If you happen to live in the Northeast and Midwest, you're
probably still thawing out from a long winter of record cold
temperatures and brutal snowstorms.
You're probably also looking forward to the coming summer,
when you can shove all of your winter wear in the attic and throw
on your sandals and shorts.
If so, here's some good news: You'll probably get those
sandals at a steep discount off the regular retail price.
Unusually cold weather in key U.S. markets hurt sales of
sandals and other spring items at many retailers, meaning there's
a large inventory of these goods that need to be moved off the
One company that makes and sells sandals,Steve Madden (
), appears primed to offer promotions on its inventory to make up
for poor sales during the first three months of the fiscal
Private Label Footwear
Steve Madden specializes in fashion-forward name brand and
private label footwear for women, men and children. In addition
to shoes, it also designs, makes and sells handbags and other
accessories. It operates a wholesale business as well as a retail
A good chunk of the company's business comes from sandals. It
sells a wide variety that range in price from around $40 to $140.
Normally, sandals sell pretty well in the late winter and early
spring as shoppers prepare for warmer weather.
This year, however, the warm weather was a long time coming in
many parts of the U.S.
"Due to the prolonged cold weather this year, there is a
significant buildup of sandal inventory on the selling floor
across the retail space," noted Jane Thorn Leeson, analyst at
KeyBanc Capital Markets. "As a result, we expect to see pretty
heavy promotional activity in the space during the second
The prospect of heavy promotional activity led Steve Madden to
offer a cautious outlook for the full year.
Following its first-quarter earnings report earlier this
month, management reaffirmed its fiscal year 2013 guidance for a
net sales increase of 6% to 8% from 2012 and guided earnings in a
range of $2.95 to $3.05 a share.
For the most part, analysts remain upbeat about Steve Madden's
prospects in coming quarters.
"Though traffic remains challenging and management expects
heavier promotional activity in Q2, we continue to see potential
upside for the second half of 2013," said Citigroup analyst Kate
She cited the potential for market share gains for the core
Steve Madden brand atMacy's (
) department stores.
McShane also cited a "significant expansion" of Superga, a
brand of Italian footwear for which Steve Madden serves as the
official licensee in North America; as well as "second-half
momentum" in shoe brands such as Madden Girl, Report and
Steve Madden has seen an uptick in sales of its shoes at
Macy's thanks to a merchandising change implemented last
The company moved its Steve Madden footwear to the Impulse
department at Macy's from its previous position in the Junior
department, while continuing to sell its Madden Girl footwear in
the Junior department.
"This strategy enabled us to put more elevated Steve Madden
product into Macy's and has resulted in significantly higher
sell-through rates for both brands," Chief Executive Edward
Rosenfeld said on a first-quarter conference call with
"As a result, we saw double-digit percentage increases in
shipping to Macy's for both Steve Madden and Madden Girl footwear
in the first quarter," he added.
Those gains aside, Steve Madden still delivered one of its
weakest performances in years during its fiscal first
Sales and earnings both rose in single digits to end a long
run of double-digit gains in both categories.
Revenue came in at $278.9 million, up 5% from the prior year
but below estimates for $280.9 million. Earnings gained 4% to 52
cents a share, in line with views.
Net sales from the wholesale business grew only 2.2% to $233.9
million as strong growth in the wholesale accessories business
was partially offset by a modest decline in the wholesale
Retail net sales rose 21.7% to $45.1 million during the
quarter. Same-store sales increased 3.0%.
Steve Madden's stock price climbed 3% to 49.03 on the day the
company reported its Q1 results. Shares fell back some the next
two sessions, but later rebounded to touch a record high of 49.76
on May 15.
CEO Rosenfeld sounded particularly optimistic about Steve
Madden's growth prospects in international markets, which account
for about 8% of total sales.
"We saw rapid growth with our partners in Europe, particularly
in the U.K., Netherlands and Germany," he said. "We also had a
significant increase in the UAE, where our partner ended the
quarter with 23 Steve Madden retail stores, up from 12 at the end
of the first quarter last year."
Analyst Leeson notes that management "is currently focused on
aggressively expanding in the Middle East and Latin America and
remains cautious in Europe. Notably, the inventory buildup in
Asia is now gone, and sales have turned back to nice growth."