Steven Madden's CEO Discusses Q2 2012 Results - Earnings Call Transcript

Steven Madden, Ltd. (SHOO)

Q2 2012 Results Earnings Call

July 26, 2012 8:30 AM ET

Executives

Jean Fontana – ICR, IR

Ed Rosenfeld – Chairman and CEO

Analysts

Jeff Van Sinderen – B. Riley

Kate McShane – Citi Research

Scott Krasik – BB&T Capital Markets

Camilo Lyon – Canaccord Genuity

Jane Thorn Leeson – KeyBanc

Corinna Freedman – Wedbush Securities

Steve Marotta – C.L. King & Associates

Sam Poser – Sterne, Agee

Presentation

Operator

Please standby as we are about to begin. Good day, everyone. And welcome to the Steve Madden Limited Second Quarter Fiscal 2012 Earnings Conference Call. Today's call is being recorded.

For opening remarks and introduction, I would like to turn the call over to Jean Fontana of ICR. Please go ahead, ma’am.

Jean Fontana

Thank you. Good morning, everyone. Thank you for joining us today for the discussion of Steve Madden's second quarter 2012 earnings results. Before we begin, I would like to remind you that statements made 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 risks and uncertainties and other unknown facts, that could cause actual results of the company to differ materially from historical results, or any future results expressed or implied by forward-looking statements.

The statements contained herein are also subject generally to other risks and uncertainties as described from time-to-time in the company's reports and registration statement filed with the SEC.

Also please refer to the earnings release for more information on risk factors that could cause actual results to differ. Finally, please note that any forward-looking statements used in today's 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, everyone. And thank you for joining us today, as we review our second quarter results and discuss our outlook for the remainder of the year. Second quarter of 2012 was in some respects a more challenging quarter than we have seen in some time.

The overall retail environment soften somewhat during the quarter and fashion footwear in particular was challenged by weakness in the sandal category. Nevertheless, we delivered strong financial results with net sales increasing 38% from the prior year to $288.7 million and net income up 13.1% to 26.9 million or $0.61 per diluted share.

We believe this solid performance in the face of a challenging environment is a testament to the power of our brands, talent of Steve and his design team, and the enduring strength of our business model.

Importantly, we also continue to make progress in each of the four major growth areas we outlined at the beginning of the year: One, new brands; two, direct-to-consumer; three, categories outside footwear; and four, international.

Before I get into the details of our second quarter performance, I’d like to touch briefly on the highlights with regard to each of those growth opportunities.

First growth area is expanding new brands. For spring of this year, we launched Superga, a fashion sneaker brand out of Italy for which we have been licensee for North America. Superga is 101-year old brand with a great heritage and an iconic style, the classic canvas sneaker call the 2750. While Superga is well known throughout Europe, prior to our involvement, it had very little presence in North America.

We knew we needed to do some creative marketing to position the brand in the United States. After signing the license agreement, we installed Ashley Olsen and Mary-Kate Olsen as creative directors for Superga and also partnered with them on the collaboration with their designer brand The Row.

The Row for Superga collection consists of the Classic 2750, a luxurious fabrications like Italian Linen and Cashmere. Initial shipments of the collaboration sold out quickly of retailers, including Bergdorf Goodman, Neiman Marcus and Barneys.

We also opened the Superga flagship store on Crosby Street in SoHo. In connection with the opening Ashley and Mary-Kate hosted a launch party that generated outstanding coverage in both traditional press and the blogosphere. These efforts have served to create enormous buzz around the brand and so far the launch of Superga has exceeded all expectations.

Regular Superga line is currently carrying retailers like Nordstrom, Bloomingdale's and J.Crew, as well as top independent boutiques across the country. Initial sell-throughs has been nothing short of outstanding. We are very excited about the opportunity with this brand as we move ahead.

Our next brand introduction comes this quarter, with the launch of Betseyville, as an exclusive brand J.C. Penney. The first Betseyville product ships at the end of August and will be on the floor at the beginning of September.

We will be doing footwear, handbags, fashion scarves, cold weather accessories and sunglasses in-house, and we have licensed now jewelry, watches, intimate apparel and hosiery. Betseyville will be carrying approximately 600 J.C. Penney doors.

The second big growth opportunity we have outlined is expanding our direct-to-consumer business, after shrinking the store base by 17% from 2007 to 2011 as we focused on improving the profitability of the existing stores. We now have a rejuvenated and highly profitable retail business and we are once again in expansion mode in 2012.

We now expect to open 13 Steve Madden full-price stores and five Steve Madden outlets in 2012, in addition to the one Superga store, I mentioned earlier. We also acquired seven stores in the acquisition of SM Canada, and we are adding e-commerce store as well.

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