Keeping up with a really good first half, Steve Madden managed again to exceed analysts' expectations on sales and earnings in the third quarter, thanks to a robust performance from the flagship Steve Madden and Blondo brands. Growth in Europe through the SM Europe joint-venture was also a highlight. The company's share price soared by 10 percent after the release of its results.
No details were given about Superga, the brand of Basicnet for which Steve Madden has been the licensee for North America since 2011.
Overall, the company's revenues jumped by 8.5 percent from the year-ago quarter to $497.3 million. The company's overall gross margin inched up by 0.2 percentage points to 38.4 percent. The quarterly net income declined by 5.6 percent to $52.5 million, mainly due to an increase in operating expenses. However, adjusted earnings per share still beat the analysts' consensus.
Boasting that sales and earnings “significantly exceeded” its expectations, the management decided to raise its guidance for the full year. It now expects that sales will increase by 7.0 to 7.5 percent, up from a previous forecast of between 5.0 and 7.0 percent. Annual diluted earnings per share are also predicted to be higher than formerly budgeted.
During the quarter, Steve Madden's wholesale revenues went up by 8.5 percent to $421.6 million, driven by a 15.8 percent gain in accessories and apparel and boosted by the acquisition of two brands, BB Dakota and Greats, during the quarter. The Greats brand adds Italian-made sneakers to Madden's expansive footwear range, while BB Dakota beefs up the New York-based company's contemporary women's fashion offer.
The company also announced the establishment in September of a new joint venture in China with Channel Link, which it said offers superior capabilities both online and off-line. Channel Link was said to have a successful track record as the Chinese e-commerce partner for various international footwear brands. It also operates a multi-brand chain of 550 apparel stores called Gaga and some 230 franchised stores for other brands. The new JV is owned 51 percent by Steve Madden and 49 percent by Channel Link. It is already operating the Steve Madden business on Tmall and the group is expecting to launch on JD.com in early 2020. It is planning to open its first store in Shanghai during the present quarter and to open two to three additional locations in spring 2020.
Wholesale revenues from footwear improved by 6.3 percent, led by Blondo, women's shoes under the Steve Madden brand and the company's private label business. The gross margin in the wholesale segment decreased by 0.5 percentage points to 33.9 percent, as an increase in footwear was more than offset by a decrease in accessories and apparel, due primarily to higher tariffs on goods imported from China.
In the retail segment, Madden's revenues rose by 8.3 percent to $75.7 million, and same-store sales went up by 5.1 percent, driven by a strong performance in the company's e-commerce operations. The gross margin in retail climbed by 3.2 percentage points to 63.3 percent, due primarily to reduced promotional activity. The group ended the quarter with 227 company-operated retail stores, plus seven e-commerce sites and 32 directly operated concessions in foreign markets.