Steven Madden, Ltd., a leading designer and marketer of fashion-forward branded and private label footwear, accessories, and apparel, reported impressive financial results for the second quarter of 2024, showcasing the strength and resilience of its diversified business model.
Financials
For the full year 2023, Steven Madden reported annual revenue of $1,981,582,000 and net income of $171,554,000. The company generated annual operating cash flow of $229,237,000 and free cash flow of $209,767,000, demonstrating its ability to consistently generate substantial cash flow.
In the second quarter of 2024, Steven Madden delivered robust top-line growth, with revenue increasing 17.6% year-over-year to $523,553,000. This performance was driven by exceptional growth in the accessories and apparel categories, as well as strong gains in international markets and the direct-to-consumer channel. Net income for the quarter came in at $35,376,000, up from $34,529,000 in the prior-year period.
Segment Performance
The Wholesale Footwear segment reported revenue of $237,024,000, a 0.9% increase compared to the same quarter last year. This growth was fueled by strength in the private label business, which offset softness in the branded footwear category. Wholesale Accessories/Apparel revenue surged 86.0% to $148,276,000, reflecting the positive impact of the Almost Famous acquisition as well as robust performance in the Steve Madden handbag and apparel lines.
The Direct-to-Consumer (DTC) segment, which includes the company's retail stores, e-commerce websites, and international concessions, delivered a 6.4% year-over-year increase in revenue to $136,409,000. This growth was driven by a 7% increase in brick-and-mortar sales, while e-commerce sales rose at a more modest 1% pace. Steven Madden ended the quarter with 273 company-operated retail stores, 5 e-commerce websites, and 27 international concessions.
The Licensing segment contributed $1,844,000 in revenue, down 25.2% from the prior-year period, as Steven Madden navigated a more challenging licensing environment.
Profitability and Margins
Gross margin for the quarter was 41.5%, down from 42.6% in the same period last year. This decline was primarily attributable to the impact of the Almost Famous acquisition, which carries a lower gross margin profile. Excluding Almost Famous, the company's consolidated gross margin increased 10 basis points year-over-year.
Operating expenses as a percentage of revenue improved to 31.1%, down from 32.6% in the prior-year quarter, reflecting Steven Madden's ability to leverage its cost structure on higher sales. Operating income for the quarter was $54,500,000, or 10.4% of revenue, up from $44,500,000, or 10.0% of revenue, in the second quarter of 2023.
Liquidity
Steven Madden's balance sheet remains strong, with $192,218,000 in cash, cash equivalents, and short-term investments as of June 30, 2024, and no outstanding debt. Inventory levels increased 16.3% year-over-year to $241,643,000, as the company positioned itself to meet anticipated demand.
Outlook
Looking ahead, Steven Madden is maintaining its full-year 2024 guidance, expecting revenue to increase 11% to 13% compared to 2023 and diluted earnings per share to be in the range of $2.55 to $2.65. The company cited continued strength in international markets, accessories and apparel, and the direct-to-consumer channel as key drivers of its outlook.
Recent Developments
Steven Madden's strategic initiatives, including expanding its international presence, growing its accessories and apparel business, and enhancing its direct-to-consumer capabilities, have been instrumental in diversifying its revenue streams and reducing its reliance on the U.S. wholesale footwear market. In 2019, prior to the COVID-19 pandemic, U.S. wholesale footwear revenue represented 55% of the company's consolidated revenue. This year, Steven Madden expects that business to account for less than 40% of its overall revenue.
Geographically, the company's international operations continue to be a standout, with revenue in the EMEA region expected to grow more than 20% in 2024. Steven Madden has also made progress in expanding its presence in the Middle East and South Africa through joint ventures, which are driving exceptional brand heat and growth.
In the accessories and apparel category, the Steve Madden handbag and apparel businesses delivered outstanding performance, with revenue increasing more than 30% and nearly 80%, respectively, in the second quarter. The company's acquisition of Almost Famous has also contributed to the strong growth in this segment, with the introduction of Madden Girl apparel through the Almost Famous platform progressing well.
The direct-to-consumer channel continues to be a bright spot, with revenue increasing 6.4% in the second quarter, including a 4% increase on a comparable store basis. Steven Madden's focus on product assortment and disciplined inventory management enabled it to reduce promotional activity and drive gross margin expansion in this segment for the second consecutive quarter.
Conclusion
While the near-term operating environment remains volatile, Steven Madden's management team is confident that the company's core strengths – its brands, business model, and people – will enable it to drive sustainable revenue and earnings growth over the long term. The company's diversified business model, with a growing presence in international markets, accessories and apparel, and direct-to-consumer channels, has positioned it well to navigate the evolving retail landscape and deliver value for its stakeholders.