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Steve Madden Says Wholesale Cancelations Fueled $16.6M Q2 Loss

Hurt by store closures due to the coronavirus pandemic and cancelled orders in the wholesale channel, Steve Madden saw red in the second quarter.

In a Nutshell: The impact from the coronavirus, or COVID-19, pandemic has hurt many brands and retailers as nonessential retails were forced to temporarily shut down due to shelter-in-place orders, and footwear and accessories firm Steve Madden was no exception.

“The past few have been challenging for all of us due to the COVID-19 pandemic,” said Edward Rosenfeld, chairman and CEO. “We are encouraged by the strong performance we are seeing in digital commerce channels–including 88% revenue growth on in the second quarter—which underscores the strength of our brands and the continued consumer demand for our products.”

The company has $356.9 million in cash, cash equivalents and marketable securities totaling $356.9 million, while advances from its factor totaled $42.7 million. Steve Madden also recently entered into a new $150 million five-year asset-based revolving credit facility with its factor.

Second-quarter revenue was below investment bank CL King’s estimate of $193 million and even below Wall Street’s low estimate of $147 million, giving analyst Steven Marotta some cause for concern. Although considered one of the best-managed footwear firms across the industry, the key will be its ability to right-size its expense structure to fit the “new normal,” Marotta said.

“With over $350 million in cash [and a] new $150 million asset-backed credit facility, the company has ample liquidity to ride out the storm,” he added. “We are a bit more negative on the macro-environment, however, and remain ‘Neutral’ on the stock at this time.”

Net Sales: For the three months ended June 30, total revenue was down 68.2 percent to $142.8 million from $449.6 million and net sales also fell a corresponding 68.2 percent to $141.4 million from $445.0 million. The balance of revenue was from commission and licensing fee income.

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Retail revenue fell 49.2 percent to $41.4 million as most of its stores closed because of the COVID-19 outbreak. Sales were partially offset by strong performance in the company’s e-commerce business, Steve Madden said.

The company said wholesale sales fell 72.5 percent to $100.0 million, which included a 72.8 percent decline in wholesale footwear and a 71.5 percent drop in wholesale accessories and apparel. “The revenue decline was driven by significant order cancellations resulting from the COVID-19 pandemic,” it added.

For the six months, net sales dropped 41.9 percent to $497.0 million from $855.9 million.

Earnings: The net loss for the quarter is $16.6 million, or 21 cents a diluted share, against net earnings of $36.6 million, or 44 cents, a year ago. On an adjusted basis, the net loss was $14.7 million, or 19 cents a diluted share.

Wall Street’s estimate called for an adjusted diluted EPS loss of 27 cents on revenue of $183.5 million.

For the half, the loss was $34.0 million, or 43 cents, against net income of $71.1 million, or 85 cents, in the year-ago period.

Steve Madden said it wasn’t providing guidance due to the continued disruption and uncertainty related to COVID-19.

CEO’s Take: “We know the path forward will continue to be bumpy in the near-term, but we are confident that our strengths–powerful brands, a fortress balance sheet, a proven business model and most of all, our talented and dedicated employees–will enable us to successfully navigate this crisis and return to profitable growth once conditions normalize,” Rosenfeld said.