Despite industry wide challenges that seemed to plague its competitors, Steve Madden Ltd. pulled off a “solid” Q3 that beat market watchers forecasts in a tough economic environment.
Among the quarter’s highlights were a double-digit percentage increase in comparative store sales and a 5.5 percent year-over-year rise in revenues.
“Our retail segment was again a standout. Comparable store sales grew 11.2 percent with double-digit comp gains in both full price and outlet channels,” said chairman and CEO Ed Rosenfeld during the firm’s Q3 conference call. “Our retail business continues to benefit from trend right merchandise across a number of categories. Open dress shoes, which have been strong for us all year, lead the way. Our sandals also performed well remaining strong through September as unseasonably warm weather and the customers buy now, wear now mentality lengthened the season.”
Boots and booties, Rosenfeld said, got off to a slow start due to warmer temperatures, although there has been an uptick now that temperatures have cooled off.
In the company’s wholesale accessories business, net sales increased 11.7 percent while international revenues improved 32 percent year-over-year.
Based on lower-than-anticipated back half sales in its private label footwear business however, the company adjusted down its sales outlook but maintained its earnings per share guidance.
Steve Madden’s share price had gained more than 5 percent at press time.
Net Income: Net income rose 9.3 percent to $42.9 million from $39.2 million in the prior year’s third quarter.
EPS: Earnings per diluted shares increased year-over-year to 70 cents per share from the comparable quarter when diluted EPS were 62 cents.
Net Revenue: Net sales increased 5.5 percent to $413.5 million compared to $392 million in the same period of 2014.
Hit, Miss or Beat: Steve Madden beat Wall Street’s estimates for EPS and missed its forecasts for revenues. Analysts polled by Yahoo Finance had predicted EPS of 67 cents and revenues of $416.6 million.
Executive Insights: “We are pleased with our third quarter results, which included an increase in diluted EPS of 13 percent compared to the prior year period… We also benefited from earnings contributions from the recently acquired Dolce Vita, Blondo and SM Mexico. While the overall retail environment is choppy, we are pleased with the momentum in our business and remain on track to meet our earnings targets for the year.” — Rosenfeld in a release
Looking Ahead: Based on lower-than-anticipated back half sales in its private label footwear business, the company has adjusted its sales outlook for fiscal year 2015. The company now expects that net sales will increase 6 percent to 7 percent over net sales in 2014. The company continues to expect diluted EPS for fiscal year 2015 to be in the range of $1.85 to $1.95.
Analyst Insights: “The Steve Madden women’s business, as well as Steve Madden Men’s, Blondo, and other better brands appear to be very healthy as indicated by the strong same store sales and wholesale margins. Margin growth should continue in the coming quarters as the recent acquisitions of Dolce Vita and Blondo gain more scale and traction. We remain confident that Steve Madden and its better brands are gaining share in department stores. We expect that share gain to further accelerate in 1Q16 as the Dolce Vita line is re-launched, and its sub-brand DV is introduced in a large mass retailer.” —Sterne Agee CRT analyst Sam Poser
“Given the traffic challenges in the market, we believe this earnings demonstrates that Steve Madden is performing well and leading the category… We reiterate our buy rating… Solid Q3 beat in challenging economic environment.” — Canaccord Genuity Inc. analyst Camilo Lyon