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Steven Madden Ltd. Reports Operating Results (10-Q)

August 08, 2012 | About:
10qk

10qk

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Steven Madden Ltd. (SHOO) filed Quarterly Report for the period ended 2012-06-30.

Steven Madden, Ltd. has a market cap of $1.77 billion; its shares were traded at around $40.54 with a P/E ratio of 16.3 and P/S ratio of 1.8. Steven Madden, Ltd. had an annual average earning growth of 21.7% over the past 10 years. GuruFocus rated Steven Madden, Ltd. the business predictability rank of 3-star.

Highlight of Business Operations:

For the quarter ended June 30, 2012, the Company posted positive sales and earnings growth, despite a challenging retail environment. In the second quarter of 2012, net sales increased 38% to $288,692 from $209,152 in the same period of last year. Net income increased 13% to $26,899 in the second quarter of 2012 compared to $23,784 in the same period of last year. Net income included $2,500 reserved for a class action lawsuit related to unauthorized text messaging and a $1,810 charge for impairment of a note receivable from our former licensee for Betsey Johnson retail and apparel. The effective tax rate for the second quarter of 2012 decreased to 31.3% compared to 39.0% in the second quarter of last year due primarily to a tax benefit of $2,800 related to the year-to-date impact of a portion of earnings from the Company's foreign operations that have been invested indefinitely in its Canadian operations. Diluted earnings per share increased to $0.61 per share on 43,943,000 diluted weighted average shares outstanding compared to $0.55 per share on 43,259,000 diluted weighted average shares outstanding in the first quarter of last year.

Net sales for the three months ended June 30, 2012 increased 38% to $288,692 compared to $209,152 in the same period of last year. Excluding sales from recently acquired SM Canada and our two acquisitions from May of 2011, Topline and Cejon, organic net sales rose 18.5%. Our gross margin decreased to 36.1% for the second quarter of 2012 from 40.2% in the second quarter of 2011, primarily due to sales mix shifts in our Wholesale Footwear segment as a result of the addition of the Topline business, and significant sales increases in our Target private label business and our international business, which typically achieve lower gross margins. Excluding these mix shifts, wholesale gross margin was up approximately 20 basis points compared to the prior year. Operating expenses increased in the second quarter of this year to $66,702 from $51,339 in the second quarter of last year, primarily due to incremental costs associated with the aforementioned new divisions, SM Canada, Topline and Cejon. As a percentage of sales operating expenses decreased to 23.1% in the second quarter of 2012 from 24.5% in the same period of last year, reflecting leverage gained from sales increases. In the second quarter of 2012, we recorded charges of $2,500 for a class action lawsuit related to unauthorized text messaging and $1,810 for impairment of a note receivable from our former licensee for Betsey Johnson retail and apparel. Our commission and licensing fee income decreased to $4,252 in the second quarter of 2012 compared to $4,432 in the second quarter of 2011. The effective tax rate for the second quarter of 2012 decreased to 31.3% compared to 39% in the second quarter of last year due primarily to a tax benefit of $2,800 related to the year-to-date impact of a portion of earnings from the Company's foreign operations that have been invested indefinitely in its Canadian operations. Net income for the second quarter of 2012 increased 13% to $26,899 compared to net income for the quarter ended June 30, 2011 of $23,784.

In the second quarter of 2012, net sales from the Retail segment accounted for $40,559 or 14% of our total net sales compared to $33,980 or 16% of our total net sales in the same period last year. We opened twelve new stores, acquired seven stores as part of the acquisition of SM Canada, established a Superga online store and closed seven under-performing stores during the twelve months ended June 30, 2012. As a result, we had 96 retail stores as of June 30, 2012 compared to 83 stores as of June 30, 2011. The 96 stores currently in operation include 81 Steve Madden® stores, eight Steve Madden® outlet stores, three Steven® stores, one Report® store, one Superga store and two e-commerce websites. Comparable store sales (sales of those stores, including the e-commerce websites, that were open throughout the second quarters of 2012 and 2011) increased 6.8% in the second quarter of this year. In the quarter ended June 30, 2012, gross margin decreased to 63.7% from 64.8% in the same period of 2011, primarily due to an increase in promotional selling. In the second quarter of 2012, operating expenses increased to $21,549 compared to $16,173 in the second quarter of last year, primarily due to the incremental cost associated with the addition of the twelve stores we opened and seven stores we acquired from SM Canada since the first quarter of last year, net of cost reductions from the seven stores we closed during the period. Income from operations for the Retail segment decreased to $4,302 in the second quarter of this year from $5,846 in the same period of last year.

Net sales for the six months ended June 30, 2012 increased 48% to $554,662 from $374,907 for the comparable period of 2011. Excluding sales from recently acquired SM Canada and our two acquisitions from May of 2011, Topline and Cejon, organic net sales rose 18.3%. During the six months ended June 30, 2012, gross margin decreased to 36.1% compared to 40.9% in the same period of last year, primarily due to sales mix shifts in our Wholesale Footwear segment as a result of the addition of the Topline business, and significant sales increases in our Target private label business and our international business, which typically achieve lower gross margins. Operating expenses increased for the six months ended June 30, 2012 to $131,909 from $97,583 in the same period of the prior year, primarily due to incremental costs associated with the aforementioned new divisions, SM Canada, Topline and Cejon. As a percentage of sales, operating expenses decreased in the first half of this year to 23.8% from 26.0% in the same period of last year. In the second quarter of 2012, we recorded charges of $2,500 for a class action lawsuit related to unauthorized text messaging and $1,810 for impairment of a note receivable from our former licensee for Betsey Johnson retail and apparel. Commission and licensing fee income decreased to $8,725 in the first six months of 2012 compared to $8,999 in the first six months of 2011. The effective tax rate for the six months ended 2012 decreased to 34.9% compared to 38.7% in the same period of last year due primarily to a tax benefit of $2,800 related to the year-to-date impact of a portion of earnings from the Company's foreign operations that have been invested indefinitely in its Canadian operations. Net income increased to $48,767 in the first six months of this year compared to $41,636 in the same period last year.

In the first six months of 2012, net sales from the Retail segment accounted for $77,586 or 14% of our total net sales compared to $65,476 or 17% of total net sales in the same period last year. We opened twelve new stores, acquired seven stores as part of the acquisition of SM Canada, established a Superga online store and closed seven under-performing stores during the twelve months ended June 30, 2012. As a result, we had 96 retail stores as of June 30, 2012 compared to 83 stores as of June 30, 2011. The 96 stores currently in operation include 81 Steve Madden® stores, eight Steve Madden® outlet stores, three Steven® stores, one Report® store, one Superga store and two e-commerce websites. Comparable store sales (sales of those stores, including the e-commerce websites, that were open throughout the first six months of 2012 and 2011) increased 9.3% in the first six months of this year. The gross margin in the Retail segment increased to 62.0% in the six months ended June 30, 2012 from 61.6% in the corresponding six months of 2011 primarily due to improved operating efficiencies. During the first half of 2012, operating expenses were $41,653 compared to $34,423 in the same period of last year, primarily due to the incremental cost associated with the addition of the twelve stores we opened and seven stores we acquired from SM Canada since June 30 of last year, net of cost reductions from the seven stores we closed during the period. For the six months ended June 30, 2012, income from operations for the Retail segment increased to $6,433 compared to $5,901 for the same period in 2011.

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10qk
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