Steve Madden reported sales increased 13.7 percent in the third quarter ended Sept. 30, to $356.9 million. Retail comparable store sales increased 8.6 percent.

Other highlights of the quarter:

  • Gross margin improved to 36.8 percent compared to 34.9 percent in the third quarter of 2011.
  • The effective tax rate was 35.4 percent compared to 39.0 percent in the prior year’s third quarter due to the reinvestment, indefinitely, of a portion of earnings from the company’s foreign operations in such foreign operations.
  • Net income was $37.9 million, or $0.86 per diluted share. Net income included a $5.1 million impairment charge and a $0.9 million charge for bad debt, both related to the bankruptcy of Bakers Footwear Group. On an after-tax basis, these charges negatively impacted net income by $3.7 million, or $0.08 per diluted share. Net income in the third quarter of 2011 was $31.9 million, or $0.74 per diluted share.

Edward Rosenfeld, Chairman and Chief Executive Officer, commented, “We saw continued strength in the business during the third quarter, delivering the highest quarterly sales and earnings in the company’s 22 year history. We achieved double-digit sales growth, gross margin improvement and operating expense leverage in both our wholesale and retail businesses in the quarter. Our flagship Steve Madden brand performed particularly well, as consumers continue to respond to our fashion-forward, on-trend product. Overall, we are pleased with the momentum in our business and are confident that we can continue to drive strong sales and earnings growth in the balance of 2012 and beyond.”

Third Quarter 2012 Results

Third quarter net sales increased 13.7 percent to $356.9 million compared to $313.9 million in the same period of 2011. Net sales from the wholesale business grew 12.0 percent to $311.5 million compared to $278.3 million in the third quarter of 2011, driven by strong growth in the Steve Madden Women’s business as well as the benefit from the acquisition of SM Canada. Retail net sales rose 27.2 percent to $45.3 million compared to $35.6 million in the third quarter of the prior year. Same store sales increased 8.6 percent following a 13.2 percent increase in the prior year’s third quarter.

Gross margin expanded 190 basis points to 36.8 percent in the third quarter of 2012 compared to 34.9 percent in the same period last year. Gross margin in the wholesale business was 33.3 percent compared to 31.9 percent in the prior year's third quarter, with improvements in both the wholesale footwear and wholesale accessories businesses. Retail gross margin increased to 60.7 percent in the third quarter of 2012 compared to 58.4 percent in the third quarter of 2011, due primarily to the impact from the higher-margin SM Canada retail business as well as reduced promotional activity.

Operating expenses as a percentage of sales remained flat to the prior year’s third quarter at 20.6 percent as a result of leverage on higher sales in both wholesale and retail, offset by an increased mix of retail, which has higher operating expenses as a percentage of sales than the wholesale business.

Operating income for the third quarter was $56.4 million, or 15.8 percent of net sales. Excluding the aforementioned charges for impairment and bad debt related to the bankruptcy of Bakers Footwear Group, operating income for the third quarter was $62.4 million, or 17.5 percent of net sales, compared to operating income of $50.5 million, or 16.1 percent of net sales, in the same period of 2011.

Third quarter net income was $37.9 million, or $0.86 per diluted share. Net income included a $5.1 million impairment charge and a $0.9 million charge for bad debt, both related to the bankruptcy of Bakers Footwear Group. On an after-tax basis, these charge negatively impacted net income by $3.7 million, or $0.08 per diluted share. Net income in the third quarter of 2011 was $31.9 million, or $0.74 per diluted share.

The company opened three Steve Madden full-price stores in the third quarter and ended the quarter with 99 company-operated retail locations, including eight outlets and two Internet stores.

For the First Nine Months of 2012:

For the first nine months of 2012, net sales increased 32.3 percent to $911.5 million from $688.8 million in the comparable period last year.
Net income was $86.7 million, or $1.97 per diluted share, for the first nine months of 2012. Net income for the first nine months of 2011 was $73.5 million, or $1.70 per diluted share.

At the end of the third quarter, cash, cash equivalents and marketable securities totaled $154.4 million.

Outlook

For fiscal 2012, the company now expects that net sales will increase 25 – 26 percent from 2011. Diluted EPS is now expected to be in the range of $2.64 – $2.69. The current EPS guidance includes the aforementioned charges for impairment and bad debt related to the bankruptcy of Bakers Footwear Group, which were not included in the previous EPS guidance of $2.67 – $2.77 and negatively impacted EPS by $0.08.