Q1 2025 Steven Madden Ltd Earnings Call
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Speaker Change: Good day and thank you for standing by. Welcome to the Q1 2025 Steve Madden Ltd earnings conference call. At this time, all participants are in a listen-only mode.
Speaker Change: After the speaker's presentation, there will be a question and answer session
Speaker Change: To ask a question during the session, you will need to press star 1-1 on your telephone You will then hear an automated message advising your hand is raised
Speaker Change: Please be advised that today's conference is being recorded. I would now like to hand the conference over to Danielle McCoy, VP of Corporate Development and Investor Relations. Please go ahead.
Danielle McCoy: Thanks Lauren, and good morning everyone. Thank you for joining our first quarter, 2025, Erning Cole and Webcast.
Danielle McCoy: 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 full of booking statements within the meaning of the private security litigation reform act.
Danielle McCoy: He's following looking statements with subject to risks that could cause actual results to materially differ from those expressed on by such following statement.
Danielle McCoy: These risks include, among others, matters that we have described and are freshly issued earlier today and filing pre-make with the SEC.
Danielle McCoy: We should claim any obligation to update these forward-looking statements which may not be updated until our next quarterly earnings conference fall, if at all.
Danielle McCoy: 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 earning belief.
Speaker Change: Joining me on the call today is Ed Rosenfeld, Chairman and Chief Executive Officer, and Zine Mazouzi, Chief Financial Officer and Executive Vice President of Operations.
Speaker Change: With that, I'll turn the call over to Ed. Ed? Alright, thank you Danielle and good morning everyone and thank you for joining us to review Steve Madden's first quarter of 2025 results [inaudible]
Speaker Change: We were pleased with our performance in the first quarter with earnings results significantly exceeding expectations [inaudible]
Speaker Change: While sales trends across the industry were somewhat sluggish in January and February , we saw a strong improvement in March as weather turned warmer and more consumers began to look for spring fashion [inaudible]
Speaker Change: Our product teams did an outstanding job of creating on-trend spring assortments that resonated with consumers. And we supported these assortments with increased investment in our full funnel marketing strategy.
Speaker Change: Highlighted by our global marketing campaign House of Steve featuring social media [inaudible]
Speaker Change: Overall, our team's discipline execution of our strategy continues to create deeper consumer connections and drive demand for our brands and products.
Speaker Change: That said, it's no secret that in the near term, we face meaningful headwinds and heightened uncertainty due to the impact of new tariffs on goods imported into the United States.
Speaker Change: After the most recent additional tariffs were implemented in early April , our team moved swiftly to adapt to the change in with a focus on mitigating near-term impacts while positioning the company for long-term growth.
Speaker Change: We leveraged our strong and long-standing supplier relationships to negotiate meaningful discounts on products coming from China to the US so we could limit the negative impact to earnings in the short term, while keeping goods flowing, continuing to deliver the most important fashion items and protecting market share.
Speaker Change: Simultaneously, we sharply accelerated our shift of production out of China, capitalizing on the groundwork we've laid in alternative countries of production over the last several years to move quickly and minimize disruption as we did so.
Speaker Change: Due to the foundation we have built in these other countries, combined with our model of working close to season, we have been able to significantly reduce the amount of fall 2025 production out of China.
Speaker Change: On previous earnings goals, we disclosed that in 2024 we sourced 71% of our U.S. imports from China.
Speaker Change: For Fall 2025, we expect the comparable figure excluding Kurt Geiger to be in the mid-teens and by spring 2026 down to the mid-single digits.
Speaker Change: Additionally, we have begun selectively raising prices to consumers and wholesale customers.
Speaker Change: We have taken a surgical approach, raising prices by differing amounts, and sometimes not at all, depending on the brand, product category and style. Thank you very much.
Speaker Change: The first adjustments to retail prices were made over the last several days, so it's too early to assess the impact but we will monitor the elasticity of demand carefully and react accordingly.
Speaker Change: Finally, we are also looking for expense savings and operational efficiencies where we can and recently completed a reduction in force that will result in over $12 million in annual savings.
Speaker Change: While the tariffs and the related uncertainty are undeniably challenging in the short term, we believe that we are well positioned relative to many of our closest competitors. Most of whom do not have the ability to shift production as quickly as we can and or are not as well capitalized.
Speaker Change: We will continue to invest in marketing and the other strategic initiatives that position us for long-term growth. And we believe that the current disruption will create opportunities for us to take market share over time.
Thank you.
Speaker Change: The most important investment we've made this year is the acquisition of Kurt Geiger, which we were excited to close yesterday
Speaker Change: The Kirk-Eiger London brand continues to demonstrate outstanding momentum as its unique brand image, distinctive design aesthetic, and compelling value proposition drives success across multiple categories led by handbags.
Speaker Change: It's differentiated and elevated position and it's alignment with our strategic initiatives of expanding international markets, accessories, categories, and direct to consumer channels make it a highly attractive and complementary addition to our portfolio.
Speaker Change: For the 12-month ended February 1st, 2025, Kurt Geiger had revenue of 400 million pounds, and a purchase price in the transaction reflected in enterprise value of 289 million pounds [inaudible]
Speaker Change: of which approximately 14 million pounds is deferred and payable to management over a five-year period upon achievement of certain financial targets.
Speaker Change: In connection with the acquisition, the company entered into a new credit agreement which provides for a $300 million term loan facility and a $250 million revolving credit facility.
Speaker Change: and we funded the acquisition with borrowings under the new credit agreement and cash on hand.
Speaker Change: With the transaction consummate, we are thrilled to get to work in supporting the Kurt Geiger Management team led by CEO Neil Clifford in their journey to making Kurt Geiger London a billion dollar brand.
Speaker Change: So in some, we delivered solid results in the first quarter in a tough environment.
Speaker Change: Looking ahead, we are clear-eyed about the challenges and uncertainty we face due to the impact of tariffs, but our team has moved quickly to adapt. We believe the agility of our business model, combined with our fortress balance sheet, gives us a competitive advantage in dynamic environments like this one.
Speaker Change: We are confident that we are well positioned to navigate the current disruption and to return to profitable and sustainable growth in the dust science.
Speaker Change: And with the acquisition of Kirk Eiger, we have added a powerful brand to our portfolio that meaningfully enhances the growth profile of our company going.
Edward
Zine Mazouzi: And now I'll turn it over to Zine to review our first quarter 2025 financial results in more detail.
Texas, and good morning everyone.
Zine Mazouzi: In the first quarter, our consolidated revenue was 553.5 million, a 0.2% increase compared to the first quarter of 2024
Zine Mazouzi: Our wholesale revenue was $439.3 million up to 0.2% compared to Q122.24 [inaudible]
Othell Footwear Revenue, with 296.1 million.
A 0.2% increase from the comparable period in 2024
Both cell accessories and a power revenue was 143.2 million [inaudible]
Zine Mazouzi: At 0.4% compared to the first quarter in the prior year [inaudible]
Zine Mazouzi: In both businesses, gains in the branded business were partially offset by the clients in private labour.
Zine Mazouzi: As a reminder, we move the approximately $13 million of shipments related to the mass channel from January 2025 to December 2024, which benefited wholesale revenue in the fourth quarter of 2024 and negatively impacted revenue in the first quarter of 2025.
Zine Mazouzi: In our Director-Consumer segment, revenue declined 0.2% to 112.1 million as a modest increase in our digital business was offset by a decline in brick and mortar.
Zine Mazouzi: We ended the quarter with 314 company operated brick and mortar retail stores, including 72 outlets, as well as five key commerce websites, and 61 company operated concessions in international markets.
Thank you for your time.
Zine Mazouzi: Our licensing royalty income was 2.2 million in the quarter compared to 1.8 million in the first quarter of 2024 in the quarter of 2024.
[inaudible]
Zine Mazouzi: Consolidated gross margin was 40.9% in the quarter compared to 40.7% in the comparable period of 2024, a 20 basis point increase despite approximately 20 basis points of negative impact from the tariffs implemented in February and March.
Zine Mazouzi: Bullset Gross Margin was 35.7% compared to 35.1% in the first quarter of 2024, with increases in both the wholesale footwear and wholesale accessories and apparel businesses.
Zine Mazouzi: Directed consumer cost margin was 60.1% compared to 61.9% in the comparable period in 2024 driven by an increase in promotional activity.
Zine Mazouzi: Operating expenses were 170.5 million or 30.8% of revenue in the quarter compared to 164.1 million or 29.7% of revenue in the first quarter of 2024.
Zine Mazouzi: Operating income for the quarter was 56.1 million or 10.1% of revenue compared to 61 million or 11% of revenue in the comparable periods in the prior year.
Zine Mazouzi: The effective tax rate for the quarter was 24% compared to 23.6% in the first quarter of 2024.
Zine Mazouzi: And finally, that income attributable to seed model limited for the quarter was 42.4 million or 60 cents per dollar share compared to 47 million or 65 cents per dollar share in the first quarter of 2024.
Zine Mazouzi: Move into the balance sheet. Our financial foundation remains strong. As of March 31, 2025, we had 147.2 million of cash, cash equivalents, and short-term investments, and no debt.
Zine Mazouzi: Inventory was 238.6 million compared to 202 million in the first order of 2024
Zine Mazouzi: This is driven primarily by longer lead time, called by the disruption in the Suiz Canal, and our diverse space in out of China, as well as shipments we accelerate ahead of the April of 2nd Direct Announcement.
Our top-ax in the first quarter was 9.8 million [inaudible]
Zine Mazouzi: And during the first quarter, the company did not repurchase any shares of its common stock in the open market The company spent $7.8 million on repurchases of shares to the net settlement of employees' stock awards The company did not repurchase any shares of shares to the net settlement of employees' stock awards
Zine Mazouzi: The company's Board of Directors approved a quarterly cash student of 21 cents per share. The dividend will be payable on June 20th, 2025 to stop all those africcards as of the close of business on June 9th, 2025.
Zine Mazouzi: As mentioned now, press release issued earlier this morning due to uncertainty related to the impact of new tariffs on goods imported into the United States. We are withdrawing the 2025 financial guidance. We've provided our February 26, 2025, and will not be providing guidance at this time.
Zine Mazouzi: Now I'd like to turn the call over to the operator professions. Lauren?
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Speaker Change: Thank you. At this time, we will conduct the question and answer session. As a reminder, to ask a question, you will need to press star-1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star-1-1 again. One moment will we compile the Q&A roster?
Speaker Change: Our first question comes from the line of Paul Lejuez with City. Your line is now open.
Speaker Change: Hi, this is Kelly on for Paul. Thanks for taking our question. First.
Edith Ones
Speaker Change: You're more aggressive, moved outside of China, it's good to see [inaudible]
Speaker Change: You're only going to see a mid team penetration. I guess could you just talk more broadly about how you're handling the orders from China? Is there a sense that? [inaudible]
where the production is moving.
Speaker Change: Just any color on, you know, the countries where you're moving to and what the margin profile looks like from sourcing from those countries, you know, relative to kind of pre-care of margins.
Speaker Change: This is sort of an understanding impact there. And then I'll have a follow-up. Thanks.
Speaker Change: Sure, so in truth of how we're handling production that was in China. On the stuff that was far along in the production process or done, we are taking the majority of that in, but we have worked with our factory partners and suppliers to negotiate price concessions on those goods.
So we can uh...
Speaker Change: At least mitigate some of the damage in the near term. And again, keep those goods flowing and make sure we're still delivering fashion to our customers.
Speaker Change: and consumers. But basically, anything that was early in the production process to move, we have moved.
And so, we...
Speaker Change: You know, taking components from China, for instance, and moving them to other countries [inaudible]
Speaker Change: and that's why you've seen that fall production come down so significantly. In fact, in brands like Steve Madden Shoes or Dolce A.B. to Shoes, you know, that...
Speaker Change: That fall production in China is going to be virtually nothing. Overall and footwear and accessories, we think will be below 5% in fall. It's really some of the apparel and the more value priced apparel that's bringing the number up because it's taking us a little longer to move those goods.
Speaker Change: But we've been very proactively move very quickly to move those goods for fall.
Speaker Change: Now, I do want to point out that as we, you know, some of these good, as we move them to the other countries it is it does mean that you know the goods are going to come a month to even 45 days later and so that will push out some of our deliveries.
Speaker Change: In terms of the countries that we're moving to, it's really the same countries that we have been talking about, you've got some countries in Asia like Cambodia and Vietnam, they're important and then Mexico and Brazil
are also very important and we've particularly been focused on this.
Speaker Change: on pushing as hard as we can on Mexico and Brazil for a couple of reasons. One is those are countries where-
Speaker Change: We can actually see improved speed from where we were sourcing out of China, whereas right now Vietnam and Cambodia the lead times are extended from what we're traditionally used to out of China.
Speaker Change: And also, as you know, Mexico and Brazil did not receive reciprocal tariffs so there is less risk when July 9th comes along with respect to tariffs in those countries.
Speaker Change: Just a follow-up on the question around or around moving the production, I guess.
Speaker Change: Within that, the sort of the sourcing penetrations that you've cited, is some of that [inaudible]
Speaker Change: As a result of just not choosing to take orders and trying to in terms of where the penetration is going, are you?
Speaker Change: You know, going to impact on the top line in the back half a year because obviously, you know, your penetration of China will come down if you're just not taking orders at all. So just want to clarify there in terms of, you know, potential impact from the law fails and then just a.
Speaker Change: Follow-up on sort of just the margins or any other sort of impact on your business model you're fast turning it like as you pointed to as you point out the longer lead times how does that impact you know how you your normal course of business thanks [inaudible]
Speaker Change: Oh yeah, no, for the most part, we are replacing all the production in these other countries so we're not walking away from whole businesses or whole categories of business or anything like that. Now, that's not to say there won't be any top line impact.
from what's going on with tariffs. So,
Speaker Change: We have experienced some cancellations, I want to explain that as you know we have certain customers.
Speaker Change: who buy from us on what's called an FLB business basis rather, where they are the importer of record and they are responsible for the terrace. We have seen some cancellations from those customers. We've also...
Speaker Change: Seeing some cancellations from customers who are not willing to accept the price increases.
Speaker Change: that we are putting through in fall and also certain customers are canceling because the goods, as I mentioned, when they get moved to the other countries, may come in later. And even if the customers are taking those goods in.
Speaker Change: If the initial sets go in a month or a month and a half later, we do think that will have an impact on reorder business and then I guess the last point would be
Speaker Change: You know, we are starting to hear about certain whole so customers who are getting more more.
Speaker Change: You know, thinking about their fall plans more conservatively given the current environment and I think we all have to be aware that there are, you know, there may be a consumer demand impact from the turmoil here, so certainly there will be a revenue impact.
Speaker Change: From all of this, but it's not because we just can't ship goods
in terms of…
Speaker Change: I think you asked about the margin impact of moving to the other countries.
It's a very fluid situation, so I'm... [inaudible]
Speaker Change: You know, I'm not going to be too specific about that but certainly we are accepting lower margins than we historically achieved when we're moving to some of these other countries [inaudible]
Speaker Change: And there is price pressure on some of these other countries as everybody is move trying to move so quickly out of China to these alternative countries. So if you look at Vietnam, Cambodia, Brazil
Speaker Change: These are countries where the FOB price is prior to this disruption we're already slightly higher than what you see in China and we have seen additional pressure
Speaker Change: recently due to the greater demand for in those countries as much as 10 to 15% additional prices, you know, hikes relative to where things were before, so.
So we're obviously managing through that that.
Speaker Change: Well, then you asked about the lead times. Yes, again, the lead times are longer right now in Vietnam and Cambodia, but we have Brazil and Mexico where we're actually faster than we are in China. And so...
Speaker Change: We're utilizing this network where we have multiple countries to manage the business and make sure that when we need to move very quickly we try to lean on Mexico and Brazil and when we have a little bit more time we can work in some of these other countries.
out of very helpful. Thank you.
Thank you.
Speaker Change: Our next question comes from the line of Anna Andreeva with Piper Sandler. Your line is now open.
Great, thanks so much and good morning, guys [inaudible]
Speaker Change: We wanted to follow up on Gross Marges, came in better than expectations than up in wholesale. How much of that was effects as a benefit, and others have called out higher costs tripling through the VML starting kind of now, mid-to-Q and Eurofactor, inventory, turning business, just any color and how we should think about Gross Marges directionally as we go through the year just giving all the moving pieces.
Zine Mazouzi, Danielle McCoy Zine Mazouzi, Danielle McCoy
Speaker Change: Sure, so in Q1 we did come in a little better than we had anticipated. I think there was a couple things there. One was March, was just a better month than we anticipated and we guided at the end of February .
Speaker Change: and as we mentioned, it's somewhat soft start to the year and then saw this big improvement in March, so that was part of it. I think the team really did a good job of managing inventory as well and that enabled us to deliver a better gross margin. You found out FX, that was not...
Zine Mazouzi: significant issue for us at all. There is also, you know, if you're looking at it versus last year, a benefit that from mix because Zine called out at his prepared remarks on the wholesale side. We...
Zine Mazouzi: We were positive in the branded business and had it declined in the private label business so that's a mix a mix benefit for us
Zine Mazouzi: And then as you pointed out, you're asking about when tariff starts impact us because we turn our inventory quickly, we start to see the tariff impact.
Zine Mazouzi: sooner than some others. So, we did in fact have even, as Zine called out, about a 20 basis point negative impact in Q1. And obviously there will be a much more significant impact in Q2.
Zine Mazouzi: And just okay, that's very helpful. Thank you. And just as a follow up, you mentioned March better. You did call out promo activity in DTC just anything to share in quarter to date.
Zine Mazouzi: In terms of April , it's been in DTC, it's been a touch softer than March but still better than we were in the January , February period
Zine Mazouzi: has not been super promotional. So we have not seen any major uptick in promotions and we haven't had to be more promotional than expected in our own DTC today.
All right. Thank you so much, guys.
Thank you.
Speaker Change: Our next question comes from Jay Sole with UBS. Your line is now open.
Speaker Change: Thank you so much. Ed's is moving production out of China restrict your ability to deliver different fashion styles in any way. In other words, there's certain types of footwear that if you don't produce in China that you can't make. So in other words, if that's the trend that consumers looking for, you'd be sort of constrained in your ability to deliver that trend.
Speaker Change: No, there are certain things that are, I would say, a little bit more difficult, but there is nothing that we are prevented from making at all [inaudible]
Speaker Change: If there's any category of footwear that I would highlight is probably the most difficult, I think kids is challenging but we think we have a good plan there as well and we're going to figure that out [inaudible]
Speaker Change: And how do you think about just the 10% tariff on the other countries? Obviously China is in its own category, but what sort of strategy to mitigate the impact of just the 10% tariff on countries like Cambodia or some of the other places that you're doing business?
Speaker Change: As we mentioned in the earlier remarks, we are raising prices [inaudible]
And so, even… [inaudible]
Speaker Change: Absence, what's happening in China? You know, we do need to raise prices [inaudible]
Speaker Change: because of the additional cost in the other countries which includes the 10% baseline tariff. And so I think you're going to see that from us and I expect you'll see that from most others in the marketplace as well over time.
Speaker Change: Got it. And maybe one more if I can. Just on the inventory, being up 18% keeps making it possible to break it down in terms of units or ASPs or Kurt Geiger. You know, what are the different components of that inventory growth, if you can give us a little bit more color on that. That'd be super helpful. Thank you.
Zine Mazouzi: Yeah, this is the inventory that's not the censor, but it's a nine-close-curred guideger.
Speaker Change: So the over 70% of that increase is primarily related to the three things I mentioned in the remarks which relate to the longer lead times.
Speaker Change: based on the destruction and supply chain, also the fact that we're diversifying outside of China, and those are created in also longer lead times.
And the third component is the fact that we…
Speaker Change: decided to accelerate certain production that was ready to ship and would have ship otherwise in April and would ship it in March.
Speaker Change: So that's basically the main drivers for the inventory. We remain confident in inventory composition and the health of our inventory and we feel that we're set up nicely for Q2 from inventory position.
Ok, thank you so much
Thank you.
Speaker Change: Our next question comes from the line of Laura Champine with Loop. Your line is now open.
Laura Champagne: Thanks for taking my question. I think you mentioned in your prepared comments some price increases that you're rolling out already. Can you generalize about how significant those increases are and how fully they recapture your cost increases.
Zine Mazouzi, Danielle McCoy Zine Mazouzi, Danielle McCoy
Yeah, so...
Laura Champagne: As I mentioned, we're really looking at this at the style level and we're not taking an approach where we're just applying a blanket percentage increase across the portfolio. There are goods that we're not raising the prices at all and there are goods we're raising the prices as much as 20%. If I had to give you a round number, I think we're in and around 10% on average.
Laura Champagne: But this is a very fluid situation and again we're going to be monitoring the elasticity of demand carefully and we'll continue to iterate going forward.
Speaker Change: Is it your sense that the stance of the industry as a whole that your price increases are kind of in keeping with what you're seeing out there in the competitive environment or do you have a different philosophy?
Speaker Change: I think it's a little bit too early to say. I mean, I could speculate based on conversations with some of our also customers, but I think it was better to wait to see what actually happens.
Makes sense. Thank you
Thank you.
Speaker Change: Our next question comes from the line of Sam Poser with Williams Trading. Your line is now open.
Sam Poser: Good morning. Thanks for taking my questions. I've got a pile of questions. The first thing, um,
Speaker Change: As you mentioned in your I think as you mentioned in for the end of your comments, it's one of the exact quote but something you know we expect to return to profitability
Speaker Change: That, you know, next year, whatever. He said something like that. Can you rehash what you said there? Repeat what you said there? And then I have a question about that. The, the, the, the, the, the, the, the,
Speaker Change: I said return to profitable growth, so now we're not returned to property, we're not providing guides, I will tell you we are not expecting to be lost making either.
Speaker Change: No, because you said return to probable growth was basically feel like you're not going to have probable growth for the rest of the year so that's I'm just trying to figure out that was a weird comment so I was just trying to make sure I understood it.
Speaker Change: I think you should assume that in the near term, we won't be growing profits. And as long as the term, we expect that, that was the, that was the, what we were expecting to do.
Speaker Change: So a couple of now I got a bunch of other things. So one, the what is the additional inventory that you have now with the acquisition of the closed acquisition of Kirkiger?
Speaker Change: I don't have that number on the top of my head. We've closed the deal 24 hours ago.
Wow!
Speaker Change: Okay, and then what is the sourcing mix for Kurt Guig?
as a map. Yeah, Kirk Eiger is about 80% out of China.
Speaker Change: So, I do want to remind folks that if you look at their business, and most recent fiscal year, only 35% of it was done in the United States, so they are more insulated from tariff impacts
Speaker Change: than our existing business, due to the much heavier penetration outside the U.S. But certainly 80% sourcing out of China.
It's an issue and I can tell you that
Speaker Change: You know, that is the number one priority for us now that we are closed and as we start to integrate that is that is job one and we've got a you know I think a pretty comprehensive plan and a team mobilized.
Speaker Change: And in fact, we're already engaged and moving the ball forward on that front and you're going to see that number go down significantly for spring 26.
Speaker Change: And then how long do you think it's going to take to get your margins back to normal sort of given what you've known at today?
Speaker Change: I'm not going to speculate about that. I mean, there's way too much uncertainty for me to put a line in the sand there.
Speaker Change: and then lastly on the product that you're selling, your private label product that you sell to the math. Is that where...
Speaker Change: I mean, the big, the container shipments that they take, is that probably the biggest challenge for keeping that business to get those prices well enough for them to still be.
You know, how is that being handled? I guess [inaudible]
Speaker Change: Part of that product as well. And we are, that's also something we've been working on for the last couple of years.
Speaker Change: With those customers, it's finding alternative countries of production. I think I'd like to think that we're ahead of most of the folks that we compete with for that business. And so I actually think that this could create an opportunity for us over time, but no, we're on a good path there and I'm confident we'll figure that out.
Thanks very much, good luck [inaudible]
Thanks Jim.
Speaker Change: Thank you. Our next question comes from the line of Aubrey Tianello with B&P Paribus. Your line is now open.
Aubrey Tionella: Thank you, Marni. Thanks for taking the questions. Ed, I want to follow up on a point you made earlier about demand and just curious what you're seeing in terms of consumer behavior right now. Are you seeing?
Aubrey Tionella: The consumers try to make purchases before prices for goods go up, just any thoughts on how you see consumers reacting to the changing environment.
Aubrey Tionella: Yeah, so far consumer demand is is holding in there. Okay, as we mentioned our DTC business was a little softer in April than than in March, but you know, but still okay. I mentioned ahead of where we were in the first couple of months of the year.
So, in terms of, you know,
Aubrey Tionella: How much of that is consumers trying to get ahead of price increases? What is that?
Aubrey Tionella: Very hard for us to know, but as of now, consumer demand still looks okay, but obviously something we're gonna have to watch carefully We're certainly well aware that consumer confidence has dipped sharply over the last few months
Thank you.
Got it, and then I'm just curious if there's-
Aubrey Tionella: At any traction in the lobbying front in Washington, I think there was a letter from the FDR8, the White House last week. It's wondering if there's, if any conversations are happening there in terms of potential exemptions for the industry that you're hearing about.
Well, I think you know, our- I- I-
Aubrey Tionella: Lobby Group, and our industry trade organization FDRA is doing a great job of trying to get our voice out there and make our position known, but I don't have any new information to share about.
Aubrey Tionella: You know about developments on that front so we're hopeful but we're not counting on that we're running our business and operating until we have to deal with you know with what is in place currently.
Understood. Thank you.
Thank you. Thank you.
Thank you.
Speaker Change: Our next question comes from the line of Tom Nikic with medium. Your line is now open.
[inaudible]
Tom Nigget: All the tariff questions who have been beaten to death so I don't know if she's done something else. Congrats on closing the Geiger acquisition yesterday. Can you, I know you talked about diversifying the sourcing mix as being an opportunity there? Can you talk about some of the other...
Speaker Change: Strategies to drive growth at Geiger and capitalize with some of the opportunities that you see there.
Speaker Change: Yeah, look, if we start with the US, that's been a tremendous growth business for them over the last several years, I think I disclosed on the last call they were, it was the business that was...
Speaker Change: Kurt Giger-London Brand was less than $10 million in 2019 and did over 170 million last year but we still think we're just scratching the surface of
Speaker Change: What that brand can be in the United States? It got outstanding momentum in digital. Again, that was a business that was up almost 60% last year and we think that you know
We're going to continue to push hard there there.
Speaker Change: I think there's a very meaningful store rollout opportunity. They've just opened over the last year their first five stores in the US. The most recent one is in Aventura in Miami. They're doing very well. And so we think there's a. [inaudible]
you know, an opportunity, a big opportunity there.
Speaker Change: And then, you know, I think that we can continue to grow the wholesale business. The distribution there is really Nordstrom, Dillard, and Bloomingdale's primarily. A very successful business is with each of those and I think there's room for growth there. And then internationally
Speaker Change: Look, this is what I would characterize as the early stages of their expansion in Europe , but they're performing very well. They're positioned in all the right sort of image accounts and are seen strong sell-throughs. And so we think there's a big opportunity there.
Speaker Change: You know, they're doing great in Mexico, I think I've mentioned and then I'm really you know bullish [inaudible]
Speaker Change: I think the other area of synergy we talked about, obviously, you know, helping them with the sourcing but I think the other big area of synergy is utilizing our Steve Madden International Network
Speaker Change: to help them expand outside the U.S. And so that's going to be the other big priority in the near term is making those connections and helping them because this is a brand that I think has tremendous global reach and potential.
Speaker Change: So that's what we're really excited about. I think there are some other synergy opportunities as well. You know, we think they can really help to expand Steve Madden in the UK.
Speaker Change: They already operate two of our stores, but I think there's a plan to roll out more stores and continue to expand our business. They are digitally with their help, etc.
Speaker Change: A lot of exciting stuff that we're going to be working on there
Speaker Change: All right, sounds good. Thanks very much and best of luck. Yeah, navigating all the challenges this year.
Thanks, Tom.
Speaker Change: Thank you. Our next question comes from the line of Dana Telsey with Telsey Advisory Group. Your line is now open.
Speaker Change: Mike, thinking about the near term and the long term in the near term [inaudible]
Speaker Change: Any more discussion around private label versus branded and the current performance and also international?
Speaker Change: And then thinking about the long-term, with the shift in sourcing in the countries that things are coming from...
Speaker Change: What could that mean to the business long-term? Are there opportunities that could emerge from that, that getting through this near-term mess? What does it mean for the long-term in terms of the complexion of the business? Whether quantitative, financially or qualitative opportunities? Thank you Thank you.
Speaker Change: Yeah, so in terms of branded versus private label, we did disclose that in Q1, the branded business performed better. We grew in both wholesale footwear and wholesale accessories in parallel on the branded side and we're down modestly on the private label side.
In terms of international versus domestic, international perform better in...
Speaker Change: for the US and near-term. And obviously, in the context of tariffs growing that international business becomes even more important. And so we were already focused on it, but we're even more focused on it today.
Speaker Change: If I understand your question correctly, you were asking about the opportunities that could be created by some of this turmoil and leadership production, etc. I do think that
Speaker Change: As I mentioned in the program marks, many of our competitors, particularly some of these private companies that are important competitors of ours, they are China penetration is even higher than ours, and also they are not...
able to move as quickly
Speaker Change: as we are. So I think that that actually could create an opportunity for us.
Speaker Change: to take some share because we are able, you know, we have moved.
Speaker Change: As I mentioned, over 95% of our shoes and accessories for fall 2025, outside of China And so I think that if some of these competitors are not able to deliver goods
Speaker Change: or Kent, deliver as much that we will have an opportunity to take some share there. And that goes for even potentially taking some business that was historically done on a private label basis for certain retailers.
Speaker Change: And then the other thing is, we compete with a lot of folks that aren't as well capitalized and so they may have to fall back on marketing or other growth investments and we won't and we'll still be able to play offense where appropriate
Rosenfeld, Zine Mazouzi, Danielle McCoy
Thank you.
Thank you.
Great, thanks [inaudible]
Speaker Change: Ed, I wanted to get your perspective on the handbag category. I know that at least you had previously mentioned, I think it was on the last call that the category was backed up.
and any updated thoughts there.
Speaker Change: Yeah, I think that's still, I do think that's still an issue. You know, we mentioned on the last calls you as you point out that we expected some pressure there because
Speaker Change: There was some excess inventory in the channel at our price points, you know, the price points that we focus on in Steve Madden and that was going to constrain our, you know, shipping this year and we still think that that's a factor and frankly, it'll be now compounded a little bit by
Speaker Change: You know, the top line impact will be compounded a little bit by what the disruption works very well. It's great to see you.
Got it. And then you mentioned that
Speaker Change: I guess in April you talked about DTC trends but I'm just curious about if there's anything you can provide about color on wholesale and maybe around cancellations and what that.
Speaker Change: Has looked like versus historical averages or any context around that because we've heard a lot of concern from investors around what inventory might look like going forward. So I'm curious what you might be able to tell us about.
what you have seen in terms of cancellations.
Speaker Change: Yeah, well, first I'll start with, you know, the cell through in April in wholesale.
Speaker Change: has been good. It was really very similar to what we saw in March, which again was an improvement over what we saw in January and February .
Speaker Change: So, that piece we're pleased with, I'm not going to quantify cancellations for you but we did indicate earlier in the call that yes we have seen cancellations for the reasons I articulated both for, you know...
Speaker Change: The FOB customers, again, who are the border of record and the transaction and have to pay the tariffs themselves. We have seen some cancellations there and then going forward there are going to be some cancellations.
Speaker Change: Due to customers that don't want to take, don't want to accept price increases or don't want to accept the later deliveries that are required when we move the products from China to other countries
Okay, thank you very much.
Thank you.
Speaker Change: Our next question comes from the line of Janine Stichter with BTIG. Your line is now open.
Speaker Change: Hey, good morning. I just want to get your thoughts on the longer term outlook for China sourcing. I totally understand the need to move out as quickly as possible right now, but there's definitely trade-offs in terms of speed, skill, cost. So if we get terra-free moving lower and do pivot back at some level, are you doing this with a long-term move?
Zine Mazouzi, Danielle McCoy Zine Mazouzi, Danielle McCoy
Speaker Change: Yeah, obviously we need to move as quickly as possible right now for the goods that we're bringing into the US but we are maintaining a China sourcing capability because we're continuing to make
for the rest of the world, for our international businesses.
Speaker Change: in China. And so if you know if we find ourselves in a situation where tariffs go away and there's a little bit more clarity and certainty that
Speaker Change: We can work in China again, then we will certainly be well positioned to pivot back if that makes sense.
Bye.
Speaker Change: Perfect. Okay, and then maybe just on off-prey, so I think you had talked about about it.
Speaker Change: That channel's wholesale buys being a little bit weaker on their expectation that there'd be some dislocation and better opportunistic buys. Are you still seeing that now? The inventory out looks a little bit less clear with maybe not having enough on some level for the next few quarters and then maybe we do get to a point where there's excess in the back half of the air.
Speaker Change: I do continue to expect that to be a channel where there is somewhat reduced demand for what we do on the upfront.
Underup Front Basis
Speaker Change: We talked about customers not accepting or certain customers being less willing to accept price increases out to an off price in that bucket.
Speaker Change: They are taking some price increases, but there's more resistance there. And again, I do think that they are expecting to have some excess inventory available to them as the year goes on.
Thank you.
Thanks so much.
Thank you.
Speaker Change: Our next question comes from the line of Sam Poser with Williams Trading, your line is now open.
Sam Poser: Thanks, I've got three follow-ups, one, besides pricing, what else, I think you might have said this before, what else are you doing?
to mitigate the terrorists.
Sam Poser: Well, number one, we talked about how we're moving all the good data China, number two on the good that are still coming from China in the near term with negotiate.
Sam Poser: Factory Cost Concessions, and then number three is the raising the prices.
Speaker Change: Thanks. And then you mentioned, you know, when you, when you originally, when you announced the app could be pending acquisition of Kirk Eiger, you talked about, you know, you talked about the sales.
Sam Poser: I mean, are those sales expectations whatever they were now less than what they were when you told us before? Have they changed for this year anyway without asking what? [inaudible]
What they are, but-
Sam Poser: Yeah, look, we're not providing guidance, but I think you should assume that for both the existing business and for Kirk Eiger that we're looking at a more conservative revenue expectation.
Thank you very much.
Sam Poser: The impact of Kirk Eiger should be less than what we see in the existing business, in part because of the fact that 65% of the business is done outside the US.
Speaker Change: and then lastly, when you're getting the impact on a lot of the, you know, the, the contenders that get taken.
Speaker Change: Controlov at the court, I guess, and these retailers have to pay the duty
Speaker Change: With that business shrinking, does that immediately sort of create, I believe that would create significant or more de-leveraged on your SG&A because there's virtually no SG&A against that
Speaker Change: that those kind of shipments. That is not the right way to think about it.
No, I don't see that [inaudible]
Speaker Change: If those container shipments become less a percentage of your business, that would increase S-G-N-A as a percent because you have to see a more handling and other costs
Speaker Change: That would go in, or is that all freight that would that would? [inaudible]
Speaker Change: from the distribution cost out of the gross margin. I'm not sure which way it works but it's no different from the other business team.
Thank you. Thank you.
All right, thank you [inaudible]
Speaker Change: Thank you. Thank you. This concludes the question and answer session. I would now like to turn it back to Ed Rosenfeld for closing remarks.
and Danielle McCoy.
Speaker Change: Great, well thanks so much everybody for joining us today, hope you have a great day and we look forward to speaking with you on the next call.
Speaker Change: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.
Thank you.