Steven Madden, Ltd. — 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. This is an annual report, not a standalone fourth-quarter results filing. Unless noted, financial figures below are in millions of dollars; figures may not sum due to rounding.
Business context
Steven Madden designs, sources and markets branded and private-label footwear, accessories and apparel through wholesale, direct-to-consumer and licensing channels. Its reportable segments are Wholesale Footwear, Wholesale Accessories/Apparel, Direct-to-Consumer and Licensing. The company added 38 stores and closed 15 stores and one e-commerce site during 2023; year-end operations included 255 brick-and-mortar stores, five e-commerce sites and 25 international concessions.
Financial performance
| Metric | 2023 | 2022 | Change |
|---|---|---|---|
| Total revenue | $1,981.6 | $2,122.0 | -6.6% |
| Gross profit / margin | $832.4 / 42.0% | $873.8 / 41.2% | Margin +0.8 percentage points |
| Operating income / margin | $213.2 / 10.8% | $281.6 / 13.3% | -24.3% income |
| Net income attributable to Steven Madden, Ltd. | $171.6 | $216.1 | -20.6% |
| Diluted earnings per share | $2.30 | $2.77 | -17.0% |
| Cash provided by operating activities | $229.2 | $267.9 | Down $38.6 |
Segment trends: Wholesale Footwear revenue fell 12.3% to $1,048.4 million, with operating income down to $205.0 million from $265.0 million. Wholesale Accessories/Apparel revenue grew 5.5% to $416.5 million, while operating income increased to $61.4 million from $29.8 million, supported by improved freight and production costs and lower markdown allowances. Direct-to-Consumer revenue declined 2.9% to $506.5 million and operating income decreased to $30.2 million from $67.6 million; lower sales, promotional activity and expense deleverage weighed on results. Licensing revenue was $10.1 million, up from $9.8 million.
Liquidity, capital and balance sheet
- Cash, cash equivalents and short-term investments totaled $219.8 million at year-end, down from $289.8 million. Approximately 61% of the 2023 balance was held in foreign subsidiaries.
- The company reported no cash borrowings, working capital of $477.2 million and stockholders’ equity of $848.0 million. Its asset-based revolving facility has a $150 million commitment and a stated maturity of March 20, 2027; availability is subject to borrowing-base terms.
- Cash used in investing activities was $99.9 million, including $75.3 million for the Almost Famous acquisition and $19.5 million of capital expenditures. Cash used in financing activities was $200.9 million, including $142.3 million for share repurchases and net stock-award settlements and $63.2 million of dividends.
- Inventory was $229.0 million, essentially unchanged year over year. Inventory turnover improved to 5.6 times from 4.9 times. Operating lease obligations were $138.9 million on the balance sheet; disclosed future minimum lease payments totaled $157.3 million.
- The company declared annual dividends of $0.84 per share and approved a $0.21-per-share quarterly dividend in February 2024. Approximately $175.5 million remained available under the repurchase authorization at year-end.
Material changes and unusual items
- Revenue declined principally because wholesale customers moderated orders in a challenging retail environment, reducing Wholesale Footwear sales; Direct-to-Consumer sales also fell. Accessories/Apparel growth partly offset those declines.
- Consolidated gross margin improved despite lower gross profit dollars. Lower freight costs and better Accessories/Apparel margins were partly offset by lower margins in footwear and Direct-to-Consumer, including higher promotional activity.
- Operating expenses rose to $612.7 million, or 30.9% of revenue, from $592.2 million, or 27.9%. The 2023 results included $3.8 million of severance and office restructuring costs and $2.4 million of acquisition-related costs. Cost of sales included a $2.0 million inventory fair-value step-up charge related to Almost Famous.
- A $6.5 million non-cash impairment charge reduced the carrying value of the GREATS trademark from $12.7 million to $6.2 million. The impairment was recognized in Direct-to-Consumer.
- In October 2023, the company acquired substantially all assets and certain liabilities of Almost Famous, a women’s junior apparel business. Total purchase price after closing adjustments was $86.5 million, including an estimated $13.3 million contingent consideration liability. Earn-out payments over four years may reach $68 million, with no minimum payment; the liability is remeasured and changes affect earnings.
- The company ceased acting as a buying agent and stopped reporting a First Cost segment beginning in January 2023; management said the change was not material to operations.
Outlook, risks and contingencies
The filing does not provide clear numeric revenue or earnings guidance for 2024. Management says it will focus on trend-right products, international growth, non-footwear categories, digital commerce, the U.S. wholesale business, and inventory and expense management. It believes available liquidity and current financial resources will meet commitments and operating needs for at least the next 12 months.
Key risks include changing fashion preferences and discretionary consumer demand; competition and retailer consolidation; inventory and markdown-estimation risk; inflation and freight costs; and dependence on overseas manufacturers. China accounted for 79% of 2023 product purchases, and the company has no long-term manufacturing or supply contracts. The filing also highlights tariffs and trade policy, geopolitical tensions including the Israel-Hamas conflict, foreign exchange exposure, cybersecurity and international operating risks. Three customers represented 16.1%, 12.7% and 12.4% of accounts receivable at year-end, although no customer accounted for more than 10% of 2023 revenue.
Management reported that pending ordinary-course legal matters are not expected to have a material effect on financial position or results. The independent auditor gave an unqualified opinion on the financial statements and internal controls; management and the auditor excluded Almost Famous’s internal controls from their year-end controls assessment.
Important facts for investors to verify
- Whether wholesale order patterns and footwear demand stabilize, and whether the Accessories/Apparel gains continue.
- Direct-to-Consumer comparable sales, promotional intensity, store productivity and the profitability of the expanded international footprint.
- Almost Famous performance against earn-out targets, final purchase-accounting adjustments and any changes in the $13.3 million contingent liability.
- Exposure to China sourcing, potential tariffs, freight and inflation costs, and any disruption from geopolitical events.
- Customer receivable concentration, the quality of receivables factoring and collection arrangements, and the company’s capacity to sustain dividends and buybacks while funding operations and contractual commitments.
- Assumptions behind markdown allowances and the GREATS trademark valuation; these were identified as significant audit judgment areas.