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Steve Madden Now Air Freights 30% of Goods

Steven Madden, Ltd., the designer and marketer of fashion-forward footwear, accessories and apparel for women, men and children, saw third-quarter revenue increase more than 52 percent to $528.7 million on total net income of $66.6 million. Despite supply chain headwinds, the owner of brands including namesake Steve Madden, Dolce Vita, Greats and BB Dakota, also raised its fiscal guidance for the year, anticipating a nearly 50 percent revenue jump.

In a Nutshell: The footwear company transported 30 percent of goods to the U.S. air freight, nearly double the 17 percent last year, and almost triple the 11 percent flown in 2019.

Dress shoes and boots are the top performers for the quarter as more shoppers return to work and social settings, with Steven Madden’s dress shoe penetration currently running ahead of where it was in 2019 “by a pretty significant margin,” CEO Edward Rosenfeld said in the call.

As more people flock back to dress shoes, inventories soared 83.4 percent to $201.2 million in the third quarter from $109.7 million last year, and were up approximately 36 percent from 2019 levels. But while there is a heavy total increase in inventory, the number on hand is down 16 percent, according to Zine Mazouzi, Steven Madden’s chief financial officer.

The in-transit numbers are up 229 percent year-over-year, Mazouzi said, and now represent approximately 51 percent of the footwear seller’s inventory at quarter-end. This percentage dwarfs the approximately 21 percent of product in transit two years ago.

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Gross margin increased to 41.6 percent, up from 40.3 percent in the same period of 2020 and 39 percent in 2019. Gross margin as a percentage of wholesale revenue declined to 33.6 percent from 34.6 percent in the year-ago quarter, and is down from 33.9 percent margin from two years ago. The declines result from increased freight rates, and was partially offset by higher average selling prices and lower markdowns.

Gross margin as a percentage of retail revenue rose to 65.9 percent from 63.8 percent in the period, and was up from the 63.3 percent margin in the third quarter of 2019. The increase was due to margin improvement in both digital and brick-and-mortar channels, driven by a reduction in promotional activity, which more than offset the headwinds from increased freight rates, according to Mazouzi.

“For Q3, the freight was about a 270-basis-point drag on the margin, and the GST (goods and services tax) was about 50 basis points,” Mazouzi said. “For Q4, we’re estimating that the freight will impact somewhere around 260 basis points.”

The footwear icon is raising its fiscal 2021 guidance, now expecting revenue will increase 50 percent to 52 percent over fiscal 2020. The company also expects diluted earnings per share will be in the range of $2.21 to $2.26 and adjusted diluted EPS will be in the range of $2.30 to $2.35.

These numbers come in ahead of the company’s initial anticipation of a 43 percent to 47 percent revenue increase over last year, and an adjusted diluted earnings per share in the range of $2.00 to $2.10.

As of Sept. 30, cash, cash equivalents and short-term investments totaled $259.9 million, slightly up from the $256.2 million last year. The company has no debt or borrowings. On Nov. 2, the company’s board of directors approved an increase in share buyback authorization from approximately $200 million to $250 million.

Net Sales: Total revenue including net sales and commission and licensing fee income increased 52.4 percent to $528.7 million compared to $346.9 million in the same period of 2020. Net sales were $525.1 million, up 53.1 percent from last year’s $342.8 million. On a two-year basis, revenue increased 5 percent.

Revenue for the wholesale business was $402 million, a 41.6 percent increase compared to the third quarter of 2020, with a 42.6 percent increase in wholesale footwear and a 38.7 percent increase in wholesale accessories/apparel. Overall U.S. wholesale footwear revenue remained down 4.6 percent compared to 2019 totals, primarily due to the impact from shipments that moved out into the fourth quarter due to supply chain delays.

Retail revenue was $123.1 million, a 108.6 percent increase compared to the third quarter of 2020. The segment’s revenue grew 62.5 percent in the quarter compared to 2019.

The company’s e-commerce business has seen outsized growth in 2021, with revenue increasing 83.7 percent versus 2020 and 200 percent versus 2019. E-commerce accounted for 49 percent of Steven Madden’s total retail segment sales in the quarter, compared to 26 percent in 2019.

Net Earnings: Net income attributable to Steven Madden, Ltd. was $66.6 million, or 82 cents per diluted share, compared to net losses of $7 million, or 9 cents per diluted share, in the same period of 2020. Adjusted net income for to the brands was $31.8 million, or 39 cents per diluted share, in the third quarter of 2020.

Income from operations totaled $88.4 million, or 16.7 percent of revenue, compared to a loss from operations of $3 million, or negative 0.9 percent of revenue, in the same period last year. Adjusted income from operations totaled $46.2 million, or 13.3 percent of revenue, in the third quarter of 2020.

CEO’s Take: Rosenfeld highlighted the company’s growth trajectory in Europe. Earlier this year, the footwear manufacturer acquired the remaining 49.9 percent of its European joint venture, with revenue leaping 45 percent on a two-year basis in the quarter.

“That business has continued to trend up, so it’ll actually do north of $60 million this year, which puts it over 85 percent ahead of where it was in 2019,” Rosenfeld said. “There’s very strong growth there. If you look at the EMEA region overall, we’re going to be close to $100 million this year.”