Steven Madden, Ltd.

Welcome to the Q1 2021 Steve Madden Limited Earnings Conference call. At this time, all participants are in a listen-only mode. After this speaker presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1 on your telephone. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker for today, Ms. Danielle McCoy. Please go ahead.

Thanks, LaShonna. Good morning, everyone. Thank you for joining our first quarter 2021 earnings call and webcast. Before we begin, I'd like to remind you that during our call, we may make certain forward-looking statements as defined in the federal securities laws regarding our expectations or predictions about the future. Generally, these statements relate to projections involving anticipated revenues, earnings, or other aspects of the company's operating results. Because these statements are based on current assumptions and expectations, they involve known and unknown risks, uncertainties, and factors not within the company's control, and as such, our actual performance and results may differ materially from these statements. Our annual report and other reports filed with the SEC from time to time include detailed discussions of the risks the company faces, and we urge you to refer to these. Specifically, the COVID-19 pandemic has had and is currently having a significant impact on the company's business operations and results. Such forward-looking statements with respect to the COVID-19 pandemic include, without limitation, statements with respect to the company's plans in response to this pandemic. At this time, there is still significant uncertainty about the duration and extent of the impact of the COVID-19 pandemic. Due to the dynamic nature of these circumstances, statements made on this call regarding the company's response to the pandemic could change at any time. Any forward-looking statements represent our judgment as of the time of this call and cannot be relied upon as current after today's date. We disclaim any intent or obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. except as required under applicable law. The financial results discussed are on an adjusted basis unless otherwise noted. A reconciliation to the most directly comparable GAAP financial measure and other associated disclosures are contained in our earnings release. Joining the call today are Ed Rosenfeld, Chairman and Chief Executive Officer, and Zane Mazzuzzi, Chief Financial Officer. With that, I'll turn the call over to Ed.

Thanks, Danielle. Good morning, everyone, and thank you for joining us to review Steve Madden's first quarter 2021 results. In light of the continued challenges posed by COVID-19, we were very pleased with our results in the first quarter, which significantly exceeded our expectations for both revenue and earnings. Our business accelerated meaningfully in March, with sharp improvement in revenue trends in our retail segment and performance at our wholesale partners. Undoubtedly, we owe some of this improvement to the impact of the government stimulus, as well as the vaccine rollout and easing government restrictions. But we believe the improvement we saw, particularly in our flagship Steve Madden brand, exceeded that of the overall fashion footwear category, which we attribute to an outstanding, trend-right merchandise assortment, much of which we only began delivering later in the quarter due to supply chain delays. Steve and his design team have created a Steve Madden Women's Footwear Collection with both a large number of strong-selling styles and a couple home-run products that look like they will rank up there with some of the top styles we've had over the years. Highlights include joggers with rhinestones, flat sandals with studs and chunky jewels, styles with braided detailing, and more. We're also very encouraged by what we're seeing in dress shoes, where we have a number of strong-performing styles. As consumer interest in dress shoes is coming back, we believe we are capturing a disproportionate share in that category. Overall, our consolidated revenue for the quarter was $361 million, up 1% from the first quarter of 2020, and our diluted EPS was 33 cents, a 108% increase from the prior year period. Our wholesale revenue declined 4% in the quarter, topping our expectation of a high single-digit decline due primarily to an impact from supply chain disruption that, while still significant, was smaller than we anticipated. The port congestion in California eased somewhat in March, as the production and export pause in China in February for Chinese New Year resulted in a two- to three-week period in March of fewer imports in California that enabled the port to work through some of the backlog, which in turn enabled us to ship product to our wholesale customers at the end of March that we had anticipated would slip into April. Unfortunately, it looks like that was a temporary reprieve, as imports surged again in April and are expected to rise further in May and beyond, likely meaning port congestion will continue to pose a challenge at least through the end of the second quarter. Wholesale footwear revenue declined 8% in the quarter. Steve Madden Women's and Kids had relatively better performance, as did Dolce Vita and our private label business. Men's and Ankleine, which have seen a disproportionate negative impact from COVID-19, were softer than the segment overall. In international markets, Europe was the highlight, with a strong revenue gain compared to the prior year driven by outstanding performance in digital channels. Canada, on the other hand, was challenging due to the extensive COVID-19 lockdowns and restrictions in the country in the quarter. In wholesale accessories and apparel, revenue increased 10% compared to the prior year period, driven by strong gains in Steve Madden handbags in both domestic and international markets, as well as growth in private label. Looking ahead, while we are encouraged by the dramatically improved sell-throughs our wholesale customers have seen the last two months, we remain cautious on the near-term outlook for the wholesale channel given the continued impact of COVID-19 on our wholesale customers, conservative open device, and supply chain disruption. In our retail segment, revenue in the first quarter increased 27% compared to the first quarter of 2020. far outstripping our expectations for a mid-single-digit increase due to the significant improvement in performance we saw in March, both online and in-store. When comparing to the pre-COVID-19 first quarter of 2019, retail revenue increased 7%, demonstrating the strong consumer demand for our brands and our products. While the revenue trend in our stores improved meaningfully in March, it remained down from 2019. and stores were under significant pressure for the quarter overall when compared to 2019. Our digital commerce business, however, was outstanding and accelerated further from the strong trends we saw in 2020. E-commerce revenue increased 89% for the quarter compared to the first quarter of 2020, including 112% growth in our Steve Madden e-commerce business. Looking ahead, while our year-over-year online growth should moderate somewhat due to the much tougher comparisons beginning in Q2, we believe the momentum in our e-commerce business, combined with the strength of our product assortments, will enable us to continue to drive overall retail segment revenue gains compared to 2019 levels. I'd now like to touch on a transaction that we completed early in the second quarter, the acquisition of the 49.9% share that we did not already own of our European joint venture, which distributes Steve Madden branded footwear and accessories to most countries throughout Europe. We formed the European joint venture nearly five years ago, and it has experienced strong double digit percentage revenue growth each year, including a 21% revenue gain in 2020, despite the impact of COVID-19. In 2021, we expect the business will generate approximately $55 million in revenue, over three-quarters of which will come from digital channels, with a mid-teen operating profit margin before allocation of corporate overhead. We are excited about taking full ownership of our brand and operations in this large and strategically important market, and we believe this business can be a significant growth driver for us for years to come. Overall, we are encouraged by the improving trends we are seeing in the business, the strong consumer demand for our brands and products, our momentum in digital channels, and the growth opportunities we see in international markets like Europe. In the near term, we know we still face challenges due to COVID-19 and that our results in the wholesale channel will continue to be under pressure. But as we look out further, we are confident that, based on the strength of our brands, our business model, and our people, we are well positioned to drive long-term sustainable revenue and earnings growth and create value for our stakeholders. With that, I'll turn it over to Zine to review our first quarter 2021 financial results in more detail and provide our guidance for the second quarter.