Steve Madden said revenues for the three months to Sept. 30 dropped by 1.2 percent over the same quarter of last year, down to $408.4 million, in spite of strong growth for its core women's business and the Dolce Vita division. The management blamed a challenging retail environment that caused wholesale partners to remain cautious.
In the retail division, sales were up by 9.6 percent to $61.8 million, with comparable store sales for the quarter increasing by 1.3 percent. The group experienced declines in sandals and casual boots and booties, which were offset by strong gains in fashion sneakers, dress shoes and dress boots and booties. However, the retail segment's gross margin decreased by 0.5 percentage points to 59.9 percent due to the negative impact of a stronger U.S. dollar on the company's international business.
During the third quarter, Steve Madden opened four full-price stores and three outlet locations, and closed one full price store. It ended the quarter with 186 company-operated retail locations, including four internet stores.
Revenues from the wholesale business dropped by 2.9 percent to $346.6 million. However, the company noted that sales in the third quarter of 2015 had included $14.9 million from a one-time Madden Girl cold-weather capsule collection, which was not repeated in 2016. The segment's gross margin was up by 1.8 percentage points to 33.9 percent, partly boosted by higher profits in the Dolce Vita division.
Sales outside the U.S. represented around 10.0 percent of all revenues, with products now sold in about 80 countries. Among the highlights, the company mentioned growth in Canada and Mexico as well as its new joint venture in Europe, which Steve Madden formed in June with SPM Shoe Trade. The aim is to position the brand for future growth in Europe and manage the Steve Madden footwear and handbags business in the territories covered by the agreement: Germany, France, England, Switzerland, the Benelux region, Scandinavia, Central Europe and the Baltic states (more on this in our previous issues).
The group said it experienced declines in its distributor business in Asia - and to a lesser extent the United Arab Emirates - due to the fact that an Asian distributor has seen inventory backup and has sharply reduced orders in order to rationalize its stock position.
The company managed to expand the group's gross margin by 1.8 percentage points to 37.8 percent, as its on-trend merchandise assortment and disciplined inventory management resulted in higher initial mark-ups and reduced close-outs and markdown allowances. The operating margin gained 1.9 percentage points to 23.5 percent and net earnings rose by 2.1 percent to $43.8 million.
Steve Madden narrowed its guidance for 2016, predicting that sales growth will range between 0.5 and 1.0 percent for the full year.