Continuing on its strong performance in the previous months, Steve Madden once again posted upbeat results in the fourth quarter of 2018, driven by strong growth in both wholesale footwear and accessories. The flagship Steve Madden brand stood out, in both footwear and handbags. The group also saw outstanding growth for Blondo and its private label accessories business.
However, profits were affected by an $8.5 million pre-tax adjustment related to the bankruptcy of the Payless Shoesource chain (see the related story in this issue). In February, Payless announced the liquidation of all 2,500 of its North American stores in a Chapter 11 bankruptcy filing. Steve Madden had been working with the discount footwear retailer for a long time.
Overall, Steve Madden's revenues increased by 12.6 percent from the year-ago quarter to $364.4 million. Wholesale revenues went up by 14.1 percent to $317.4 million, but the segment's gross margin declined by 0.9 percentage points to 30.1 percent, due to a decline in accessories as well as the impact of a 10 percent tariff, implemented in September, on handbags and certain other accessory categories imported from China. These and other tariffs are set to be eliminated under a recent agreement between the U.S. and Chinese governments.
In the retail segment, Madden's revenues dropped by 7.9 percent to $93.0 million, but same-store sales went up by 4.0 percent, driven by strong performance in the company's e-commerce business. The gross margin inched up by 0.2 percentage points to 61.0 percent due to improved gross margin in the e-commerce business. The group ended the quarter with 229 company-operated retail stores, plus seven e-commerce sites and 42 directly operated concessions in foreign markets.
The company's overall gross margin declined by 1.3 percentage points to 37.1 percent. Excluding a $8.5 million pre-tax expense for bad debt and write-offs associated with Payless ShoeSource's bankruptcy, the gross margin reached a higher level of 38.1 percent. Net income dropped by 49.2 percent to $12.5 million, but adjusted net income jumped by 29.8 percent to $35.7 million.
For the whole financial year, sales increased by 7.0 percent to $1,650 million. International sales increased by 22 percent from the prior year, with strong increases in the group's owned markets, Canada and Mexico, as well as an increase of more than 40 percent in the company's European joint venture with SPM Shoe Trade and in its distributor business, most notably the Middle East, India and Italy. Also, at the end of the year, Steve Madden transitioned another key market from the distributor model to an ownership model, with the formation of a joint venture in Israel with Inner Jeans.
The net income for the year went up by 8.7 percent to $129.1 million. On an adjusted basis, it jumped by 22.0 percent to $157.7 million.
Moving forward, the management said that it faces a near-term headwind due to the bankruptcy of Payless ShoeSource, but is confident that its diversified business model is positioning the company for long-term growth. For fiscal year 2019, the company expects that sales will increase by 4 to 6 percent from 2018.