Steve Madden reported sales in the third quarter slipped 0.7 percent to $392 million. Net income was down 10.9 percent to $39.2 million, or 62 cents a share. The company said sales were softer than anticipated, particularly at its retail stores, due to a lack of strong fashion trends.
For the Third Quarter 2014:
- Net sales were $392.0 million compared to $394.8 million in the same period of 2013.
- Gross margin was 34.7 percent as compared to 35.4 percent in the same period last year.
- Operating expenses as a percentage of sales were 20.9 percent compared to 19.4 percent of sales in the same period of 2013.
- Operating income totaled $59.3 million, or 15.1 percent of net sales, compared with operating income of $68.1 million, or 17.2 percent of net sales, in the same period of 2013.
- Net income was $39.2 million, or $0.62 per diluted share, compared to $44.0 million, or $0.66 per diluted share in the prior year’s third quarter.
Edward Rosenfeld, chairman and chief executive officer, commented, As previously reported, business during the third quarter was softer than we anticipated, particularly in our retail segment, as we continue to be impacted by a lack of significant fashion footwear trends on which to capitalize. While near-term business trends are challenging, we are excited about the steps we took in the quarter to position the company for long-term growth. In August, we added a powerful contemporary footwear brand to our portfolio with the acquisition of Dolce Vita, and in September, we signed a definitive agreement to acquire our Mexican licensee, an important move in our continued international expansion.
Third Quarter 2014 Segment Results
Net sales from the wholesale business were $343.3 million in the third quarter compared to $345.9 million in the third quarter of 2013. Excluding the results of Dolce Vita, wholesale net sales decreased 4.9 percent compared to the prior year period. Gross margin in the wholesale business decreased to 31.3 percent compared to 31.9 percent in last years third quarter, due to the impact from Dolce Vita as well as increased markdown allowances.
Retail net sales were $48.7 million compared to $48.9 million in the third quarter of the prior year. The decrease in net sales was due to a same store sales decrease of 7.4 percent, offset by an increase in net sales resulting from the net opening of 11 new stores since the end of the third quarter last year. Increased promotional activity resulted in retail gross margin of 58.9 percent in the third quarter of 2014 compared to 60.2 percent in the third quarter of 2013.
During the third quarter, the company opened four outlet stores and acquired the Dolce Vita Internet store. The company also acquired, through a 50.1 percent interest in its South African joint venture, four Steve Madden stores in South Africa. Including the stores in South Africa, the company ended the quarter with 133 company-operated retail locations, including 28 outlets and four Internet stores.
The effective tax rate for the quarter of 35.0 percent compares to 36.5 percent in the third quarter of the prior year.
Balance Sheet and Cash Flow
During the quarter, the company repurchased approximately 1.1 million shares of the companys common stock for $36.1 million.
As of September 30, 2014, cash, cash equivalents, and current and non-current marketable securities totaled $189.5 million.
As previously announced, factoring in the recent acquisition of Dolce Vita and current expectations for the remainder of the year, for fiscal year 2014, the company expects that net sales will increase 1 percent to 2 percent over net sales in 2013. Diluted EPS for fiscal year 2014 is expected to be in the range of $1.81 to $1.86.
The company’s brands include Steve Madden, Steven by Steve Madden, Madden Girl, Freebird by Steven, Stevies, Betsey Johnson, Dolce Vita, DV by Dolce Vita, 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.