Q4 2024 Steven Madden Ltd Earnings Call
Speaker Change: Good day and thank you for standing by. Welcome to the fourth quarter 2024 Steve Madden Limited Earnings Conference Call.
Speaker Change: 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-one-one on your telephone. You will then hear an automated message advising your hand is raised.
Speaker Change: To withdraw your question, please press star 1 1 again. Please be advised today's conference is being recorded I would not like to hand the comps over to your speaker today Danielle McCoy VP of corporate development investor relations. Please go ahead
Speaker Change: Thanks, Kevin, and good morning, everyone. Thank you for joining our fourth quarter and full year 2024 earnings call and webcast.
Speaker Change: Before we begin, I'd like to remind you that our remarks that follow, including answers to your questions, contain statements that we believe to be forward-looking statements within the meaning of the Private Securities Litigation Reform Act.
Speaker Change: These forward-looking statements are subject to risks that could cause actual results to materially differ from those expressed or implied by such forward-looking statements.
Speaker Change: These risks include, among others, matters that we have described in our press release issued earlier today and filings we make with the SEC.
Speaker Change: We disclaim any obligation to update these forward-looking statements, which may not be updated until our next quarterly earnings conference call, if at all.
Speaker Change: The financial results discussed on today's call 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.
Speaker Change: Joining me on the call today is Ed Rosenfeld, Chairman and Chief Executive Officer, and Zine Mazouzi, Chief Financial Officer. With that, I'll turn the call over to Ed. Ed?
Ed Rosenfeld: All right. Well, thanks, Danielle, and good morning, everyone, and thank you for joining us to review Steve Madden's fourth quarter and full year 2024 results.
Ed Rosenfeld: We are pleased to have delivered earnings results at the high end of our guidance range for the fourth quarter of 2024.
Ed Rosenfeld: Capping off a strong year in which we grew revenue 15% and diluted EPS 9% compared to 2023.
Ed Rosenfeld: These results demonstrate the power of our brands and the strength of our business model, as well as our team's disciplined execution of our strategy. So let me walk you through the highlights.
Ed Rosenfeld: First and foremost, our top priority is always to win with product.
Ed Rosenfeld: In 2024, our teams utilized our proven model, which combines talented design teams, a test-and-react strategy, and an industry-leading speed-to-market capability.
Ed Rosenfeld: to create trend-right product assortments across our various brands and product categories that resonated with consumers.
Ed Rosenfeld: We then supported this great product with increased investment in our full funnel marketing strategy, highlighted by our global marketing campaign for the Steve Madden brand in fall that we called Never Miss a Beat, a love letter to our hometown of New York City, featuring the iconic D-Lite song, Grooves in the Heart.
Ed Rosenfeld: Together, this combination of outstanding product and effective marketing enabled us to deepen our connection with our consumers and drive results across our four key business drivers.
Ed Rosenfeld: The first of those key business drivers is expanding our business in international markets.
Ed Rosenfeld: In 2024, our international revenue grew 12% versus the prior year.
Revenue in the EMEA region increased 18 percent.
Ed Rosenfeld: including a solid game in Europe despite a challenging retail environment.
Ed Rosenfeld: strong expansion in the Middle East, and explosive growth in South Africa.
Ed Rosenfeld: In the Americas ex-US, revenue grew 9%, including mid-single-digit percentage gains in Canada and Mexico, as well as a contribution from our new joint venture in Latin America, which is off to a strong start.
Ed Rosenfeld: We also continue to transition from the distributor model to an ownership model in key markets.
Ed Rosenfeld: In addition to the aforementioned joint venture for certain countries in Latin America, which we formed in the second quarter of 2024, we also converted our distributor business in Southeastern Europe, including Serbia and Croatia, to a joint venture with our partner fashion company.
June 2, 2024.
Ed Rosenfeld: Then in the fourth quarter, we formed a JV for Singapore with leading regional player Valorant group.
Ed Rosenfeld: And in January, we converted our partnership with Valoram in Malaysia to a majority-owned JV structure.
Ed Rosenfeld: We currently operate 14 stores and e-commerce through the joint ventures with Valorant.
Ed Rosenfeld: And also in January, we formed a new JV in Australia, where we currently operate eight stores in e-commerce and have wholesale distribution in retailers including David Jones and Meyers.
Ed Rosenfeld: Our second key business driver is expanding in categories outside of footwear, like accessories and apparel.
Ed Rosenfeld: In 2024, our overall accessories and apparel revenue increased 53% compared to 2023.
or 25% excluding Almost Famous.
Ed Rosenfeld: Our Steve Madden handbag business was outstanding, crossing the $300 million mark in revenue for the first time and increasing 31% compared to the prior year.
Ed Rosenfeld: Since 2019, Steve Madden handbag revenue has increased 23% per year on a compounded annual basis.
Ed Rosenfeld: Steve Madden Apparel also continued to gain traction, with revenue up 23% versus 2023.
Ed Rosenfeld: And the almost famous division exceeded expectations in its first full year under our ownership, contributing $179 million in revenue with an operating margin of nearly 11%.
Ed Rosenfeld: Our third key driver is growing our business in direct-to-consumer channels. DTC revenue in 2024 was $550 million, a 9 percent increase versus 2023, or 5 percent growth on a comp basis.
Ed Rosenfeld: Steve Madden DTC revenue increased 6%, while Dolce Vita DTC revenue grew 36%.
Ed Rosenfeld: And our last key driver is strengthening our core U.S. wholesale footwear business.
Ed Rosenfeld: While many of our key wholesale customers continued to take a cautious approach to orders as they prioritized inventory control, we were pleased to return to revenue growth in this business in 2024, with a 2% increase compared to 2023.
Ed Rosenfeld: Overall, 2024 was a strong year for Steve Madden, with robust top and bottom line growth driven by tangible progress on our key strategic initiatives.
Ed Rosenfeld: We also demonstrated our ongoing commitment to returning capital to our shareholders with nearly a hundred and sixty million dollars in combined dividends and share of purchases.
Ed Rosenfeld: As we look ahead, however, we are cautious on our outlook for 2025 as we face meaningful near-term headwinds.
Ed Rosenfeld: Most notably, our earnings will be negatively impacted by new tariffs on goods imported into the United States, and by our efforts to aggressively diversify production out of China.
Ed Rosenfeld: We also expect our handbag business, which has been a leading growth driver for us in recent years, to face pressure this year, as handbag inventories in certain parts of the wholesale channel have backed up, resulting in constrained open-to-buys and more cautious ordering from key wholesale customers.
Ed Rosenfeld: That said, we have a proven ability to navigate difficult market conditions with our Agile business model.
Ed Rosenfeld: We are also looking forward to adding a powerful new growth engine to the company with the acquisition of Kurt Geiger, which we announced on February 13th and expect to close in the second quarter of 2025.
Ed Rosenfeld: The Kurt Geiger London brand has exhibited exceptional growth over the last several years, as its unique brand image, distinctive design aesthetic, and compelling value proposition have driven success across multiple categories, led by handbags.
Ed Rosenfeld: Its differentiated and elevated positioning and its alignment with our strategic initiatives of expanding in international markets, accessories categories, and direct-to-consumer channels make it a highly attractive and complementary addition to our portfolio.
Ed Rosenfeld: In addition to Kurt Geiger London, Kurt Geiger's brand portfolio includes KG, Kurt Geiger, and Carvella. And the company also operates footwear concessions within luxury and premium department stores in the United Kingdom, including Harrods and Selfridges, where it sells both its own and third-party brands.
Ed Rosenfeld: For the 12 months ended February 1st, 2025, Kurt Geiger had revenue of 400 million pounds.
Ed Rosenfeld: The purchase price in the transaction reflects an enterprise value of £289 million, with £275 million in cash due at closing, and the balance payable to management over a five-year period upon achievement of certain financial targets.
Speaker Change: Importantly, all members of the executive management team have agreed to stay on and continue to lead Kurt Geiger under our ownership, including CEO Neil Clifford, who has led Kurt Geiger for over 20 years.
Speaker Change: So, in sum, we are pleased to have delivered strong revenue and earnings growth, as well as meaningful progress on our key strategic initiatives in 2024.
Speaker Change: And while we clearly faced some headwinds in 2025, we are confident that the combination of our strong brands and proven business model
Speaker Change: supplemented by a significant new growth driver in Kurt Geiger will enable us to drive sustainable revenue and earnings growth over the long term.
Zine Mazouzi: Now, I'll turn it over to Zine to review our fourth quarter and full year 2024 financial results in more detail and provide our initial outlook for 2025.
Thanks, Seth, and good morning, everyone.
Zine Mazouzi: In the fourth quarter, our consolidated revenue was $582.3 million, a 12% increase compared to the fourth quarter of 2023.
Zine Mazouzi: Our wholesale revenue was $402.9 million, up 13.6% compared to the fourth quarter of 2023.
Zine Mazouzi: Wholesale footwear revenue was $227.4 million, a 1% increase from the comparable period in 2023.
Zine Mazouzi: Also, accessories and apparel revenue was $175.4 million, up 35.4% to the fourth quarter in the prior year, driven by strong growth across the board.
Zine Mazouzi: with double-digit percentage gains in accessories and apparel categories, domestic and international markets, and branded and private label businesses.
Zine Mazouzi: Our wholesale business in the quarter also benefited from approximately $13 million of shipments to the mass channel that were expected to shift in January 2025 and were moved up to the end of Q4 2024.
Zine Mazouzi: In our direct-to-consumer segment, revenue was $176 million, an 8.4% increase compared to the fourth quarter of 2023, with increases in both the brick-and-mortar and e-commerce businesses.
Top sales rose 4.5% in the quarter.
Zine Mazouzi: We ended the year with 291 company-operated brick and mortar retail stores, including 68 outlets, as well as five e-commerce websites and 42 company-operated concessions in international markets.
Zine Mazouzi: Our license in royalty income was $3.5 million in the quarter compared to $2.7 million in the fourth quarter of 2023.
Zine Mazouzi: consolidated gross margin was 40.4% in the quarter compared to 41.7% in the comparable period of 2023.
Zine Mazouzi: Wholesale gross margin was 30.5% compared to 31.7% in the fourth quarter of 2023, primarily driven by a greater mix of private label businesses.
Zine Mazouzi: Direct-to-consumer gross margin was 62 percent compared to 62.7 percent in the comparable period in 2023, driven by an increase in promotional activity.
Zine Mazouzi: While we did not run more or deeper promotions, we saw a higher concentration of consumer spend during the promotional periods compared to the prior year.
Zine Mazouzi: Operating expenses were $182.9 million, or 31.4% of revenue in the quarter, compared to $163.9 million, or 31.5% of revenue in the fourth quarter of 2023.
Zine Mazouzi: Operating income for the quarter was $52.6 million, or 9% of revenue, compared to $53 million, or 10.2% of revenue in the comparable period in the prior year.
Zine Mazouzi: The effective tax rate for the quarter was 21.4% compared to 14.3% in the fourth quarter of 2023, driven by lower discrete benefits related to stock-based compensation.
Zine Mazouzi: Finally, net income attributable to Steve Madden Limited for the quarter was $39.3 million, or $0.55 per diluted share, compared to $45 million, or $0.61 per diluted share, in the fourth quarter of 2023.
Now I would like to touch briefly on four-year results.
Zine Mazouzi: Total revenue for 2024 increased 16.2% to $2.3 billion, compared to $2 billion in 2023.
Zine Mazouzi: Net income, attributable to Steve Madden Limited, was $192.4 million, or $2.67 per diluted share.
Zine Mazouzi: for the year ended December 31st, 2024 compared to $182.7 million, or $2.45 per diluted share, for the year ended December 31st, 2023.
Zine Mazouzi: Moving to the balance sheet, our financial foundation remains strong. As of December 31st, 2024, we had $203.4 million of cash, cash equivalents, and short-term investments, and no debt.
Inventory was $257.6 million, up 12.5% to the prior year.
Zine Mazouzi: Our CapEx in the fourth quarter was $9.3 million, and for the year was $25.9 million.
Zine Mazouzi: During the fourth quarter and full year 2024, the company spent $2.6 million and $98.4 million, respectively, on repurchases of its common stock, including shares acquired through the Net Settlement of Employee Stock Awards.
Zine Mazouzi: The company's Board of Directors approved a quarterly cash dividend of $0.21 per share. The dividend will be payable on March 21, 2025 to stockholders of record as of the close of business on March 10, 2025.
Zine Mazouzi: Turning to our outlook, we expect revenue for 2025 to increase 17 to 19 percent compared to 2024 and we expect diluted EPS to be in the range of 2030 cents to 2040 cents.
Zine Mazouzi: This outlook assumes the Kurt Geiger acquisition closed on May 1st and includes Kurt Geiger from that date.
Zine Mazouzi: excluding Kurt Geiger, we expect revenue to increase low single digits on a percentage basis, and we expect diluted EPS to be in the range of $0.020 to $0.030.
Zine Mazouzi: In the first quarter, we expect diluted EPS to decline approximately 30 to 35 percent versus the first quarter of 2024.
as Q1 represents our toughest comparison to last year.
Zine Mazouzi: We are also significantly increasing our year-over-year market investment in Q1 and our DTC business has been under pressure quarter to date.
Speaker Change: Now I would like to turn the call over to the operator for questions. Kevin?
Speaker Change: Thank you. Ladies and gentlemen, if you have a question or a comment at this time, please press star 11 on your telephone. If your question hasn't been answered, you're wishing with yourself from the queue, please press star 11 again. We'll pause for a moment while we compile our Q&A roster.
Thank you. Thank you.
Speaker Change: Our first question comes from Paul LaJouce with Citi. Your line is open.
Hey, thanks guys. Can we maybe talk about...
Speaker Change: How are you thinking about gross margin pressure throughout the year just given the the tariff?
impact.
Speaker Change: and what your plans are to mitigate as you move throughout the year.
and then also on the Kurt Geiger investment, Curious.
Speaker Change: If you are baking in any needed investment into that business as you kind of get it looped in. If there's any drag that we should be thinking about that occurs this year from needed investment versus what you'll see going forward. Thanks.
Speaker Change: Thanks, Paul. So, in terms of the first question, yeah, obviously we are dealing with pressure from tariffs this year. The plan to mitigate is...
Speaker Change: really essentially the playbook that we've outlined previously. It's number one, diversifying production out of China.
Speaker Change: And we are making significant progress with respect to that part of the strategy already. You'll recall that on the last call, we said at that time that on the goods that we imported to the United States.
Speaker Change: that about 71% of those were coming from China. Sitting here today, based on what we've already brought in so far this year and what's on order, that number is already down to 58%, so almost a 20% reduction.
Speaker Change: since the last call, and we expect to continue to make further progress.
Speaker Change: throughout the year. You'll recall that our goal was to be down to the low 40s in terms of goods that we're placing a year from the election. So essentially November of this year when we're placing goods we are targeting low 40s and we think we're marching towards that goal.
Speaker Change: The other pieces of the mitigation plan are of course going back to the factories and looking for price concessions.
Speaker Change: and those discussions are ongoing. And then the third piece is we will be selectively raising prices. And it's not going to be an across-the-board price increase, but we will be surgical about it and we're...
Speaker Change: You know, we think that we can get a little bit more for the goods, we will do that starting in fall. In terms of specific growth margin guides, I think...
you know, essentially
given all the
uncertainty here and and the fluidity
We're not going to provide specific gross margin guidance today.
Speaker Change: You know, we're signing up for the revenue and EPS that we've disclosed, but not prepared to make any commitments around gross margin or specific tariff impact today. But but obviously, as we go throughout the year and get more clarity here, we'll we will provide you more color at that time.
Thank you. One moment, Mark.
Sorry, go ahead.
Speaker Change: I'm sorry, I forgot to respond to the second part, yes. So on Kurt Geiger, no, I don't think there's any
Speaker Change: meaningful investment required up front. You know, we certainly see a lot of opportunity to grow that business and we'll be investing, but there's no operating margin drag in the first year or two for big investments.
Ed Rosenfeld: Just to go back to the gross margin, Ed, you know, any color just in terms of the first half, second half pressure, just your ability to execute on some of those mitigation efforts, like are you seeing, you know, that come through as an offset in the first half or is that not, you know, is that something that we won't see until the second half?
Ed Rosenfeld: Again, first of all, we don't provide quarterly guidance in the first place, and this is a situation that's even more uncertain. So I'm hesitant to try to give too much color around the quarterly cadence there. Obviously, the longer...
Ed Rosenfeld: The farther out we are, the more the mitigation efforts have an impact, but in the near term, we're also engaging in certain discussions with our factories and seeing what we can do to give us a little bit of help in the near term as well.
Thank you. Good luck.
Thank you. One moment for our next question.
Speaker Change: Our next question comes from Anna Andreeva with Piper. Your line is open.
Speaker Change: Great, thank you so much and good morning. A couple from us. First, you mentioned DTC is under some pressure quarter to date. Can you just parse out what are you seeing in January versus February? Any improvement in Feb? And do you think this is mostly macro and the tariff conversation, but is weather hurting you guys as well? And then we have a follow-up.
Speaker Change: Yeah, we have seen a slow start to the year. I would say in particular, we've seen a slow start to the selling of spring products, including sandals.
Speaker Change: and overall weak traffic to stores and you know I think this is not something that it's a just a Steve Madden phenomenon we talked to a lot of folks in the industry and we're hearing
Speaker Change: something consistent from a lot of the other retailers that we speak with. I'll say that in my conversations with other folks, I think at this point, you know, while we are loathe to blame the weather, we are hearing from a lot of other folks in the industry that they're attributing a lot of this
Speaker Change: slow start to the year to weather. It's obviously been very cold across the across the country.
Speaker Change: But look, I think we have to, we're going to have to monitor that because there are some other signs that we need to be watching. Obviously, I think we've all seen the consumer confidence.
Speaker Change: figures over the last couple of weeks that have shown a pretty significant drop in consumer sentiment. So we'll have to monitor that carefully. Not any major difference between January and February in terms of the trend.
Speaker Change: Okay, that's super helpful. And secondly on KG, and congrats on the acquisition. Can you talk about why you think now is the right time to make this acquisition? How do you guys think about offsetting the tariffs exposure there? I think over 80% of their production is in China. And you mentioned the revenue contribution from the business. How should we think about EPS contribution for this year?
Thank you. Thank you.
So, in terms of why now,
Look, this is a...
Speaker Change: this opportunity became available. And fundamentally, we want to make this acquisition because we think the Kurt Geiger London brand can be a very big and very profitable brand. As I mentioned in the prepared remarks.
Speaker Change: It's a brand with a really unique and differentiated brand image and design aesthetic and that combined with a really strong price value proposition.
Speaker Change: has, you know, is really resonating with consumers. It plays in a really attractive part of the market, you know, what we would call, for lack of a better term, accessible luxury, led by handbags.
Speaker Change: with obviously a very strong shoe business as well. And it's a brand that's generated outstanding growth and sustained brand heat over the last several years. So this is a brand that was up over 25% last year, over 35% per year on a compounded annual basis since 2019.
Speaker Change: If you look just at the U.S., this is a business that was.
Speaker Change: was under $10 million in the U.S. in 2019 and did over $170 million.
Speaker Change: last year. But despite all that exceptional growth in recent years, I think what's exciting about it is that it's still really in the very early innings of its growth journey and still lots of runway and untapped growth potential ahead of it.
It also, I think it's just a really good fit.
Speaker Change: with our company. It's a brand that has a very different.
Thank you.
Speaker Change: very different aesthetic, very different positioning, very different price point from the other brands in our portfolio. So it's complimentary in that respect. And it advances the strategic initiatives that we've been talking about for the last several years, which is.
you know a pretty
Speaker Change: and High Growth Asset. In terms of the tariff exposure, it's a good question. I do want to point out that, different from us, only 35% of their overall business is done in the United States.
Speaker Change: So while they do have tariff exposure, it's considerably less just because by virtue of the fact that, you know, the majority of the business is done outside the U.S.
Speaker Change: On that 35% that is in the U.S., you are right, they do have a significant exposure to China. It's about 85% of their sourcing.
Speaker Change: coming from China today. And that's something we think that, you know, we'll be able to help them with and we'll be working with them. There's a, we have a plan in place to...
to diversify them.
Speaker Change: And I think that based on their product mix being majority handbags, as well as their, you know, higher price points, I do think there's a clear path to diversifying over a relatively short period of time.
Speaker Change: In terms of the EPS impact, it's about $0.10 that we've built in for this year. Again, that's for the partial year, May 1 through the end of the year.
Speaker Change: All right, well, thank you so much, Ed, and congrats again.
Thank you. One moment for our next question.
Speaker Change: Our next question comes from Janie Stitcher with VTIG, your line is open.
Janie Stitcher: Good morning. So on the low single digit growth that you're planning for the year organically, can you just unpack how you're thinking about wholesale versus GTC? And then maybe within wholesale, how you're thinking about the different segments, whether it's the Seabed and Branded business, mass and off price?
There.
Janie Stitcher: Yes, so within that low singles on a consolidated basis excluding KG, we're looking at down low single digits in wholesale and up high single digits.
Janie Stitcher: in DTC. And if we unpack wholesale a little bit, that's up low singles in wholesale footwear.
and down mid-single digits.
Janie Stitcher: in wholesale accessories and apparel. In terms of branded versus private label, we actually think branded will have better growth than private label in 2025, different from what we saw last year.
Speaker Change: Great. And then within the wholesale accessories and apparel down mid-single digits, I assume that would mean handbags down more significantly. How are you thinking about the apparel growth this year now that you've started to last the almost famous acquisition?
Yeah, I think,
That's right, I think that
You know, we think that
Speaker Change: We've talked about the pressure on the Steve Madden handbag business and we are looking at that being down double digits at this point.
Speaker Change: In terms of apparel, we're bullish on the Steve Madden apparel business and think we'll continue to see nice growth there. We do have a private label apparel business as well, and there we do expect to see some pressure. Part of that is just a good chunk of that is just a move, I think Zine called out in his prepared remarks that
Speaker Change: that there was a fairly significant move of goods that typically would go out in January into December, and so that's causing a little bit of pressure there.
Great, thanks so much.
One moment for our next question.
Speaker Change: Our next question comes from Marnie Shapiro with the Retail Tracker. Your line is open.
Speaker Change: Hey guys, can I just actually follow up on that last comment? The pressure from the shift into December from January, once you're past that...
Speaker Change: Are there any other shifts or anything we should be aware of? Or is it just a general kind of pressure on the private label apparel side?
Speaker Change: I think that will I think that's a that's a big piece of it but I do expect to see a little pressure on that side as well we are seeing some of those mass customers get a little bit more conservative with their orders
Speaker Change: That makes sense. And then could you just talk, by the way, the Steve Madden branded apparel at retail looks
Speaker Change: Fantastic. Beautiful sets at the stores and growing. It's nice to see. Could you talk a little bit about the slowdown you're seeing in the bags? I think you said it was a little bit too much inventory in the pipeline and in shoes. Are you seeing it at every level, at mass, all the way up to?
Speaker Change: Dolce Vita's customers or is it more specifically at the mass level?
Speaker Change: First of all, thank you for the comments about Steve Magnaferro. We're really excited about the progress that we're making there, and I feel really good about that. In terms of handbags,
Thank you. Bye bye.
Speaker Change: Where we're seeing that most acutely is in that Steve Madden handbag business and and that that tier of distribution And that is obviously the bulk of our business that's the business that's been driving so much growth for us and it's been such a strong tailwind for us in recent years
Speaker Change: and so it does put some pressure you know on the overall numbers and handbags when that one slows down because that's the bulk of it.
Speaker Change: And can I sneak in one more just following up on the tariff conversation?
Speaker Change: When does the product that came in pre-tariff start to wane, and you start to really feel the impact? Is that Q2 or Q3, or is it...
Any guidance around that?
Speaker Change: Yeah, I mean the only thing I'll say is that in contrast to some of the other companies that you may follow Because we turn our inventory so quickly You know, we still turn our stories faster than just about anybody else in the industry. We will feel this
Speaker Change: earlier than others. And, you know, particularly in our wholesale channel, we return our inventories close to ten times a year, which means that, you know, if the tariff went into effect in early February, we're going to start to feel it even at the end of first quarter on certain goods.
Speaker Change: God, if that makes sense. Best of luck. The product looks fantastic, guys.
Thanks so much.
Speaker Change: Our next question comes from Laura Champagne with Loop Capital. Your line is open.
Speaker Change: Thanks for taking my question. I concur that the valuation on Kurt Geiger was attractive.
Speaker Change: Is that widespread? Are you seeing that kind of across the board? And if so, would you be open to other M&A this year, or is this a big enough transaction that you feel like this is one and done for this year?
Speaker Change: This is a really important transaction for us. We think this is a super, super impactful opportunity going forward. So I think that our focus this year is going to be on integrating this and setting this up for success.
Speaker Change: I'll never say never, but we'll be certainly oriented towards focusing on Kurt Geiger for the time being.
Speaker Change: Understood. And then on the wholesale footwear business, you mentioned that gross margin was pressured because of higher penetration of private label. Would wholesale footwear have grown in Q4 without growth from the mass channel?
Now the branded business was down about 3% in Q4.
Do you have an expectation for improvement in 2025?
Speaker Change: Yeah, I do. I think it will get better. I think we should be able to turn positive in Q1, but up low singles. And that's really how we're thinking about it for 2025.
Got it. Thank you.
One moment for our next question.
Speaker Change: Our next question comes from Sam Poser with Williams Trading. Your line is open.
Thank you very much. Good morning.
Speaker Change: Well, we're not going to guide to every line on the income statement, Sam, but what I would, I guess what I would tell you is the
Speaker Change: We are incurring debt to do the new transaction. We've built that in, again, we've assumed that that transaction closes May 1st.
Speaker Change: That the new term loan there will be at SOFR plus 200 to start So hopefully that gives you enough to do your your modeling
Speaker Change: You know me well enough to know that it's not accurate, but okay.
Anyway
Speaker Change: With the changes in moving the JVs to subsidiaries and or distributors to JVs and so on, how much revenue, like how does that work on sort of
Speaker Change: How much does that lift the revenue, all other things being equal, in those places where you've done it or are planning to do it?
Speaker Change: Yeah, that does that does give us a revenue bump. I would say the
Speaker Change: incremental revenue from those changes this year is probably going to approach 25 million dollars. Unfortunately, there's also a negative exchange rate impact this year from translation, which is actually more than 25 million dollars.
So
Speaker Change: So, you know, all that and more is being offset by a stronger dollar.
Okay, and then.
Speaker Change: concessions help maybe grow some of the other businesses that you have primarily in the UK.
Sure.
Speaker Change: Yeah, so if you look at Kurt Geiger's revenue by geography, it's about, as we mentioned, 35% in the U.S., a little over 50% in the U.K., and the balance is in the rest of the world, of which Europe is obviously.
important.
Speaker Change: It's about 50% in the U.S., a little over 30% in the U.K., and then the balance in the rest of the world. So we do think that that is one area of pretty significant synergy opportunity is utilizing our Steve Madden network to expand Kirk Iger into some new international markets.
Speaker Change: and capitalizing on the relationships and the infrastructure that we have in some of these markets and that's going to be really a top priority for us once we close the transaction to start to work on those synergy opportunities.
Speaker Change: In terms of the concessions that they have, look, we have already been partnering with Kurt Geiger for years, and they already have Steve Madden in their
Speaker Change: in their concessions. They also operate two stores for us in London, but we'll obviously continue, you know, look to expand that relationship.
Speaker Change: and roll out more stores in the UK under Kurt Geiger's operation. And that's another piece of exciting synergy here.
Well, I may come back on. Thank you.
One moment for the next question.
Speaker Change: Our next question comes from Aubrey Tonella with BNB Parabus. Your line is open.
Hey, good morning. Thanks for taking the questions.
Speaker Change: I'm Kurt Geiger. Could you give, you know, more color on how we should think about the longer-term growth and margin profile there? I think it grew double digits last year. Is that the right rate to think about long-term and then how how do the margins compare to your existing business and what are the opportunities to expand there?
Speaker Change: Yeah, we are forecasting double-digit growth for Kurt Geiger this year, and frankly, I think that there's runway for this business to grow double digits for a long time.
Speaker Change: for a number of years here. In terms of the margin profile,
Speaker Change: You know, last year they had EBITDA margins of a little over 11%.
Speaker Change: Now, for this year, we've taken a small haircut to that just because of tariff impact. And then, you know, when you take out
Speaker Change: There's clear opportunity for this to be a double-digit operating margin business.
Speaker Change: I don't think I want to provide a timeline on how quickly we'll get there on today's call, but once we get the transaction closed and work with the team there, we'll come back to you with more specifics on how we'll get there.
Speaker Change: That's great. And then maybe just in terms of balance sheet leverage, is the plan to get back to a net cash position and what's the timeframe to kind of get to whatever your target is?
Speaker Change: Yeah, look, we've been operating with this net cash position of, you know, approximately $200 million in net cash. I don't think...
Speaker Change: We need to be there You know, we will have a small
Speaker Change: Net debt position at closing, you know, we're talking about half a turn of net debt to EBITDA though, so pretty modest.
Speaker Change: And I think the plan would be to try to get back to net debt of zero, you know, sort of a neutral position. And at that point, we would then look to, you know, most likely resume share purchases.
and it goes from there.
Thank you.
One moment for our next question.
Dana Telsey: Our next question comes from Dana Telsey with Telsey Advisory Group. Your line is open.
Dana Telsey: Hi, good morning, everyone. Ed, as you think about tariffs and as we go through the year, and you mentioned price increases, how do you think about the price increases, either by category, compared to what you did last time, where I think it was almost $10, $10 an item or a pair?
Dana Telsey: and then Almost Famous, how did they do this year or this quarter and what's the outlook? And then Marketing Investment, you said was increasing, by how much? And what are you doing differently? Is the social media effective? How are you thinking about it? Thank you.
Dana Telsey: Yeah, so in terms of price increases, look, I do think we have to be careful here. Obviously, we have a consumer.
Dana Telsey: who has been exhausted by price increases over the last several years. And so what I don't think we can do is just raise prices across the board or, you know, or take the exact same styles and just raise them 10 bucks. So what, but we do need to.
Dana Telsey: to get some price increases pushed through here to mitigate some of the impact of tariffs.
Dana Telsey: And so what we're really focused on is, again, being surgical, looking for where we have newness, where we have a very, where we're delivering a really strong price-value proposition, and and raising those prices, and then there will be other items that will not come up at all. And that's one of the
Dana Telsey: One of the things that we really have focused on as we're looking at the fall line is really elevating the materials and the detailing so that there is increased
Dana Telsey: perception of value in the product and we can raise product and therefore we can raise prices.
In terms of almost famous
Dana Telsey: had a very strong Q4, a very strong year overall in 2024. As we mentioned, they did benefit from a
a move in of
Some shipments that otherwise
Dana Telsey: Normally would have gone out in January that that went out in in Q4
So that will impact them.
Dana Telsey: in 2025. But overall, I feel very good about the branded business there and how they're doing with Madden Girl and Madden NYC. I am more cautious on the private label piece.
in 2025.
And then the last question was about marketing and Q1.
Dana Telsey: Dana, could you just repeat the question about marketing? On marketing, how much is investment going up in 2025? And anything special that you're doing in any quarter that we should be mindful of?
Dana Telsey: Sure. Yeah, I think you will see marketing increase in 2025. I think as a percentage of revenue, again, excluding Kurt Geiger, it should be relatively in line. However, Q1, there is a significant increase in marketing investment in Q1 because we had that very successful fall campaign.
that we think show really great results.
Dana Telsey: and we wanted to follow that up with something similar and we think even better for spring.
Dana Telsey: So, we've got a really exciting new campaign that we're calling House of Steve that's going to launch next week. And in support of that, there is a significant increase in market investment.
Dana Telsey: in Q1. Once we get into Q2, you will essentially be more in line with what we've seen in the prior year for the balance of the years.
Thank you.
Corey Tarlow: Our next question comes from Corey Tarlow with Jefferies. Your line is open.
Corey Tarlow: Great, thanks. I was wondering if you could talk a little about your inventory. It was up double digits, relatively in line with sales, but just curious.
Corey Tarlow: If you could talk about the health of that inventory, the newness that you're flowing in, what's working, and then also if you could touch on the performance of boots as the weather's gotten colder. Thanks so much.
Corey Tarlow: Okay, so I'll take the first part of the question as it relates to the 12.5% increase. If you look at our inventory at the end of Q4, obviously we feel very good about the composition of it and the increase is primarily due to the fact that we're accounting for inventory for a longer period of time due to transit times.
Corey Tarlow: On average, globally, our transit times are around six days longer.
and that's for both China and Cambodia as an example.
Corey Tarlow: But if you look at it in the U.S., it's probably around five days longer to get goods here, and international businesses, it could peak to 30 days when you look at the Middle East.
as an example.
Corey Tarlow: So if you take those six days of inventory out of the balance at the end of the year and you look at it from an Apple-to-Apple perspective versus last year,
We're expecting next year to be.
We've got some great suede boots, brown suede in particular.
Corey Tarlow: A lot of good things working in that category, and as we've come into first quarter, of course, in the cold weather in the first part of the year, we've continued to sell quite a lot of boots, but obviously right now, our focus is on getting that consumer to transition into the spring.
to the spring styles.
Now, the one thing I will say is
Corey Tarlow: Boots are still going to remain important in spring because we do have a very strong festival package that we're very excited about. And as we've been talking about, Boots is more of a year-round category for us these days, but obviously not as big this time of year as what we saw in Q4.
Speaker Change: Got it. That's very helpful. And then just to follow up on an earlier question, the comments you made, Ed, about
Speaker Change: How much more work do you think there is to be done in terms of some of the shifts in business structures that you've made?
in international markets? And where else do you think?
there's further opportunity to optimize.
the structure of these agreements internationally.
Speaker Change: Yeah, I mean, that's an ongoing process. We've done a lot there. We still have some distributor markets that I think over time could make sense to transition to the joint venture model. And I could also see, you know, some of these joint ventures becoming wholly owned subsidiaries.
Speaker Change: over time. From a regional standpoint, I think the biggest opportunity though is in APAC.
Speaker Change: You know, we're doing, we've got a very meaningful business in EMEA now that's...
Speaker Change: continues to see very strong growth. We've also got a big business in what we call the Americas Ex-US with Canada, Mexico, Latin America, etc. But APAC is still a relatively small region for us. And so that's going to be a big focus for us over the next couple years is
is making that more meaningful.
Thank you. One moment for our next question.
Speaker Change: Our next question comes from Sam Poser with Williams Trading. Your line is open.
Speaker Change: other areas as you move product out. Zine, you said it was a six-day, it was taking six days longer total, five days longer to the U.S. How does that, as you move more product
Speaker Change: to Vietnam, I guess, primarily, but other places as well, and with sort of the unknown going on with Mexico, I guess we'll find out next week.
Speaker Change: How is that going to change your speed to market and, again, I guess the visual look at the inventories in future quarters?
receive employee agreement in the future.
Thank you.
Speaker Change: The pressure on the supply chain that we're seeing for two reasons. One, Chinese New Year being earlier, and also the frontloading that a lot of folks were doing was clogging up the supply chain. And add to that, basically, the canal sways and everything that we always know about.
Speaker Change: So that was the main reason behind the five to six days that I mentioned earlier. But as we move forward in our diversification, I think as we said earlier,
Speaker Change: either on calls or in the meetings that we had, we're looking at, basically, it takes about a week to 10 days longer.
to get from these other countries versus China.
Speaker Change: and that's what we would expect to see and as I said our inventory is in line and the only thing that seems to impact it is just the transit dates at this point in time and we expect it to continue as we move forward and it will also be impacted by the penetration of DTC to total.
Speaker Change: Did you just want to? I'm going to open that, Sam. I just thought you'd... Go ahead.
Speaker Change: I was just going to say, obviously, you know, speed to market is absolutely critical.
accepts.
Speaker Change: any meaningful reduction in how fast we can be. So we have to operate under that.
Zine Mazouzi: under those guidelines. And so, you know, we have to plan around that there. As Zine mentioned, we're going to move to some of these other countries in Asia.
Zine Mazouzi: We do have slightly longer lead times, but we can plan around that. We can leave the certain things in China where we need to move faster. Obviously, you mentioned Mexico. Mexico...
Zine Mazouzi: has been a priority for us to move products, particularly in the Steve Madden brand, because there we can actually be faster due to the obviously much shorter transit times.
Zine Mazouzi: Now, there's been a little bit of a monkey wrench thrown into that plan because of the potential tariffs that are scheduled to start next week.
Zine Mazouzi: but you know we'll monitor that situation hopefully that'll get resolved and we can and we can focus on Mexico again.
Zine Mazouzi: And then with Kirk Geiger, I mean, what is their, how does, in footwear, how does their time frame work? And is that something that using your resources you could, you could speed up as well?
Zine Mazouzi: Yeah, look, we'll have to get into that with them. I imagine their lead times are a little bit longer. It's also a different...
Zine Mazouzi: It's a different kind of a business. And I think that by the nature of their product assortments, their price points, their positioning, they don't necessarily need to have the same test and react speed to market model that we do. But where there are areas for us to collaborate and utilize our sourcing capability to help them, we will certainly do that.
Thanks very much. Good luck.
Speaker Change: Our next question comes from Paula Jusopcity. Your line is open.
Speaker Change: Hi, this is Kelly on for Paul. It's a follow-up on on your previous comment. What are you embedding in terms of your tariff assumptions this year? Are you assuming just
Speaker Change: China tariffs or are you including, you know, Mexico tariffs as well? And just, maybe I missed this, but did you say how much of your sourcing comes from Mexico currently? Thanks.
Speaker Change: We have included an impact from Mexico as well. That's about mid-single digits as a percentage of our overall sourcing.
Speaker Change: and but we also have assumed that if those tariffs are in effect that we would then move products back out of Mexico in fall so it so that the primary impact that we've built in would be over the next few months things that are already on them in work or on the way
Speaker Change: And then there's a there's also a an impact in the country of Mexico because they have also implemented Anti-dumping additional duties on goods from China that and that's embedded in the guidance as well
All right, thank you.
Ed Rosenfeld: And I'm not showing any further questions at this time. I'd like to turn the call back over to Ed for any closing remarks.
Ed Rosenfeld: Great, well thanks so much for joining us on the call today. Have a great day and we look forward to speaking with you on the next call. Thank you, ladies and gentlemen. This concludes today's presentation. You may now disconnect and have a wonderful day.