Q2 2021 Steven Madden Ltd Earnings Call
Good day and thank you for standing by welcome to the quarter to 2021, Steve Madden Ltd Earnings Conference call. At this time, all participants are in a listen only mode.
After the speaker's presentation, there will be a question and answer session to ask a question. During the session you will need to press star 1 on your telephone.
If you require any further assistance please press star zero.
I would now like to hand, the conference over at your Speaker of today Danielle Mccoy. Please go ahead.
Thanks, Misty and good morning, everyone.
Thank you for joining our second quarter 2021 earnings call and webcast.
Before we begin I'd like to remind you that during the recall, we may make certain forward looking statements as defined in the federal securities laws regarding our expectations or predictions about the future.
Generally.
Statements relate to projections involving anticipated revenues earnings or other aspects of the company's operating results for it.
Statements May also include discussions involving the ongoing COVID-19 pandemic, including its current unexpected impact on our business operations and results as.
The piece of the company's plans to respond to such uncertain end dynamic event.
Because these statements are based on current assumptions and expectations stay at.
Both known and unknown risks uncertainties and factors not within the company's control and as such our actual performance and results may differ materially from the.
As well.
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 these.
Any forward looking statements represent our judgment as of the time of this call and cannot be relied upon as current after today's date.
State and 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 results discussed are on an adjusted basis, unless otherwise noted our reconciliations.
For the most directly comparable GAAP financial measure and other associated disclosures are contained in our earnings release.
Joining the call today are Ed Rosenfeld, Chairman and CEO.
T O N theme of who's the CFO with that I'll turn the call over to Ed.
Thanks Danielle.
And good morning, everyone and thank you for joining us to review the Steve Madden second quarter 2021 results.
We're really excited about the strong and accelerated recovery, we are seeing in our business the.
The outstanding the trend right product Assortments created by Steven our design teams are driving strong consumer demand for our brands.
Our own.
Weighted E Commerce business continues to have exceptional momentum out.
The retail stores have rebounded sharply and are now comping well above pre pandemic levels.
While our wholesale shipments remained below pre pandemic levels in the quarter, our sell through performance was robust positioning us for strong improvement in that business going forward.
Overall, our second quarter results significantly exceeded our expectations with earnings slightly ahead of pre COVID-19 second quarter 2019.
Turning to our performance by segment, our retail business was the highlight in the quarter and the source of the outperformance versus our expectations.
Overall.
For all retail revenue increased 63% compared to the second quarter of 2019.
Our digital Commerce business was the primary driver as it at accelerated once again with revenue increasing 105% on top of 86% growth in the prior year period, including the 119%.
In our Steve Madden Global digital business on top of 85% growth last year.
We continued to see strong returns on our increased investment in digital marketing as well as tangible results from our ongoing efforts to add an optimized features and functionality on the site.
Our brick and mortar business was.
Rent growth strong.
On an open only basis, our global brick and mortar comparable store sales were up 8% in the quarter compared to 2019.
We achieved this revenue performance with significantly reduced levels of promotional activity in both digital and brick and mortar channels, which in turn drove segment gross margin up.
Over 500 basis points compared to the comparable period in 2019 for the second consecutive quarter.
We also continued to benefit from the cost savings measures, we implemented over the last year, including rent savings from restructured leases for.
For the first 6 months of 2021, our retail segment has.
Also did $31.4 million in EBIT compared to an EBIT loss of $3.8 million in the first half of 2019.
In our wholesale business revenue in the quarter was as expected down to the comparable period in 2019.
Our sell through performance however was.
Strong across shoes accessories and apparel.
Our core Steve Madden Womens footwear business had particularly outstanding sell throughs with success across a range of categories, including sandals dress shoes and sneakers.
While the industry overall benefited from increased consumer demand and spending on fashion over at.
This time period.
Our performance at retail outpaced the competition and our wholesale customers are reacting with increased purchases for fall.
We expect strong sequential improvement in the back half in our wholesale business with Q3 down low to mid single digits for 2019, and Q for returning to growth versus 2000.
19.
As we drive this accelerated recovery in our business results. We also continue to focus on advancing our diversity equity and inclusion and corporate social responsibility initiatives.
Q2, we expanded our partnership with the Fearless fund of venture fund, which seeks to bridge the gap in venture capital funding.
At of color founders we.
We established a new partnership with Howard University, and which will work with the business school to re imagine its retail curriculum starting this fall.
And we launched our first collection of Steve Madden Kids adaptive footwear fashion forward styles, which were developed in partnership with children with disabilities and their families.
For women in the coming weeks, we will be putting out our second annual sustainability report.
Carriage all of you to check it out so you can see the progress we have made on our sustainability goals as well as our targets and roadmap for the future.
Overall, we are very pleased with the progress we are making and the trends we are seeing in the business.
Outstanding results in our retail segment and robust sell through performance in wholesale demonstrate the health of our brands the strength of our product Assortments and the momentum we have in digital channels.
While we still face challenges due to COVID-19, including but not limited to continued supply chain disruption across the globe.
The youre confident that based on the strength of our brands our business model and our people, we are well positioned to drive sustainable revenue and earnings growth and create value for our stakeholders over the long term.
With that I'll turn it over to Jim to review, our second quarter of 2021 financial results in more detail and provide.
Our fiscal year guidance.
Thanks, Ed and good morning, everyone. Our consolidated revenue in the second quarter was $397.9 million.
178, 6% increase compared to 2020.
And then the 11, 5% decrease versus 2019.
For wholesale revenue was $262.1 million.
Up 162, 2% compared to the prior year.
Down 27, 9% compared to 2019.
Wholesale footwear revenue was $198.1 million.
150 for.
Okay increase from 2020.
At 38% decline from 2019.
We feel like accessories, and apparel revenue was 64 million of 197% to last year and day.
17, 2% versus 2019.
In our retail.
<unk> segment revenue was $132.7 million.
226% increase compared to 2020.
And a 62, 8% increase compared to 2019.
E Commerce drove the growth versus 2019 E. Commerce revenue grew 105, 2% compared to 2020.
282, 2% versus 2019.
E Com accounted for 54% of our total retail segment sales in the quarter compared to 23% in 2019.
We ended the quarter with 216 company operated retail stores, including 60.
6 outlets.
E Commerce at ecommerce site.
As well as 15 company operated concessions in international markets.
As of June 30 of when the last 10 stores in Canada reopen.
We now have 100% of our stores open worldwide.
Turning to our licensing in the first half segment.
Our licensing royalty income was $2.8 million in the quarter.
At the $1.2 million last year, and $3.1 million in 2019.
Gross profit Commission income was <unk> 3 million.
After the prior to year end down from.
From $1.6 million in 2019.
Consolidated gross margin was 42, 7% in the quarter.
Up from 39, 1% in the prior year and 37, 8% in 2019.
Wholesale gross margin was 36%.
Baird.
<unk> of 6.6% last year and 32, 1% in 2019 the decline compared to 2019 was the result of increased freight rates and the non renewal of GSP.
Retail gross margin was 65, 4% compared to 67, 4% last year.
Year end 59, 7% in 2019.
Third 2019, we saw strong margin improvement in both ecommerce and stores due to less promotional activity, which more than offset the higher freight rates.
Operating expenses were $119.1 million in the quarter compared.
Compared to $76.9 million last year, and $120.9 million in 2019.
Operating income for the quarter totaled $51 million or 12, 8% of revenue.
Up from last year's operating loss of $21 million in 2019 operating income of <unk>.
$1.1 million or 10, 9% of revenue.
Our effective tax rate for the quarter was 27 per cent compared to 26, 9% in 2020 and 22, 4% in 2019.
Finally, net income attributable to the Steve Madden Ltd for the quarter was 30.
The $9.7 million or <unk> 48 per diluted share.
From last year's net loss of $14.7 million or <unk> 19 per diluted share in 2019, net income of $39.5 million or <unk> 47 per diluted share.
Moving to the balance sheet.
Our financial.
<unk> Foundation remains very strong and as of June 30 of 2021, we had $302.7 million of cash cash equivalents and short term investments and no debt.
Inventory totaled $125.5 million.
At the 21.5 per cent compared to last year, but down 14.
The national at 1% to 2019.
Our capex in the quarter was $1.2 million.
During the quarter, we repurchased approximately 876000 shares for $37.2 million, which includes shares acquired through the net settlement of employee.
Stock Awards.
There is approximately $81 million remaining on the share repurchase authorization.
The company's board of directors approved a quarterly cash dividend of <unk> 15 per share.
The dividend will be payable on September 27, 2021 to stockholders of record as of the close of.
14th on September 17, 2021.
Turning to our guidance for.
For fiscal 2021, we expect revenue to increase 43% to 47% compared to 2020, and we expect diluted EPS to be in the range of $2 to $2.10.
When comparing.
<unk> thousand 19, we expect revenue and diluted EPS to increase mid single digits on a percentage basis in Q3, and then to accelerate in Q4.
Now I would like to turn the call over to the operator for questions operator.
At this time, if you would like to ask a question press star 1 on your telephone keypad.
Again at a star and the number 1.
Okay.
Your first question comes from the line of Paul <unk> with Citi.
Hey.
Thanks, guys curious if maybe you could talk about the comp drivers behind that.
8% opened only comp.
When you compare that to the second quarter of 19.
And Ed.
Maybe just a supply chain outlook just any.
Timing of delivery issues that you might be seeing how you guys are mitigating any pressures that youre seeing in the supply.
Chain the might impact flow for the second half thanks, guys.
Sure.
Morning, Paul.
Thanks for your question so in terms of the the comp drivers.
Look we're seeing traffic improve but it still remains.
Negative, 2% to 19 and double.
Supplied at negative to 19, but we've seen improved conversion and a significant increase in AUR.
We've raised some prices selectively in terms of our initial prices, but at the bigger driver there is.
Much reduced promotional activity.
So that's so that's.
Did the big increase in AUR, which is contributing to that.
Were a big driver of the of the comp store increase that we're seeing in bricks and mortar in terms of the supply chain looked at there's a lot of we could talk about this at all day there are challenges throughout the globe there is port congestion.
Religion.
Both in the U S end in China.
Their COVID-19 outbreaks at factories there are.
Challenges getting containers, we could go we could go on and on so we are seeing a pretty significant increase in the lead times still.
<unk> and the supply chain disruption remains of significant challenge.
We.
Attempted to build that into the guidance that we've provided and we've planned for it.
And we've taken what steps we can to mitigate at I think.
I believe we've talked to you about how we've moved about half of the Steve Madden women's production.
And to Mexico, and Brazil for fall.
So a big move out of China.
That has helped although there are challenges in both Brazil, and Mexico as well, Brazil has had some COVID-19 outbreaks.
There has been challenges.
Getting space on airplanes, if we want to fly the goods.
<unk>.
In China, sorry, excuse me in Mexico, some of the components coming from China, and Theres been delays. So so it helps moving to Mexico, and Brazil, but still remains a challenge.
Got it thanks guys.
Ltd at all in the second quarter or do you feel like you were missing sales.
Missing some deliveries.
<unk> and in the wholesale business as a result of them from this the blockchain pressures.
Oh, Yeah, there was a very significant impact in.
In Q2.
Particularly in the wholesale business from the supply chain challenges.
In a normal year, if we had the types of sell throughs debt we had.
At this spring.
We would have chased into a lot more business in second quarter, a lot more reorders in second quarter, but we were not able to do that due to the supply chain disruption.
Got it. Thank you good luck.
Thanks, Paul.
Your next question is coming in low lying with BP.
Jim.
Thanks, Good morning, everyone.
And we are excited to hear that you're excited about the trends.
Now you've seen in the business.
Wanted to focus on 2 topics. The first is the C comp strength that you talked about triple digit strength.
Even at stores are now starting.
Going to get traffic back.
As you think about your customer and the fact that she is now where she is predominantly the online shopper.
How are you guys thinking about what E. Comm can ultimately be end and as a part of the retail mix and how does that influence.
Any sort of product assortments at might lean towards.
The T tailing E Com first.
And then at the second question on channel.
Yeah.
Yeah, well look.
We're already at this point.
A majority of digital company in our in our retail segment. So.
<unk> now.
Ben I think 5 quarters in a row, where E. Commerce has made up more than 50% of our retail segment revenue.
Revenue and we expect that to continue and that's going to continue to be a major focus for us and I think our growth driver.
In terms of of products.
Are there products that perform better on e-commerce than in stores, yes. There are some differences, but generally speaking we're trying to make.
Great shoes that resonate with our with our consumer and we're not necessarily designing into ecommerce versus stores.
I was more talking about timing on the drops.
At that.
Several of your.
Direct channel.
For some of the the wholesale.
In terms of trying to create the more segmentation of that would lean more towards.
The drug channels over time.
Yeah, well certainly given the growth in that channel and end and frankly the improved.
<unk> profitability that we've seen in that channel.
We are really prioritizing our owned and operated ecommerce in of <unk>.
Way that we never had before.
Got it and at the follow up question I had on channel is just if you could provide any commentary volume demand within.
Within your different channel partner of ours, if there was any difference therein.
And then lastly, if you could just provide an update on the early day sell through of what you're seeing at the anniversary of sell the Nordstrom anniversary of yourself that'd be helpful.
Yeah.
Sure.
Look there's nothing really to call out in terms of the the difference by channel obviously.
You know some some retailers are performing better than the others et cetera, but but generally speaking, we're seeing strong consumer demand and all the channels in which we play and we're really pleased with the performance and the sell through in all of the channels in which we distribute our products.
And then in terms of anniversary.
I.
Can't get into too many of the details other than to say, we're very very pleased with our performance so far particularly in the Steve Madden brand.
It sounds like he might be and I'm excited about the early performance of it.
[laughter] Yeah, we are.
Okay.
I'll I'll turn it over to the queue. Thanks, not nothing like with the balance of the year.
Thanks Camilla.
Your next question is from Susan Anderson with B Riley.
Hi, good morning, nice job on the corner and I guess, just a follow up on the wholesale channel at so it sounds like the demand. They are so I'm wondering.
If you were able to plan more inventory for that channel for the back half to meet that demand I guess should we expect the spread between wholesale and retail performance narrow at debt in the back half and then really quick on the gross margin by the channel I think retail was down of debt. While wholesale was absolutely just curious what the divergence of the 2 way where there. Thanks.
Sure, Yes, you will see that that gap between wholesale and retail narrow in the back half end as we indicated in the prepared remarks, we think wholesale when comparing to 2019 wholesale will improve to download to mid singles in Q3, and then be back to positive versus 19.
In Q4.
So you asked about the gross margin I think you were comparing it.
2 Q2 of last year.
Really the the better comparisons for Q2 of 19, there were so many.
Unusual things happening in Q2 of 2020, so I think.
In 2019 Q2 of 2019 is actually the inverse of of.
The of what you said, which is that at wholesale was down to 2019 and that was.
All driven by the increased.
Freight rates and the impact of the non renewal of Gsp's, if you back those.
Those 2 things out we were positive.
We had gross margin improvement relative to Q2.2019, and then in the retail segment, we had a very substantial increase in gross margin.
<unk> to Q2 of 2019 and Athene pointed out it was we had strong improvement in both stores and.
If you look at comp due to the reduced promotional activity.
Okay. Great. That's helpful. And then how are you thinking about the puts and takes of gross margin in the third quarter in the back half I guess, she does benefit seen in second quarter continue in the third quarter and then the impact of at the higher free should that be.
And in similar impact as in second quarter.
Or is it more or less as you maybe airfreight a lot of product scale.
Yes, youre still going to see the same the.
The same impact.
Freight in GSP or are of similar impact that's going to continue to be of headwind obviously.
We hope the GSP gets renewed at some point and that goes away, but but we have built in an impact from GSP throughout the year in terms of the overall gross margin look at should be a little bit lower than I don't think we're going to see the 42, 7% that we saw in Q2.
Because wholesale.
We'll make.
Make up a bigger percentage of the mix in the back half than it did in Q2.
Obviously carries a lower gross margin, but we still do expect to.
To see gross margins to start with the for the back half.
Great. That's really helpful. Thanks, so much good luck for MSCI.
Thank you.
Your next question is from Joseph <unk>.
So with UBS.
Great. Thanks, so much so just to follow up on the last question. If we just think about SG&A dollars in Q3, and Q4 are there any incremental drivers may be investments or you know more ecommerce marketing or anything that could be.
You know an impact on that and maybe could you give us a little bit of guidance.
On how you're thinking about SG&A for the back half. Thank you.
Sure Yeah, we have we have taken up.
Our forecasted SG&A in.
In line with the with the increased expectations around revenue for.
For the year, So I think previously.
For the full year, we had said that we thought SG&A would be lower than 2019, I think at least at the high end of our guidance.
We'll now see SG&A above 2019 for the full year and of course that means above in the back half as well.
The change there is really.
The incremental investment in marketing, particularly digital marketing to support the the are at the very strong trends, we're seeing in the owned and operated ecommerce business as well as other variable expenses and then 2 are less of those at the 2 big buckets to a lesser extent, we have started to.
Add back some of the payroll.
At that we had cut from the reduction in force last year as we see the strong recovery of the business.
Got it understood and if I can ask 1 more.
How would you characterize some of the gross margin improvement of the retail business is the.
The increased full price selling really of byproducts of happy just really on trend product or is it more of a factor of that.
Low inventory across the channel.
And as you know is better than supply generally speaking and that's what's driving it.
Because of the ideas are how do we think about next year at like do the.
How sustainable are of the gross margin gains that youre seeing in that retail business.
Well I think it's really both of the things that you mentioned, so I think.
There is just at.
We have to acknowledge that inventory.
Inventory levels across the industry.
Our low end the levels of <unk>.
Promotional activity not only its not just us that's reduced promotional activity many of our of.
Of our peers and competitors have done the same.
<unk>.
And so youre seeing gross margins I think increase across the space. We also believe that we have particularly strong product.
That's really resonated with the consumer and so that's another reason we've been able to.
Pull back on promotions, even even incrementally compared to some others.
But it is definitely.
It's definitely a combination of those 2 factors.
Got it thank you so much.
Yep.
You can ask the question is from Janine Stichter with Jefferies.
Hi, Good morning, I wanted to dig a bit more into the acceleration in performance at Youre expecting between <unk> and for Q is that just reflective.
<unk> long it takes you to meet the demand that's out there right now or is there any assumption around underlying improvements in wholesale demand and then also curious on for Q1 of your expectation is right now about reorders and your ability to meet them just given whats going out of the supply chain. Thank you.
Sure Yeah, well in.
In terms of the debt.
Sequential improvement from Q3 as of Q4, I think we're just seeing ongoing sequential improvement in the business as we as we recover from.
From the impact of Covid, 19, and as our wholesale customers.
The increase orders.
I think.
At the other.
There is also an impact here from the supply chain disruption and there is some product. That's I think that's moving out from the end of Q3 into the early part of Q4 in our forecast.
But generally speaking we just we just feel the momentum building.
In terms of Reorders of course, we've got a.
The plan for reorder in Q4, we've tried to be.
We've tried to bake in to our assumption there.
All of the challenges around the supply chain disruption.
And we feel comfortable with where that's sitting.
Okay, Great and then just wanted to follow up I think you had said dressy still very strong I am curious if youre seeing.
In any of your competitors able to get into that category at this point or do you still feel like you have at the much broader assortment.
Yes, I think that was the big advantage for us in spring.
I think we had really really strong dress shoes and in many of our competitors had really deemphasize that category.
End.
And we took a lot of share in that category is that as the category of demand in that category. It started coming back I think it's safe to assume debt.
Our competitors have seen that end theres going to be more competition in that category of fall, but we feel very good about our <unk>.
Positioning with the consumer in that category end about our product.
Product assortment, so I think it's still going to be the.
The nice driver for us.
Alright, great. Thanks very much.
Your next question is from Erinn Murphy with Piper Sandler.
Great. Thanks, Good morning, 2 questions for me as well first of all of it for your wholesale business overall, given the strength of sell through.
Can you just speak to where your market share gains are currently in that channel and then do you expect this to translate for further shelf space as we move through the back half of this year and into next year and then secondly could you just speak to the performance of the business outside of the U S would love to hear how Youre up in Canada are starting to have.
Back.
And the recovery.
Sure.
Yeah, well in terms of the market share.
Yes, certainly in the in the spring season.
Our sell throughs exceeded those of our key competitors in our largest wholesale.
The sale customers.
And.
Wholesale customers are reacting to that so.
At least certainly in our core and our core businesses, Steve Madden womens at.
At the top of the list.
Plans that we have from our customers end.
For for fall exceed.
Yeah.
What theyre planning for their overall department and what they are planning for our competitors. So we so we are taking shelf space and we're excited about that.
In terms of.
Some of the markets outside the U S. Europe continues to be a real highlight for us.
That business was actually up over 100%.
In Q2.
Paired to Q2 of 2019, so tremendous momentum there.
Again.
It continues to be driven by digital channels, both our owned and operated but also what we do in the wholesale channel with folks like the Lando and asos.
So really excited about that business cash.
<unk> has obviously had more of a or a slower recovery from COVID-19.
End.
So that business has been tougher although we're starting to see some improved results over the last couple of weeks.
Great and then if I could just add 1 more on <unk>.
Can you the speak to how of that brand is performing currently we're seeing at a lot more I'm just end social.
<unk> and Influencers at would love an update on how that brand is performing overall, thank so much.
I really appreciate the question because Dolce Vita is doing great things.
They had.
A really incredible.
The spring season.
I think that they've had and in the long time.
Really strong selling across a number of of products and categories, but also 1 sort of a homerun item thats, probably the best item they've had since we've owned them I think it's got to be up there.
So great momentum.
Wholesale channel also on Dolce Vita Dot com.
And and that's what also without if not for the supply chain disruption. They would have really been able to capture a lot more business and that is the 1 area of caution with Dolce Vita going forward is that we make the majority of our Dolce Vita products.
In the at pretty much all of our first year of products in Vietnam.
Which is obviously dealing with a lot of challenges with Covid right now and in fact, the number of there of Dolce Vita as factories are shut down. So we have factored that into our guidance, but generally speaking consumer demand for the brand is very very strong.
Excellent.
Thanks, so much.
Thank you.
Your next question comes from Sam Poser with Williams trading.
Good morning, Thank you for taking my questions at the company.
I have a few of them 1.
What is the wholesale appetite.
Early in the year it didn't appear to be that great and then your business came up the appetite.
Got better and you couldn't ship with the much good because of the supply chain, but when we look at the wholesale appetite now both for the balance of the year end into next spring what are you starting to see.
Yeah, well it's.
Dramatically.
And that's why.
We've guided to this very significant improvement in our wholesale revenue in the back half again, that's down low to mid singles in in Q3 versus 19, and then positive in Q4 versus 19.
Thanks, and then.
You mentioned that the gross margin you expected at the start with core in the back half of the year is that in both quarters, you think it's going to start with before.
Or would it be.
Would it be likely better in Q3 because the.
The.
Penetration.
The little move around a little more in Q4, how should we think of them up.
I was speaking about the the back half in total.
And in fact, it will be better in Q4 because of the higher penetration of retail in Q4.
Okay, and then lastly, just the.
Actually 2 more 1.
What's the story with Anne Klein and the other licenses now.
What is how are you of handling that I know the small business for.
You acquired at summit.
Probably quite off of it.
Yeah. So so.
And Cline.
The along with I would say men's is probably the businesses that took.
Took the biggest hit from Covid.
Just based on their positioning.
And.
The good news about Anne Klein is that we have seen at.
At a pretty strong improvement.
Sell through over the last couple of months. So we're seeing some nice signs of life. There, we're going to see a nice improvement in the back half from where we've been but will still be below that's the business, where we will still be below pre pandemic levels.
In the back half so so encouraging signs, but we still have some work to do there.
Thanks for them.
Movement in quick lastly, the tax rate for the full year, what are you guys thinking.
It should be right around where it was last year I think last year. We were at 26, I think right around there.
Okay, great. Thanks continued success.
Thanks Sam.
Our next question is from Marni Shapiro.
We're at with retail tracker.
Hey, guys congratulations.
Gosh of stores have been so busy you need inventory.
Can we just talk a little bit about the back half of the year. We know we heard all about the deliveries of delays and things like that I guess, how are you planning promotions for the back half of the ear.
And they know they've been much lower and now there's a lot of demand not of lot of inventory out there, but as the consumer comes into the holiday season.
Is there debt assumption that you'll still be looking for some kind of promotion. So how are you working with your wholesale partners for holiday promotions and how are you guys thinking about it.
Yeah.
Thanks, Thanks, Marty for it for the question and yes, we do.
Alright.
I can give you a list of stores [laughter] of degree of.
We're working on it as fast as we can.
It took the promos are look I think at.
We end and our key wholesale customer.
Customers are all you know.
The operating with the plan to continue with this lower level of promotional activity.
Inventories are at very well controlled in the channels as you pointed out probably 2 well controlled.
The new low not only for us but for for our key wholesale customers.
And so.
I do anticipate the levels of promo activity will be will be less than they were at 19. It doesn't mean, there's not going to be any we all know that at holiday time.
Customers expect some level of promotional activity, but but I think it should be well controlled.
And then for just ask a follow up to some of the sellout questions that we've been talking about.
You've had some really killer of items that are coming in.
You watch them come in and go out the door.
I guess help.
Quickly can you get back into some of them or are these fashion items that it doesn't make sense like I look at I don't know how to parents and I'm guessing it's the Kenley, which is just the hot Hot Hot item.
Does it make sense to chase that item or by the time you get it back in the customers moved onto the next thing how are you guys balancing debt I know you've always had to do at in the past, but I feel like right now things are moving exponentially faster.
Yeah look it's a different answer depending on the depending on the item.
But but it has been a big challenge you know we're not at a.
Able to get back into things as quickly as we normally do as you know that's 1 of the hallmarks of our company how quickly we can chase and our speed to market capability in end of <unk>.
We're not as fast as we normally are I think we're still faster than that.
Than our peers.
But you know our lead times are 3.4 weeks longer than the normal in many cases and so that's made of challenge Theres some things.
We're going to.
We will continue to go after and then and then there are some opportunities are more seasonal products that we've had to just kind of walk.
Walk away from the for maximizing the only move onto the next season.
Thanks, So much best of luck for the fall season.
Thanks Marty.
Your next question is from Dana Telsey with Telsey Advisory group.
Good morning, and congratulations on the nice progress.
Can you give us an update on.
No.
Business is doing with the discounters kind of what you're seeing.
And then also at the margin impact of freight and how you're planning that go forward.
Sure Yeah the.
Performance of <unk>.
Private label with the mass merchants is very good you know in Q2.
2 it was down and I think we called out some of the.
At like a big 1 time program that we did not anniversary from 2019 are down I'm talking about down to 2019 because of not anniversarying of Big 1 time program.
That happened in the wake of the Payless bankruptcy, but generally speaking our sell.
Who is good with the mass merchants and we feel good about our performance there Zane do you want to address the freight sure.
At the.
Got it for free for Q1, if you recall, we told you of the impacts of was about 110 basis points for.
For Q2 of the impact of 270 basis points.
And as far as.
Sell through of concern in Q4, I think we're looking at for right now around 260 basis points with Q3 similar to Q2, and then maybe a little of relief towards the end of Q4.
Got it and then.
Any update on accessories, and apparel and what you're seeing in those categories.
Q3 for the back half.
Yeah. So.
In terms of the the wholesale if youre asking about the the wholesale segment.
Revenue plan.
Really.
In line with what we said for overall wholesale.
Versus 19.
Meaning the download to mid singles to 19 in Q3, and then improving in Q4.
But in terms of what we're seeing in the business that I'm really happy about that in the the first thing I want to highlight is what we're seeing in apparel.
Because that BB Dakota, Steve Madden business is really.
At the strong traction.
Again, very strong sell throughs there the dress category in particular has been great for us, but great performance with our with our big customers.
Bricks and mortar or the Omnichannel, guys like Nordstrom and bloomingdale's, but also.
Our E comm or pure play E comm retailers like revolve.
And and at really strong performance in the Nordstrom anniversary sale. So far so really excited about the trends there and the.
And the momentum that we have in apparel.
And then on the handbag side also feeling very good Steve Madden handbags, I think are stronger than they've ever been.
And having lot of success.
A lot of product categories cross bodies are phenomenal for us.
But also doing well with a weekend or as our Satchels and it's not only in wholesale we've seen a big improvement in that business in our direct to consumer and our direct to consumer segment.
<unk> seen the penetration go up significantly there so.
So we're excited about about the non footwear categories.
And just lastly, how is sneakers stealing given the improvement that we've been seeing in dressy.
Yes, the acres are still performing very well at pick the number 1 product in the company is a is the fashion sneaker, but with the Brian Stone.
But as that continues to be a very important category for us.
Thank you.
Thanks, Dan and no further questions I will now turn the call back over to Ed Rosenfeld.
Great well, thanks, so much for joining us on today's call.
The rest of the summer and we look forward to speaking with you on the Q3.
So have a great day.
This concludes today's conference call you may now disconnect.
Okay.
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Carl.
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Hum.
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Yes.
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Great.
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