Steven Madden, Ltd. — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. This filing reports annual results; it does not provide a standalone fourth-quarter income statement. Unless otherwise noted, financial figures below are in millions of dollars.
Business context
The company designs, sources and markets branded and private-label footwear, accessories and apparel. Its five reportable segments are Wholesale Footwear, Wholesale Accessories/Apparel, Direct-to-Consumer, First Cost and Licensing. Results rebounded from pandemic-affected 2020; management also described continued supply-chain and freight disruption.
Financial performance and liquidity
| Metric | FY2021 | FY2020 |
|---|---|---|
| Total revenue | $1,866.1 | $1,201.8 |
| Gross profit / margin | $767.5 / 41.1% | $464.5 / 38.7% |
| Operating income (loss) / margin | $243.6 / 13.1% | ($31.6) / (2.6)% |
| Net income (loss) attributable to Steven Madden, Ltd. | $190.7 | ($18.4) |
| Diluted EPS | $2.34 | ($0.23) |
| Cash provided by operating activities | $159.5 | $44.2 |
- Revenue rose 55.3% year over year and was approximately 4.4% above FY2019 revenue. The rebound included gains across segments.
- Segment revenue: Wholesale Footwear $1,022.3 million (up 43.3%); Wholesale Accessories/Apparel $343.7 million (up 45.7%); and Direct-to-Consumer $487.9 million (up 103.8%). Direct-to-Consumer benefited from e-commerce strength and comparison with prior-year store closures.
- Gross margin improved with a higher Direct-to-Consumer sales mix and lower promotional activity. Inbound freight costs and the non-renewal of the Generalized System of Preferences (GSP), affecting handbag imports from Cambodia, partly offset the improvement. Accessories/Apparel gross margin declined to 27.5% from 30.1%.
- At December 31, 2021, cash and cash equivalents were $219.5 million and short-term investments were $44.0 million. Working capital was $509.5 million, versus $462.3 million a year earlier. Stockholders’ equity totaled $820.5 million.
- The company reported no cash borrowings under its $150 million asset-based revolving facility; $0.8 million of letters of credit was outstanding. It said available liquidity was expected to meet commitments and operating needs for at least the next 12 months.
- Operating cash flow increased to $159.5 million. Inventories rose to $255.2 million from $101.4 million; the cash-flow statement shows a $153.8 million inventory use of cash. Financing activities used $184.7 million, including share repurchases, dividends and joint-venture buyouts.
Material changes and unusual items
- Operating expenses were $519.8 million, or 27.9% of revenue, compared with $415.0 million, or 34.5%, in 2020. Improved revenue leverage, expense controls and an $8.0 million trademark-sale gain contributed; lease termination/modification charges and contingent-consideration revaluation partly offset these effects.
- Impairment charges fell substantially from 2020: FY2021 included $2.6 million for the BB Dakota trademark and $1.4 million for lease right-of-use and fixed assets, compared with $44.3 million and $36.9 million, respectively, in 2020.
- The effective tax rate was 20.5%, down from 39.0%. Management attributed the change to several factors, including the tax effects of share-based awards and changes in CARES Act, GILTI and jurisdictional income impacts.
- The company acquired the remaining 49.9% interests in its European and South African joint ventures for $18.9 million in total and acquired Dolce Vita handbag rights for $2.0 million. It also recorded $11.9 million of expense from changes in contingent-consideration valuation, primarily related to the BB Dakota acquisition.
- Cash dividends resumed in 2021 at $0.15 per share quarterly; $49.2 million was paid during the year. In February 2022, the board approved a $0.21 quarterly dividend. The company repurchased $88.0 million of shares under its repurchase program in 2021; the cash-flow/equity statement reports $123.2 million for treasury-stock purchases and net award settlements.
Outlook, commentary and risks
- No specific revenue or earnings guidance is provided in the supplied filing text; the company says it had temporarily suspended guidance. Management’s stated priorities include digital commerce, non-footwear categories, international growth, inventory and expense management, and corporate social responsibility.
- For 2022, the company expected to open 10–12 new brick-and-mortar stores in international markets and close three to six locations globally. It reported 214 brick-and-mortar stores and six e-commerce sites at year-end 2021.
- Management said inflation in raw materials, labor and freight had significantly affected FY2021 profitability and expected elevated prices to continue in 2022. Mitigation efforts included price increases, supplier renegotiations and operating efficiencies; success is not assured.
- Supply-chain exposure is significant: 79% of FY2021 product purchases were from China. The filing describes pandemic-related factory, port, warehouse and freight disruptions, delays, container shortages and higher freight costs. It also identifies tariff and trade-policy risks, including uncertainty over GSP renewal.
- Two customers accounted for approximately 14.0% and 10.6% of FY2021 revenue; two customers represented 19.3% and 18.1% of year-end accounts receivable. Fashion-trend risk, discretionary consumer demand, customer credit, inventory obsolescence, competition, foreign exchange, cybersecurity and COVID-19 developments are also identified risks.
- Wholesale backlog was approximately $839.4 million at February 1, 2022, versus $310.2 million a year earlier. The company cautions that backlog varies with seasonality and ordering patterns and may not predict eventual shipments.
- Ordinary-course legal matters include contractual, employment, distribution, product-liability and intellectual-property claims. Management does not expect resulting liabilities to materially affect financial condition, results or liquidity.
Important facts for investors to verify
- Whether the FY2021 sales rebound and margin gains are sustainable after pandemic comparisons normalize, particularly in Direct-to-Consumer and wholesale.
- Whether higher inventory can be converted to sales without increased markdowns, and how freight, input-cost inflation and GSP/tariff developments affect margins and cash flow.
- The exposure and payment timing associated with major customers, the substantial China sourcing concentration, and the $263.0 million of purchase obligations due in 2022.
- How much of reported cash and short-term investments is accessible for U.S. needs: approximately 59% of the year-end total was held in foreign subsidiaries.
- The distinction between program share repurchases and total treasury-stock/net award-settlement cash outflows, and the capacity to sustain dividends and buybacks alongside operating needs.
- The assumptions underlying customer markdown allowances, a critical audit matter, and the valuation and expected payments for contingent consideration.