Steven Madden, Ltd. Q3 FY2025 earnings call

Management Statement and Operational Highlights

• Tariff Impact: Q3 was challenging due to tariffs, but worst seen as behind us. Order patterns normalizing, margin pressure mitigated by pricing and sourcing.
• Brand Performances:
  • Steve Madden: Strong fall product assortment (boots, dress shoes, casuals) with accelerating DTC and wholesale sell-throughs. Marketing on social platforms driving awareness.
  • Kurt Geiger London: Mid-teens comp sales growth in Q3, acquisition integration on track with international expansion efforts.
  • Other Brands: Dolce Vita expanding int'l and entering handbags; Betsey Johnson renewing relevance with partnerships. Both expected to deliver revenue gains in 2025.

Segment Performance

• Consolidated Revenue: $667.9 million, up 6.9% y-o-y. Excluding Kurt Geiger, down 14.8%.
  • Wholesale Revenue: $442.7 million, down 10.7% y-o-y. Excluding Kurt Geiger, wholesale footwear down 16.7%, wholesale accessories/apparel down 22.5%.
  • DTC Revenue: $221.5 million, up 76.6% y-o-y. Excluding Kurt Geiger, up 1.5%.
  • Gross Margin: Consolidated 43.4% (up from 41.6% in Q3 2024). Wholesale 33.6% (down from 35.5% in Q3 2024). DTC 61.9% (down from 64% in Q3 2024).
  • Operating Expenses: $243.4 million (36.4% of revenue), up from $174.2 million (27.9% of revenue) in Q3 2024.
  • Net Income: $30.4 million, $0.43 per diluted share, down from $64.8 million, $0.91 per diluted share in Q3 2024.

Guidance

• Fourth Quarter 2025: Revenue expected to increase 27%-30% y-o-y. EPS range $0.41-$0.46. Core business (excluding KG) revenue down 2%-4%. KG contribution to revenue: $182M-$187M. KG ~70% DTC, ~$135M DTC revenue expected in Q4.

Risks

• Tariffs: Continued negative impacts on revenue/margins, though mitigation efforts ongoing.
• Supply Chain: Shipment delays, stockouts in some styles affecting demand chasing.
• Market Pressures: Excess inventory in handbags, challenges in apparel mass market due to tariffs.

Question and Answer

• Q: Kelly Crago on fashion performance, inventory, and 4Q guide breakdown A: Ed Rosenfeld discussed strong fall fashion in Steve Madden, confidence in spring, core business revenue guide excluding KG, and KG's DTC contribution.
• Q: Anna Andreeva on stockouts, DTC vs brick-and-mortar, sourcing from China A: Ed Rosenfeld noted stockouts in some styles, DTC outpacing brick-and-mortar, and continued diversification in sourcing despite potential return to China.
• Q: Abigail Zvejnieks on Kurt Geiger region performance and revenue synergy progress A: Ed Rosenfeld said KG growing in core regions, with revenue synergy efforts underway, expecting benefits in 2026.
• Q: Marni Shapiro on handbags, apparel, and price resistance A: Ed Rosenfeld discussed handbag challenges due to inventory and tariffs, apparel growth in key accounts, and positive price reception for fashion products.
• Q: Corey Tarlowe on AUR lift, wholesale tone shift, and promotions A: Ed Rosenfeld talked about AUR increase from higher-priced products and better wholesale orders due to normalized demand and improved sell-through.
• Q: Tom Nikic on margin recovery A: Ed Rosenfeld said margin recovery is expected over time, with tariffs expected to impact retail prices and Kurt Geiger margins improving long-term.
• Q: Unknown Analyst on KG margin impact and international growth A: Zine Mazouzi and Ed Rosenfeld discussed KG's margin impact in Q4 and international growth plans for Steve Madden and Kurt Geiger.
• Q: Janine Stichter on margin recapture and pricing A: Zine Mazouzi and Ed Rosenfeld discussed tariff impact on margins, Q4 margin outlook, and pricing prudence.
• Q: Dana Telsey on wholesale type performance and DTC outlet vs full price A: Ed Rosenfeld noted stronger performance in regular price wholesale channels, outlet drag due to border stores and supply chain issues, and better full-price DTC.
• Q: Kelly Crago on KG EBIT margin and long-term margins A: Ed Rosenfeld discussed KG's EBIT margin in 2025 and long-term margin targets, expecting improvement through SG&A synergies.