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Steven Madden (SHOO) Q4 Earnings & Revenues Beat, Fall Y/Y

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Steven Madden, Ltd. (SHOO - Free Report) reported better-than-expected results for fourth-quarter 2020. Although the coronavirus pandemic continued to hurt the company’s business, quarterly results surpassed management’s expectations and witnessed a sequential improvement. Its actions, including quickly adjusting merchandise assortments to cater to changed consumer preferences, enhancing digital initiatives and managing expense structure, have aided it to maneuver the pandemic-induced challenges. Meanwhile, strength in brands, a strong balance sheet and a robust business model appear encouraging.

Steven Madden delivered adjusted earnings of 27 cents a share, which beat the Zacks Consensus Estimate of 21 cents. However, the bottom line tumbled 30.8% from adjusted earnings of 39 cents reported in the year-ago quarter.

Total revenues plunged 15.9% year over year to $353 million. This takes into account a 15.9% decline in net sales of $349.1 million and a decrease of 17% in commission and licensing fee income of $3.9 million. Nonetheless, the metric comfortably surpassed the Zacks Consensus Estimate of $343 million. Moreover, the rate of revenue decline decelerated from 30.9% witnessed in the preceding quarter.


Steven Madden, Ltd. Price, Consensus and EPS Surprise Steven Madden, Ltd. Price, Consensus and EPS Surprise

Steven Madden, Ltd. price-consensus-eps-surprise-chart | Steven Madden, Ltd. Quote

Segment Performance

Revenues at the Wholesale business fell 16.2% to $263 million, reflecting a drop in wholesale footwear and accessories/apparel revenues. Wholesale footwear revenues tumbled 19.7% to $187.3 million. Wholesale accessories/apparel revenues dropped 5.9% to $65.7 million. We note that the pandemic continued to hurt this business, nevertheless the unit witnessed sequential improvement.

Retail revenues plunged 14.9% to $86.1 million owing to a sluggish brick-and-mortar business, somewhat offset by strength in e-commerce business.

Detailed Discussion

We note that cost of sales decreased 16.7% to $217.7 million and adjusted operating expenses dropped 13.2% to $109.2 million owing to the company’s cost-control measures.

Adjusted gross profit tumbled 15.1% year over year to $134.8 million, while adjusted gross margin expanded 40 basis points (bps) to 38.2%. We note that gross margin in the wholesale business contracted 90 bps to 28.3%, mainly owing to the closeout of surplus inventory from store closures and order cancellations related to the pandemic. However, retail gross margin expanded 400 bps to 65.6%, mainly buoyed by higher margins in e-commerce and stores owing to less discounting.

Further, the company reported operating income of $25.6 million, down 22.4% from the same quarter a year ago.

Steven Madden ended the fourth quarter with 218 company-operated retail outlets, comprising 66 stores and seven e-commerce sites along with 17 company-operated concessions in international markets. The company had reclosed 1/3 of its stores in the reported quarter on local government orders. Currently, nearly 34% of its stores in Canada remain shut but the rest of the stores worldwide have reopened. However, the company’s operation remained limited by about 25% on average.

Other Financial Aspects

Steven Madden, which carries a Zacks Rank #3 (Hold), ended the reported quarter with cash, cash equivalents and short-term investments of $287.2 million, and shareholders’ equity of $776.6 million, excluding non-controlling interest of $13.8 million. As of Dec 31, 2020, the company had no debt, and inventory was $101.4 million, down 26% year over year.

CapEx came in at $1.1 million during the reported quarter. The company generated net cash from operating activities of $44.2 million in 2020.

Further, the company's board reinstated a quarterly cash dividend of 15 cents per share, payable Mar 26, 2021, to stockholders of record as on Mar 16.

Things to Note

Given the pandemic uncertainties, management did not issue revenue and earnings guidance for 2021. For the year, Steven Madden is focused on creating trend-right products, deepening relations with customers via marketing, enhancing digital commerce agenda, expanding international markets including Europe, and efficiently controlling inventory and expenses. Strength in the company’s brands and a robust business model position it well to cash in on market-growth opportunities and boost stakeholders’ value in the long run. Moreover, the company expects an ongoing benefit, including $25 million of annual savings from the restructuring and $14 million of rent expense savings, for 2021.

Although management is confident of its long-term prospects as conditions normalize, it remains cautious about the near-term outlook regarding supply-chain disruption, elevated freight costs, store closures and lower store traffic and hours of operation. In fact, the company anticipates supply-chain disruption in relation to congestions and slowdowns at the ports to adversely affect first-quarter revenues by about $30 million. Taking this effect into consideration, management projects wholesale revenues to fall high-single digits and retail revenues to rise mid-single digits on a percentage basis year over year in the first quarter of 2021.

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