Steven Madden, Ltd. — Q3 2021 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2021. Unaudited consolidated results; amounts below are in U.S. dollars, millions, except per-share data and percentages. The company designs, sources, markets and sells branded and private-label footwear, accessories and apparel through wholesale, retail, e-commerce and licensing channels.
Financial performance
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Total revenue | $528.7 | $346.9 | $1,287.7 | $848.8 |
| Gross profit / margin | $220.0 / 41.6% | $139.9 / 40.3% | $529.2 / 41.1% | $329.2 / 38.8% |
| Operating income (loss) / margin | $88.4 / 16.7% | $(3.0) / (0.9%) | $164.2 / 12.8% | $(52.9) / (6.2%) |
| Net income (loss) attributable to Steven Madden | $66.6 | $(7.0) | $124.7 | $(41.0) |
| Diluted earnings (loss) per share | $0.82 | $(0.09) | $1.53 | $(0.52) |
Q3 revenue increased 52.4% year over year; nine-month revenue rose 51.7%. Results rebounded from pandemic-affected 2020 comparisons, which included significant impairment charges. In Q3, wholesale footwear revenue was $304.2 million (+42.6%), wholesale accessories/apparel was $97.8 million (+38.7%), and retail was $123.1 million (+108.6%). Retail growth reflected strong e-commerce and brick-and-mortar performance as well as the prior-year disruption. Retail’s larger share of revenue supported consolidated gross margin, while accessories/apparel margin was pressured by the loss of U.S. Generalized System of Preferences benefits for Cambodian imports.
For the nine months, operating cash flow was $96.2 million, versus $0.6 million in 2020. Inventory and factor receivables increased substantially, using cash; management attributed the operating cash-flow improvement mainly to higher earnings and favorable changes in accounts payable and accrued expenses. Investing cash flow was $2.4 million, including $8.0 million from a trademark sale and $4.6 million of capital expenditures. Financing cash use was $126.4 million, including $74.7 million of treasury-stock purchases, $37.0 million of dividends and $19.1 million to acquire additional joint-venture interests.
Financial position and capital
At September 30, 2021, cash and cash equivalents were $219.5 million and short-term investments were $40.4 million, totaling $259.9 million; approximately 56% of that total was held by foreign subsidiaries. Working capital was $492.5 million. The company reported no cash borrowings and $1.4 million in letters of credit under its $150 million asset-based revolving facility, which matures in 2025. Total stockholders’ equity was $807.2 million. Inventory was $201.2 million, up from $101.4 million at year-end 2020; factor receivables were $347.7 million, up from $252.7 million. Operating lease liabilities totaled $117.4 million.
Management stated that available resources should meet financial commitments and operating needs for at least the next 12 months. The company declared a $0.15-per-share quarterly dividend payable December 27, 2021, subject to board discretion. On November 2, 2021, after quarter-end, the board increased the repurchase authorization, bringing total authorization to $250 million, including the remaining prior authorization.
Outlook, commentary and risks
The filing provides no specific numerical revenue or earnings guidance. Management described continued improvement in retail and wholesale sell-in and sell-through, alongside ongoing pandemic effects and supply-chain disruption. It cited higher freight costs, pandemic-related outbreaks in Asia, port and warehouse delays, container shortages and inflation. The company warned that delays or inventory mismanagement could cause lost sales, higher shipping costs, markdowns or excess inventory. It also identified fashion-trend execution, competition, independent-manufacturer dependence, tariffs, international exposure, liquidity under adverse events and acquisition integration among its risks.
Notable items include an $8.0 million gain on the sale of an internally developed trademark and a $7.8 million increase in contingent-consideration valuation expense, principally associated with B.B. Dakota. The company recorded $1.1 million of fixed-asset and lease-asset impairment for the first nine months of 2021, versus $79.4 million of fixed-asset, lease-asset and intangible impairment in the comparable 2020 period. It also completed acquisitions of the remaining interests in its European and South African joint ventures during 2021. Reported future contractual obligations totaled $289.0 million, including $128.6 million of purchase obligations due in the remainder of 2021; these are not equivalent to funded debt.
Management reported effective disclosure controls and no material change in internal control over financial reporting during the quarter. Routine legal proceedings were not expected by management to have a material effect.
Important facts for investors to verify
- Whether supply-chain delays, freight inflation and higher inventory affect fulfillment, markdowns and gross margins in subsequent quarters.
- How sustainable the revenue and earnings rebound is against pandemic-distorted prior-year comparisons, especially across retail and wholesale segments.
- The amount and timing of purchase commitments, lease obligations and contingent acquisition payments, and the availability conditions on the revolving credit facility.
- The effect of the November 2021 repurchase authorization increase and ongoing dividends on cash resources and share count.
- Whether accessories/apparel gross-margin pressure from freight costs and the GSP change persists, and how much the trademark-sale gain and contingent-consideration expense affect underlying comparisons.