Steven Madden, Ltd., a leading designer, wholesaler and marketer of fashion footwear for women, men and children, today announced financial results for the fourth quarter and fiscal year ended December 31, 2004.
Fourth quarter sales increased 18.9% to $84.5 million from $71.1 million in the comparable period last year. Gross margin was 32.2% versus 38.2% in the year-ago period primarily due to two factors. First, the Company experienced pressures in its wholesale business, including soft boot sales that led to high markdown levels and weakness in the l.e.i. division which continued to face a larger than expected sales decline coupled with a demanding markdown environment. Second, the Company recorded higher than anticipated cost of goods sold primarily related to freight costs and sourcing from certain countries. Net income was $0.4 million, or $0.03 per share, versus $2.6 million, or $0.18 per share, in last year's fourth quarter.
Revenues from the wholesale business, comprised of the Company's seven brands, Steve Madden Womens, Steve Madden Mens, Stevies, l.e.i., Steven, UNIONBAY, and Candie's, increased 20.1% to $50.6 million from $42.2 million in the comparable period of 2004, driven mainly by strength in Steve Madden Womens.
Retail revenues for the quarter increased 17.2% to $33.9 million from $28.9 million in the same period of 2003. Same-store sales increased 9.5% versus a decrease of 3.3% in the prior year period due primarily to positive sales of dress shoes, a larger contribution from sales of mens footwear, the early release and strong reception to Spring sandals, and the success of casual footwear. During the quarter, the Company opened one Steve Madden store and converted one Shoe Biz outlet store to a Steve Madden store.
Richard Olicker, President and Chief Operating Officer, commented, “During the quarter our strong sales growth was offset by greater than planned price pressure in most divisions of our wholesale business as well as higher cost of goods sold, and these factors negatively impacted overall gross margin. While we continue with initiatives to reduce certain expenses across select wholesale divisions, we are also excited to announce the promotion of Amelia Newton to the position of Executive Vice President of Wholesale Sales. Amelia has been with Steven Madden, Ltd. since 1996 in a variety of sales and management positions, and in her new role she will be responsible for managing the Company's wholesale customer base and running the key accounts for improved profitability.
“At the retail level, we achieved solid revenue and same-store sales increases in the quarter and continued an emphasis on not only expanding our store base but also closing underperforming locations. Retail continues to be an important segment of our business that allows us to quickly test our products and showcase the power of our brand,” stated Mr. Olicker.
Full year sales increased 4.3% to $338.1 million from $324.2 million last year. Net income was $12.3 million, or $0.86 per diluted share, versus $20.5 million, or $1.45 per diluted share, in 2003. The Company opened 10 stores and closed 2 during the year, ending 2004 with 91 company-owned retail locations, including the Internet store.
“In 2004, we repurchased a total of 545,100 shares for an aggregate of $9.7 million and ended the year with $80.0 million in cash, cash equivalents, and investment securities, no debt, and total stockholders' equity of $164.7 million. This position reflects our sound balance sheet and the financial stability of our Company,” added Arvind Dharia, Chief Financial Officer.
With respect to the outlook for 2005, the Company is cautious given its expectation that certain challenges will remain. The Company expects continued significant margin pressure in the wholesale business as well as higher cost of goods sold. Specifically, due to weak boot sales in the fourth quarter of 2004, the Company has planned for later purchases of boots by wholesale customers in the second half of 2005, which in turn results in higher operating expenses related to freight costs and sourcing necessary for timely delivery. In addition, the Company anticipates higher operating expenses associated with not only increasing occupancy expenses but also an expanding store base. Taking these factors into consideration, the Company currently anticipates that 2005 net sales will be flat with sales in 2004 and diluted earnings per share will be in the range of $0.65 to $0.68. In addition, the Company plans to open 12 to 15 retail locations during 2005.
Jamieson Karson, Chairman and Chief Executive Officer, said, “Fiscal 2004 marked a year of changes and challenges for Steven Madden, Ltd. on many fronts. On the one hand, we undertook a variety of measures to improve the long term viability of our business by implementing a transition into new categories, investing in advertising and key personnel, and integrating newer brands into our portfolio. On the other hand, we experienced significant price pressure across most of our wholesale divisions, which had a greater than anticipated impact on our overall business. Nonetheless, we met our previously announced annual expectations for top line improvement and bottom line results.
“As we look to 2005, we are very focused on growing the business and improving profitability of various divisions. In addition, we continue to evaluate various opportunities to further leverage the Steve Madden brand through expansion into other brand building categories as well as to consider strategic and accretive acquisitions and/or organic growth. We remain committed to our share repurchase program and continue to consider additional avenues to maximize shareholder value for the long-term. Finally, we are extremely pleased to announce the anticipated return of Steve Madden to the Company in Spring of 2005. As the founder and emotional inspiration behind the Steve Madden brand, he adds an invaluable dimension to the Company. His return is very positive news from every perspective for Steven Madden, Ltd. and we look forward