The impact of record levels of congestion at the West Coast ports is starting to show up in earnings reports for major shoe players.
Steven Madden Ltd. today signaled caution about the negative effects of congestion at the country’s busiest ports, the ports of Los Angeles and Long Beach, on its supply chain in the months ahead — noting that such disruption could significantly contribute to a $30 million revenue impact in Q1.
“We are cautious on the near-term outlook due to headwinds that include supply chain disruption, higher freight costs … store closures and reduced store traffic and hours of operation,” CEO Ed Rosenfeld told analysts during a conference call to discuss the company’s fourth-quarter results.
For the past few weeks, the ports in Southern California have seen record levels of congestion stemming from COVID-19 interruptions and increased shipping volume. And Rosenfeld said the company is seeing shipping lead times that are extended by, on average, three to four weeks making congestion at the ports Steve Madden’s “biggest” supply chain issue.
“For a company that turns their inventory as quickly as we do and really operates in sort of a ‘just-in-time’ model, it’s pretty challenging, and it’s having an impact,” he added.
Indeed, speed-to-market and agility in responding to trend shifts have long been markers of Madden’s business — and they’re tools the company has had to rely on heavily in recent months as COVID-19 pressured categories such as dress shoes and sandals.
For instance, Rosenfeld told analysts the company took “swift action” in 2020 to adjust its merchandise assortments to align with rapidly changing consumer preferences, leaning into more casual and comfortable styles while deemphasizing dressier products.
More recently, however, Rosenfeld said the company is starting to see momentum in sandals and certain dress styles that typically perform during the spring — although he doubled down on caution that port issues could create hurdles in getting those products out.
“It’s been a little frustrating for us because we’ve got some spring styles that we feel very, very good about overall and the customer is really responding to them,” Rosenfeld said. “We’ve got some sneakers that are phenomenal. In the sandal category, we’re doing really well. We’ve got flat sandals that the customer is really responding to and even dress sandals, anything with big jewels on it [and] oversized embellishment [as well as] wovens.”
He added, “We’ve got a lot of different things happening, but unfortunately, we’re just not able to get enough of it into the stores and up on folks sites right now because of the supply chain disruption.”
Rosenfeld further indicated that he expects — although the firm is not issuing guidance — that “a good chunk of the goods that we would have otherwise delivered to wholesale customers, say, in March, we believe will go out in Q2.”
For the three months ended Dec. 31, the fashion footwear retailer logged adjusted profits of $21.8 million, or earnings of 27 cents per share, compared with the prior year period’s $32.2 million, or 39 cents per share. Wall Street had predicted earnings of 27 cents per share. Revenues were down 15.9% to $353 million but still beat analysts’ estimates of $345.7 million.
For the full year, Steve Madden’s revenues fell 32.8% to $1.2 billion. On an adjusted basis, its income was $51.8 million, or earnings of 64 cents per share, versus the prior year’s $162.8 million, or $1.95 per share.
At the end of 2020, the company had cash, equivalents and short-term investments totaling $287.2 million, and its board of directors have approved the reinstatement of a quarterly cash dividend of 15 cents per share.