarter of 2012, with growth in the wholesale accessories business par
tially offset by flat sales in the wholesale footwear business driven by a decline in our Topline division due to the loss of two private label customers. Gross margin in the wholesale business was 32.1 percent compared to 31.6 percent in last year's second quarter, driven by improvement in the Steve Madden Women's wholesale footwear division.
Retail net sales rose 13.9 percent to $46.2 million compared to $40.6 million in the second quarter of the prior year driven by the opening of 17 new stores since the end of the second quarter last year and a same store sales increase of 2.5 percent. Retail gross margin increased to 64.7 percent in the second quarter of 2013 compared to 63.7 percent in the second quarter of 2012 driven by fewer markdowns.
The company opened two Steve Madden full-price stores and one outlet store in the second quarter and ended the quarter with 113 company-operated retail locations, including 12 outlets and three Internet stores.
Balance Sheet and Cash Flow
During the quarter, the company repurchased 455,616 shares of the company's common stock for $21.6 million at an average price of $47.46 per share.
At the end of the second quarter, cash, cash equivalents, and current and non-current marketable securities totaled $290.1 million.
Company Outlook
The company reaffirms fiscal year 2013 guidance that net sales will increase 6 – 8 percent from 2012. Diluted EPS is expected to be in the range of $2.95 – $3.05.
