Revenue was down and expenses were up in the first quarter as Steve Madden dealt with a wave of cancellations caused by the coronavirus pandemic.
In a Nutshell: Operating expenses as a percentage of revenue for the footwear, apparel and accessories company rose to 41.8 percent, compared to 28.2 percent in the comparable period last year. This, according to the company, was due to a “significant” loss of revenue stemming from wholesale cancellations in Q1.
CEO and chairman Edward Rosenfeld said Steve Madden’s brands got off to a strong start in 2020, pointing to revenue and earnings that were coming in above expectations prior to the crisis.
“Beginning in March, however, our business weakened materially due to the effects of the COVID-19 pandemic,” Rosenfeld said. “Since then, our top priority has been protecting the safety and well-being of our employees and the broader community, followed by ensuring the long-term viability and strength of our business.”
The company’s response has so far included the suspension of share repurchases and dividends along with significant reductions in payroll thanks to furloughs, non-essential operating expenses, capital expenditures and planned inventory receipts.
As of May, Steve Madden has also drawn $50 million from its existing credit facility.
Sales: Revenue fell by 13.6 percent in the first quarter to $359.2 million, compared to the $415.8 million recorded a year ago. Despite the loss, sales still came in above Wall Street’s estimate of $356.34 million.
Wholesale revenue fell 13 percent to $302.7 million with a 15 percent decline in footwear and a 5.4 percent decline in accessories and apparel, driven by “significant order cancellations in March” brought on by COVID-19.
Falling by 15.8 percent, retail revenue totaled $52.9 million for Steve Madden in the first quarter, down from $62.8 million in the comparable period a year prior.
Wholesale margins dropped to 32.5 percent due to inventory reserves taken in Q1 as necessitated by the pandemic, the company said. Meanwhile, retail margins rose to 59.8 percent from 58.5 percent, which the company owed to a modification of its loyalty program.
Earnings: Steve Madden recorded a net loss of $17.5 million in Q1, resulting in a loss of 22 cents per share compared to income of $34.5 million and EPS of 41 cents in the first quarter of FY19.
The average Wall Street estimation for earnings in the quarter was 2 cents.
CEOs Take: Rosenfeld said he expects Steve Madden’s robust balance sheet to carry the company through the pandemic-provoked downturn without significant damage to its brands and businesses.
“We entered this crisis with an exceptionally strong balance sheet, but we have nonetheless taken a number of precautionary but significant measures to preserve liquidity and enhance financial flexibility,” Rosenfeld said. “As we look ahead, we are confident that our strengths–including our brands, business model and balance sheet–will enable us to navigate this crisis and to thrive once conditions normalize.”