Release Date: July 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Revenue increased by 18% and adjusted diluted EPS rose by 23% compared to the same period in 2023.
- Exceptional growth in accessories and apparel categories, with overall accessories and apparel revenue rising 74%.
- Strong international market performance, with revenue in international markets growing 13% in the second quarter.
- Direct-to-consumer (DTC) revenue grew 6%, including a 4% increase on a comp basis.
- Successful integration and performance of the Almost Famous acquisition, contributing $45 million in revenue.
Negative Points
- US wholesale footwear business saw only a 2% revenue increase, with branded business experiencing a decline.
- Consolidated gross margin decreased to 41.5% from 42.6% in the comparable period of 2023.
- Licensing royalty income dropped to $1.8 million from $2.5 million in the second quarter of 2023.
- Inventory levels increased by 16.3% compared to the prior year, potentially indicating slower inventory turnover.
- The company faces significant headwinds in the back half of the year, including a $0.09 impact from freight costs and an $0.08 impact from tax changes.
Q & A Highlights
Q: Can you provide any updates on the 11% to 13% revenue growth guidance for the year? Are there any changes to the composition of that guide from a segment perspective or from what you're expecting from Almost Famous?
A: No, we are still in the same place as before. We expect low to mid-single-digit growth in wholesale, high single-digit growth in direct-to-consumer (DTC), and mid-single-digit growth overall excluding Almost Famous.
Q: How should we think about the organic growth rate in the accessories and apparel segment going forward into the back half of the year?
A: We will start lapping tougher comparisons, so we have built into the guidance a slowdown in that business. Excluding Almost Famous, the guidance assumes low single-digit growth in wholesale accessories and apparel for the back half.
Q: What is the apples-to-apples store count, and how does that impact your DTC growth?
A: We had 273 stores at the end of Q2, up from 242 a year ago. However, 14 stores were added through new JVs at the tail end of the quarter, contributing minimally to revenue. The comp was 4.1%, and overall DTC revenue growth was 6.4%.
Q: How do you intend to get the Steve Madden and Dolce Vita branded businesses turned around given the cautiousness of your larger customers?
A: We are focusing on delivering the right product that resonates with consumers. The recent market week showed strong reactions to our collections, and we believe that continued delivery of the right products will eventually reflect in the wholesale channel numbers.
Q: Should we still think about gross margins for the year being down 70 basis points?
A: Yes, we are maintaining the 41.4% gross margin guidance, down 70 basis points, primarily due to the impact of Almost Famous.
Q: Can you comment on the current promotional environment and how it came in relative to your plan for Q2?
A: The promotional environment is normal, neither super aggressive nor light, and it came in as expected. We saw gross margin improvements in DTC and wholesale, excluding the impact of Almost Famous.
Q: What is your current sourcing exposure to China, and what is your strategy if higher tariffs are implemented?
A: About 75% of goods coming into the US are from China, down from 95% a few years ago. We are diversifying methodically to countries like Cambodia, Vietnam, and Mexico. We are prepared to accelerate this shift if new tariffs are implemented.
Q: How is Almost Famous tracking versus expectations?
A: Almost Famous is performing well, with revenue tracking as expected and profitability running ahead of expectations due to faster-than-anticipated gross margin improvements and operating efficiencies.
Q: How are you thinking about the boot business heading into Q4, given last year's performance and the current consumer environment?
A: The industry and wholesale customers are cautious about the fashion boot category, and we have built this conservatism into our forecast. However, we feel good about our product assortment and early indications in our DTC channels.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
