The U.S.-based footwear company recorded a 10.6 percent increase in net sales to $394.8 million for the quarter ended Sept. 30 as compared to the same period of 2012, despite a difficult retail environment, beating revenue expectations and meeting Wall Street estimates. According to analysts, the company's agile structure and fashion-forward eye helped drive sales and market share. The retail business was softer than expected, due in large part to weak retail traffic trends. The group's comparable store sales decreased 3.5 percent in the quarter.
Net income increased by 16.1 percent to $44.0 million compared with the prior year's third quarter, adjusted for the three-for-two stock split effective Oct. 2, 2013. Net income for the third quarter of 2012 had included a $5.1 million impairment charge and a $0.9 million charge for bad debt, both related to the bankruptcy of Bakers Footwear Group. On an after-tax basis, these charges negatively impacted net income by $3.7 million.
The gross margin declined to 35.4 percent from 36.8 percent in the same period last year due primarily to a sales mix shift toward the lower-margin private label footwear business.
Operating income totaled $68.1 million, or 17.2 percent of net sales, compared with operating income of $56.4 million, or 15.8 percent of net sales, in the same quarter of 2012. Excluding the previously mentioned charges related to the bankruptcy of Bakers, Madden had booked operating income of $62.4 million, or 17.5 percent of net sales, in the third quarter of 2012.
Steve Madden designs, sources and markets footwear and accessories for women, men and children. In addition to marketing products under its owned brands - Steve Madden, Steven by Steve Madden, Madden Girl, Freebird by Steven, Stevies, Betsey Johnson, Betseyville, Report Signature, Report, Big Buddha, Wild Pair, Cejon and Mad Love, among others - the company is a licensee of other brands such as Olsenboye for footwear, handbags and belts and Elizabeth and James, Superga, l.e.i. and GLO for footwear. The company also designs and sources products under private label brand names for various retailers. Its wholesale distribution includes department stores, specialty stores, luxury retailers, value-priced retailers, national chains, mass merchants and catalog retailers.
Net revenues from the group's wholesale business grew 11.0 percent to $345.9 million as compared to the third quarter of 2012, with particular strength in the Steve Madden Women's, Steve Madden Men's, Madden Girl and international divisions, both domestically and abroad. The private label footwear business grew by 38 percent. The gross margin in the wholesale business was 31.9 percent versus 33.3 percent in last year's third quarter.
Retail net sales rose 7.8 percent to $48.9 million, driven by the opening of 18 new stores since the end of the third quarter last year. They generated a gross margin of 60.2 percent, compared with 60.7 percent in the third quarter of 2012, resulted from increased promotional activity. During the quarter, the company opened one Steve Madden full-price store and four Steve Madden outlet stores and closed its Report store. The company ended the quarter with 117 company-operated retail locations, including 16 outlets and three internet stores.
During the quarter, the company repurchased 1,042,644 shares of its common stock for $36.7 million.
For fiscal year 2013, the company reaffirms its guidance for net sales to increase by between 6 and 8 percent against 2012.