Steve Madden reported sales in the second quarter were $295.7 million compared to $297.6 million in the same period of 2013.

Other highlights:

  • Gross margin was 36.2 percent as compared to 37.2 percent in the same period last year due to increased promotional activity in the retail and wholesale segments.
  • Operating expenses as a percentage of sales were 23.6 percent compared to 23.1 percent of sales in the same period of 2013.
  • Operating income totaled $40.3 million, or 13.6 percent of net sales, compared with operating income of $45.6 million, or 15.3 percent of net sales, in the same period of 2013.
  • Net income was $28.0 million, or $0.44 per diluted share, compared to $29.0 million, or $0.43 per diluted share in the prior year's second quarter, adjusted for the three-for-two stock split effective October 2, 2013.

Edward Rosenfeld, chairman and chief executive officer, commented, “The second quarter proved difficult for Steve Madden, as we continued to face a challenging retail environment, weak mall traffic, and a women’s footwear market with few significant fashion trends. In our wholesale segment, our branded footwear business grew sales in the mid-single digits range, led by our Steve Madden Men’s, Steve Madden Women’s, and Steven lines, while our private label footwear business experienced a sales decrease, as expected, due primarily to a temporary reduction in sales with one customer during the quarter. We also had a strong sales gain in our wholesale accessories business, driven primarily by growth in private label accessories. On the retail side, the absence of fashion drivers and continued weak traffic negatively impacted our full-price stores, while our outlet stores had a modest comparable store sales increase. Finally, we saw solid gains in our international business during the quarter. While we are confident that the long-term growth prospects for our company remain strong, based on current trends we are lowering our guidance for the full year. This is due primarily to a reduction in our forecast for the wholesale accessories segment due to pressure on our branded handbag business. We will continue to carefully manage our inventory and control costs as we work through this tough environment.”

Second Quarter 2014 Segment Results

Net sales from the wholesale business were $249.8 million in the second quarter compared to $251.4 million in the second quarter of 2013, including a solid gain in the branded footwear business and strong growth in wholesale accessories, offset by a decrease in private label footwear. Gross margin in the wholesale business was 31.3 percent compared to 32.1 percent in last year’s second quarter, due primarily to increased markdown allowances.

Retail net sales were $45.9 million compared to $46.2 million in the second quarter of the prior year. The decrease in net sales was due to a same store sales decrease of 8.5 percent partially offset by an increase in net sales resulting from the net opening of 11 new stores since the end of the second quarter last year. Increased promotional activity resulted in retail gross margin of 62.8 percent in the second quarter of 2014 compared to 64.7 percent in the second quarter of 2013.

During the second quarter, the company opened four outlet stores and closed two full-price stores and one Internet store. The company ended the quarter with 124 company-operated retail locations, including 24 outlets and three Internet stores.

The effective tax rate for the quarter of 32.0 percent compares to 36.7 percent in the second quarter of the prior year. The effective rate for the quarter includes a benefit of $1.3 million related to prior year state tax refunds.

Balance Sheet and Cash Flow

During the quarter, the company repurchased approximately 1.1 million shares of the company’s common stock for $36.3 million.

As of June 30, 2014, cash, cash equivalents, and current and non-current marketable securities totaled $282.7 million.

Outlook

Based on second quarter results and updated expectation for the second half of the year, for fiscal year 2014, the company now expects that net sales will increase 2 percent to 4 percent over net sales in 2013. Diluted EPS for fiscal year 2014 is now expected to be in the range of $2.00 to $2.10.