Q4 2020 Steven Madden Ltd Earnings Call
Yes.
Ladies and gentlemen, and thank you for standing by and welcome to the Q4 and full year with each one of the Steve Madden Ltd earnings Conference at this time, all participants are in a listen only mode.
After the speak of of presentation, there will be a question and answer session. The ask a question. During the session you will need the press star one on it's all up on.
If you require any further assistance please press star zero.
I would now like to hand, the conference over to MS. Danielle Mccoy Ma'am you may begin.
Okay.
And good morning, everyone and thank you for joining our fourth quarter and full year 2020 earnings call and webcast before we begin I would like to remind you that during the call. We may make certain forward looking statements and its just fine.
And the federal Securities laws.
And our expectations or predictions about the future.
Generally these statements relate to projections involving anticipated revenue earnings or other aspects of the company's operating results.
These statements are based on current assumptions and expectations.
And I have known and unknown risks uncertainties and factors not within the company's control and.
And as such our actual performance and results may differ materially from the statements.
Our annual report and other reports filed with the SEC from time to time include detailed discussions of the risks of the company faces and we urge you to refer to the specifically the COVID-19 pandemic has had and is currently having a significant impact on the company's business operations and results and such.
Forward looking statements with respect to the COVID-19 pandemic include without limitation statements with respect to the company's plans and response to this pandemic.
At this time, there is still significant uncertainty about the duration and extent of the impact of the pandemic.
Due to the past due to the dynamic nature of these circumstances statements made on this call regarding the company's response to the COVID-19 pandemic could change at any time.
Any forward looking statements represent our judgment as of the time of the skull and cannot be relied upon as current after today's date.
Disclaim any intent or obligation to publicly update or revise any forward looking statements, whether as a result of new information future events or otherwise, except as required under applicable law.
The financial the financial results discussed are on an adjusted basis, unless otherwise noted a reconciliation to the most directly comparable GAAP financial measure and other associated disclosures are contained in our earnings release.
Joining me today are Ed Rosenfeld, Chairman and Chief Executive Officer, and Jim will do the Chief Financial Officer with that I'll turn the call over to Ed.
Yeah.
Thanks, Danielle good morning, everyone and thank you for joining us to review the Steve Madden fourth quarter and full year 2020 and results.
While the COVID-19 pandemic continues to have a negative impact on our business. We were pleased with our results and fourth quarter, which exceeded our expectations and showed strong sequential improvement from third quarter.
Overall 2020 with in many ways, the most challenging year and our company's history, but we relied on our strength and agile business model and strong balance sheet, and our talented and resourceful employees to successfully navigate the crisis.
We continued investing and our brands and our digital capabilities, while reducing the expenses in other areas and we utilized our test and react strategy and speed to market capability to quickly adjust our product mix to align with changing consumer preferences.
We also made significant progress on our ESG initiatives let.
Let me briefly touch on the highlights.
First and foremost our top priority since the crisis began has been protecting the safety and wellbeing of our employees and the broader community and I'm proud of the steps we took to safeguard the health of our employees and our customers, including proactively closing of our stores earlier and keeping them closed longer than most of our peers and.
And how we supported our communities through donations of medical grade masks to hospitals nonmedical face coverings to homeless shelters meals for health care workers financial assistance for organizations combating hunger and more.
Second when the severe impact of COVID-19 became clear we moved quickly to implement a number of measures to preserve liquidity and enhanced financial flexibility, including suspending dividends and share repurchases cutting operating expenses capital expenditures and the inventory receipts and putting in place and new 100 <unk>.
The million dollar asset base revolving credit facility.
While some of the expense savings were temporary in nature of meaningful portion will have an ongoing benefit.
Including $25 million and annual savings from the restructuring we implemented in July and $14 million of rent expense savings in 2021 compared to 2019.
Overall these actions enabled us to generate strong free cash flow through the crisis, and we ended 2020 with no debt and $287 million and cash and short term investments.
Based on our strong financial position, we announced today that the company's board of directors approved the reinstatement of our quarterly cash dividend of <unk> 15 per share and we also plan to resume share repurchases in future periods.
Third we also took swift action to address the rapidly changing marketplace in terms of product, we utilized our test and react strategy and industry, leading speed to market capability to quickly adjust our merchandize assortments to align with changing consumer preferences successfully leaning into more casual and comfortable styles.
And while deemphasizing Dressier products.
And with respect to distribution, we significantly accelerated our digital commerce initiatives, increasing investment in that area, even as we pulled back spending and other parts of the business.
We added high level talent to the organization and invested in our data science capabilities ramped up digital marketing spend and launched our new try before you buy a payment option rolled out buy online pickup and store to all U S full price retail stores and introduce new enhanced delivery and return options and more.
Overall, our company operated E Commerce revenue grew nearly 50% in 2020 on top of 58% growth last year include.
Including 55% growth and our Steve Madden ecommerce business on top of the 51% increase and the prior year.
Importantly company operated E Commerce profit margin profit margins also expanded meaningfully for the third year in a row.
And force the challenges we all faced in 2020 emphasize to us our responsibility to all our stakeholders and the opportunity we have to create positive change for our people and our communities and.
In addition to the COVID-19 relief efforts I mentioned earlier.
We made donations to black lives matter the end double ACP, the Trevor project and more and in December we announced the partnership with the Fearless fund to provide 50 women of color entrepreneurs free enrollment to their 12 month get ready venture program, which provides training and mentorship to build the knowledge and skills needed to gain access to capital.
We also made progress and lessening of our environmental impact by among other things introducing news, Steve Madden shoe boxes that are 100% recyclable partnering with industry trade group F. D. R. A on a pre consumer waste management project piloting a new shoe takeback program at our stores and increasing the use of recycled and renewable.
Aerials and products across our business.
The spring, we're excited to be launching cool planet by Steve Madden, and new brand offering fashion footwear, using recycled renewable and other environmentally preferred materials.
For every pair of cool plant at shoe sold we will plant a tree and partnership with one tree planted a nonprofit organization dedicated to reforestation efforts around the world.
Overall, we are committed to meaningful and measurable improvement and the impacts we have and to being transparent about our actions and July we published our first sustainability report, which outlines our overall corporate social responsibility roadmap and how we intend to ensure that CSR and states and sustainability are embedded in <unk>.
We do going forward and we look forward to updating you on our progress when we publish our next report later this year.
Overall, our company was tested like never before in 2020, and I couldnt be prouder of how our teams responded and all day, we're able to accomplish.
As we looked at 2021, our focus remains on creating trend right product and getting it to market quickly deepening connections with our consumers through enhanced marketing.
Driving our digital commerce agenda.
Banding and international markets like Europe, where we have strong momentum and lots of runway and efficiently managing our inventory and our expenses.
All while working to create positive change for our people at our communities.
And while we are cautious on the near term outlook due to continued headwinds from COVID-19, we are confident that the steps we have taken during the crisis combined with the strength of our brands and our business model leave us well positioned to capitalize on market share opportunities and create value for our stakeholders over the long term.
I would now like to introduce <unk>, <unk>, who became our chief financial Officer on January 1st.
Zane has been a key member of our executive team since the beginning of 2018, when he joined US as Chief Accounting Officer, and senior Vice President of Finance and operations and his strong financial operational and leadership experience combined with his deep understanding of footwear accessories and retail they can the tremendous asset as we drive toward and.
Weighted recovery and a return to profitable and sustainable growth.
I also want to thank Arvind Daria, who is our CFO for the past 28 years and congratulate him on his retirement from that roll.
Arvind was instrumental and building the Steve Madden and at the company. It is today and I am extraordinarily grateful for her partnership over the past 15 years that we worked together.
I also want to thank Arvind for agreeing to serve the company and an advisory capacity through the end of 2021.
With that I'll turn it over to Zane to review, our fourth quarter and full year of 2020 financial results in more detail.
Thanks, Ed and good morning, everyone.
I would like to start off by saying that it has been of great pleasure to be part of the Steve Madden and team over the last couple of years on.
And honored to take on my new role and CFO and look forward to meet and and connecting with many of you end the year end.
Paul.
Turning to our results and the fourth quarter, our consolidated revenue decreased 15, 9%.
We haven't at $53 million compared to prior year revenue of $419 million six.
Our wholesale business declined 16, 2%.
$263 million compared to $313 8 million and the prior year period.
Wholesale footwear decreased 19, 7% to one.
$187 3 million and wholesale accessories, and apparel declined five 9% to $65 7 million.
While COVID-19 related impact clearly continued to pressure of this business. We were pleased with the sequential improvement compared to the third quarter.
And our retail segment revenue decreased 14, 9% to $86 1 million.
And our brick and mortar business remains under significant pressure during the quarter.
Our strong e-commerce momentum continued with revenue, increasing 36%, including 51% growth and all of our Steve Madden and E Commerce business.
We ended the quarter with 218 company operated retail stores.
And 66 outlets and 70 ecommerce site as.
And as well as 17 company operated concessions and international market.
Due to local government partners, we had two we closed a third of the power stores during the third and fourth quarter at.
As of today, approximately 30% of our stores and Canada remained closed.
Our stores worldwide have reopened all day.
Hours of operation remain reduced by approximately 25% on average.
Turning to our licensing and first of all segments.
The license and royalty income, which is now included in total revenue was $3 million and the quarter compared to $3 one of a million and last year's fourth quarter.
The first cost Commission income, which is also now included in total revenue was zero point of 9 million into the quarter.
We're at two $1 6 million and last year's fourth quarter.
Consolidated gross margin and the quarter increased 40 basis points, the 38, 2% compared to 37, 8% and the prior year.
Gross margin declined 90 basis points to 28, 3% compared to 29, 2% last year the truth of it.
All of that off of excess inventory, resulting from the store shutdowns and order cancellations earlier and the year.
Retail gross margin rose 400 basis points to $65 six per cent compared to 61, 6% and Q4 last year as we saw higher margins and both ecommerce and stores, primarily due to less discounting.
Operating expenses for the quarter decreased 13, 2% two one on $9 2 million compared to $125 7 million and last year's fourth quarter reflected and the company's expense control measures.
Operating income for the quarter totaled $25 6 million or seven 3% of revenue compared to the.
Compared to last year's fourth quarter operating income of $33 million or seven 9% of revenue.
Our effective tax rate for the quarter was 13, 3% compared to six 3% and the same period last year.
Finally, net income attributable to Steven Madden Ltd for the call.
<unk> was $21 8 million of.
<unk> 27.
<unk> per diluted share compared to net income of $32 2 million at 39 cents per diluted share and the fourth quarter of 2019.
Now I would like to briefly touch on full year results.
Total revenue for 2020 decreased 32, 8% to $1 2 billion from $1 8 billion and the prior year.
Net income attributable to the Steve Madden Ltd was $51 8 million or <unk> 64 per diluted share for the at year ended December 31, 2020, compared to $162 8 million or a dollar and 95 per share for the year ended December 31 and 2019.
Moving to the balance sheet, our foundation remains strong and.
And as of December 31 of 2020, we had $287 2 million of cash cash equivalents and short term investments and no debt and.
And until they totaled $101 4 million down 26% compared to the prior year figure of $136 9 million.
Our capex in the quarter was $1 1 million.
As Ed mentioned, the company's board of directors reinstated the quarterly cash dividend of <unk> 15 per share and.
The dividend will be payable on March 26, 26, 2021 to stockholders of record as of the close of business on March 16 2021.
Okay.
Looking forward, while we are confident and our long term positioning and optimistic about our prospects as conditions normalize.
And our cautious on the near term outlook due to headwinds that include supply chain disruption.
Higher freight costs and.
Non renewal of T. S P.
Rogers and reduced store traffic and hours of operation and.
Particular, we expect supply chain disruption primarily related to the congestion.
And slowdowns at the ports to negatively impact Q1 revenue by approximately $3 million.
Including this impact we currently expect Q1 wholesale revenue to decrease the high single digits and retail revenue to increase mid single digits on a percentage of patients compared to last year's first quarter.
Given the continued uncertainty related to the COVID-19 pandemic when the.
And I provided full year revenue.
And the earnings guidance at this time.
Now I'd like to turn it over to the operator for questions operator.
As a reminder to ask the question you would need the press star one on the telephone so withdraw your question press the pound or husky.
Please standby, while we compile the Q&A roster.
The first question comes from the line of Erinn Murphy with Piper Sandler.
Great. Thanks, Good morning, I guess my first question at it for you on your ecommerce business. It sounds like you've made a lot of progress on the margin could you just kind of remind us where they compare to the overall business today and then maybe taking a step back you know how big of your E. Comm business today and does the growth prospects kind of influenced or changed your views.
On kind of an appropriate physical footprint overtime, and then I've got a couple of follow on.
Sure.
Yeah, we're really pleased with the.
The progress, we've made and improving the profitability of our of the owned and operated ecommerce business. We've had pretty substantial increases each of the last few years I think we were up about 350 basis points.
In 2020 over 2019, and so that business now is and is contributing in the high teens in terms of profit now of course as you.
At.
Excludes the any corporate allocation, but the but the contribution of that business itself.
And again in the high teens, and and we think that at.
There's potential for further expansion and in 'twenty, one and beyond.
In terms of the size of the business overall.
It's at about $133 million and 2020.
The the owned and operated E Commerce business.
And yes, certainly I think all of us sort of reevaluating all of our physical footprint in light of the the.
The.
The growth of E. Commerce overall, I still think stores certainly have a place and and I think that we do see the benefits of the omni channel model and how the stores and E Commerce work together to serve our consumers.
But I.
I do think.
We will have to continue to evaluate how many stores and we need going forward as the ecommerce business continues to grow.
Great. That's Super helpful. And then I guess my second question is around your wholesale business and kind of what youre seeing from your key retailers, thus far and spring.
Just curious if you can give us any color around the order book or what's the kind of trending right now in terms of the footwear side of your business and then if you could just take a little bit more into the supply chain disruption, how long could that be with us and we look forward over the next three to six months at that kind of at the timeframe you're thinking about some of the pressure there. Thank you so much.
Sure.
Well look I think.
As we talked about on the last call.
On the.
And the retailers of planned their business is down.
And for spring of 2021 compared to 19.
On the last call, we talked about down 15% to 20% overall.
Of course.
Subsequent to that we had.
The third.
And third and most significant surge and Covid. So I think if anything does play and Scott.
And it pushed down even a little bit further.
The.
On an overall basis, so maybe more of like down 20, but.
The biggest issue right.
Right now is what you alluded to and the second part of your question, which is the supply chain disruption. So.
Where it's at a big challenge and it's you know, there's a there and a number of places and the supply chain.
And where there are challenges certainly the biggest one is the congestion.
At the ports.
But we're seeing lead times debt of.
And you know that our extended by as much as I would say at or even an average of like three to four weeks.
And so it's the for a company that turns of inventory as quickly as we do.
And really operates and sort of adjust and tie model, it's pretty challenging and and it's having an impact and at Zane alluded to on the prepared remarks, we're looking at about at $30 million revenue impact in Q1.
From the supply chain disruption and most of that is in the wholesale the wholesale business in terms of how long that's going to last.
I don't know that I have much better information then and then you do on that there are there are folks that are the debt.
I believe that it's going to be around April may time frame, we're going to see that get back to normal, but I've seen others speculate that the this could be an issue into the summer.
So, we'll just have to keep monitoring it and and.
And trying to manage through it.
Thank you so much and I'll, let someone else open.
And Sir.
Our next question comes from the line of Camilo Lyon with B T I D.
Okay.
Thank you good morning, everyone.
Just following up on the supply chain discussion and.
How do we think about the impact on Q2, which is typically of more of a on the reorder quarter for you. So what is this delay.
And really how does that progress through Q1 into Q2 and and how do we think about them.
You know that affecting your business and then.
And then separately from that and want to get your thoughts on.
Does this change how your design timelines unfolds.
With the anticipation and expectation that we get to some sort of return to socialize and events next in the back half of this year are you already starting to plan the assortments to cater towards more dress and going out and occasion type of footwear.
Or are you waiting for more of the order patterns on cold towards like that.
Yeah.
Okay. So in terms of how the supply chain disruption impacts Q2 look some of the or a good chunk of the goods that are that we would have otherwise deliver at the wholesale customers say in March we do believe will go out in Q2. So there is some benefit.
As things move out.
But.
To your point.
We do a lot we get a lot of reorder business in Q2, and unfortunately when goods are late there is less.
Timing for them on the selling floor on the or on the websites of our of our partners and.
Typically that's going to mean.
Less Reorders and then of course, we also don't know.
As I said to air and how long this is kind of go and and how much of.
And if there are products that would have gone out and in June and they get pushed into July for instance.
And so we'll just have to keep watching that in terms of.
The the the <unk>.
Product mix.
Look we do certainly anticipate that in fall of theirs.
Gonna be more.
The people getting out more and hopefully go into events and the out to dinner and.
Concerts will sit and you'll have to see where we are there, but certainly it should be.
Further along than we are today, and so where it's at where that's obviously at top of our mind as we think about the product mix. You know we're already one thing I'll say is.
We're seeing some.
I'm pretty.
Surprisingly good performance in terms of sell through on some of our dress styles right now and now it's it's a it's a smaller percentage of the overall mix.
And the penetration is lower but the stuff that we have out there is selling through so we do see of customer that's looking for that and I think where we remain the destination for that so at that part of the business recovers I think we'll be positioned well.
Great and then the if you can just give us.
And some shapes, how we should expect to see the gross margin line unfold understanding that theres, probably more costs from supply chain perspective.
And that are going to hit in Q1, and maybe into Q2 and and help us understand how we should think about the the turn on of higher price goods, maybe more of boots, and booties and dress shoes and the back half as the recovery takes hold.
Take shape.
Yeah look I mean, we're not providing guidance and I kind of get too specific here, but I guess I'll say as you think about the first half if youre comparing to last year.
On the one hand last year of course.
And when the when.
When we had the shutdowns we took some pretty significant inventory.
Reserves, which impacted which negatively impacted gross margin.
So we don't anticipate having to anniversary of that of course, but on the other hand. There are some there are some significant headwinds to gross margin in the first half year and so.
So you mentioned one of them, which is the supply chain disruption and the impact that's going to have another of somewhat related one is and I'm sure you've heard from from others.
The freight rates are up dramatically and so on that.
And then the third one I would point to is the non renewal of GSP, so unless and until our GSP is renewed that's the headwind for us I mean, we make.
The little over half of our handbags now and Cambodia.
That's that's the significant impact to our accessories margin.
And hopefully when we get into the back half.
These issues.
Will all be behind us.
Got it thanks, a lot for the color and good luck.
Thanks Camilla.
Your next question comes from the line of Janine Stichter with Jefferies.
Hi, good morning, and thanks for all of the color on the gross margin wanted to dig a little bit more end to the retail gross margin you've been pulling back on those promotions for some time now so curious if that something you still see ongoing operating before and then maybe if you could just comment on the inventory and the channel I think its been a very lean and and maybe even a little bit too lean and for awhile now how you see that on.
Clothing as the year progresses, and how you think that impacts the amount of promotional environment. Thank you.
Yeah, that's a bit of positive story for us that we've been able to to.
To be less promotional and our and our retail segment.
And that's that included both certainly and fourth quarter, both on our ecommerce business and our stores and that's continued into Q1 and so I think you'll see.
You know continued gross margin improvement in that segment and the first part of the year as we move throughout the year, we start to anniversary some of those some of those increases so probably less improvement as we go throughout the year.
In terms of the inventory and the channel yes.
You know, we would say, particularly.
If you think about our our brands that the inventory and the channel is light and.
You know I think of.
At the moment of good.
A lot of the reason for that is the supply chain disruption so.
And I spent a little frustrating for us because we've got some some spring styles that we feel very very good about.
The overall and we and the customer is really responding to them. So we've got some sneakers that are phenomenal.
And the and the sandal category, we're doing really well, we've got flat sandals that of that.
And that the customer is really responding to and even dress sandals anything with this.
<unk> jaws on at oversized embellishment woven and so we've got a lot of different things happening, but unfortunately, we're just not able to get enough of it into the stores and up on folks at sites right now because of the supply chain disruption.
Okay, Great and then on the wholesale gross margin just wanted to clarify was the on disposal of the excess inventory was at the entirety of the the client and are you completely done with that now.
Yes.
Yeah and in fact, we estimate that that accounted for about 120 basis points of gross margin pressure in wholesale.
And I think overall, we were down 90, so that so that was the that was the story there.
And yes, that's essentially I mean, there's a couple of dribs and drabs, but that's essentially behind us.
Great. Thanks very much.
Thank you.
Your next question comes from the line of Laura Champine with loop capital.
Thank you for taking my question.
Really on your early thoughts about back half and and maybe the easier to answer part of that is how late can you set.
Your plans or of orders for inventory amounts for the back half.
We can be up versus 19 and the back half.
Are you prepared if if we do see uhm a at surge and events just kind of of bounce back pent up demand for fast from footwear how.
Can you successfully chase how late can be successfully changed product into holiday at the shapes up uhm to see even perhaps some growth and on top of the 19th.
Well look you know and I think that's something we do about it and anybody you know that's really been the hallmark of of our company is our at our speed to market and how quickly once we identify try and how quickly we can chase into it and you know, particularly and fall where you know.
And we're doing more out of Mexico, which which you've and increases are speed to market.
The only caveat of course is is all of that we're dealing with on the supply chain here you know so at the very moment, we're not as fast as we usually are but but certainly by fall of to hope that's behind us.
Understood. Thank you.
Excellent.
And the next questions on the on the line of Sam Poser with Williams training.
Good morning, Thanks for taking my questions and put the really safe and well.
The what about and what about are free and can you also give us some idea of how your direct to consumer businesses of running quarter. The date the floor to just go with some color on sort of how to think about it.
Yeah. So.
Looking at the normal.
And the normal environment, if we were having and a.
A lot of poured congestion and and float and we would probably be putting a lot more products on the airplanes, but the challenges air freight is up over 100 per cent air freight rates from where they were a year ago and so we are fly and some goods, but we have to be judicious about that as well given.
And given how expensive that is right now and.
And.
Terms of of the R retail business.
So far this year, we are running and positive to last year and our retail segment overall, so obviously still negative and bricks and mortar, but at very strong growth and and are owned and operated ecommerce.
And then when you think about your E Congress and said for.
I know you don't guide and the full year, but when you think about the <unk> business.
For the full year I mean on.
And are you looking at another you know.
You know.
Growth like you've seen over the last two years in and 2021.
I think what we expect the momentum.
To continue having strong momentum there and to see strong growth I would say not we do expect the growth the right to moderate though just given the tough comparisons from last year. I mean, there there were periods of last year, obviously, where it was the only channel that was open and as as we do expect the bricks and mortar business to recover.
Somewhat that will eat into that e-commerce business, and a little bit, but but again still should see nice growth.
Okay, and then lastly, I just want of I might've missed and I totally did miss at.
Can you give us what the gross margin was for.
The wholesale footwear and accessories.
And the quarter.
Sure Yeah, I don't think we did give that but I'd be happy to and let me just pull that up here.
Wholesale footwear was 27 seven per cent wholesale accessories, and apparel 29 eight per cent.
And then and then and your guidance sorry, one more tour and I put it in the in your guidance for Q1 and the revenue guidance for two one with the the wholesale revenue down high singles are you thinking about that was footwear being more impacted then accessories because of this.
For some reason the barrel given the addition, and.
Of the of your total business and so on.
Well I I I do think that the the decline and footwear will be versus the prior year will be it'll be down a little bit more than wholesale accessories and apparel.
I think that's mostly just the function of the apparel business, we've already anniversary that day I don't think that's the issue I think that we've talked about how.
We've we've been pleasantly surprised with our performance and bags and so we've got the private label bag business doing quite doing very well and Steve Madden handbag business doing well and and I think that's what's driving at.
At the accessories, and apparel outperforming shoes, and a little bit.
And I I'm, sorry, I got one more what about the business to your to the Walmart and target of the World. What are you seeing there and that big chunk of that has been open pretty much the whole time.
Yeah, not surprisingly the tread there is is better.
Then and the balance of the business, so so and queue for our.
Our private label business and.
And the trend was better than the branded business, but going forward I think and we expect that to to start to.
The revert back to sort of normal and.
<unk> okay.
Thanks, very much and.
I appreciate it.
Yeah.
Your next question of comes from the line of calm negate the Wells Fargo.
Hey, good morning, Thanks for taking my question and on on the last few calls you've spoken about you know some dynamics and the off price channel and a lot of pack away product.
And I'm like that and I was just wondering if you could sort of and.
Give us an update their you know what's happening and that channel. You know is there sort of still significant disparity and the outlook between off price and and and your full questions.
Yeah, We did we did ship a fair amount of of that Covid.
The inventory into the off price channel and queue for for pack away, So and we talked about how that had a and impact on the gross margin and wholesale and queue for it also at will impact.
The revenue a little bit and Q1, because obviously all of that pathway inventories is for spring and so they don't need as much new spring this year, but I think once we get into the queue to that should pretty much be behind us.
Ah got it and then just the a quick follow up on the on the cost structure of the business and.
You spoke about some of the cost savings and will persist post COVID-19 and I think at total almost $40 million and.
And I would imagine there's like you know some other areas of of reinvestment and maybe and like the digital and and things like that but so what what are we kind of think about you know the S. G and a line and 21 of relative to the school at 2019, and I think all of the levels like I mean, we're probably not thinking you know the.
$40 million lower but you know, we'll probably thinking of <unk> somewhat lower than the 20th 19 at my and I'm.
Thinking about that correctly.
Yeah, I think you are I think that the.
And so elaborate on that I think that you know the offset to the savings that we talked about when comparing 21 to 19, the big one would be marketing, we do continue to increase marketing investment and our brands, we were up and 2020 and marketing even even with the revenue of being down so significantly.
And we are planning on a further increase and 21 and so marketing is probably at $15 million and 21 compared to what it what it wasn't took 2019 and then as you point out there's also.
You know as are owned and operated ecommerce business has grown and keep in mind. That's the highest variable cost business that we have so there are a variable costs associated with that that are out but other than that I think you're thinking of of.
You really thinking about at the right way.
Alright makes sense, thanks for the color and the best of luck of this year.
Okay.
As a reminder to ask a question you would need the price Dar one of your telephone two of the Joy of your question the press the pound or has he.
Police day in mind, when they come out of the Q&A roster.
And the next question is from the line of Susan Anderson would be Riley.
Hi, good morning, nice job, managing and the corner of especially the <unk> the stores Clinton again and.
I guess, just the follow up on the E com business and the increasing penetration and 2020, just curious your thoughts on 2021 and and do you think this is I guess, the new norm are you expecting that to dial back at all and consumers go back to wholesale stores and then also your own stores.
Yeah. That's a good question like I think for the most part I think this this change and shop and behavior is going to be sticking at.
I think that it's it's likely that the overall penetration and 21.
Kicks down slightly from where we were and 20.
You won't have much of the time with nope, no business and happening and stores, hopefully, but but nevertheless, the penetration and in 21 is going to remain substantially above where it was and 19 and I think the and it will continue continue that way of going forward.
Great and then just the on the great business I'm curious, how that's done and this environment and especially get from the more casual me try there.
It's you know it's it's.
Somewhat challenging I would say I think the great.
It is sneakers.
But great.
Was impacted pretty negatively by Covid and number one we were not we did not move forward with our our plans to expand the distribution as we talked about that really got delayed at a year and to some of the new wholesale accounts, but but also.
While the products or sneakers that core Italian and leather sneaker that they do is really a product that there's a lot of men and where to the office or <unk>.
And when going out the.
For night on the town and.
And so I do think that there was there was some pressure on that business due to COVID-19 what.
And what we have seen recently, though is we've and introducing and some new products and and we're pretty excited about the consumer response to some of the newness and we had the biggest one was the slipper that we introduced and queue for which pretty much overnight became like 20 or 25% of the business every day.
But we continue to introduce.
And we introduced Roger and and also a lot more of the sustainable products and we're really not really telling telling the story of are responsible manufacturing and the consumers really responding to that so and so I feel good about the direction, we're headed there.
Great and and then did you say you're expecting to expand that distribution. This here is at at 2022 thing.
Yeah, we will we will be.
Putting it into some new wholesale accounts of this year.
You know I'll I'll be honest with you and it's.
Not the the expansion plan that we had for 2020 prior to Covid I think what on pet will probably go a little bit slower, but we will be we will be shipped at the new wholesale accounts.
Got it that's helpful. Thanks, so much good luck this year.
Thank you.
And the next question comes on on the on line of J. So would you be S.
The question has been withdrawn and your next question comes from the on line apology with with the C D.
Hi, This is <unk> can I go on for four o'clock and get your question.
And I guess I, just wanted to dig it and a little bit more around the the category performing and and the fourth quarter and you know and and then I'll put it into a little bit about the the penetration of from the your ticket they get the category of the 21st at historical level.
Yeah, sure and queue for the.
The.
Think the strongest category by far was really the casual boots, most notably.
And Ah Lug-soled boots comb.
Combat boots.
Chelsea, we had some Chelsea boots that were also very good but that was really the I think far and away the best category for us and I talked about a little bit earlier, and we moved into spring. Some of the success, we're seeing with sneakers sandals et cetera.
In terms of the category.
Penetration for the year look at you know I think the biggest headline is the dress shoes were down substantially.
Substantially the the penetration probably only about two thirds of what it normally is.
And and you were continuing to see the penetration down considerably and Q1 this year versus the prior year, although I as I said earlier at the products that that we do have our Sally and not surprisingly slippers [laughter] higher percentage of the mixed the normal and as I said, the casual boots were up versus the prior year.
Got it and then get on the on the first corner and sales guidance. If they were to back out of the supply chain disruption I'm in your hotel visit the onion.
Alright is at the earliest in the bedroom.
The kind of flattish and the first corner.
Yeah of flat or even modestly up if you didn't have the supply chain impact.
Got it and then when we think we can talk to the the the back at the end and not getting back to that day at 19 levels and and thanks for the call at around the first corner uhm, but at the I didn't think about the second quarter of which is the <unk> primarily when the.
The biggest lockdown related to call the end, where how can we think about sales of of medieval at some point of 19.
Look at we're not providing guidance we wanted to give you the color of around Q1.
Not going to get into.
The.
And fix the future quarters, and frankly, they're so much uncertainty given COVID-19, and then compounded by the supply chain disruption that.
I don't think we'll get into that certainly [laughter] I can tell you will be up over the last year's queue to them [laughter].
Got it and the ZIP Lastly, just you know given the all the description protraction the retail management and are there any you know M&A opportunities at your thing up there.
Yeah, we continue to keep our eyes and ears open there's nothing too to report at the moment, but but it's certainly something that we're open to and and obviously, we have the balance sheet strength and the wherewithal to do something if we find the right opportunity.
Great. Thank you.
Your next question is that the one O nine of J, So would the U B S.
Hi, Good morning, and thank you. This is my own interest on my on behalf of J. So I just wanted to ask you could you tell us of a little bit of on how your current like the sales how does that look in terms of the like the categories. I mean, how does that look in terms of cash will comfort versus.
The fashion dress categories and also of you can talk a little bit more about the size of your whole wholesale e-commerce business and.
I mean, you talked about the size of your own your own website D. T. C com, but you know once you know a little bit about the size of the wholesale portion.
Sure Yeah, I think the first question is at the category. So yeah. So I think the.
In terms of the top categories right now sandals.
And I'm repeating myself over here, but sandals, both flat the handles and dress sandals sneakers doing very well.
And dress shoes, the lower penetration, but but strong sales through on the ones that we have.
And and of course, and the first part of the year of where should we can still selling these casual boots, obviously flow and slowing down and now but it is very important and and and January certainly.
The wholesale at E Commerce business.
We estimate that.
Was about of.
Of the wholesale business about 32% of at was E. Commerce in 2020, so that was at pretty dramatically from about 18% the prior year.
Got it and also if you could provide us a little bit more detail on like the puts and takes on the on the gross margin. You know you mention it was the 20 120 bps headwind from and.
From the inventory disposal, but maybe you could if you could tell a truckload.
Chuckles about more of like any other factors that impacted and have any of those continued into the first quarter.
Yeah. So that was just to clarify that was on the wholesale side hundred 20 basis points. We also had at a negative impact from.
From free.
In queue for and that will continue into the queue one.
But again absent the disposal of the of the Covid inventory, we were actually up and wholesale and we of course had the the 400 basis point of improvement and retail and queue for and and and.
Indicated that I think we can be up again and retail.
And Q1.
Thank you.
Thanks.
And the next question is the follow up question from the line of Sam Houser with Williams training.
Hi, Thanks for taking the second most of the with the.
Delays I mean, just to be just to be clear you expect second quarter to be much stronger than the first quarter, but you're you you'll have those orders shift over but the.
You talked about the fill it and orders of at normally occur of came up with and earlier conversation could do color and can you give us a little color in on.
And sort of how.
And how to think about it and you know of the goods that are coming and the outside of the $30 billion. I mean are you see and good and neutral results on that stuff that could drive bill and ordered or will show on orders of two could be delayed and just stop it could be closer to the.
And what's the pleasure of problems.
Okay. So.
We think it's the 30 million dollar impact to Q1 I want to be straightforward about the fact, the majority of that at this moment. We think is moving out into the queue to these are the wholesalers and move out but there's a good chunk of it you know could be 40% debt. We think is lost whether.
And it's cancellations.
Or product that that we need it we could of using a retail or e-commerce business that didn't.
It was not here.
And consult so therefore, Vince I'll throw and.
And then as we talked about when we go into the queue to at least.
Think there's any way I can quantify this for you, but but we just want everyone to have [laughter].
And understanding of the fact that the.
When goods hit the floor of later.
There's a there's a <unk>.
Sure, they're selling window, and it's typically going to mean fewer reorders and Q too. So I don't know exactly what that's going to look like but that has the potential impact.
Why why why is it particularly frustrating for us because we think we have really good price at the customer really likes and I talked about all of the things a couple of times at the customers really responding to right now but.
We don't have enough of of those items in the stores.
As of the supply chain disruption. So I mean, so so you're just sort of your and a sense, you're you're taking the edge of what you can take advantage of and the first half of the year, but you're sort of holding on and I would assume outside of the logistic focus on the first half of the year, you're really gearing up to make sure that you.
Completely ready to go from the back is that of like sort of just give out to the you know you're you're going to do anything you can to avoid getting over your skis and the for like half of the year to make sure of the tobacco is set to go instead of fair wouldn't think about it.
Yeah, well, we never drove and the tell at any any season, but but we are going to continue to manage the inventory and as we always do and we're not going to take a ton of risk and buy tons of the spectrum of inventory and you've noticed for a long time today and we're always willing to.
The.
Sacrifice the.
That last dollar sales or maximizing that last dollar sales in in an effort to.
Managed half of the appropriate inventory level and managed.
Downside risk.
Okay, Thanks, very much and and we had and good luck and thanks.
Sam.
At this time there are no further questions I would like to turn the call back over to Mr. Ed most of the field.
Great well, thank you everybody for joining us this morning and.
Hope, everyone stays healthy and safe and we look forward to speaking with you on the next call have a great day.
Ladies and gentlemen, and this concludes today's conference call. Thank you for participating you may now disconnect.
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