Steve Madden reported sales for the second quarter increased 0.6 percent to $325.4 million compared to $323.6 million in the same period of 2015.
Net income was $24.7 million, or $0.42 per diluted share, compared to $24.5 million, or $0.40 per diluted share, in the prior year’s second quarter.
Gross margin expanded 130 basis points to 37.2 percent as compared to 35.9 percent in the same period last year. Operating expenses as a percentage of sales were 27.0 percent compared to 25.5 percent of sales in the same period of 2015. Operating income totaled $35.9 million, or 11.0 percent of net sales, compared with operating income of $36.8 million, or 11.4 percent of net sales, in the same period of 2015.
Edward Rosenfeld, chairman and chief executive officer, commented, “We were pleased with our second quarter performance, which was highlighted by robust gains in our Steve Madden Women’s and Dolce Vita wholesale footwear divisions as well as continued strong comparable store sales growth in our retail segment. While these core businesses are meeting or exceeding expectations, we are seeing softer than anticipated trends in our private label footwear business and with certain international distributors. Therefore, we are adjusting our sales outlook and now expect net sales for 2016 to increase 0 percent to 1 percent compared to 2015. Despite the lower sales expectation, we continue to expect that diluted EPS will be in the range of $1.93 to $2.03 due to better than anticipated gross margin trends and a reduction in our forecasted full year tax rate.”
Second Quarter 2016 Segment Results
Net sales for the wholesale business were $262.9 million in the second quarter of 2016 compared to $266.7 million in the second quarter of 2015. Gross margin in the wholesale business increased to 31.1 percent compared to 29.8 percent in last year’s second quarter, driven by improvement in the wholesale footwear segment.
Retail net sales in the second quarter were $62.5 million compared to $56.9 million in the second quarter of the prior year. Same store sales increased 5.4 percent for the second quarter. Retail gross margin decreased to 62.8 percent in 2016’s second quarter compared to 64.5 percent in the second quarter of 2015, due to the positive impact in the second quarter of 2015 of insurance proceeds related to prior-period losses, as well as the second-quarter negative impact in 2016 of a stronger U.S. dollar on the company’s international retail businesses.
During the second quarter, the company opened 2 full price stores and 7 outlet locations. The company ended the quarter with 180 company-operated retail locations, including 4 internet stores.
The effective tax rate for the second quarter of 2016 was 32.0 percent compared to 33.9 percent in the second quarter of the prior year.
Balance Sheet and Cash Flow
During the second quarter of 2016, the company repurchased 792,933 shares of common stock for approximately $27 million, which includes shares acquired through the net settlement of employee stock awards.
As of June 30, 2016, cash, cash equivalents and current and non-current marketable securities totaled $199 million.
Company Outlook
Steve Madden has adjusted its sales outlook for fiscal year 2016. The company now expects that net sales will increase 0 to 1 percent over net sales in 2015. The Company continues to expect diluted EPS for fiscal year 2016 to be in the range of $1.93 to $2.03.
