Steven Madden, Ltd. (NASDAQ:SHOO) Q1 2024 Earnings Call Transcript May 1, 2024
Steven Madden, Ltd. beats earnings expectations. Reported EPS is $0.65, expectations were $0.56. SHOO isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good day, and thank you for standing by. Welcome to the Steven Madden First Quarter 2024 Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Danielle McCoy, VP of Corporate Development and Investor Relations. Please go ahead.
Danielle McCoy: Thanks, Didi and good morning, everyone. Thank you for joining our first quarter 2024 earnings call and webcast. Before we begin, I’d like to remind you that our remarks may that follow, including answers to your questions contain statements that we believe to be forward-looking statements within the meaning of the Private Securities Litigation Reform Act. These forward-looking statements are subject to risks that could cause actual results to materially differ from those expressed or implied by such forward-looking statements. These risks include, among others, matters that we have described in our press release issued earlier today and filings we make with the SEC. We disclaim any obligation to update these forward-looking statements which may not be updated into our next quarterly earnings conference call, if at all.
The financial results discussed on today’s call are on an adjusted basis unless otherwise noted. A reconciliation to the most directly comparable GAAP financial measure and other associated disclosures are contained in our earnings release. Joining me on the call today is Ed Rosenfeld, Chairman and Chief Executive Officer; and Zine Mazouzi, Chief Financial Officer. With that, I’ll turn the call over to Ed.
Edward Rosenfeld: Right. Thank you, Danielle and good morning everyone, and thank you for joining us to review Steven Madden’s first quarter 2024 results. So we got off to a strong start to 2024 with first quarter revenue increasing 19% and diluted EPS rising 30% compared to the same period in 2023. These results are the direct result of our team’s disciplined execution of our strategy for long-term growth. The foundation of that strategy is creating deeper connections with our consumers through the combination of outstanding product and effective marketing, thereby enabling our success with our four key business drivers. Our first key driver is expanding our business in international markets. Revenue in international grew 15% in the first quarter compared to the same period in the prior year, including strong gains in each of our three international regions, EMEA, the Americas ex-U.S. and APAC.
The EMEA region remains the biggest driver of growth. We continue to buck the trend in Europe and deliver solid growth there despite the challenging operating environment. Our Middle East JV has strong momentum and is ramping quickly. And our JV in South Africa continues to see explosive growth, driven by the exceptional brand heat we have in that market. Our second key business driver is growing our business outside of footwear. In the first quarter, overall accessories and apparel revenue rose 73% or 28% excluding the newly acquired Almost Famous business. Our Steve Madden handbag business continues to be outstanding. Revenue there increased more than 45% compared to the same period in the prior year for the third consecutive quarter. Steve Madden apparel also saw strong growth, increasing 23% in the quarter, driven by additional doors and expanded assortments within key wholesale accounts.
And Almost Famous contributed $41 million in revenue in its first full quarter under our ownership. A critical part of our strategy with this acquisition is to utilize the Almost Famous platform to introduce and build a Madden Girl apparel business. We launched Madden Girl Apparel and Macy’s in the first quarter and initial sell through performance has been very strong. Our third key business driver is expanding our direct-to-consumer business led by digital. DTC revenue grew 13% compared to the first quarter of 2023, including double-digit percentage gains in both digital and brick-and-mortar channels. We achieved these top line results while also meaningfully expanding DTC gross margin as the combination of on trend merchandise assortments and effective inventory management enabled us to increase full price selling and reduce discounting.
And finally, our fourth key business driver is strengthening our core U.S. wholesale footwear business. This business was under pressure in 2023 as many of our largest wholesale customers entered last year with too much inventory and reduced orders significantly in order to right size inventory levels. Fortunately, those wholesale customers have much healthier overall inventory levels this year. And as expected, we were able to return to year-over-year growth in the U.S. Wholesale footwear business in the first quarter with revenue increasing 5% compared to Q1 of 2023. While our wholesale customers for branded product remain cautious overall, our private label business, which is primarily done in the mass channel has improved significantly and experienced strong growth in the quarter.
So overall, we delivered tangible results across each of these areas, which not only drove strong top line performance, but also enabled us to expand our consolidated operating margin for the quarter to 11%, up from 10.3% in the first quarter of 2023, despite a headwind from the inclusion of Almost Famous. Looking ahead, our first quarter performance and the success we are seeing across each of our key strategic initiatives gives us confidence that we are not only on track to meet our financial goals for 2024, but that we are well positioned to continue to drive sustainable top and bottom line growth for years to come. And now, I’ll turn it over to Zine to review our first quarter financial results in more detail and provide our outlook for 2024.
Zine Mazouzi: Thanks, Ed, and good morning, everyone. In the first quarter, our consolidated revenue was $552.4 million, a 19.1% increase compared to the first quarter of 2023. Excluding Almost Famous, consolidated revenue grew 10.3% compared to the same period in the prior year. Our wholesale revenue was $438.2 million, up 21% to the first quarter in the prior year or 9.7% excluding Almost Famous. Wholesale footwear revenue was $295.7 million, a 4.7% increase from the comparable period in 2023, driven by strong growth in the private label business. Wholesale accessories and apparel revenue was $142.6 million, up 78.6% through the first quarter in the prior year or 27.4% excluding Almost Famous. Our Steve Madden handbag business was the primary growth driver and Steve Madden apparel also saw a strong gain.
In our direct-to-consumer segment, revenue was $112.3 million, a 12.8% increase compared to the first quarter of 2023. Brick-and-mortar revenue grew 15% or 8% on a comp store basis and owned and operated e-commerce revenue rose 11%. We ended the quarter with 253 company operated brick-and-mortar retail stores, including 69 outlets, as well as five e-commerce websites and 25 company operated concessions in international markets. Turning to our licensing segment. Our licensing royalty income was $1.8 million in the quarter compared to $2.1 million in the first quarter of 2023. Consolidated gross margin was 40.7% in the quarter versus 42.1% in the comparable period in 2023. The inclusion of Almost Famous negatively impacted consolidated gross margin by approximately 120 basis points.
Wholesale gross margin was 35.1% compared to 37% in the first quarter of 2023, driven primarily by the impact of Almost Famous and a mix shift in wholesale footwear to the private label business. Direct-to-consumer gross margin was 61.9%, up 270 basis points from the comparable period in 2023, driven by a reduction in promotional activity. Operating expenses as a percent of revenue were 29.7%, down from 31.8% in the first quarter of 2023. Operating income for the quarter was $61 million or a 11% of revenue, up from $47.7 million or 10.3% of revenue in the comparable period in the prior year. The effective tax rate for the quarter was 23.5% compared to 24.2% in the first quarter of 2023. Finally, net income attributable to Steve Madden Ltd. for the quarter was $47 million or $0.65 per diluted share compared to $37.6 million or $0.50 per diluted share in the first quarter of 2023.
Moving to the balance sheet. Our financial foundation remains strong. As of March 31, 2024, we had $143.1 million of cash, cash equivalents and short term investments and no debt. Inventory at the end of the quarter was $202 million, up 12.2% to the prior year or 7.2% excluding Almost Famous. Our CapEx in the first quarter was $4 million. During the first quarter, the company spent $37.3 million on repurchases of its common stock including shares acquired through the net settlement for employee stock awards. At the end of the quarter, there was approximately $143 million remaining on the share repurchase authorization. The company’s Board of Directors approved a quarterly cash dividend of $0.21 per share. The dividend will be payable on June 21, 2024 to stockholders of record as of the close of business on June 10, 2024.
Turning to our outlook. We are maintaining our annual guidance. We continue to expect revenue for 2024 to increase 11% to 13% compared to 2023 and we continue to expect diluted EPS to be in the range of $2.55 to $2.65 Now, I’d like to turn the call over to the operator for questions. Didi?
Operator: Thank you. [Operator Instructions]. And our first question comes from Paul Lejuez of Citi. Your line is open.
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