Steve Madden Beats Earnings Estimates in Q3, But Warns on Wholesale Business
Steve Madden beat expectations in the third quarter of 2022, but cautioned investors about challenges in its wholesale business.
The New York-based footwear company reported revenue increased 5.3% to $556.6 million in the third quarter of 2022, compared to $528.7 million in the same period of 2021.
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By channel, revenue for the wholesale business was $434.6 million, an 8.1% increase compared to the third quarter of 2021. Wholesale footwear revenue increased 8.7% and wholesale accessories/apparel revenue rose 6.2%, each driven by strong growth in the branded business partially offset by a decline in private label.
Direct-to-consumer revenue was $118.5 million, a 3.7% decrease compared to the third quarter of 2021 driven by a decline in the e-commerce business. And brick-and-mortar revenue was approximately flat to the third quarter of 2021.
On the company’s quarterly earnings call on Wednesday, chairman and CEO Edward Rosenfeld boasted that Steve Madden’s “on-trend merchandise assortments” have restored a “critical competitive advantage” particularly in an uncertain environment.
That said, Rosenfeld told investors that many of the company’s wholesale partners are placing fewer orders upfront and are “chasing inventory” in season. “Most of our wholesale customers are prioritizing inventory control,” the CEO said. “Most of them have pulled back on orders as they seek to make sure their inventories are in line, but if you look at year-over-year sales growth in the back half, the mass channel is the weakest.”
This move has resulted in order cancellations from the fall 2022 season and “conservative” buys for spring 2023. “The good news is that given the easing of the supply chain and the fact that we’re really now in a position to get back to what we do best, which is working close to season and testing to react, testing and reacting in season,” Rosenfeld added.
Looking ahead, Steve Madden adjusted its fiscal 2022 guidance in light of the wholesale pull back. The company now expects revenue will increase 12.5% to 13.5% over fiscal 2021, with diluted EPS in the range of $2.77 to $2.79.
For now, Rosenfeld said the company will be focused on driving the company’s direct-to-consumer business, expanding its business outside of footwear (with handbags seeing a 19% revenue gain in Q3 and apparel growing 52% in the period), growing its international business and strengthening the U.S. wholesale footwear business.
“Overall, we are confident in our strategy and pleased with the progress we are making on our key priorities despite the increasingly challenging environment,” Rosenfeld added. “While we expect the macroeconomic backdrop to remain unpredictable in the coming quarters, we believe we are well positioned due to our strong brands, agile business model and proven ability to navigate difficult market conditions.”
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