Steven Madden, Ltd. Q2 FY2025 earnings call

• Tariffs impacted the second quarter significantly; the team diversified sourcing from China but moved some production back for fall 2025, sourcing ~30% of U.S. imports from China vs 71% in 2024. They selectively raised prices to wholesale and consumers, with mixed acceptance on new fashion.
• Steve Madden's design teams are delivering strong assortments, with positive consumer response in dress shoes and boots; marketing spend is rebalanced across the funnel, investing in top and mid-funnel tactics and diversifying channels like YouTube, Pinterest, and Snapchat.
• Integration of Kurt Geiger (closed May 6) is proceeding smoothly; the Kurt Geiger London brand has strong momentum, with potential for growth in international markets and Steve Madden in the U.K., along with cost savings in freight and logistics.

Consolidated revenue for the second quarter was $559 million, a 6.8% increase compared to the second quarter of 2024. Excluding the newly acquired Kurt Geiger, consolidated revenue decreased 10%. Wholesale revenue was $360.6 million, down 6.4% compared to Q2 2024; excluding Kurt Geiger, it decreased 12.8%. Wholesale footwear revenue was $220.1 million, a 7.1% decrease from the comparable period in 2024 (11.7% excluding Kurt Geiger), and wholesale accessories and apparel revenue was $140.4 million, down 5.3% compared to the second quarter in the prior year (14.6% excluding Kurt Geiger). Direct-to-consumer segment revenue increased 43.3% to $195.5 million; excluding Kurt Geiger, it decreased 3%. Consolidated gross margin was 41.9% in the quarter compared to 41.5% in the comparable period of 2024. Wholesale gross margin was 31% compared to 33.1% in Q2 2024, and direct-to-consumer gross margin was 61.3% compared to 64.3% in the comparable period in 2024. Inventory was $437 million compared to $241.6 million in Q2 2024; excluding Kurt Geiger, inventory increased 1%.

• Not providing 2025 financial guidance due to tariff uncertainty. - Expect continued tariff-related disruption in Q3, with gross margin pressure remaining significant in Q3 and potentially improving in Q4.

• Tariffs led to wholesale customers canceling orders, reducing open-to-buys, and causing shipment delays, negatively impacting revenue and earnings. - Uncertainty in sourcing diversification and fluctuating tariff rates pose risks to costs, product quality, and on-time delivery.

Q: Which wholesale channels saw order cancellations due to tariffs, and how ordering behavior changed?

A: The majority of the wholesale revenue shortfall in the organic business came from off-price and mass channels. Continued pressure is expected on these channels, with some recovery but Q3 impact still seen.

Q: Consumer response to price increases, elasticity by product category?

A: Average 10% price increase, with good acceptance on new fashion, but less in sandals and fashion sneakers; early days, monitoring demand elasticity closely.

Q: Kurt Geiger integration progress, US and international growth?

A: Kurt Geiger integration is smooth, with strong momentum in the London brand. There's potential for growth in international markets, including expanding Steve Madden in the U.K. and tapping into opportunities in Europe, Latin America, and Asia.

Q: Apparel business performance, boot vs sneaker trends?

A: Steve Madden apparel had revenue growth in the quarter. Boots are performing well in DTC channels, while fashion sneakers have softened.

Q: Inventory and OpEx breakdown?

A: Excluding Kurt Geiger, inventory was up 1% due to tariffs and longer transit times. Excluding Kurt Geiger, operating expenses were up a little less than 3%.

Q: Nordstrom anniversary sale, Kurt Geiger sell-through?

A: Strong sell-through in the Nordstrom anniversary event. Kurt Geiger sell-through is strong, with similar performance in other Steve Madden brands.

Q: Inventory from non-China sources, impact on P&L?

A: Most Q3 inventory from non-China sources not impacted, but quick inventory turnover means tariff impacts are felt early in the P&L