After a great year in 2019, Steve Madden was hit hard by the coronavirus pandemic and posted lower-than-expected results for the first quarter. The New York-based company recorded a net loss of $17.5 million, compared with a net income of $34.5 million for the year-ago quarter. Revenues decreased by 13.6 percent to $359.2 million, while the gross margin fell by 1.7 percentage points to 37.2 percent. The company’s share tumbled by 10.5 percent after the announcement.
Steve Madden said it had a good start to 2020, with revenues and earnings trending above plan through the first two months of the year and positive consumer reaction to the spring product in the Steve Madden brand. But in March, business weakened because of the Covid-19 pandemic.
In response, the group has suspended share repurchases, halted its quarterly cash dividend and drawn down $50 million from its existing credit facility. It also implemented furloughs and pay cuts, and reduced nonessential operating expenses, capital expenditures and planned inventory receipts.
During the quarter, Steve Madden’s wholesale revenues went down by 13.0 percent to $302.7 million, weighed down by a 5.4 percent drop in accessories and apparel, and a 15.0 percent decline in wholesale footwear, following order cancellations in March resulting from the pandemic. The gross margin in the wholesale segment narrowed by 2.0 percentage points to 32.5 percent.
In the retail segment, Madden’s revenues dropped by 15.8 percent to $52.9 million, hampered by store closures. This is despite revenues through the first two months of the quarter trending up by mid-single digits, including a low-single digit increase in comparable store sales. However, the gross margin in retail climbed by 1.3 percentage points to 59.8 percent, due to a benefit recognized in connection with the modification of the company’s loyalty program, partially offset by inventory reserves taken as a result of the pandemic. The group ended the quarter with 224 company-operated retail stores, plus eight e-commerce sites and 30 directly operated concessions in foreign markets.
The management pointed out that in April and May this year, wholesale revenues are trending down by about 75 percent, but it expects business to start to build up slightly in June with more meaningful improvement beginning in July. In the U.S., 15 stores have reopened since mid-May.
It remains confident to have all the right elements in place to emerge strongly from the crisis, and is planning to capitalize on the strength of its portfolio, and to accelerate its e-commerce business and further build private-label partnerships with mass retailers.