Release Date: November 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Steven Madden Ltd (SHOO, Financial) delivered strong Q3 2024 results with revenue and earnings exceeding expectations.
- The accessories and apparel categories, particularly Steve Madden handbags, showed exceptional performance.
- International revenue grew 11% in Q3, with significant growth in the EMEA region and new joint ventures in the Middle East and Latin America.
- Direct-to-consumer revenue increased by 8% in Q3, with e-commerce revenue growing by 10%.
- The company raised its 2024 revenue and earnings guidance, reflecting confidence in continued growth.
Negative Points
- Wholesale footwear revenue declined by 4% in Q3, with branded business facing challenges.
- Gross margin decreased to 41.6% from 42.1% due to the impact of the Almost Famous acquisition.
- Operating expenses increased to 27.9% of revenue, driven by higher marketing investments and incentive compensation.
- Inventory levels rose to $268.7 million, primarily due to increased transit times.
- The company faces potential risks from tariffs on Chinese imports, with a significant portion of goods currently sourced from China.
Q & A Highlights
Q: Can you update us on your China sourcing exposure and how you plan to address potential tariffs? Also, what happened in the wholesale footwear channel?
A: Edward Rosenfeld, CEO: We've been preparing to reduce our reliance on China due to potential tariffs. We've developed sourcing capabilities in countries like Cambodia, Vietnam, and Mexico. Currently, about two-thirds of our business involves US imports, with over 70% sourced from China. We aim to reduce this by 40-45% over the next year. Regarding wholesale footwear, we saw a sequential improvement but not as much as hoped. Some key customers delayed boot deliveries, impacting Q3, but we expect improvement in Q4.
Q: With the updated revenue guidance for 2024, how do you see growth between wholesale and direct-to-consumer channels?
A: Edward Rosenfeld, CEO: We've raised our wholesale revenue guidance to mid-teens growth, driven by strength in accessories and apparel, especially Steve Madden handbags. Direct-to-consumer (DTC) is expected to grow in high single digits, consistent with previous guidance.
Q: What is driving the impressive growth in the handbag business, and how should we think about its future growth?
A: Edward Rosenfeld, CEO: The handbag business has seen strong growth due to a robust product engine and consumer positioning. Despite tough comparisons, growth continues as we update popular items and introduce new silhouettes. We focus on trends in materials and colors, ensuring strong product execution.
Q: How does the wholesale business differ by type, and what trends are you seeing in the retail business?
A: Edward Rosenfeld, CEO: In wholesale, value-priced retailers and private label business are performing better than branded business, with strength in off-price channels. In retail, full-price stores have recently outpaced outlets, reversing previous trends.
Q: What are the likely gross margin impacts of moving production out of China?
A: Edward Rosenfeld, CEO: It's difficult to quantify the impact due to potential tariffs and their wide-ranging implications on supply chains and the economy. It's too early to speculate on specific impacts.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
