Q3 2025 Steven Madden Ltd Earnings Call
Good day and thank you for standing by.
Welcome to the Q3 2025 Steve Madden LTD earnings conference call.
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So withdraw your question, please? Press star, 1 1 again, please be advised. That today's conference is being recorded. I will now like to hand the conference over to your first Speaker today, Daniel McCoy, CP of corporate development and investor relations. Please go ahead.
Thanks Brittany and good morning everyone. Thank you for joining our third quarter 2025 earnings call and webcast
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.
These forward-looking statements are subject to risk that could cause actual results to materially differ from those expressed or implied by such forward-looking statements.
We've explained any obligation to update these full booking statements, which may not be updated. Until our next quarterly earnings conference call is at all
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 relief.
Joining me on the call today are Edy Rosenfeld chairman and chief executive officer and Z muzi Chief Financial Officer and executive, vice vice, president of operations with that. I'll turn the call over to Ed Ed, Ed
All right. Thanks Danielle and good morning, everyone. And thank you for joining us to review. Steve Madden's third quarter of 2025 results.
As anticipated, the third quarter was challenging driven, largely by the impact of new tariffs on Goods imported into the United States.
During the period in April and May when new tariffs on Chinese Imports, reached 145%, wholesale customers, cut back meaningfully on orders for the third quarter. And we shifted large amounts of production out of China amidst dreams, which led to shipment delays,
These factors together with the negative impact, to gross margin from the significant increase in our landed costs. Resulted in substantial pressure on both revenue and earnings in Q3
Fortunately, while we will continue to see negative impacts from tariffs. We believe the worst is behind us.
Order patterns from our wholesale. Customers are normalizing, and we are mitigating a larger percentage of the gross margin pressure through strategic, excuse me, strategic pricing actions, and sourcing initiatives.
And most importantly, underlying consumer demand for Our Brands and products is strong.
Despite the noise from tariffs, our team has stayed laser focused on executing our strategy to deepen Consumer Connections, through the combination of compelling product and effective marketing. And we are seeing those efforts pay off particularly in our Flagship Steve Madden brand.
Steve and his design team have created an outstanding fall product assortment, that is resonating with consumers, and enabling us to outperform the competition.
Foods have been the standout led by our casual of tall shaft Styles or also seeing strong performance in dress shoes across various heel Heights, as well as casuals like, loafers Mary, Janes and mules.
Our marketing team is amplifying this great, assortment with richer brand and product, storytelling and increased investment across YouTube Tik Tok, Snapchat and Pinterest, which is driving measurable increases in awareness and conversion with our key gen Z and Millennial consumers.
And as a result, both wholesale sell through and DTC sales trends for Steve Madden have accelerated meaningfully in recent months.
Our new brand, Kirk Geiger London also has strong momentum as consumers, continue to respond to its bold statement, making designs and eye-catching marketing including the current campaign. Featuring Emily rickowens.
Sales for the brand were up mid teens in the third quarter.
Overall, the acquisition integration remains on track and our teams. Continue to make progress on revenues energies, including expanding current Geiger, in international markets through the Steve Madden network, and growing Steve Madden in the UK through the Kurt Geiger platform, as well as cost savings opportunities in areas, like Freight and Logistics.
We are also making meaningful progress in advancing. Our other own brands. In Dolce Vita, we're building on the outstanding success. We've had over the last several years, in our us Footwear business by expanding the international markets and extending the brand into other categories like handbags.
And in Betsey Johnson, we are driving renewed, cultural relevance for the brand with elevated Talent Partnerships, Community engagement, high impact activations. And differentiated merchandise assortments both, Dolce Vita and Betsey Johnson are on track to deliver Revenue. Gains for the full year. 2025 despite the headwinds from tariffs.
In some while the third quarter was undeniably challenging and our financial results were not up to our usual standards. Our team's disciplined execution of our strategy is strengthening Our Brands and building relevance and demand with consumers.
We are confident that we will begin to see improved financial performance in the fourth quarter and looking out further that we have the brands business model and strategy to drive sustainable revenue and earnings growth over the long term.
And now, I'll turn over to Zen to review our third quarter of 2025 Financial results in more detail.
Consolidated Revenue decreased 14.8%.
Our wholesale Revenue was 442.7 Million.
Down 10.7% compared to Q3 2024.
Excluding curve Geiger our wholesale Revenue, decreased 19%.
Wholesale Footwear Revenue was 266.5 Million.
A 10.9% decrease from the comparable period in 2024 or down 16.7% excluding per gear.
The wholesale accessories and apparel Revenue was 176.2 Million.
Down 10.3%. Compared to the third quarter in the prior year or down. 22.5% excluding Kirk gagger.
The majority of the organic decline in wholesale, Revenue can be attributed to tariff related. Further reductions shipment delays and other impacts related to the production disruption.
In our direct to Consumer segment Revenue, increase 7676.66 to 221.5 million.
Excluding Kirk Geiger, our direct to Consumer Revenue, increased to 1.5%.
We ended the quarter with 397 company operated brick and mortar retail stores including 99 Outlets as well as 7, e, Commerce, websites and 133 company operated concessions in international markets.
Our licensing. Royalty income was 3.7 million in the quarter compared to 3.5 million in the third quarter of 2024.
Consolidated growth margin was 43.4% in the quarter up from 41.6% in the comparable period of 2024, due to the impact of Kirk gagger which has a much higher mix of DTC than the Legacy business and therefore has higher overall growth margin
HOSA's growth margin was 33.6% compared to 35.5% in the third quarter of 2024, due to pressure from tariffs, partially offset by our mitigation efforts.
Direct to Consumer growth. Margin was 61.9% compared to 64% in the comparable period in 2024 due to pressure from tariffs, as well as the addition of Kurt Geiger, which had lower DTC margin in the quarter than the existing business driven by the concessions. Concessions business.
Operating expenses were 243.4 million or 36.4% of Revenue in the quarter compared to 174.27% of Revenue in the third quarter of 2024.
Operating income for the quarter was 46.3 million or 6.9% of Revenue, compared to 84, 85.4 million, or 13.7% of Revenue in the comparable period in the prior year.
The effective tax rate for the quarter was 23.4% compared to 23.8% in the third quarter of 2024.
Finally, net income attributable to Steve Madden limited for the quarter was 30.4 million or 43 cents per share compared to 64.8 million or 91 cents per digital. Share in the third quarter of 2024,
Moving to the balance sheet, our financial Foundation remains strong.
As of September 30th 2025, we had 293.8 million of outstanding debt and 108.9 million of cash, cash equivalents and short-term Investments for a net, debt of 185 million.
Inventory. At the end of the quarter was 476 million, compared to 268.7 million in the third quarter of 2024.
Excluding Kurt Geiger inventory was 275.6 Million.
A 2.6% increase compared to the same period last year.
Our capex. In the third quarter was 11.6 million.
During the third quarter, the company did not repurchase any shares of its comes stock in the open market.
Company's board of directors approved. A quarterly cash dividend of 21 cents per share.
The dividend will be payable on December 26th, 2025 to stockholders of record as of the close of business on December 15th, 2025.
Now, I would like to turn the call over to the operator for questions. Brittany
Thank you. At this time. We will be conducting a question and answer session.
As a reminder to ask a question during the session, you will need to press star 1. 1 on your telephone. You will then hear automated message advising. Your hand is raised.
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1 moment while we can file our Q&A roster.
Our first question comes from the line of Paul Leu Leu with City, your line is now open.
Hi there. This is Kelly on, for Paul, thanks for taking our question. Um, and you, you sounded pretty positive on what you're seeing on the fashion front. I'm just curious. If you could, you know, talk more about how you're seeing the fashion developed this fall, um, how inventory levels in the in the wholesale channel are looking. And if that makes you think differently about sort of the prospects for for spring, uh, particularly in the hotel Channel.
Yeah, good morning Kelly. Yeah, we we feel really good about what we've seen in in Fall as as we mentioned we've seen a pretty meaningful acceleration in the trends. Particularly in that Ste in that course, Steve Madden women shoe business. Um and and as I called out, I think the biggest driver has been boots are, are boot assortment, uh, has has just seemed really strong performance. Uh, we called out that, you know, it's it's been led by the Casual tall shaft Styles. Those have been most important but we've got a number of other things working in the boot and booty category as well. Um, and then, you know, as I said earlier, it's not just about boots because we're, you know, we're we've really seen a nice, uh, Improvement in the dress shoe category. That's obviously a category where where we think we we have a really strong competitive positioning, um, and and our team is executed there. And and we're seeing strength in a number of different sort of looks within with, within the dress category. And as I mentioned, you know, really at various heel Heights.
Uh, and then casuals have been important, too. So, um, you know, the, the fashion sneaker business has has the downshift, it a bit, and we're picking that business up, and then some in, um, in loafers and wheels and Mary James. Uh, so, really feeling, uh, you know, better than we have in some time about, uh, our fashion and Steve Madden and how it's performing. And yes, it does, uh, give us uh, uh, confidence going into spring that. Uh, and I think we feel better than we did, you know, a few months ago,
About about how spring is shaping up.
Great uh good to hear there and then unfortunately you've got um well above sort of where consensus is looking and we should or could you just break that down a bit for us, in terms of what you're expecting from the core relative to the, you know, kind of down. 15%, you saw in the third quarter. Um, whether there's any shifts there or or what's kind of driving any acceleration there and and just what you would expect from uh kg in the fourth quarter.
Sure. Yeah, so the core business, if you exclude kg, uh, the revenue guide is essentially down to, to down 4, um, and that, that that includes, uh, uh, uh, increases in both wholesale Footwear and DTC, but still a decline offset by a decline in wholesale, accessories and apparel. Uh, and then the kg, uh, contribution to revenue. I think at the low end, we're at 182 and the high-end 187.
and, and any any
When we, when we think of about our models, and how much of of that kg revenues coming from from the DTC channel, on the fourth quarter and what kind of impact I'll have on on the grosses?
Uh yeah I mean that as you know overall kg is over 70%. DTC um,
in the, uh,
I think I'd have to. I mean, if I want to say, it's probably about 135 million, something like that in the uh in the fourth quarter coming from DTC and obviously that does have a meaningful mix impact to gross margin.
Got it. Thank you. Best of luck.
Thank you.
Thank you so much.
Our next question comes from a line of Anna and dvo with Piper Sandler. Your line is now, open.
Can you chase uh great to hear about DTC? Uh xkg bouncing back to positive and and you mentioned the strong consumer response to a number of uh categories. But can you parse out how own Ecom? I did versus brick and mortar. Um and how does the uh 10% reduction in China? Uh, affect your thinking about sourcing?
Sure. Uh
Yeah. Look you know, are there certain Styles where we've had stockouts? Yes. Uh but generally speaking, we've been able to uh to chase some of the additional demand in the in the core Steve Madden business. As you point out because of the supply chain disruption. We don't have the ability to chase that we that we normally do and the speed, uh, that we normally do. Uh, but we did front load some merchandise here because we had good reads on these products. And so we were in a, you know, in a position to uh, to fill some reorders, for instance, in in Steve Madden. And then also some of this product is coming or a good portion of its coming from Mexico. Uh, and obviously we you know that's that's where we have a lot of speed and we can get back into reordering in in 30 days. Um, so so that's that. I think has been an okay story. Uh in sure I think the second quarter was about e-commerce uh versus bricks and mortar uh in both Steve Madden and Kirk Eiger. E-commerce is outpacing bricks and mortar but we've seen a a you know we talked
About the acceleration C band. We've seen that in both Ecom and stores uh, in recent months.
And then, in terms of the, the final question I think it was how does the China reduction impact, our sourcing? Uh, look it's obviously uh it's a welcome development to see the the reduction in the Tariff on on China. Um,
You know, the way that that that the stair regime looks right now. Uh you know the math would tell us we would move move quite a bit back to China. I think that we're going to be careful about that. We want to remain Diversified. We don't want to get back into a position where we have, you know, 70 plus percent of our sourcing coming from 1 country and so we're going to continue to try to be Diversified but it obviously does give us an greater flexibility uh to go back to China, where we need to to get the the right, you know, deliveries um,
Quality pricing speed, Etc.
Um makes sense. No, thank you for that. Just as a follow-up.
Think about the case.
Lands. Uh, as we look into next year, does any color uh you could provide how we should think about the store growth of versus wholesale?
Yeah. Well we will be uh we're going to you know, I think not get into a lot of detail about about 26 overall uh because we'll obviously be be talking about that on the on the next call. But I can tell you that we do plan to open uh a handful of stores uh, in the United States next year for Kirk I
And we're we're working on those plans now. But but as we've talked about the initial uh 6 stores in the United States are performing very well. And so we're uh, we're getting pretty close on a handful of leases uh, for next year uh, to continue that role out. Um, but there'll be some wholesale growth, uh, as well because I, I think that we have, we have opportunity in both channels.
Awesome. Thanks so much again.
Thank you. Thank you so much.
Our next question comes from the line of J. Soul with UBS. Your line is now open.
Great, thank you so much. Um, and I think I heard you say that Legacy Steve Madden should be down by 2 to 4% with wholesale Footwear in DC, DTC positive. Can you just talk about how you're thinking about 4q for the entire wholesale, uh, Footwear segment and then wholesale accessories? That'd be helpful. Thank you.
Yeah, wholesale.
including,
I guess. Excluding care. Geiger.
Excluding Kirk Geiger, wholesale Footwear. We're looking at up to, to up 4 and a half.
And uh, wholesale accessories and apparel, excluding Kirk Eiger, still down mid to high teens.
Got it. Okay. All right. So that makes sense. And then um I guess if you think about Kurt Geiger retail versus wholesale. I mean, how are you thinking about that?
Uh well we provided the the the DTC revenue for Kirk Eiger. Which I said, I think is going to be around 135, uh, and then the overall number for Kirk Eiger, you know, 1 182 to 187 is the is the range.
Be taken orders. You know, if you take orders earlier for Kirk Geiger, your relatives of Steve Madden business, I mean you have visibility out into Q1 and Q2 yet for Kirk Geiger, or is it going to be on the same sort of quick-turning supply chain that Steve Madden is not.
No, we do take orders earlier there, and so we'll have more visibility over time there.
and I guess any comment on sort of you know, the order book and and how that shaping up right now
I think we're going to postpone all discussion of 26 until the until the next call but look the Kirk Eiger brand continues to perform very well. Um and uh and we we're going to see growth next year.
Got it. Okay, thank you so much.
Thank you so much.
Our next question comes from the line of Aubrey TLO with BNP pariba your line is now open.
Hey, good morning. Thanks for taking the questions. I wanted to ask on Kirk Eiger as well. Appreciate the comment on cam sales up mid teams. Uh any color you can share on how Kurt Geiger performed by region in the quarter.
uh,
yeah, it's, uh, it's, it's growing in in all, the core regions. So they, they performed well in their home Market of the UK. Uh, it continues to grow in the us and we're also growing in Europe.
Got it. And then, and you've talked about the re Revenue Synergy potential there and
1 of the first pieces of that being, you know, plugging sort of plugging kg into your existing International markets,
I know it's still early but um, any updates on that in terms of how that's progressing or when you could start seeing some of those benefits?
Yeah we've been uh we've been hard at work uh on that the Kirk Geiger CEO just went on a a world tour. I think he was he hit. I want to say 4, continents over a 3 week period meeting with all of our International Teams and international partners. And so that that work is underway and I think we'll start to see some some benefits in in 26, probably more, you know. I think anything that will be meaningful to the numbers would be towards the the back end of 26.
All right. Thank you.
Thank you so much.
Our next question comes from the line of Marne Shapiro with the retail tracker. Your line is now open.
Hey guys, thanks so much for taking my question, your stories have really looked beautiful. Could we just focus a little bit on some of your smaller book growing areas it? It sounds like the handbag business was a little bit disrupted. Um, I'm guessing some late delivery is I'm curious. If you could just talk a little bit about what's going on there and then can we get an update on the apparel business, both at stores like Macy's Bloomingdales and revolve as well as um Madden NYC at Walmart?
Yeah, sure. Um
In terms of handbags. Look, that's that's obviously been a category. If we're talking about Steve Madden handbags, that we have talked about all year, was going to be down, uh, based on the excess inventory in the channel. And some of the, you know, Market pressures that we've experienced there. That was, you know? We, so we came into the year expecting that business to be down double digits, that's been exacerbated, by all the, uh, tariff, disruption and everything. That's happened with the supply chain and, and deliveries, and everything else. Um, so we, we certainly felt a lot of pressure there. Um, and we're going to continue to feel that in Q4. Uh, the good news is that
That the underlying, uh, demand, I think is improving. And we've we've seen, uh, we've seen, uh, good sell throughs in Fall, so far, improved over spring. We've got a number of things working there. I think that, you know, our online, hobos shoulder bags, East West bags, anything in brown suede. We so we've got we've got the trends and they're performing. And so, I do expect that business to stabilize as we come into spring 26. Uh, and then, uh, apparel as you know, has been a nice, uh, nice growth story for us. Um, and uh, you know, the focus of course is Steve Madden apparel and that's a business that uh, uh,
The uh, uh, the mass business that we do with Walmart under Madden YC and uh, that's an important business for us as well. Although, you know, the our overall business in the mass Channel, um you know, has definitely felt some pressure from from tariffs and so we're uh you know, we expect that to get better as we go into 26.
and then, can I just
Follow up on.
On what's going on on the um on the back side in the department stores, I'm sorry in the shoes out in the department stores. Are you seeing a big difference between the higher-end stores that you sell? Some of the the better stores or I guess even more fashion stores. We have revolved as much more fashion store than some of the others versus stores that are a little bit less fashion or it's a across the board you sell through has been good and there's not a lot of price resistance to the mad and brand when the product is right.
yeah, we've been really pleased so far with, with the lack of price resistance that we've seen, uh, particularly in the Madden brand, I think, as we've said, we have a lot of, uh,
Very strong fashion right now. And I think overall, if you look at the overall company, you know what, the the, the real Takeaway on the price increases is that when you have, you know, uh, you know, real fashion forward products or new fashion. The consumer is willing to pay, uh, where you have to be much more careful with price increases is on the core, uh, and more basic product. Um, but the good news is, that's, you know, that's how we uh, that's how
We did it. That's how we planned it. Um you know as you know we were very surgical about it. We didn't take a you know a a peanut butter approach where we where we
Spread the price increases evenly everywhere. We you know we're you know, we went Style by style and and so I think that so far we've been pleased with with how the price increases have been uh
you know, the the, you know, have been received by the consumer
Fantastic. Thank you the, the product really looks outstanding, some of the best products out there in the market best of luck for Holiday you guys. Hey,
Thanks so much.
So much.
Our next question comes from the line of Corey Carlo with Jeffries. Your line is now open.
Great, thanks, and good morning. Um, Ed, I was just wondering if you could talk about the Aur Lift in the business that you're selling.
$200 boots today, uh, versus you sneakers that were
More like 70 previously. Um, so how, how does that affecting the business and what what's the impact on?
On.
On sales and comp. How do you measure that and uh, how do these fashion trends, speak to what Aur could be?
Next year.
Yeah, we are seeing a pretty significant increase in Aur, and it's really, it's really twofold. It's, it's 1. It's based on the price increases that we've put through in response to tariffs and number 2. It's as you point out, uh, there's a mixed benefit, uh, due to selling more boots and, uh, you know, in higher price categories. So, uh, in Q3, uh, in, in our DTC, we were up, uh, about high singles in Aur. Uh, in Q4, we're running more like mid teams increases in day, are
That's really helpful. Um, and then it does feel as if there's a bit of a tone shift in, in your commentary around wholesale where
kind of the first half of the year. I talked about order cancellations and now you're talking about orders ramping back up. So I'm curious if is this
It the fact that the channels are doing better, or is it that you see Steve Madden, gaining more market share in in these channels. How do you think about that?
I think it's both. I think I look I if my tone didn't get better from how I was talking when we had 145% tariffs and everybody canceled every order, then we would it would be pretty depressing. But so look some of that the external noise has, uh, you know, has abated a bit and and so, we're, you know, I think things are normalizing, uh, in the wake of all the Tariff disruption. Uh, but in addition to that, we are also seeing, uh, improved underlying demand improved self through and and that's, you know, that's, you know, causing the wholesale customers to to come back to us with with more aggressive plans.
got it and then if I could just squeeze 1 more in um,
It seems like the products resonating really nicely, um, intuitively. What, what do you think that means for promotions? And how what's embedded in your outlook for that? Thanks so much.
I mean, the good news is uh, we have been able for instance, in our DTC channels. We have uh, so far in Q4 uh reduced promotional days, uh, by pretty meaningful amount compared to what we were doing last year. So we've been able to be less promotional because of the strength of the, of the product, and the trend and, um, and, you know, we'll, we'll do we need to remain competitive. Uh, when we get into the fall that that, you know, the the part of the holiday season here, when everybody's promotional but. But we're going to attend to uh, continue to be less promotional where we can.
Great. Thanks so much and best of luck.
Thank you.
Thank you so much.
Our next question comes from the line of Tom naked with needle. Your line is not open.
Good morning, guys. Thanks, thanks for taking my question. Um, I want to ask about the margin structure of the business. Uh, so obviously, you know, 2025, um, you know, between tariffs and, you know, uh,
The acquisition and, you know, maybe, you know, some tough first half of the year at the, at the core brand or a tough first 9 months, you know, there's quite a bit of, uh, margin erosion this year. Um, how do we think about how much of that is recoverable? Uh, and how much, uh, maybe structural things.
I'd like to thank all of it is recoverable over time. Uh, I think it's going to, it's going to take a little bit of time. I don't expect us to get it all back in in 2026, but, uh, but certainly, you know, the overtime, I believe, I do believe that the, the tariffs are going to find their way into the retail prices and we'll be able to get back to our uh, pre- tariff, margins in the core business. Um, and then the Kirk Eiger business is obviously lower margin than than the Legacy business. But, uh, we think that business has a path to getting to, uh, where you know, the Steve Mann levels, or, or potentially even higher over time.
So that's the goal.
All right, sounds good. Uh, thanks very much and buffalo this holiday season.
Thank you.
Thank you so much.
Our next question comes from the line of James Ross.
With William's training, your line is now open.
Hey, good morning, and thank you for the question. Uh, this is so 2 questions actually, uh, the first being
I will the mix of business, uh, with the addition of Kurt Geiger impact, gross margins. In Q4, I know, we kind of touched on it in the first question, but was hoping we could sort of
Dig into that. A little deeper, Maybe.
And second being uh can you provide some color on brand growth and opportunities internationally and what that looks like going into next year?
Thank you.
Yeah, go ahead. So, as far as your first question related to Kurt Geiger impact and gross margin in Q4, I think it would be similar to what we've seen in Q3 somewhere around 300 basis points.
And I'm sorry what was the second part of the question?
Yeah and the second part was uh could you provide some color on brand growth and just generally, the opportunities internationally and what that looks like going into next year.
For the, okay? So the is this about the Legacy business or group, guys. Are you asking about Kirk Eiger or the Legacy, the Steve? I. Yeah. So, Steve Madden and then also, um, Geiger as well.
Sure. Yeah. So Steve Matt and we continue to have nice momentum uh, in international markets where uh, for a 2025 we're looking at, uh, hi singles. Uh, Revenue growth and that's very similar across the 3 regions. So, um, very similar growth in, uh, the, you know, our key, our 3 key regions being, uh, emea, APAC and, uh, the America's X us. So nice momentum really across the board and
And we'll look for a continued growth into 2026. Um, and then Kirk Geiger, uh, as we've said, um, you know, there in the really, the early stages of their growth outside, the UK, and the US. Um, and um, so we'll be looking for, for very, you know, strong double digit growth internationally uh, to them for for a handful of years here.
Wonderful. All right. Thank you so much. Just a look,
thanks.
Thank you so much.
Our next question comes from the line of
Your line is not open.
Hi, good morning. Um just wanted to follow up on the margin recapture if you could help us out. I think the Tariff fears that hit gross margin a little over 200 basis points in Q2 how much was it in Q3? And then how to think about Q4 and maybe help us unpack that, um, Kurt gagger between that and the core business. I think Kurt Geiger had been hit a bit more in the start of the year just because you hadn't been able to move as quickly there.
Yeah. So as far as the Tariff impact in Q3, um given all the moving Parts with the price increases uh Factory discounts are renegotiated cost in as well as fob differential between all the countries, I think it's best to look at it from a growth and mitigated perspective and 2 3 was about a 100 basis points more than what 222 was.
And I think you're asking about 2 4 as well. I think it would be a little bit worse than that in Q4.
The Q4 is the 100% will be worth in Q4 versus Q3.
So, Q3 was about a 100 basis points worth than Q2.
And we expect Q4 to be a little bit worse in Q3.
But but but those are unmitigated and and so the, the mitigation gets bigger over time. So the uh, the net impact to gross margin will be considerably less in Q4 than it's been.
Understood.
He took 10% increases earlier this year. Have you taken more or do you plan to take more?
That's where we are. Uh right now we'll have to look at it as we as we go forward so that that obviously is still not enough to offset the full amount of the tariffs. So over time, you know, we'd like to see if we can take more but we want to be prudent about it.
Perfect.
Thank you so much.
Our next question comes from the line of Dana telsey. With telsey Advisory Group your line is now open.
Hi, good morning everyone. As you think about the wholesale business, what differed by type whether off price department stores Mass. What did you see and what do you think of the Outlook going forward? And then on the DTC side was there a difference between full price and Outlook performance? Thank you.
Yeah. Uh, so in wholesale, I would say we're seeing, uh, the strongest performance in the, uh, regular price channels, um, where we have had more pressure, uh, is in the, uh, value price channels like the off price and the mass, um, in terms of DTC. Uh, we're seeing much better performance in full price channels Outlet remains a drag. Um, and I think, you know, we're being hurt by a couple things there. Uh, 1 is
Uh you know 5 of our biggest 8 outlet stores are on the border with Mexico and those those stores are running down about 40%. Uh,
and so that's uh that's been a big headwind there. And then the other thing is that uh I think we were impacted more acutely there by some of the uh disruption from the supply chain in the wake of tariffs. So outlet has still been trending negative and and full price towards have been much better.
Got it and then just on the value side of the wholesale bit channel, are they just not taking orders? Are they waiting for newness, or are they waiting for more Goods? Not accepting the price increase? Any way to articulate it?
Well, they were the ones that pulled back most significantly again. It was during the period in April and May when China tariffs were 145%. They are coming back now, and we're seeing those businesses normalize. But that was where we felt that, you know, a big part of the pullback in the last couple of quarters.
and just lastly, on
marketing, as you think about Q4,
You should be watching on the marketing side, given your improved social that you've had in terms of marketing as we head into the holiday season. Thank you.
No, I just we're just going to continue to to, to keep doing the the storytelling. I think that, you know, we we see it's working. Um, I think our marketing teams are um, you know, are are hitting the bullseye. And we got to we're just going to keep uh, keep investing and and keep telling our and keep, you know, engaging with consumers.
Thank you.
Thanks David. Thank you so much.
Our next question comes from the line of Paul.
Linda.
With City, your line is now open.
Hi. It's Kelly again. Thanks for the follow-up. Um, I just wanted to uh, follow up on an earlier. Question around the kg margin structure, uh, in your disclosure that you said, um, kg was about 9% even margin business in f24 Curious. Were, you know, that's going to shake out this year with the Terrace. And then, as we looked at 206, uh, how much can you recover can, can you get back to the, the, the, um, the 9% next year?
It's just longer term. I mean, you spoke pretty positively about uh, kg margins where, where ultimately do you think uh this business can land and and how do you get there? Is it through, you know, sgna synergies, uh, anything in the gross margin to speak about just any color on on sort of how we should think about the kg margins. Um, as we look forward. Thanks.
Yeah. Uh, in terms of this year, uh, for the, for the partial period that we're going to that we own them from May on, I think that they're going to come in around 6%. Um,
In terms of next year, we'll, we'll talk in more detail about that on the next call. But certainly we should see improve improvement from where we were today, um, or from where we where this year. But I think we'll
Postpone any further discussion of that until that call uh and then in terms of the, the lessons that the drivers to get to the longer term. Yeah. Uh
I think.
There's opportunity in both gross margin and uh sgna. But I think the bigger opportunity is an sgna. There's some, there's some cost savings opportunities that that that they're going to get from the combination with us which we're already. You know all that that work is is already underway. Uh but we also think there's a significant opportunity to just leverage operate expenses over time as we as we grow that business.
And just curious where you maybe think that those margins could go longer term.
I think what we said earlier was that that certainly
The intermediate Target would be to get to where Steve Madden. Uh the Legacy business was historically, uh but we think there's opportunity beyond that.
Got it. Best of luck, thanks.
Thanks Kelly.
All right, thank you so much.
I'm showing no further questions at this time. I would now like to turn it back to Ed Rosenthal for closing remarks.
Hey well, thanks so much for joining us today. Uh, we hope you have a wonderful day and we look forward to speaking with you on the next call.
Thank you for your participation. In today's conference, this does conclude the program. You may now disconnect