Long Island City, NY—Despite being faced with a “difficult retail environment,” Steve Madden Ltd. today reported a first quarter profit in line with expectations and strong growth in its wholesale business.
For the quarter ended March 31, the footwear and accessories company posted net in come of $23 million, or 36 cents a share, compared with 23.4 million, or 35 cents a share, in the year-ago period. The results were in-line with analysts’ estimate for 36 cents a share.
Net sales increased 9.2% to $304.6 million compared to $278.9 million in first quarter 2013. Gross margin narrowed to 35.6% from 36.8% a year ago due primarily to increased promotional activity in the retail segment.
Operating expenses as a percentage of sales were 24.8% compared to 25.3% of sales in 2013 due to operating expense leverage on growing sales in the wholesale segment.
Promotions Hits Retail Margins
“We were pleased to deliver solid overall financial results in the first quarter in a difficult environment,” said Chairman/CEO Edward Rosenfeld. “While a lack of fashion footwear trends and the soft overall retail climate continued to challenge our retail segment, our wholesale business was outstanding. Wholesale net sales increased 13.3%, led by strong growth across all Steve Madden brands. We also added a luxury brand to our portfolio in the quarter with our acquisition of majority ownership in the Brian Atwood intellectual property. Looking ahead, we remain on track to meet our sales and earnings targets for the year.”
In the wholesale division, the company posted double-digit percentage gains in Steve Madden Women’s, Steve Madden Men’s and Madden Girl wholesale footwear divisions. Gross margin in the wholesale business was 32.6% compared to 32.3% in last year’s first quarter, driven by improvement in both branded and private label wholesale footwear margins.
Meanwhile, retail sales net sales decreased 12.1% to $39.6 million. The increase in net sales resulting from the net opening of 13 new stores since the end of the first quarter last year was more than offset by a same store sales decrease of 17.2% for the first quarter of 2014. Increased promotional activity resulted in retail gross margin of 55.7% compared to 60.3% a year ago.
Steven Madden said it opened one full-price store and three outlet stores and closed two full-price stores in the quarter, ending with a total of 123 company-operated retail locations, including 20 outlets and four Internet stores.
The company reaffirmed its full year sales: a 5% to 7% increase in net sales and earnings in the range of $2.05 to $2.115 a share.