Steven Madden, Ltd. — Q2 2023 Form 10-Q
Reporting period: Three and six months ended June 30, 2023. Financial figures below are in millions of dollars unless noted. The filing is unaudited.
Business context and results
Steven Madden designs, sources, and markets footwear, accessories, and apparel through wholesale, direct-to-consumer, and licensing channels. Effective January 2023, it ceased acting as a buying agent and no longer reports a First Cost segment.
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Total revenue | $445.3 | $535.0 | $909.1 | $1,094.7 |
| Gross profit / margin | $189.9 / 42.6% | $217.8 / 40.7% | $385.0 / 42.3% | $445.7 / 40.7% |
| Operating income / margin | $44.0 / 9.9% | $65.2 / 12.2% | $90.6 / 10.0% | $163.1 / 14.9% |
| Net income attributable to Steven Madden | $34.5 | $48.5 | $71.3 | $123.0 |
| Diluted EPS | $0.46 | $0.62 | $0.95 | $1.55 |
Financial position, cash flow, and capital
- At June 30, cash and cash equivalents were $258.1 million and short-term investments were $16.4 million; together, $274.4 million. Working capital was $510.3 million and stockholders’ equity was $841.7 million.
- The company reported no cash borrowings under its $150 million asset-based revolving facility. The facility matures March 20, 2027; $504,000 of letters of credit were outstanding outside the facility.
- For the six months, operating cash flow was $82.3 million, versus $40.3 million a year earlier. Investing activities used $8.8 million; financing activities used $90.7 million, primarily for $64.2 million of share repurchases and $31.9 million of dividends.
- Inventory was $207.8 million, down from $306.5 million at June 30, 2022. Management reported trailing-four-quarter inventory turnover of 5.2 times and average receivable collection days of 69, versus 74 a year earlier.
- The board increased the share-repurchase authorization by approximately $189.9 million in May, to $250 million. Approximately $224.8 million remained available at June 30. The quarterly dividend was $0.21 per share; a further $0.21 dividend was declared August 1, payable September 25, 2023.
Material changes and segment performance
- Q2 revenue declined 16.8% year over year, mainly because wholesale customers moderated orders while managing inventory; direct-to-consumer revenue also fell. Six-month revenue declined 17.0%.
- Wholesale Footwear Q2 revenue fell 19.4% to $234.9 million; operating income fell to $43.7 million from $60.0 million. Management cited lower customer orders and higher promotional activity, partly offset by lower freight costs.
- Wholesale Accessories/Apparel Q2 revenue fell 24.6% to $79.7 million, while operating income rose to $11.4 million from $5.1 million. Margin improvement reflected lower freight and production costs and a lower private-label mix.
- Direct-to-consumer Q2 revenue fell 5.4% to $128.2 million; operating income declined to $10.3 million from $20.5 million. Promotional activity and expense deleverage pressured margins. The company reported 247 stores in its segment count, including 242 brick-and-mortar stores, five e-commerce websites, and 22 international concessions.
- Consolidated gross margin improved, supported by Accessories/Apparel margin gains, lower freight costs, and mix, but operating expenses rose as a share of revenue as lower sales reduced expense leverage. Q2 operating expenses were $145.8 million, compared with $152.5 million a year earlier.
Outlook, risks, and contingencies
- Management said available cash, investments, and the revolving facility are expected to meet operating needs and financial commitments for at least the next 12 months. The filing provides no clear numerical revenue or earnings guidance for the full year.
- Key risks cited include inflation and weaker consumer spending, recessionary conditions, changing fashion trends, competition, wholesale inventory management, supply-chain and logistics disruptions, dependence on overseas manufacturers, tariffs, international-market risks, cybersecurity, and tax matters.
- Contractual obligations totaled $317.3 million, including $147.0 million of operating lease payments, $138.8 million of purchase obligations, $19.8 million of minimum royalty and advertising payments, and $11.7 million of transition tax. The purchase obligations are largely due in the remainder of 2023.
- Management stated that pending ordinary-course legal matters are not expected to materially affect financial condition, results, or liquidity. A $1.2 million contingent payment related to the B.B. Dakota acquisition was recorded as current and expected to be paid later in 2023.
- Inflation, the war in Ukraine and broader macroeconomic and geopolitical conditions may adversely affect consumer demand and costs; management cautioned it may not be able to offset future cost increases. The filing also notes that nearly half of cash and short-term investments were held in foreign subsidiaries.
Important facts for investors to verify
- Whether wholesale customer ordering and inventory-control trends continue to constrain footwear and accessories/apparel revenue.
- Whether direct-to-consumer promotions and expense deleverage persist, and whether margins recover across segments.
- How full-year results compare with expectations: the filing provides no clear numerical annual guidance.
- Cash conversion and working-capital movements, including receivables, inventories, and accrued expenses, alongside the pace of buybacks and dividends.
- Liquidity and access to foreign-held cash, compliance with the credit facility’s minimum-availability requirements, and fulfillment of near-term purchase and lease commitments.