STEVEN MADDEN, LTD. Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Product Focus: Teams utilized a proven model combining talented design teams, test and react strategy, and industry-leading speed to market capability to create trend-right product assortments.
• International Expansion: 2024 international revenue grew 12%, with EMEA up 18%, Americas ex-US up 9%, and transition from distributor to ownership model in key markets.
• Categories Outside Footwear: Accessories and apparel revenue grew 53%, with Steven Madden handbag and DeepMind apparel showing strong growth.
• DTC Growth: DTC revenue increased, with Steven Madden and Dolce Vita showing respective growth.
• Core US Wholesale: Returned to revenue growth in 2024.
• 2024 Performance: Strong top and bottom-line growth driven by strategic initiatives, and returned nearly $160 million to shareholders.
• 2025 Outlook: Cautious due to near-term headwinds like tariffs and production diversification out of China, and handbag business pressure.
• Kurt Geiger Acquisition: Announced acquisition of Kurt Geiger, expected to close in Q2 2025, with the brand showing exceptional growth and complementary to portfolio.

Segment Performance

• International Markets: In 2024, international revenue grew 12% versus the prior year. EMEA region revenue increased 18%, including solid growth in Europe, strong expansion in the Middle East, and explosive growth in South Africa. Americas ex-US revenue grew 9%, including mid-single-digit percentage gains in Canada and Mexico, and contribution from the new joint venture in Latin America.
• Accessories and Apparel: Overall accessories and apparel revenue increased 53% compared to 2023, or 25% excluding Almost Famous. Steven Madden handbag revenue crossed $300 million mark for the first time, increasing 31% year-over-year. DeepMind apparel revenue up 23% versus 2023. Almost Famous division contributed $179 million in revenue with an operating margin of nearly 11%.
• Direct-to-Consumer (DTC): DTC revenue in 2024 was $550 million, a 9% increase versus 2023, or 5% growth on a comp basis. Steven Madden DTC revenue increased 6%, while Dolce Vita DTC revenue grew 36%.
• Core US Wholesale: Returned to revenue growth in 2024 with a 2% increase compared to 2023.

Guidance

• 2025 Revenue: Expect revenue to increase 17% to 19% compared to 2024.
• Diluted EPS: Expected to be in the range of $2.30 to $2.40. Excluding Kurt Geiger, expect revenue to increase low single digits and diluted EPS to be in the range of $2.20 to $2.30.
• First Quarter 2025: Expect diluted EPS to decline approximately 30% to 35% versus the first quarter of 2024.

Risks

• Tariffs: Earnings negatively impacted by new tariffs on goods imported into the US.
• Production Diversification: Efforts to aggressively diversify production out of China.
• Handbag Business: Pressure due to back up in wholesale channel inventories leading to constrained open-to-buys and cautious ordering from key wholesale customers.

Question and Answer

Q: Can you talk about how you're thinking about gross margin pressure throughout the year just given the tariff impact and what your plans are to mitigate as you move throughout the year? And then also on the Kurt Geiger investment, curious if you are baking in any needed investment looped in and into that business as you kinda get it 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.

A: On tariffs, plan to diversify production out of China (down to low forties in goods from China a year from now), look for price concessions from factories, and selectively raise prices starting in fall. On Kurt Geiger, don't think there's any meaningful investment required upfront with no operating margin drag in the first year or two for big investments.

Q: 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 you think this is mostly macro and the tariff conversation, but is weather hurting you guys as well?

A: Seen a slow start to the year, slow selling of spring products including sandals, weak traffic to stores. While loath to blame weather, hearing from industry peers attributing slow start to cold weather. No major difference between January and February in trend, and monitoring consumer confidence figures.

Q: On KG, 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 their revenue contribution from the business. How should we think about EPS contribution for this year?

A: Kurt Geiger London brand has exceptional growth, unique image, and complementary to portfolio. On tariffs, plan to diversify production. EPS contribution this year has a small haircut due to tariff impact, with operating margin this year about 7.5% but long-term opportunity for double-digit operating margin.

Q: You mentioned wholesale footwear business had gross margin pressured because of higher penetration of private label. Would wholesale footwear have grown in Q4 without growth from the mass channel?

A: Branded business was down about 3% in Q4. Expect improvement in 2025, thinking positive in Q1 but up low singles.

Q: With the shift that's moving from China to other areas as you move product out. You Zine, you said it was a six-day it was taken six days longer, total five days longer to the US. What how does that as you move more product 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. How do you how is that gonna change your speed to market? And again, guess the visual look at the inventories in future quarters. We'll see if the inventory increases in the future.

A: Five to six business days is due to supply chain pressure. Moving to other countries takes slightly longer lead times but can plan around it. Mexico has potential tariffs impact, but monitoring situation. Inventory increase due to transit times, expected to continue as move forward.

Q: With Kurt Geiger, what is their how does the input where how does their time frame work? And is that something that using your resources, you could you could speed up as well?

A: Kurt Geiger's lead times are a bit longer, different business. Will collaborate and utilize sourcing capability where possible to speed up, but nature of their product may not need same test and react speed to market as Steven Madden.