Madden Weathers Tough Conditions in Q3

With unpredictable temperatures and slower retail traffic, Steven Madden Ltd. faced considerable headwinds in its third quarter. But the firm took on the challenges, beating revenue expectations and meeting Wall Street estimates.

Analysts said that despite any difficulties, the company’s agile structure and fashion-forward eye helped drive sales and market share.

“It was a really tough retail environment,” said Camilo Lyons, an analyst with Canaccord Genuity. “It was most important to hear that there was an improvement in the weather pattern [for October] and an increase in sales of boots and booties. It means the intent to buy is still there with the consumer.”

Still, the real test will be the holiday selling season, noted Sam Poser, an analyst with Sterne Agee. “As they said on the call, there were fewer big ideas in fashion than a year ago,” Poser said. “There are a lot of booties. It’s hard to distinguish yourself with those now.”

For the period ended Sept. 30, net income rose 16.1 percent to $44 million, or 66 cents a diluted share, compared with $37.8 million, or 57 cents, in the same quarter of 2012. Analysts had predicted the company would earn 66 cents a share.

The firm’s net sales for the quarter hit $394.8 million, a 10.6 percent increase over $356.9 million in the year-ago period. Analysts estimated Madden’s sales at $384.5 million. 

While comparable-store sales decreased 3.5 percent, the company reported strength in its wholesale business. Wholesale revenues rose 11 percent to $345.9 million, compared with a year ago. The Steve Madden and Madden Girl brands grew in the U.S. and also in key international markets, including China, Mexico, Dubai and Canada.

“Our wholesale footwear business exhibited broad-based strength, with 11 percent growth in branded footwear and 38 percent growth in private-label footwear. Our accessories business was more challenging. … Our retail business was also softer than expected, due in large part to weak retail traffic trends,” Ed Rosenfeld, chairman and CEO of the firm, said in a statement. “Despite these challenges, we believe this quarter demonstrated that our flagship Steve Madden brand is stronger than ever. We recorded double-digit percentage gains in our Steve Madden wholesale business in both footwear and accessories, both domestically and abroad, as well as in our Steve Madden men’s and Madden Girl wholesale footwear businesses.”

The wholesale accessories business trended down, a result of the decline in receipts for cold-weather accessories, the company said. As expected, retailers were cautious after two mild winters.

“[The Madden team has] managed the business incredibility well,” said Lyons.

The company reaffirmed the fiscal year guidance that earnings per share will be between $1.97 and $2.03, and net sales will increase roughly 6 percent to 8 percent.

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