Steve Madden's business is entering a slowdown period. After a solid 2013 (sales up 7 percent) and first quarter of 2014 (sales up 9 percent), the shoe and accessories brand reported a 1 percent decrease in sales for the second quarter of 2014: Net sales were $295.7 million, compared to $297.6 million in the first quarter of 2013. Margins, too, were down slightly, due to discounting both in Steve Madden's own stores and at the department stores its goods are sold in.
What's to blame for the sudden flattening of sales? Edward Rosenfeld, Steve Madden's chairman and CEO, cites two problems. The first is poor mall traffic, which led to an 8.5 percent decrease in sales at Steve Madden's existing stores. Those declines were mostly offset by the opening of 11 new stores over the past year, and the recent redesign of SteveMadden.com, which is finally seeing sales growth after several seasons of declines. (It's hard to imagine an e-commerce site shrinking rather than growing in this dot-com boom, but Rosenfeld says the website had previously seen the same rate of sales decline as its brick-and-mortar stores.)
The second reason for lackluster sales is a lack of fashion trends in the shoe category, Rosenfeld says, and there's not a lot of newness on the horizon for the second half of the year. (As Steve Madden told us recently, shoe brands have a difficult time when sneakers are the big shoe trend.) "It's a tough moment for young, trendy footwear," Rosenfeld says.
Steve Madden's handbag business -- which is made up of non-leather (primarily PVC) bags priced around $100 -- also took a hit, as more leather bags from designers were put on promotion, and as other, higher-end designers released non-leather bags at lower price points. The company expects its handbag business will be similarly weak in the second half of the year.
On the bright side, Steve Madden's men's shoe business is doing well, both in its own stores and at others', though it still represents a very small part of the company's overall business. Steve Madden is also pleased with growth internationally, particularly through its licensees in Asia, the United Arab Emirates and Mexico.
The second half of the year isn't looking great for the company, and guidance has lowered for the full year. Steve Madden is continuing to seek out potential acquisitions, though there's no word yet on how its most recent acquisition, Brian Atwood, is faring so far.
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