Steven Madden, Ltd.

Welcome to the 4Q 2022 Steve Madden Limited Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. This event is being recorded. I would now like to turn the conference over to Danielle McCoy, vice president of investor relations and corporate development. Danielle, go ahead.

Thanks, Debbie, and good morning, everyone. Thank you for joining our fourth quarter and full year 2022 earnings call and webcast. Before we begin, I'd like to remind you that our remarks that follow, including answers to your questions, contain statements that we believe to be forward-looking statements within the meaning of the Private Securities Litigation Reform Act. These forward-looking statements are subject to risks that could cause actual results to materially differ from those expressed or implied by such forward-looking statements. These risks include, among others, matters that we have described in our press release issued earlier today and filings we make with the SEC. We disclaim any obligation to update these forward-looking statements, which may not be updated until our next quarterly earnings conference call, if at all. The financial results discussed on today's call 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 me today on the call is Ed Rosenthal, Chairman and Chief Executive Officer, and Zine Mazzuzzi, Chief Financial Officer. With that, I'll turn the call over to Ed. Ed?

Well, thanks, Danielle. Good morning, everyone, and thank you for joining us to review Steve Madden's fourth quarter and full year 2022 results. We are pleased to have delivered fourth quarter earnings results in line with our expectations, despite an increasingly challenging backdrop. For the full year 2022, we achieved record financial performance, crossing the $2 billion mark in revenue for the first time with double-digit percentage growth on both the top and bottom lines. These results demonstrate the power of our brands and the strength of our business model, as well as the disciplined execution of our strategy. Let me briefly walk you through that strategy and the progress we made on our key initiatives in 2022. First and foremost, our top priority, as always, is winning with product. By utilizing our proven model, which combines talented design teams, a test and react strategy, and an industry-leading speed to market capability, we consistently create trend-right product assortments and get them to market ahead of the competition. We are then supporting this great product with an always-on, full-funnel marketing and consumer engagement strategy. By combining outstanding product and effective marketing, we are creating deeper connections with our consumers, which in turn is enabling our success with our four key business drivers. The first of which is driving our direct-to-consumer business led by digital. In 2022, our DTC revenue increased 7% over 2021 and exceeded $500 million for the first time. Compared to pre-COVID 2019, DTC revenue was up 62%, including a 192% increase in digital. And we have increased our overall DTC penetration by approximately 700 basis points over this time period. Our second key business driver is expanding our business outside of footwear. In 2022, our accessories and apparel business exceeded $400 million in revenue and increased 13% over 2021. Steve Madden handbags grew 19% for the year. In apparel, we successfully transitioned from the BB Dakota Steve Madden co-brand to the Steve Madden brand for fall 2022. And overall apparel revenue for the year increased 38%. Our third key business driver is growing our business in international markets. International has been the fastest growing part of our business over the last few years, and we believe it represents our largest long-term growth opportunity going forward. In 2022, we grew international revenue 56% compared to 2021. For the year, international represented 16% of our total revenue, up approximately 500 basis points from pre-COVID-19. We also continue to make investments to drive international growth going forward. Part of our strategy in this business is to transition from the distributor model to an ownership model in key markets. In the Middle East, we've had a distributor relationship for over a decade, and in recent years, the brand has gained strong traction in the region. In order to capitalize on the significant growth opportunity we see in the GCC, In December, we converted that business to a joint venture model when we formed a new partnership with leading regional player Apparel Group. We own 50.1% of the JV, and Apparel Group owns 49.9%. There are currently 21 Steve Madden stores in the territory, and we expect to end the year with between 25 and 30 locations. Finally, our fourth key business driver is continuing to strengthen the U.S. wholesale footwear business, It remains the core of our business. In 2022, U.S. wholesale footwear revenue reached the $1 billion mark, increasing 13% over 2021, including more than 20% year-over-year growth in each of our four largest brands, Steve Madden, Dolce Vita, Anne Klein, and Betsy Johnson. So overall, 2022 was a strong year for Steve Madden. as we delivered record financial performance and demonstrated tangible progress on each of our key strategic initiatives. That said, the operating environment became increasingly challenging as the year progressed. Consumers began to pull back on discretionary spending, and more impactfully to us, our wholesale customers pulled back on orders as they prioritized inventory control. We also faced increasingly challenging comparisons with the prior year as the year went on. culminating in the fourth quarter when we were lapping a quarter where revenue was up 38% and diluted EPS was up 125% to pre-COVID 2019. As we look ahead, we expect these challenges to persist in the near term. Our wholesale customers have taken a conservative approach to spring orders. The outlook for overall consumer spending is uncertain, and we faced tough comparisons in the first half, particularly in the first quarter. when the compares are very similar to what we faced in Q4. That said, we have a proven ability to navigate difficult market conditions and a track record of taking market share during challenging economic periods, due largely to our agile business model, which enables us to run lean-on inventory and chase goods in season when needed. And looking out further, we remain confident that we can leverage our core strengths, our people, our brands, and our business model to continue to drive progress on our key strategic initiatives, which in turn will enable us to deliver sustainable growth and create value for our stakeholders over the long term. Now, I'll turn it over to Zine to review our fourth quarter and full year 2022 financial results in more detail and provide our initial outlook for 2023.