Steve Madden, Ltd. Q2 2010 Earnings Call Transcript

Steve Madden, Ltd. Q2 2010 Earnings Call Transcript
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Steve Madden, Ltd. (SHOO)

Q2 2010 Earnings Call Transcript

July 29, 2010 8:30 am ET


Jean Fontana – IR, ICR Inc.

Ed Rosenfeld – Chairman & CEO


Claire Gallagher – CapStone Investments

Kelly Hauser – BB&T Capital Markets

Jeff Van Sinderen – B. Riley

Sam Poser – Sterne Agee

Heather Boksen – Sidoti & Company



Good day, everyone and welcome to the Steve Madden, Ltd. 2010 second quarter earnings conference call. Today’s call is being recorded.

For opening remarks and introductions, I would like to turn the call over to Ms. Jean Fontana of ICR. Please go ahead, Ms. Fontana.

Jean Fontana

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Thank you. Good morning, everyone. Thank you for joining us for the discussion of Steve Madden’s second quarter 2010 earnings results. Before we begin, I would like to remind you that statements in this conference call that are not statements of historical or current facts constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Such forward-looking statements involve known and unknown risks and uncertainties and other unknown facts that could cause actual results to be materially different from historical results or any future results expressed or implied by such forward-looking statements.

Statements contained herein are also subject to generally other risks and uncertainties that are described from time to time in the company’s reports and registration statements filed with the SEC. Also, please refer to today’s earnings release for more information on risk factors; this could cause actual results to differ. Finally, please note that any forward-looking statements in this or used in this conference call cannot be relied upon as current after this date.

I would now like to turn the call over to Ed Rosenfeld, Chairman and CEO of Steve Madden.

Ed Rosenfeld

Thanks, Jean. Good morning and thank you for joining us today. We are very pleased to report that we delivered the highest sales and earnings results in the company's history in the second quarter.

During the quarter, consolidated net sales increased 36% to $158.7 million and net income grew to $19.8 million, a 63% increase compared to the second quarter of last year. Our performance reflects strong momentum in our core business, as well as significant contributions from our newer business ventures.

On the wholesale side, we achieved strong gains in our core Steve Madden Women's, Steven by Steve Madden, and Madden Girl wholesale footwear divisions. We also continued to see outstanding growth from our Men's business with a substantial increase in our Steve Madden Men's division, supplemented by a strong contribution from our new men's brand, Madden. International also accelerated, recording top line growth in excess of 50%, driven by big year-over-year increases with our existing partners in Asia and Canada, as well as incremental business with new partners in Israel and Australia.

Whole accessories was another bright spot with a 79% net sales increase, resulting from 18% organic growth in addition to the sales contributions from our two recent acquisitions, Madden Zone and Big Buddha. I am very pleased with these acquisitions, both of which are exceeding expectations for sales and earnings.

Meanwhile, our retail business delivered increased profitability for the sixth straight quarter, driven by a 7.4% comp store sales growth and 350 basis points of gross margin expansion. Overall, we believe that our ability to deliver outstanding growth in a still challenging retail environment demonstrates the unique capabilities of Steve and his design team; strength of our brand portfolio; benefits of our diversification by channel, product, and category; and the resiliency of our business model.

Turning to the details of our financial results for the quarter. As I said [ph], consolidated net sales for the second quarter of fiscal 2010 were $158.7 million, a 36% increase over the second quarter of 2009.

Wholesale net sales increased 46% to $129.2 million compared to $88.2 million in the second quarter of 2009, driven by gains in both our wholesale footwear and accessories divisions. Wholesale footwear net sales increased 40% in the second quarter to $104.2 million compared to $74.2 million last year. This increase was driven by solid gains across all existing wholesale footwear divisions, as well as contributions from our new men's brand, Madden, launched in the fourth quarter of 2009 and the mass-merchant business which transitioned from a buying agency model to a selling agency model this year.

Net sales in our wholesale accessories business grew 79% to $25 million in the second quarter of 2010 as compared to $14 million in the second – same quarter last year. As stated earlier, this was a combination of the addition of Madden Zone, acquired in July 2009, and Big Buddha Handbags, acquired in February 2010 with 18% organic growth, driven by the exceptional performance of Steve Madden Handbags and strong growth in private-label belts.

In our retail division, net sales increased 4% to $29.5 million versus $28.3 million in last year's second quarter, driven by a comparable store sales increase of 7.4%, offset by 10 net store closings since the beginning of second quarter last year. Comp increases, primarily driven by higher AURs, as a result of a mix shift toward wedges and dress shoes, and away from flat sandals. Sales per square foot grew to $690 at stores opened for the 12 months ended June 30th, 2010 compared to $627 in sales per square foot for stores opened for the 12 months ended June 30th, 2009.

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