I decided to look up Steve Madden to see wha the potential impact on SKX might be. The ticker is SHOO. Starting with info from the 10-K which includes FY2014 (ending 12/31/2014).
Business: Wholesale and Retail. Within Wholesale they have Wholesale Footwear and Wholesale Accessories (i.e. handbags, belts, etc.). Retain they have their own stores.
Stores: 160 retail (SKX has more than 1000); they plan to open 5-6 net new stores in 2015; they also sell through 2500 doors of 17 retailers such as Macy’s and Nordstrom but also low end retailers such as Walmart, JC Penney, Sears, Kohl’s and Target.
Net sales: $1.335B up 2% from the prior year (SKX had $2.378B in the same period and was up 28.8%). They were up 2% due to an acquisition; otherwise, sales were down 1%. The Wholesale Footwear business was 65% of their revenue or $860M, up about $65M or 8.3% from the prior year. The Wholesale Accessories business had $244M in sales, up 1% from 2013. The rest of the sales were from their Retail business: $210M. Looks like shoes make up about 3/4 of their business overall.
SSS: decreased 8.1% in 2014 compared to 2013.
More on Wholesale Footwear: 2014 GM=29.5%, 2013 GM=30.7%, 2012 GM=31.4% so margins have been dropping for the past 3 years. Margins in their Retail business unit have also been dropping.
Now, within shoes there are multiple segments and I question how much overlap there is between Sketcher’s and Steve Madden. When I have come shoe shopping (men’s shoes) at Macy’s, I recall seeing a Steve Madden section amongst other similar shoe types. However, I recall seeing them in the mid to low priced section of the dressier shoe type.
Based on what I’ve read about Steve Madden, I would be surprised if they are having any material impact on SKX sales. Their 8.1% growth is ok but not spectacular, and, considering that some of this growth is from an acquisition, I’m not too impressed. When you throw in their gross margin decline over the past several years, it would seem like they have to lower prices to achieve the top line growth. In contrast, SKX is growing more than 3 times as fast while raising prices and expanding margins (45.1% in 2014, 44.3 in 2013, and 43.8% in 2012). I will be holding all my shares and will wait to see what information is provided in their latest quarterly result.