Steven Madden’s Earnings Call: Strategic Moves Amid Challenges

Steven Madden ((SHOO)) has held its Q1 earnings call. Read on for the main highlights of the call.

During the recent earnings call, Steven Madden expressed a generally positive sentiment, highlighting significant achievements such as a strong March performance and the strategic acquisition of Kurt Geiger. The company also made strides in reducing its reliance on China for production. However, challenges like new tariffs, a slight decline in direct-to-consumer revenue, and the withdrawal of financial guidance were notable concerns. Despite these hurdles, the company emphasized its robust financial foundation.

Strong March Performance

The company reported a robust improvement in March, attributed to favorable weather conditions and successful spring fashion assortments. This led to earnings that significantly exceeded expectations, showcasing the company’s ability to capitalize on seasonal trends effectively.

Kurt Geiger Acquisition

Steve Madden successfully closed the acquisition of Kurt Geiger London, a brand with impressive momentum, boasting £400 million in revenue for the year ending February 1, 2025. The acquisition, valued at £289 million, is expected to bolster Steve Madden’s portfolio and enhance growth prospects, particularly in international markets.

Reduction in China Sourcing

In a strategic move, the company significantly reduced its dependence on China for production. It plans to source only mid-teens percentage from China for fall 2025 and aims for mid-single digits by spring 2026, reflecting a proactive approach to mitigating risks associated with geopolitical uncertainties.

Strong Financial Foundation

As of March 31, 2025, Steven Madden reported a strong balance sheet with $147.2 million in cash and no debt. This financial stability positions the company well to navigate current challenges and pursue strategic opportunities.

Impact of Tariffs

The introduction of new tariffs on goods imported into the U.S. has created headwinds, affecting short-term earnings and necessitating price increases. The company is actively negotiating discounts with suppliers and shifting production to mitigate these impacts.

Decline in Direct-to-Consumer Revenue

The direct-to-consumer segment saw a slight decline of 0.2%, totaling $112.1 million. While digital sales experienced a modest increase, this was offset by declines in brick-and-mortar sales, highlighting the ongoing challenges in retail.

Lower Operating Income

Operating income for the quarter was reported at $56.1 million or 10.1% of revenue, down from $61 million or 11% of revenue in the first quarter of 2024. This decline reflects the broader challenges faced by the company in the current economic environment.

Withdrawal of 2025 Financial Guidance

Due to the uncertainties surrounding new tariffs, Steven Madden withdrew its 2025 financial guidance. This decision underscores the unpredictable nature of the current market environment and the company’s cautious approach to future projections.

Forward-Looking Guidance

In the earnings call, Steven Madden provided insights into its strategic adjustments and financial performance. The company reported a slight 0.2% increase in consolidated revenue for Q1 2025, with wholesale revenue experiencing a similar rise. Despite a modest decline in the direct-to-consumer segment, the company improved its gross margin by 20 basis points to 40.9%. Efforts to mitigate the impact of tariffs include negotiating supplier discounts and accelerating production shifts from China. The acquisition of Kurt Geiger is expected to enhance growth prospects, particularly in international markets. However, due to tariff-related uncertainties, the company withdrew its previously provided 2025 financial guidance.

In conclusion, Steven Madden’s earnings call reflected a mix of optimism and caution. While the company celebrated strong March performance and strategic acquisitions, it also acknowledged challenges like tariffs and revenue declines. The withdrawal of financial guidance highlights the uncertain market conditions. Nevertheless, the company’s strong financial foundation and strategic initiatives position it well for future growth.