Steven Madden, Ltd. Aktie

Good day, and thank you for standing by. Welcome to the First Quarter 2026 Steven Madden Limited Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Danielle McCoy, VP of Corporate Development and Investor Relations. Please go ahead.

Thanks, Jill, and good morning, everyone. Thank you for joining our first quarter 2026 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 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 on the call today is Ed Rosenfeld, Chairman and Chief Executive Officer; and Zine Mazouzi, Chief Financial Officer and Executive Vice President of Operations. With that, I'll turn the call over to Ed. Ed?

All right. Well, thanks, Danielle, and good morning, everyone, and thank you for joining us to review Steven Madden's first quarter 2026 results. We got off to a solid start to the year in Q1 with healthy underlying demand across our brands, driven by our team's disciplined execution of our strategy for long-term growth, the foundation of which is deepening connections with consumers through compelling product assortments and effective marketing.

Our flagship brand, Steven Madden, continued to gain momentum as the on-trend assortments created by Steven and his design team resonated with consumers. We saw strength across classifications, including casuals, dress shoes and boots, and we capitalized on a variety of trends in style and materials, including split toes, Velcro, hidden wedges, mesh and ballet-inspired looks.

Our marketing team supported these assortments with rich brand and product storytelling, including our Hello Spring campaign, featuring it girl Delilah Belle and a full funnel approach that drove strong new customer acquisition and cultural relevance. And the combination of trend-right product and targeted marketing investments drove measurable brand heat.

Online searches for Steven Madden increased 27% in the quarter, and global DTC comp sales rose 6% or 10%, excluding our stores in the Middle East. For the year, we continue to expect mid- to high single-digit revenue growth in the Steven Madden brand.

Kurt Geiger London also delivered another strong quarter. In handbags, in addition to continued strength in the Kensington collection, new totes and shoulder bags drove strong demand. And in shoes, sandals were a standout, including exceptional performance in Meena Eagle slides.

We also made progress on our key growth initiatives, including new store openings in the United States and international expansion into new markets. We now have leases secured for 4 new full-price stores and 1 premium outlet in the U.S. in 2026. And we signed a new franchise and distribution agreement with Reliance Brands to bring Kurt Geiger to India beginning in Q4. For the quarter, revenue for the Kurt Geiger brand increased 23% on a pro forma basis. And based on the momentum we are seeing, we have increased our forecast and now expect mid-teens pro forma revenue growth in the Kurt Geiger brand for the year.

In Dolce Vita, we delivered a compelling spring assortment with particular strength in jelly, raffia and woven styles across footwear and handbags that drove robust sell-through with key wholesale customers, including Nordstrom, Dillard's and Macy's. We also continue to gain traction with our key growth initiatives of expanding the handbag category and growing in international markets.

For 2026, we continue to expect high single-digit revenue growth in Dolce Vita. Now despite all this, in the first quarter, we saw, as expected, a decline in organic revenue driven by softness in private label and lower Steven Madden handbag revenue in the U.S. wholesale channel. That, combined with SG&A pressure from the normalization of incentive compensation and increased warehouse expenses resulted in an earnings decline for the quarter.

But looking ahead, based on the strong underlying demand trends across our brand portfolio, we expect to return to earnings growth in the second quarter and deliver strong top and bottom line growth for the full year. And looking out further, we are confident that our powerful brands, proven business model and talented team position us to deliver sustainable growth for years to come.

And now I'll turn it over to Zine to review our first quarter 2026 financial results in more detail and provide our updated outlook for 2026.

Thanks, Ed, and good morning, everyone. In the first quarter, consolidated revenue was $653.1 million, an 18% increase compared to the first quarter of 2025. Excluding Kurt Geiger, which we acquired in the second quarter of 2025, consolidated revenue decreased 4.8% Wholesale revenue was $443.6 million, up 1% compared to the first quarter of 2025. And excluding Kurt Geiger, our wholesale revenue decreased 8.2%. Wholesale footwear revenue was $278.9 million, a 5.8% decrease or down 12%, excluding Kurt Geiger, primarily driven by a steep decline in the private label business.

Wholesale accessories and apparel revenue was $164.8 million, up 15.1% compared to the first quarter in the prior year or down 0.5%, excluding Kurt Geiger, as declines in Steven Madden handbags and private label were mostly offset by increases in other branded accessories and apparel.

In our direct-to-consumer segment, revenue was $206 million, an 83.8% increase compared to the first quarter of 2025. Excluding Kurt Geiger, our DTC revenue increased 8% with growth in both brick-and-mortar and e-commerce channels. Steven Madden brand the U.S. DTC comp sales increased 17%, driven by an exceptional performance in full-price channels. Outlet comps remained modestly negative, but showed significant sequential improvement as we began to anniversary declines in our border stores.

International comp sales decreased 5%, but increased 1%, excluding our stores in the Middle East. We ended the quarter with 387 company-operated brick-and-mortar stores, including 95 outlets as well as 8 e-commerce websites and 162 company-operated concessions in international markets.

Our licensing royalty income was $3.4 million in the quarter compared to $2.2 million in the first quarter of 2025. Consolidated gross margin was 46.3% in the quarter, a 540 basis point improvement compared to the prior year. Wholesale gross margin was 39.2% compared to 35.7% in the first quarter of 2025 due to higher average selling prices as well as mix benefits from the addition of the Kurt Geiger business and a lower penetration of private label.

Direct-to-consumer gross margin was 60.8% compared to 60.1% in the comparable period in 2025 as a result of the addition of the Kurt Geiger business and a modest increase in the organic business. Operating expenses were $256 million or 39.2% of revenue in the quarter compared to $170.5 million or 30.8% of revenue in the first quarter of 2025, primarily driven by the addition of Kurt Geiger as well as higher incentive compensation and warehouse expenses.

Operating income for the quarter was $46.3 million or 7.1% of revenue compared to $56.1 million or 10.1% of revenue in the prior year. The effective tax rate for the quarter was 25.3% compared to 24% in the fourth quarter -- in the first quarter of 2025. Finally, net income attributable to Steven Madden Limited for the quarter was $32.1 million or $0.45 per diluted share compared to $42.4 million or $0.60 per diluted share in the prior year.

Turning to the balance sheet. Our financial foundation remains strong. As of March 31, 2026, we had $286.5 million of debt and $77.2 million in cash and cash equivalents for a net debt of $209.3 million. Inventory was $379.4 million compared to $238.6 million in the prior year. Excluding Kurt Geiger, inventory decreased 2.5%.

Our CapEx in the quarter was $5.9 million. We did not repurchase any shares in the open market. And during the first quarter, we spent $7.4 million on shares acquired through the net settlement of employee stock awards. The company's Board of Directors approved a quarterly cash dividend of $0.21 per share. The dividend will be payable on June 19, 2026, to stockholders of record as of the close of business on June 8, 2026.

Turning to our fiscal 2026 guidance. We are raising our revenue outlook and now expect revenue to increase 10% to 12%, up from our prior guidance of 9% to 11%. We are also introducing EPS guidance for the year and expect earnings per share to be in the range of $2 to $2.10.

Now I'd like to turn the call over to the operator for questions. Operator?

[Operator Instructions] First question comes from the line of Paul Lejuez with Citi.

Curious if you can talk about what's driving the higher revenue guidance for the year. I think you said it was Kurt Geiger, but any detail you can give in the core versus Kurt Geiger in terms of what has changed in your full year outlook? And then can you talk about the conversations you're having with private label customers and if there's been any change in how they're thinking as the tariff picture evolves? And then also just curious what you built in for tariffs within your guidance.

Sure. Okay. All right. So the first question was about the higher revenue guidance. And yes, we did raise Kurt Geiger based on the early momentum that we're seeing there. Kurt Geiger exceeded our -- the Kurt Geiger brand exceeded our expectations in Q1. We've also modestly raised our expectations for Steven Madden and Dolce Vita based on the strong performance that we're seeing there in spring and the momentum in those brands. So a positive picture because we did -- we were able to increase our forecast for each of our 3 largest brands.

In terms of the private label conversations, I would say we're having a lot of conversations. I think they're productive, but the tariff picture remains uncertain. And so there's no major change to that situation right now, but it's something we're working hard on. We have taken our forecast up very modestly for the year based on some orders that we got for the tail end of the year, but we obviously still looking at a pretty steep decline in '26 and really targeting '27 for a recovery there.

And then in terms of what we've built into the guidance, so we have assumed the section -- the 10% Section 122 tariffs remain in effect through about the end of July when those expire. And then we've built in a 15% tariff thereafter.

The next question comes from the line of Anna Andreeva with Piper Sandler.

Congrats. Really nice to see the momentum. Curious on also what you're hearing from your partners, specifically to the off-price channel. Is that channel now back to growth? And how do you think about the contribution there? And it sounds like department store business is turning very quickly with the reorders. Are you guys able to fulfill that demand? Just any color on that would be great.

And secondly, you mentioned the business back to earnings growth starting the second quarter. Just anything you can share how we should think about 2Q? Is the DTC business, which was super strong in 1Q, is that further accelerating from here?

Sure. Okay. So in terms of the off-price channel, yes, those businesses, we're seeing some nice improvement there. Those conversations have been very productive recently. And so we are seeing growth in that channel in 2026 versus 2025. Still not all the way back to '24 levels as opposed to -- your second question was about department stores. There, we are seeing strong growth. To your point, we're getting reorders. We are able to chase into goods for them. And we do expect that first tier business to exceed what we achieved in 2024. And then what was the third one?

Do you expect DTC to accelerate in Q2?

Yes. So yes, so we're not going to guide quarterly, but I will say that we continue to see strong trends in that DTC business. Now the overall DTC growth, of course, won't be as strong because we'll be anniversarying Kurt Geiger starting in early May, but the core business or the organic business should see similar trends to what we saw in Q1.

No, that's great. Can I just sneak in another one? Just as you think about the uses of cash with the tariff refund, would paying down debt would be your first priority? Or just any color you can give on that?

Yes. The first priority would be to accelerate the paydown of the debt. And then in the back half of the year, we'll start assessing potential repurchases.

The next question comes from the line of Marni Shapiro with The Retail Tracker.

Congratulations. The assortments have looked absolutely fantastic. I'm curious if you could just talk a little bit more about the sell-throughs at the department stores. Are you seeing that across footwear and the apparel? And the apparel has looked really fantastic as far as I have seen. Could you talk a little bit about, I guess, how big that business can be and what the margin implications are? Are the margins on the apparel equal or better to what you're seeing in footwear and how that could play out over time?

Yes. So we've been pleased with what we've seen from a sell-through perspective. I would say in spring, footwear has been stronger because the Steven Madden brand, in particular, has been quite hot in footwear. Apparel, we had a little bit of a soft start to the year. I don't think we transitioned as well as we could. But once we got into the season, we've seen -- we've been very pleased with what we've seen. The team has done a great job with -- obviously, dresses has been our biggest category. We've got some very strong dresses, but we've also got some novelty denim that's been selling some blazers.

So we continue to sort of expand, broaden out the strength in that business and very optimistic about what that can be longer term. In terms of how big that business is, it's over a couple of hundred million now for us in apparel. As of now, it is lower margin than the shoe and bag business. But we've been in investment mode, and we're still building. And over time, we think that should have comparable margins.

Great. And then if I could just ask one more follow-up on the Steven Madden brand. You've -- I mean, it looks so good in the stores. It looks so good everywhere and your placement has been excellent. You've had a couple of semiviral, viral items. Could you just talk about your investments behind social media and marketing and what that would look like for the rest of the year?

Yes. No, first of all, I really appreciate what you say about the product. We're really proud of how the team has executed there. And so I think it all starts with product, and that's the biggest driver here, but we also feel that we've really raised our game on the marketing front. And we continue to increase the investment there. As you know, years ago, we were -- a few years ago, we were sub-2% of revenue devoted to marketing. And now this year we'll be 5.3%, 5.4%, something like that. So a pretty significant increase in investment.

And we've also, I think, done a better job of balancing that investment because when we first increased it, it was really very heavily focused at the bottom of the funnel on performance channels, and we now have much more balanced spend throughout the funnel. We're much more balanced by channel. And we're much more consistent about the way we tell the Steven Madden story across channels on an omnichannel basis. And so as you mentioned, obviously, given our core customer and the state of the world today, digital and social are paramount, and that's where we are focusing a lot of our spend.

Great. I'm sorry, can I sneak in one more? Dolce Vita, is it having as good -- like is the sell-through as strong on the Dolce Vita brand at wholesale as it is on the Steven Madden brand?

Yes, Dolce Vita is having a very strong spring. In fact, at their biggest customer, they're even outpacing Steven Madden in terms of sell-through.

The next question comes from the line of Dana Telsey with Telsey Advisory Group.

Nice to see the progress. With rising energy prices, is there any impact on cost and how you're planning or the contracts all taken care of for it? Or how do you think of that impact on rising energy prices? And then the cadence of the quarter, was there any difference in demand on the exit of the quarter? And we've now seen just lastly on product trends, boots become like a 52-week a year trend. Any updates on product trends or the sneakers, fashion, sandals, boots to discuss?

Sure. Yes, I'll take the latter 2 questions and then turn it back to Zine to talk about what we're seeing on freight. So in terms of the cadence of the quarter, there was -- it bounced around a little bit based on weather and Easter shift and promotion time, et cetera. But basically, I would say that it was pretty strong trends throughout the quarter, and there's nothing super meaningful to call out there.

In terms of the product trends, I think the big thing is we've seen a decrease in penetration in sandals and sneakers, and we've seen super strong performance in casuals and really strong increases in dress shoes as well and also in boots -- and boots and booties. And as you correctly pointed out, those continue to be important even in spring. We did a really nice job, for instance, on our DTC in our DTC with boots for festival season.

So Zine, do you want to talk about freight?

Sure. So on the freight side, obviously, the war impact is visible, and we started seeing what they call EBS. These are emergency bunker surcharges that are being imposed by the maritime companies. So in our guide, we built in about 30 basis points of pressure from ocean as well as the increase we're seeing on air freight as well. So we started seeing air freight as probably as early as April.

And then as far as the ocean side, the emergency bunker surcharges, those started in May, on May 1, and there's another round potentially that would be coming in July as well. So all in all, it's about a 30 basis point impact. From a cost perspective as far as raw materials, we're not seeing that yet. But if this continues for an extended period of time, we expect that, that will have an impact in the latter part of the year.

The next question comes from the line of Sam Poser with Williams Trading.

A couple of things. When we think about the gross margin more holistically for the balance of the year, how much -- in the press release, you discussed -- you backed out $55 million of the refunds out of the gross margin. How much of the refunds effective for the goods sold in Q1 were in it?

And then going forward, I guess the question is, you're not going to see the same -- you're not planning to see -- what kind of increase in gross margin are we planning to see for the full year, taking into account the lower tariffs than what was true -- lower than the IEEPA tariffs, but then also the increase plus that 30 bps from freight. I mean how should we think about the gross margin? And then I have another question.

Yes, sure. So in the first quarter, obviously, there was a relatively modest negative impact from tariffs because of the reversal of IEEPA and then the institution of the Section 122. As we go forward, obviously, we'll see on a gross basis, a bigger impact than we saw in Q1. But if you're thinking about gross margin versus the prior year, we still should be seeing nice increases versus the prior year each quarter, although it will narrow a little bit in terms of the Delta. Part of that is that we anniversary Kurt Geiger in Q2, which has been a mix benefit to gross margin. But even in the organic basis, we do expect to see year-over-year gross margin improvement through the balance of the year.

And then could you -- I know it's going to come out in the queue, but can you give us the adjusted gross margin and SG&A for footwear, wholesale, footwear, handbag wholesale and direct-to-consumer, please?

What do you mean adjusted?

Wholesale footwear gross margin. So we can get to -- so build it out to the total, yes.

Yes. Wholesale footwear gross margin was 38.6%. Wholesale accessories was 40% and DTC, I think you have it, but it was $60.8 million.

And then what about SG&A? I mean -- or give us the adjusted operating income for each one of those sections, however you want to do it? I mean I built my model this way. And it's important to break it up, but I'm sorry, I'm driving crazy.

EBIT dollars for wholesale footwear, $52.7 million, accessories and apparel, $28.8 million. DTC loss of $11.4...

And the loss in DTC was primarily due because it's a small quarter. You have the fixed cost for Kurt Geiger with those fixed costs staying in. I assume that is correct.

That's right. We always -- I mean, even in the organic business, we're always loss-making in Q1 in DTC, and the same goes for Kurt Geiger.

And you originally said that Kurt Geiger would do about $600 million. That's up just -- given the first quarter, it's just up a bit from there. Is that how we should think about it?

Yes, low 600s.

The next question comes from the line of Janine Stichter with BTIG.

On Kurt Geiger, with the mid-teens growth of the brand, I just want to clarify, does that include any new distribution? And if not, how are you thinking about that? And then Steven Madden handbags, can you elaborate a little bit more what's going on there? Would you still expect it to turn positive in the second quarter?

Yes. Yes, in terms of the Kurt Geiger brand mid-teens growth, we are adding some wholesale distribution in the back half. I think the most important being that we are planning to -- we have reached agreement with Macy's to enter Macy's starting in October, we'll be in a beautiful concession in Herald Square as well as 15 other doors with handbag shops and also shoes. So we're excited about that.

But there's also very strong momentum in the DTC business, digital. The new stores continue to perform well. As I mentioned, we're opening some additional stores -- excuse me, the U.S. stores continue to perform very well, and we're opening some additional U.S. stores. So a lot of good things happening there. And what was the second one, Steven?

Steven Madden...

Yes, Steven Madden handbags, yes. As we have indicated, we expect to return to growth starting in the current quarter. So we're pleased to have that headwind behind us.

Great. And then maybe just one more on the core Steven Madden business. I think you said organic gross margins for DTC were up slightly. Maybe just talk about what you're seeing from a promotional standpoint there. It seems like you've been able to pull back a little bit on the promotional lever.

Yes, we have. We've been pleased because of the strength of the product and the demand, we have been able to reduce overall promotion days. And that's -- we really haven't seen any significant impact to demand. So that's been very positive.

The last question comes from the line of Aubrey Tianello with BNP Paribas.

I wanted to ask on SG&A and how we should be thinking about the cadence of SG&A growth into the next quarter and then into the back half of the year when you lap the Kurt Geiger acquisition.

Yes. So including Kurt Geiger in Q1, SG&A was up 50.2%. We expect that to be probably around, I would say, 25% increase in Q2, and then it should drop to low teens in Q3 and high singles in Q4.

Perfect. And then maybe just a follow-up on the Middle East and how the conflict impacts the business from a direct standpoint in terms of revenues. You mentioned the impact to store comp in the prepared remarks. I'd be curious just what's included in the guidance for 2026 from a top line perspective from the Middle East.

Yes. It's about -- so we have about north of $50 million -- or we had north of $50 million business there, about 63 stores. I don't have the overall top line impact that we've built in there. But look, the business in the GCC, for instance, is still trending down close to 40% this month. And so we built in about $4 million profit hit, I know, in that region. Yes, Zine is telling me it's about $9 million to $10 million that we've taken out for the impact there.

For revenue...

For revenue, excuse me.

Okay. Got it. And then just last one. I wanted to ask about Kurt Geiger from a margin perspective. You mentioned in the past having a runway to getting to double-digit EBIT margins over time. Anything you can share on how EBIT margin is progressing for Kurt Geiger this year, especially in light of the higher revenue guide?

Yes. So we're expecting about 100 basis points of improvement in '26 versus '25. It still doesn't get us back to pre-tariff levels. So we need to continue to drive that up in the coming years. And we still continue to believe there's no reason this business shouldn't be in the double digits. And certainly, the branded portion, if we exclude the concessions, we think has potential to be certainly in the teens, if not the mid-teens.

And I'm now showing no further questions, and I would like to turn it back to Ed Rosenfeld for closing remarks.

Great. Well, thanks so much for joining us today. We hope you have a great day, and we look forward to speaking with you on the next call.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

Good day, and thank you for standing by. Welcome to the Q4 and Full Year 2025, Steve Madden, Ltd. Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Danielle McCoy, VP of Corporate Development and Investor Relations. Please go ahead.

Thanks, Antoine, and good morning, everyone. Thank you for joining our fourth quarter and full year 2025 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 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 on the call today is Ed Rosenfeld, Chairman and Chief Executive Officer; and Zine Mazouzi, Chief Financial Officer and Executive Vice President of Operations. With that, I'll turn the call over to Ed. Ed?

All right. Thank you, Danielle, and good morning, everyone, and thank you for joining us to review Steve Madden's fourth quarter and full year 2025 results. Pleased to have delivered above guidance earnings results for the fourth quarter, driven by improved performance in our core Steve Madden footwear business as well as a strong contribution from the newly acquired Kurt Geiger. Overall, 2025 was a challenging year, driven largely by the disruption and negative impacts resulting from new tariffs on goods imported into the United States. .

I'm proud of how our team responded acting quickly to mitigate the near-term impacts while staying focused on executing our strategy for long-term growth. At the center of that strategy is deepening connections with consumers through the combination of compelling product and effective marketing. And despite the difficult environment, our team made meaningful progress on those initiatives across our brand portfolio. In our flagship brand, Steve Madden, Steve and his design team created outstanding product assortments that resonated with consumers and led to a significant acceleration in demand in the back half, particularly in our core category of women's footwear, momentum that has continued into early 2026. We are encouraged by the breadth of this strength with robust demand across various silhouettes, materials and trends. We've also elevated quality and materials enabling higher average unit retails while maintaining a strong price value proposition.

Our marketing team is amplifying these assortments with richer brand and product storytelling and an integrated, always-on full funnel strategy designed to deepen emotional connections with our key Gen Z and millennial consumers. And our marketing investments, combined with our trend right product are driving measurable brand heat. Online searches for Steve Madden increased 10% year-over-year in Q4 and have accelerated further in early 2026. And after revenue declines in Q2 and Q3, the Steve Madden brand returned to growth in Q4. And the expect to build on that momentum in 2026 with mid- to high single-digit revenue growth.

A highlight in 2025 was our acquisition of Kurt Geiger, which closed on May 6. In Kurt Geiger London, we added a brand with a unique brand image, distinctive design aesthetic and compelling value proposition that have driven success across multiple categories, led by handbags. Its differentiated and elevated positioning and its alignment with our strategic initiatives of expanding in international markets, accessories categories and direct-to-consumer channels, make it a highly attractive and complementary addition to our portfolio.

Integration is progressing as planned, and we are more confident than ever in Kurt Geiger's potential to be a significant growth driver in the years ahead. Importantly, the Kurt Geiger London brand continues to have strong momentum. On a pro forma basis, revenue in the Kurt Geiger London brand grew 11% in 2025, and we expect similar growth in 2026. We also continue to make meaningful progress with our fastest-growing brands since the pandemic, Dolce Vita. In 2025, we built on the outstanding success we've had over the last several years in our U.S. footwear business, by expanding in international markets and gaining traction in adjacent categories like handbags.

Turning to 2026. Consumers are responding favorably to our new spring products and we expect high single-digit revenue growth in Dolce Vita for the year. In summary, all 3 of our lead brands are poised for growth. And as we look ahead to 2026, we are particularly encouraged by the momentum building in Steve Madden and the opportunity for growth in Kurt Geiger London. On the other hand, we anticipate significant pressure in our private label business, which is primarily conducted in the mass channel. We believe the negative impact of tariffs on revenue has been most severe here, where price sensitivity is highest, and we don't have the benefit of brand leverage for pricing actions. Private label revenue decreased 15% in 2025 and we expect a further decline of nearly 20% in 2026.

We also expect higher SG&A driven by the normalization of incentive compensation and the restoration of senior executive salaries. But overall, while we continue to take pressure and uncertainty related to tariffs, we are heartened that the fundamentals of our business are strong. Our product assortments and marketing campaigns are resonating with consumers, our brands are powerful and gaining relevance and our strategy provides multiple levers for growth and long-term value creation.

And now I'll turn it over to Zine to review our fourth quarter and full year 2025 financial results in more detail and provide our initial revenue outlook for 2026.

Thanks, Ed, and good morning, everyone. In the fourth quarter, our consolidated revenue was $753.7 million, a 29.4% increase compared to the fourth quarter of 2024. Excluding the newly acquired Kurt Geiger, consolidated revenue decreased 1.4%. Our wholesale revenue was $433.3 million, up 7.5% compared to the fourth quarter of 2024. Excluding Kurt Geiger, our wholesale revenue decreased 2.6%. Wholesale Footwear revenue was $252.4 million an 11% increase from the comparable period in 2024 or up 5.5%, excluding Kurt Geiger, driven by double-digit increases in Steve Madden and Dolce Vita partially offset by a double-digit decline in our private label business.

Wholesale accessories and apparel revenue was $180.9 million, up 3.1% compared to the fourth quarter in the prior year or down 13%, excluding Kurt Geiger, due primarily to declines in Steve Madden handbags and private label. In our direct-to-consumer segment, revenue was $316.6 million, a 79.9% increase compared to the fourth quarter of 2024. Excluding Kurt Geiger, our direct-to-consumer revenue increased 1.6% and with modest increases in both our brick-and-mortar and e-commerce businesses.

Steve Madden U.S. DTC returned to comp growth in Q4, a strong performance in our full-price channels offset continued weakness in our outlets. We ended the year with 399 company-operated brick-and-mortar retail stores including 98 outlets as well as 7 e-commerce websites and 133 company-operated concessions in international markets. Our licensing royalty income was $3.9 million in the quarter compared to $3.5 million in the fourth quarter of 2024.

Consolidated gross margin was 43.8% in the quarter, compared to 40.4% in the comparable period of 2024. Wholesale gross margin was 31.5% compared to 30.5% in the fourth quarter of 2024. Driven by the addition of Kurt Geiger business, partially offset by the impact of new tariffs on goods imported into the United States. Direct-to-consumer gross margin was 59.8%, compared to 62% in the comparable period in 2024 as a result of the addition of the relatively lower margin Kurt Geiger concession business and the impact of new tariffs on goods imported into the United States.

Operating expenses were $278.9 million or 37% of revenue in the quarter compared to $182.9 million or 31.4% of revenue in the fourth quarter of 2024. Operating income for the quarter totaled $50.9 million or 6.8% of revenue compared to $52.6 million or 9% of revenue in the comparable period in the prior year. The effective tax rate for the quarter was 23.1% compared to 21.4% in the fourth quarter of 2024. Finally, net income attributable to Steve Madden, Ltd. for the quarter was $34.3 million or $0.48 per diluted share compared to $39.3 million or $0.55 per diluted share in the fourth quarter of 2024.

Now I'd like to touch briefly on our full year results. Total revenue for 2025 increased 11% to $2.5 billion compared to $2.3 billion in 2024. Excluding Kurt Geiger, revenue declined 6.6% compared to 2024. Net income attributable to Steve Madden, Ltd. was $120.9 million or $1.70 per diluted share for the full year of 2025 compared to $192.4 million or $2.67 per diluted share for 2024. Moving to the balance sheet. Our financial foundation remains strong. And as of December 31, 2025, we had $234.2 million outstanding debt and $112.4 million in cash, cash equivalents and short-term investment for a net debt of $121.7 million.

Inventory at December 31, 2025, was $417 million compared to $257.6 million at the end of 2024. Excluding Kurt Geiger inventory was $261.9 million, a 1.6% increase compared to the same time last year. Our CapEx in the fourth quarter was $10.3 million and for the year was $42.6 million. The company did not purchase or repurchase any shares of its common stock in the open market in 2025. During the fourth quarter and full year 2025, the company spent $5.2 million and $13.5 million, respectively, on shares acquired through the net settlement of employee stock awards. The company's Board of Directors approved a quarterly cash dividend of $0.21 per share. The dividend will be payable on March 28, 2026, to stockholders of record as of the close of business on March 11, 2026.

Turning to our outlook. We expect revenue for the full year 2026 to increase 9% to 11% compared to 2025. For the first quarter of 2026, we expect revenue to increase 15% to 17%. Due to the uncertainty related to recent developments with respect to tariff policy in the United States, the company is not providing earnings guidance at this time.

Now I'd like to turn the call over to the operator for questions. Antoine?

[Operator Instructions] Our first question comes from Paul Lejuez from Citi.

Curious if you were prepared to give guidance as of a week ago and the Supreme Court decision and actions of the administration caused too much uncertainty that made you take this approach of not given EPS guidance or was there already uncertainty was it still too high already where you didn't plan on giving guidance. Maybe just start there.

Yes. No, we did plan prior to Friday, we were planning on giving guidance for the year based on the policy that was in effect as of that time. But obviously, over the last few days, there's been an enormous amount that's changed. And a number of important questions remain unanswered. And there's genuine uncertainty about where things go from here. And obviously, we're talking about tariffs, which are a factor that have a significant impact on our earnings. So given that level of uncertainty, we just don't think it'd be responsible to put out earnings guidance right now.

And ultimately, we view guidance as a commitment to the investment community. And we only want to provide it when we have the information clarity necessary to stand behind it. And at this moment, we just don't have that.

Yes. Got it. And then I guess, is it just the tariff uncertainty. Obviously, there's an impact on your cost of goods, maybe where you source? Or is it also a function of already hearing something from your retail partners since Friday that's resulted in higher uncertainty.

No. It's really the impact of tariffs and how that affects our cost structure and our earnings. That's why we did provide revenue guidance because we still feel that we have a nice visibility into demand trends. .

Got it. And then just last one for me, if you could. Can you just give us an update on your sourcing base, like how you ended the year in terms of country of origin. And if at this point, you're planning any changes for '26.

Yes. In the fall, if we think -- if we -- typically, we've talked about this with China versus other. As you know, China back in 2024 was over 70% of our sourcing footprint and we got that into the high 30s in fall of 2025. Now year-to-date, that's got a 4 in front of it. We're back in the 40s given that towards the tail end of the year, China came essentially into parity with many of the other countries that we're sourcing from in terms of the tariff. And that continues to be how we're thinking about it, at least for the near term. But obviously, we're going to remain flexible.

Any other countries you can talk about? .

Yes. Sure, Zine, you want to go through the big ones?

Sure. The second one, I guess the first one that we diversify to is Cambodia and Vietnam comes right after it. And obviously, Mexico, as we always emphasize, Mexico for the Steve Madden brand. And given that Brazil now went from 50% to 10%, that really opens up the door for more production in Brazil as well for Steve Madden and Dolce Vita.

Our next question comes from Anna Andreeva from Piper Sandler.

The first one we had just on the 1Q revenue guide you said 15% to 17% lower than the growth you guys guided for the holiday. And Obviously, you talked about strength in the core continuing here into '26. So is the difference there private label or anything else going on, maybe something with concessions that KG just wanted to follow up on that. And just as we think about the margin recapture back to low doubles achieved previously for the core business. Can you talk about that Kurt Geiger was a 9% margin business pre-tariffs, I'm not sure if you mentioned what were margins in '25 and you talked about getting to high teens there over time. Can you maybe remind us on what revenue base that will be?

Sure. In terms of the Q1 revenue, I think you were comparing it to what we just delivered in Q4. I think one important factor to understand is that Kurt Geiger, because it's primarily a DTC business, it's much more Q4 weighted. So the impact of Kurt Geiger on the consolidated revenue growth rate is much more significant in Q4. So that's a big part of that. The other thing is we are expecting the business, excluding Kurt Geiger to be down about mid-singles in Q1. We expect it to grow each quarter thereafter. And the headwinds there. You hit the nail on the head. The biggest one is private label. About 95% of that decline is coming from private label, which we expect to be down about 30% in the quarter or maybe even a little bit more.

And then obviously, still pressure on Steve Madden handbags, which we've called out previously. And again, that's another -- that's a business that we expect to turn positive in terms of growth in Q2. In terms of KG operating margins, we came in at about, let's say, 6.8% and for the period that we owned them in 2025. Obviously, we're not giving guidance for '26 on an earnings basis. So we're not going to provide an estimate of what that looks like in the near term. But as you pointed out, we have committed to getting that into initially the low doubles, and we certainly think that brands business has the potential to be a mid-teens operating margin business over time.

And just a follow-up on the core business. Do you think getting back to low double which you were just 2 years ago is pretty realistic over time? Or can you even do better? .

Yes. I think getting back to where we were is realistic. Obviously, the timing on that is in flux with all the uncertainty that we're facing right now.

Our next question comes from Jay Sole from UBS.

Ed, maybe if we talk about the fiscal '26 guidance, can you just help us understand the private label business? Kind of like, can you size it for us like where it finished the end of 2025. And kind of where you see it trending for 2026.

Yes. That's clearly the biggest challenge that we're facing right now. So private label, just to take you back, was about $415 million in '24. We had a pretty significant decline in '25 down to about $355 million, so around about $60 million decline. Where we sit today, we see an even bigger decline in 2026. I think that could approach $70 million decline. So that's why I think we articulated approaching 20% decline in 2026. And again, that's very different from what we're seeing in the branded business, where we are seeing a very -- a nice recovery from the hit that we took in 2025.

And as we mentioned in the prepared remarks, this is a business that has really been -- has been affected much more severely by tariffs because this is primarily done in those value channels, as you know, where our customers are most price sensitive, and where because it's private label, and we don't have the benefit of our brands and the brand leverage, we don't have that power when we're looking to employ pricing actions. And so we have seen some of those customers pull back from us on a temporary basis. We're confident that we'll be able to build that back over time. We still have good relationships with those customers. We still feel that we bring something very compelling to them in terms of our styling, our fashion and the information that we have about what's working in other channels. but it's clearly a headwind for 2026.

Okay. That's clear and super helpful. Maybe if I can just ask a couple more. Can you also talk about the off-price business and kind of how you're viewing that for fiscal '26. And maybe Zine, one for you. Just on SG&A, you called it out in the press release some higher incentive comp, but also maybe can you just talk about maybe some other executive salaries with the impact of lower private label sales or some of the other costs in the business, like, can you give us an idea of how you expect SG&A dollar growth to be in fiscal '26 would be helpful.

I'll start with the OP, and then I'll turn it over to Zine. So the off-price business is recovering. We took a significant hit there in '25 as well with all the tariff disruption, and we will see -- we should see nice growth in that channel in '26. I don't expect to get in that channel all the way back to where we were in '24, which is in contrast to our first-tier retailers, our department stores, pure-play e-commerce retailers specialty stores, et cetera, where we expect the growth in 2026 to recapture everything we lost in '25 and then some.

So essentially, first year, we're going to be above '24 and '25 off price will be below '24 but above '25 and mass will be below '24 and '25 on.

So Jay, from an OpEx perspective, obviously, in addition to the inclusion of Kurt Geiger for a full year versus just having them for 8 months the prior year. We'll also see some pressure in our SG&A. I think we talked about the headwind from resetting the incentive compensation and restoring the salaries. That's about $0.14 to $0.15 right there. And as you may recall, that was reduced for a good portion of fiscal 2025, the salary base. We're also expecting the warehouse and fulfillment cost pressures to continue into 2026 that's both from occupancy from renewing to leases in 2 of our major warehouses and labor costs, we still are seeing inefficiencies in labor and labor shortages that we have to react to on a daily basis in California.

We also expect warehouse fulfillment costs to be high as our business increases and our DTC increases. And our plan is to maintain our investment in marketing to capitalize on the good trends we're seeing on the product side and further support our international expansion. And also, we'll continue to invest in our IT system and store fleet, which has an impact on depreciation.

Our next question comes from Marni Shapiro from the Retail Tracker.

And I have to say, congrats because the product in your stores look absolutely outstanding. So I'm curious if we could just run through the tariff numbers based on forgetting the Supreme Court changes, but based on where we were, were the hardest hit of tariffs, that product coming through came through during the holiday season through the first half of '26. Is that what it looked like prior to this? And then if you could just also talk a little bit about the sales trends. What percentage or what did it look like? How much were you able to pass through either to the consumer or mitigate with what you were doing internally.

Yes. First of all, thank you for the comments on the product. That's ultimately the most important thing. The greatest driver of our financial performance is the strength of our product. So we appreciate that. I guess I could start on the tariff question and Zine can fill in the gaps. In terms of when we were going to see the worst impact throughout this year prior to the ruling, look, it's -- I think we would have seen on a gross impact, a significant impact from tariffs in every quarter on a year-over-year basis the worst would have been in Q1 because we didn't have a lot of pressure last year in Q1. What was the last part of the tariff thing.

How much were we able to mitigate...

And then in terms of mitigates, look, as you know, we have put through some price in Steve Madden, in particular, it's about, I would say, 10% on light categories. And we felt we've been successful in getting that through and maintaining nice full price selling. That's because we have the fashion right, I think most importantly and also because of what I mentioned earlier, which is that we that we have elevated quality and materials so that there's more perceived value in the product. Obviously, that was not enough to offset the full amount of the tariffs.

So from the flow of tariffs, Marni Q1 was definitely the highest. Q2, we started seeing that work comp in some of the tariffs from the prior year, and Q3 and Q4 had a minimal impact.

Great. That's what I figured. I just wanted to confirm. And then could you just -- I know it's a smaller part of the business, but just curious how the apparel business has been going. It looks very good, particularly in Macy's and some of the other stores. I'm curious have the results there been good? Is the customer excited about the brand? .

Yes. Thank you for asking about that because I'm really excited about what we're seeing in apparel. We continue to do really well. And our largest category has been dresses, and we continue to perform well there. But I'm excited about some of the traction that we're seeing in outerwear to. In Q4, we had a lot of success there. And anything with apparel was really phenomenal for us. And even now, we're seeing some early -- some nice early reads on more lighter weight outerwear pieces, so that's exciting. We're getting additional doors with some of our key department store customers like Dillard's and Macy's and that's not only the contemporary sportswear departments but also dress departments, and we're investing there. We brought on some high-level very experienced talent last year into the organization. And really feel good about that and about the path that we're on there. So we're -- that should be a growth vehicle for us in the coming years.

Our next question comes from Sam Poser from Williams Trading.

You talked about the factors that the tariff factors. Can you walk through sort of specifically what's concerning you? Because theoretically, especially with your a few base you're 5%, 4% better in a lot of countries, and you're a lot, lot better in Brazil than you anticipated for the time being. Can you talk about sort of in any detail as you can about the factors that have precluded you from giving guidance, maybe what may happen with the 301 tariffs and things like that. And then I have one more.

I mean, Sam, we can talk about this all day, but I think the headline is there's just a tremendous amount of uncertainty. We don't have clarity or any stability in terms of the policy environment here. And so we don't know what it's going to look like from day to day. There have been multiple changes within the last 5 days. I think even yesterday, we got some new information that we have not yet confirmed about where we are. So we -- obviously, we have a responsibility to give investors information that's accurate and reliable. And until there's more clarity around tariffs, we don't think our earnings guidance would meet that standard.

No, I understand that. So let me ask it another way. If we take today versus Thursday, just in that factor, it's better than you thought it would be. But there's other factors that could make it coming -- possibly coming soon that could make it the same or worse than it was on Thursday. Is that a fair way to think about at the overall.

I think that's a yes.

And then with the weakness or with the plan with conceptually with the planned down business or not planned on the private label business, it's going to be down. That structurally sends your gross margin up. And the other factors you've already talked about gross with SG&A up as well as a percent of sales. So because it doesn't use very much SG&A. So conceptually, your gross margin is going up and SG&A is going up a little bit more because of the incentive comp and the other factors that Zine just walked through. Is that a fair -- like in dollars, it goes up because of those factors as a percent, it would go up anyway because there's no -- virtually no SG&A attached to the private label.

Yes. It is -- there's was a the lot there. But it is true that as private label shrinks that, that is a mixed benefit to our gross margin. It's also true that there's not a lot of SG&A that goes away when that business comes down.

And what is the time frame between the orders written, let's say, by the mass by Walmart, Target versus everything else. So like how -- what is your visibility right now on orders from them? And when does their -- you mentioned at one of the meetings that some of these guys are going to go direct. When do you think that product that they do themselves start hitting their shelves so they can see how well it did or does compared to what you've delivered over the years.

We're seeing declines throughout this year. So there are -- we assume products coming from other places that they're filling in spring and then some more in fall. So I think that's the answer. In terms of the timing, in terms of the visibility, it's not that different from what we see in the balance of the business. They do work a little farther out. But because of the first cost nature of the business, that means that where we're delivering the product earlier to them because they're picking it up overseas and then they're responsible to bring it to the United States and get through the warehouse to their floors, we then are essentially the time between when we take the order and when we ship it is very similar to the branded business.

Our next question comes from Tom Nikic from Needham.

Ed, I think you made a comment before about the decline in private label and you characterized it as temporary. Is that based on kind of conversations you've had with partners who've kind of told you that in a more normal environment, you get that business back? Or is there any risk there that, that chunk of the revenue base has kind of been structurally reduced.

Yes. No, I think I -- hopefully, what I said is that I hope it's temporary. We believe it will be temporary because we believe that we offer these customers something that they can't get from other folks. And that's why we've been able to build a very successful business with them over decades. But -- and frankly, we have seen this movie before. There are periods where I think they get new management or whatever and somebody comes in and says, hey, there's maybe a lower cost provider or we could go direct or whatever, and we've seen our business contract. But typically, after a season or 2 when they maybe perhaps they don't get the fashion is right, as we've got it for them in the past, we've seen them come back to us and that business has come back. And certainly, that's what we will be working very hard to make happen here.

Very helpful. And I had a quick follow-up on SG&A. So I know there's a bunch of headwinds this year. I think Zine, you mentioned something like $0.15 from incentive comp, and I know that there's a wraparound of the Geiger acquisition, when we just kind of think of just when you layer it all together, like, I guess, what order of magnitude should we think about for SG&A growth for the year? I mean, I think you've got high single-digit revenue growth for the year? Should we think like something in the teens for SG&A growth this year?

Yes, I'll step in there. I think given that we're not providing earnings guidance, we're not going to also guide all the line items down the P&L. So we had to postpone that one until we put out the earnings guidance.

Our next question comes from Dana Telsey from Telsey Advisory Group.

As you think about the DTC business, any unpacking of how e-commerce did relative to stores what you're seeing full price and outlet and plans for opening stores this year and remodels and refreshes. And then also just touching on international, how did that do for the Kurt Geiger brand? And how did it do for the Steve Madden brand?

Sure. Yes. So in terms of stores, we saw a nice acceleration in -- or DTC overall, nice acceleration in Q4 and in Steve Madden. Now that was driven by full price channels. We still had a double-digit decline in outlets, but we had a nice increase in our full-price stores, and an even stronger increase in our e-commerce business. And all of those businesses have actually improved further going into Q1. So I feel good about the momentum there. Outlet is still running negative, although we've gotten that into the single digits quarter-to-date, and we actually even are positive for the month, which we haven't seen for a little while. So that's a positive story.

Kurt Geiger, they had a very strong comp performance of high teens in Q4 in the Kurt Geiger brand, driven primarily by digital, but also a healthy performance in stores. And as we look ahead, yes, we will have some store growth in Geiger. As we've talked about, one of the initiatives is to open more stores in the United States. We view that as a revenue and profit opportunity, but also as a vehicle for us to build brand awareness and really tell the Kurt Geiger story because as we've said, we think the stores are the best expression of the brand. So right now, I think we're looking at about 5 stores opening this year in the United States, and we're excited about those. One of those will be in outlet. The balance will be full price.

In terms of Steve Madden, I think we'll be -- we'll probably open maybe 18 stores around the world, but we'll close a similar amount, maybe even a little bit more. So I think the store base there is not going to grow. And then we've got a handful of remodels as well. I don't know the number. I don't know Zine, if you have that top of your head, but...

No, I don't have the exact number. But for major remodels, we're probably over [ 10 ].

Got it. And then marketing spend this year, how are you thinking about it? .

I think you'll see we're going to continue to invest in marketing. Obviously, we're growing the top line. We over the past several years, we've seen a really significant increase in the percentage of revenue. This year, I think we're planning that more flat as a percentage of revenue. So up in dollars on the growing sales, but really pretty similar in terms of percentage of revenue.

[Operator Instructions] Our next question comes from Aubrey Tianello from BNP.

I wanted to go back to the annual revenue guidance of 9% to 11%. Could you maybe break that down in terms of what you're expecting from the core business in wholesale footwear, accessories, apparel, DTC? And then also what you expect Kurt Geiger to contribute in terms of revenues.

Yes. So I guess I'll start off by saying that the business, excluding Kurt Geiger, we're looking to be up low singles, Kurt Geiger. And again, just to point out, that includes that private label pull back. So if you exclude private label, we're looking to be up around 6% to 7% at the -- towards the middle of the guidance. Kurt Geiger on a reported basis will be up 50%. And then if you're looking at that on a pro forma basis, just so you can understand the underlying growth there, that's up really high singles, with the brands growing in the low double digits and then concessions pulling down the overall consolidated over there.

In terms of the segments, branded wholesale footwear and wholesale accessories, excluding Kurt Geiger, should show nice growth, kind of mid- to high singles positives there with, again, private label down significantly in each of wholesale footwear and wholesale accessories. And then DTC, I think we've got that, excluding Kurt Geiger, growing around 7.5% at the midpoint.

Perfect. And then, Ed, I think you mentioned on the last call that for 4Q, there would be something like mid-teens AUR increases with about 10% of that coming from like-for-like and the rest from product mix. How should we be thinking about AURs going into 2026 and particularly on the product mix side of things?

Yes. We continue to see nice benefit there. I think in the Steve Madden business, Steve Madden DTC business. I have the numbers in the U.S. in front of me, we were up about 18% actually is where we ended for Q4, and we're trending pretty similar to that in Q1. And again, it's really 3 factors. It's roughly 10% price increases, and then you've got the mix and then a little bit of reduced promo activity as well. As we move throughout the year, I do expect that to moderate somewhat. I don't think we're going to provide specific guidance around AUR, but I still think it should be a tailwind in the coming quarters.

Our last question comes from Janine Stichter from BTIG.

Can you talk a little bit more about your wholesale footwear business outside of the private label? It came in a bit better than expectations. Maybe just speak to what you're seeing in terms of initial orders and reorders and given where your supply chain is positioned right now, are you in a position to chase the additional demand come through? .

Yes. We're really excited about the momentum that we have there. And again, specifically in that core Steve Madden Women's business, it feels better than it has in quite some time, frankly. We saw really significant acceleration in our sell-throughs in the back half of the year, they were actually negative in the first part of it of '25. Turns positive in Q3. We're up and then have been up sort of mid-teens. This is our sell-through to the end consumer in Q4 and so far in 2026. And our wholesale customers are really reacting. And so we're seeing better initial orders. We're seeing chase activity. As we look at sort of plans going forward, obviously, those are getting better based on the momentum.

I will say most of our big customers, they seem to want to really position themselves to chase stuff. I think they're trying to leave a little bit of room in the way that they plan to chase hot items. And obviously, we continue to have a speed advantage over our competitors. We have the right product right now. And so we feel like we should be well positioned to win in that environment.

Great. And then just quickly, you mentioned Dolce Vita in the beginning of the call, planning it up high single digits for the year. Maybe just remind us how big that business is and anything else you can speak to around the growth opportunity there.

Yes. I mean Dolce Vita has been a really great story for us over the last 5 years or so. And as we said, I think, been the most the strongest growing business for us in the company as a brand since the pandemic and most consistent, it's now finished the year over $240 million in revenue. And we feel like we just continue to build that brand. As we said, it was primarily all footwear in the U.S. It was historically primarily a wholesale business, then we built this very successful dolcevita.com business. Now we've opened a handful of stores, which are performing well. And we've started to now extend the brand into other categories. We're getting some nice traction in handbags. And we're also seeing some growth in international markets. So it's a good story when we want to keep fueling.

I am showing no further questions at this time. I will now turn it over to Mr. Rosenfeld for closing remarks.

Great. Thank you so much for joining us on the call today. We hope you have a great day. We look forward to speaking with you on the Q1 call.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

Good day, and thank you for standing by. Welcome to the Q3 2025 Steve Madden Ltd. Earnings Conference Call. Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your first speaker today, Danielle McCoy, VP of Corporate Development and Investor Relations. Please go ahead.

Thanks, Brittany, and good morning, everyone. Thank you for joining our third quarter 2025 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 on the call today are Ed Rosenfeld, Chairman and Chief Executive Officer; and Zine Mazouzi, Chief Financial Officer and Executive Vice President of Operations.

With that, I'll turn the call over to Ed. Ed?

All right. Thanks, Danielle, and good morning, everyone, and thank you for joining us to review Steve Madden's third quarter 2025 results.

As anticipated, the third quarter was challenging, driven largely by the impact of new tariffs on goods imported into the United States. During the period in April and May when new tariffs on Chinese imports reached 145%, wholesale customers cut back meaningfully on orders for the third quarter, and we shifted large amounts of production out of China midstream, which led to shipment delays. These factors, together with the negative impact to gross margin from the significant increase in our landed costs, resulted in substantial pressure on both revenue and earnings in Q3.

Fortunately, while we will continue to see negative impacts from tariffs, we believe the worst is behind us. Order patterns from our wholesale customers are normalizing, and we are mitigating a larger percentage of the gross margin pressure through strategic pricing actions and sourcing initiatives. Most importantly, underlying consumer demand for our brands and products is strong.

Despite the noise from tariffs, our team has stayed laser-focused on executing our strategy to deepen consumer connections through the combination of compelling products and effective marketing, and we are seeing those efforts pay off, particularly in our flagship Steve Madden brand. Steve and his design team have created an outstanding fall product assortment that is resonating with consumers and enabling us to outperform the competition.

Boots have been the standout, led by our casual tall shaft styles, but we're also seeing strong performance in dress shoes across various heel heights as well as casuals like loafers, Mary Janes and Mules. Our marketing team is amplifying this great assortment with richer brand and product storytelling and increased investment across YouTube, TikTok, Snapchat and Pinterest, which is driving measurable increases in awareness and conversion with our key Gen Z and Millennial consumers. As a result, both wholesale sell-through and DTC sales trends for Steve Madden have accelerated meaningfully in recent months.

Our new brand, Kurt Geiger London, also had strong momentum as consumers continue to respond to its bold statement-making designs and eye-catching marketing, including the current campaign featuring Emily Ratajkowski. Comp sales for the brand were up mid-teens in the third quarter. Overall, the acquisition integration remains on track, and our teams continue to make progress on revenue synergies, including expanding Kurt Geiger in international markets through the Steve Madden network and growing Steve Madden in the U.K. through the Kurt Geiger platform as well as cost savings opportunities in areas like freight and logistics.

We are also making meaningful progress in advancing our other owned brands. In Dolce Vita, we're building on the outstanding success we've had over the last several years in our U.S. footwear business by expanding international markets and extending the brand into other categories like handbags. In Betsey Johnson, we are driving renewed cultural relevance for the brand with elevated talent partnerships, authentic community engagement, high-impact activations and differentiated merchandise assortments. Both Dolce Vita and Betsey Johnson are on track to deliver revenue gains for the full-year 2025 despite the headwinds from tariffs.

In sum, while the third quarter was undeniably challenging and our financial results were not up to our usual standards, our team's disciplined execution of our strategy is strengthening our brands and building relevance and demand with consumers. We are confident that we will begin to see improved financial performance in the fourth quarter and looking out further that we have the brands, business model and strategy to drive sustainable revenue and earnings growth over the long term.

Now I'll turn it over to Zine to review our third quarter 2025 financial results in more detail.

Thanks, Ed, and good morning, everyone. In the third quarter, our consolidated revenue was $667.9 million, a 6.9% increase compared to the third quarter of 2024. Excluding the newly acquired Kurt Geiger, consolidated revenue decreased 14.8%. Our wholesale revenue was $442.7 million, down 10.7% compared to Q3 2024. Excluding Kurt Geiger, our wholesale revenue decreased 19%.

Wholesale footwear revenue was $266.5 million, a 10.9% decrease from the comparable period in 2024 or down 16.7%, excluding Kurt Geiger. Wholesale accessories and apparel revenue was $176.2 million, down 10.3% compared to the third quarter in the prior year or down 22.5%, excluding Kurt Geiger. The majority of the organic decline in wholesale revenue can be attributed to tariff-related order reductions, shipment delays and other impacts related to the production disruption.

In our direct-to-consumer segment, revenue increased 76.6% to $221.5 million. Excluding Kurt Geiger, our direct-to-consumer revenue increased 1.5%. We ended the quarter with 397 company-operated brick-and-mortar retail stores, including 99 outlets as well as 7 e-commerce websites and 133 company-operated concessions in international markets.

Our license and royalty income was $3.7 million in the quarter compared to $3.5 million in the third quarter of 2024. Consolidated gross margin was 43.4% in the quarter, up from 41.6% in the comparable period of 2024 due to the impact of Kurt Geiger, which has a much higher mix of DTC than the legacy business and therefore, has higher overall gross margin.

Wholesale gross margin was 33.6% compared to 35.5% in the third quarter of 2024 due to pressure from tariffs, partially offset by our mitigation efforts. Direct-to-consumer gross margin was 61.9% compared to 64% in the comparable period in 2024 due to pressure from tariffs as well as the addition of Kurt Geiger, which had lower DTC margin in the quarter than the existing business, driven by the concessions business.

Operating expenses were $243.4 million or 36.4% of revenue in the quarter compared to $174.2 million or 27.9% of revenue in the third quarter of 2024. Operating income for the quarter was $46.3 million or 6.9% of revenue compared to $85.4 million or 13.7% of revenue in the comparable period in the prior year. The effective tax rate for the quarter was 23.4% compared to 23.8% in the third quarter of 2024. Finally, net income attributable to Steve Madden Limited for the quarter was $30.4 million or $0.43 per diluted share compared to $64.8 million or $0.91 per diluted share in the third quarter of 2024.

Moving to the balance sheet. Our financial foundation remains strong. As of September 30, 2025, we had $293.8 million of outstanding debt and $108.9 million of cash, cash equivalents and short-term investments for a net debt of $185 million. Inventory at the end of the quarter was $476 million compared to $268.7 million in the third quarter of 2024. Excluding Kurt Geiger, inventory was $275.6 million, a 2.6% increase compared to the same period last year.

Our CapEx in the third quarter was $11.6 million. During the third quarter, the company did not repurchase any shares of its common stock in the open market. The company's Board of Directors approved a quarterly cash dividend of $0.21 per share. The dividend will be payable on December 26, 2025, to stockholders of record as of the close of business on December 15, 2025.

Turning to our fourth quarter '25 guidance. We expect revenue to increase 27% to 30% compared to the fourth quarter of 2024, and we expect earnings per share to be in the range of $0.41 to $0.46.

Now I would like to turn the call over to the operator for questions. Brittany?

[Operator Instructions] Our first question comes from the line of Paul Lejuez with Citi.

This is Kelly on for Paul. Ed, you sounded pretty positive on what you're seeing on the fashion front. I'm just curious if you could talk more about how you're seeing the fashion develop this fall, how inventory levels in the wholesale channel are looking? If that makes you think differently about sort of the prospects for spring, particularly in the wholesale channel.

Yes. Kelly, yes, we feel really good about what we've seen in fall. As we mentioned, we've seen a pretty meaningful acceleration in the trends, particularly in that core Steve Madden women's shoe business. As I called out, I think the biggest driver has been boots. Our boot assortment has just seen really strong performance. We called out that it's been led by the casual tall shaft styles. Those have been most important, but we've got a number of other things working in the boot and booty category as well.

Then as I said earlier, it's not just about boots because we've really seen a nice improvement in the dress shoe category. That's obviously a category where we think we have a really strong competitive positioning and our team has executed there. We're seeing strength in a number of different sort of looks within the dress category, and as I mentioned, really at various heel heights.

Then casuals have been important, too. The fashion sneaker business has downshifted a bit, and we're picking that business up and then some in loafers and Mules and Mary Janes. Really feeling better than we have in some time about our fashion in Steve Madden and how it's performing. Yes, it does give us confidence going into spring that -- and I think we feel better than we did a few months ago about how spring is shaping up.

Good to hear there. Then on the 4Q guide, well above sort of where consensus is looking. I was just -- could you just break that down a bit for us in terms of what you're expecting from the core relative to the kind of down 15% you saw in the third quarter, whether there's any shifts there or what's kind of driving any acceleration there? Just what you would expect from KG in the fourth quarter?

Sure. Yes. The core business, if you exclude KG, the revenue guide is essentially down 2% to down 4%. That includes increases in both wholesale footwear and DTC, but still a decline, offset by a decline in wholesale accessories and apparel.

Then the KG contribution to revenue, I think at the low end, we're at $182 million and the high end $187 million.

Any sense of the breakdown when we think about our models and how much of that KG revenue is coming from the DTC channel in the fourth quarter? What kind of impact that'll have on the grosses?

Yes. I mean, as you know, overall, KG is over 70% DTC. In the -- I think I have to -- I mean, I want to say it's probably about $135 million, something like that in the fourth quarter coming from DTC. Obviously, that does have a meaningful mix impact to gross margin.

Our next question comes from the line of Anna Andreeva with Piper Sandler.

Congrats. Nice results. A couple of questions. Are you seeing stockouts in the core Madden business, just given everything that's going on with the supply chain? How quickly can you chase? Great to hear about DTC ex-KG bouncing back to positive. Ed, you mentioned a strong consumer response to a number of categories. Can you parse out how own e-com did versus brick-and-mortar? How does the 10% reduction in China affect your thinking about sourcing?

Sure. Yes. Look, are there certain styles where we've had stock outs? Yes. Generally speaking, we've been able to chase some of the additional demand in the core Steve Madden business. As you point out, because of the supply chain disruption, we don't have the ability to chase that we normally do and the speed that we normally do. We did front-load some merchandise here because we had good reads on these products, and so we were in a position to fill some reorders, for instance, in Steve Madden. Then also some of this product is coming -- or a good portion of it is coming from Mexico. Obviously, we -- that's where we have a lot of speed, and we can get back into reorders in 30 days. That, I think it has been an okay story.

I think the second quarter was about e-commerce versus bricks and mortar. In both Steve Madden and Kurt Geiger, e-commerce is outpacing bricks-and-mortar, but we've seen -- we talked about the acceleration in Steve Madden. We've seen that in both e-com and stores in recent months.

Then in terms of the final question, I think it was how does the China reduction impact our sourcing. Look, it's obviously -- it's a welcome development to see the reduction in the tariff on China. The way that the tariff regime looks right now, the math would tell us we would move quite a bit back to China. I think that we're going to be careful about that. We want to remain diversified. We don't want to get back into a position where we have 70-plus percent of our sourcing coming from one country, so we're going to continue to try to be diversified, but it obviously does give us a greater flexibility to go back to China where we need to, to get the right deliveries and quality, pricing, speed, etc.

Just as a follow-up, as we think about the KG rollout plans as we look into next year, just any color you could provide how we should think about the store growth versus wholesale?

Yes. Well, we will be -- we're going to, I think, not get into a lot of detail about '26 overall because we'll obviously be talking about that on the next call. I can tell you that we do plan to open a handful of stores in the United States next year for Kurt Geiger, and we're working on those plans now. As we've talked about the initial 6 stores in the United States are performing very well. We're getting pretty close on a handful of leases for next year to continue that rollout. There'll be some wholesale growth as well because I think that we have opportunity in both channels.

Our next question comes from the line of Jay Sole with UBS.

Ed, I think I heard you say that legacy Steve Madden should be down by 2% to 4% with wholesale footwear and DTC positive. Can you just talk about how you're thinking about 4Q for the entire wholesale footwear segment and then wholesale accessories, that would be helpful.

Yes. Wholesale, including Kurt Geiger or excluding Kurt Geiger?

I guess, excluding Kurt Geiger.

Excluding Kurt Geiger, wholesale footwear, we're looking at up 2% to up 4.5%. Wholesale accessories and apparel, excluding Kurt Geiger, still down mid- to high teens.

Then I guess if you think about Kurt Geiger retail versus wholesale, I mean, how are you thinking about that?

Well, we've provided the DTC revenue for Kurt Geiger, which I said I think is going to be around $135 million. Then the overall number for Kurt Geiger, $182 million to $187 million is the range.

Then I guess just -- you asked this a couple of times, but just on your visibility, I mean, have you taken orders -- do you take orders earlier for Kurt Geiger relative to the Steve Madden business? I mean do you have visibility out into Q1 and Q2 yet for Kurt Geiger? Or is it going to be on the same sort of quick turning supply chain that Steve Madden is on?

No, we do take orders earlier there, so we'll have more visibility over time there.

I guess any comment on the order book and how that's shaping up right now?

I think we're going to postpone all discussion of '26 until the next call. Look, the Kurt Geiger brand continues to perform very well, and we're going to see growth next year.

Our next question comes from the line of Abigail Zvejnieks with BNP Paribas.

I wanted to ask on Kurt Geiger as well. I appreciate the comment on comp sales up mid-teens. Any color you can share on how Kurt Geiger performed by region in the quarter?

Yes. It's growing in all the core regions. They performed well in their home market of the U.K. continues to grow in the U.S., and we're also growing in Europe.

Then you've talked about the revenue synergy potential there and one of the first pieces of that being plugging -- sort of plugging KG into your existing international markets. I know it's still early, but any updates on that in terms of how that's progressing or when you could start seeing some of those benefits?

Yes. We've been hard at work on that. Kurt Geiger, our CEO, just went on a world tour. I think he was -- he hit, I want to say, 4 continents over a 3-week period, meeting with all of our international teams and international partners. That work is underway, and I think we'll start to see some benefits in '26, probably more -- I think anything that will be meaningful to the numbers would be towards the back end of '26.

Our next question comes from the line of Marni Shapiro with The Retail Tracker.

Your stores have really looked beautiful. Could we just focus a little bit on some of your smaller but growing areas? It sounds like the handbag business was a little bit disrupted. I'm guessing some late deliveries. I'm curious if you could just talk a little bit about what's going on there.

Then can we get an update on the apparel business, both at stores like Macy's, Bloomingdale's and REVOLVE as well as Madden NYC at Walmart?

Yes, sure. In terms of handbags, look, that's obviously been a category -- talking about Steve Madden handbags that we have talked about all the year was going to be down based on the excess inventory in the channel and some of the market pressures that we've experienced there, that was -- so we came into the year expecting that business to be down double digits. That's been exacerbated by all the tariff disruption and everything that's happened with the supply chain and deliveries and everything else. We certainly felt a lot of pressure there, and we're going to continue to feel that in Q4.

The good news is that the underlying demand, I think, is improving, and we've seen good sell-throughs in fall so far, improved over spring. We've got a number of things working there. I think that our online Hobos, shoulder bags, East West bags, anything in Brownsway. We've got the trends, and they're performing. I do expect that business to stabilize as we come into spring '26.

Then apparel, as you know, has been a nice growth story for us. The focus, of course, is Steve Madden apparel, and that's a business that we've been -- the sell-throughs have been good, and we've been steadily growing it in those key accounts that you mentioned, Nordstrom, Dillard's, Bloomingdale's, [Topdoors] and Macy's, REVOLVE, etc., and then to your point, we also have the mass business that we do with Walmart under Madden NYC. That's an important business for us as well, although our overall business in the mass channel has definitely felt some pressure from tariffs. We expect that to get better as we go into '26.

Then can I just follow up on what's going on, on the bag side and the department stores -- I'm sorry, in the shoe side and the department stores. Are you seeing a big difference between the higher-end stores that you sell, some of the better stores or, I guess, even more fashion stores, REVOLVE is a much more fashion store than some of the others versus stores that are a little bit less fashion? Or it's across the board, your sell-through has been good and there's not a lot of price resistance to the Madden brand when the product is right?

Yes. We've been really pleased so far with the lack of price resistance that we've seen, particularly in the Madden brand. I think as we've said, we have a lot of very strong fashion right now. I think overall, if you look at the overall company, the real takeaway on the price increases is that when you have real fashion forward products or new fashion, the consumer is willing to pay, where you have to be much more careful with price increases is on the core and more basic product.

The good news is that's how we did it, and that's how we planned it. As you know, we were very surgical about it. We didn't take a peanut butter approach where we spread the price increases evenly everywhere. We went style by style. I think that so far, we've been pleased with how the price increases have been received by the consumer.

The product really looks outstanding, some of the best product out there in the market.

Our next question comes from the line of Corey Tarlowe with Jefferies.

Ed, I was just wondering if you could talk to the AUR lift in the business. You're selling $200 boots today versus sneakers that were more like $70 previously. How is that affecting the business? What's the impact on sales and comp? How do you measure that? How do these fashion trends speak to what AUR could be next year?

Yes, we are seeing a pretty significant increase in AUR, and it's really twofold. It's one, it's based on the price increases that we've put through in response to tariffs. Number two, it's -- as you point out, there's a mix benefit due to selling more boots and higher-priced categories. In Q3, in our DTC, we were up about high singles in AUR. In Q4, we're running more like mid-teens increases in AUR.

Then it does feel as if there's a bit of a tone shift in your commentary around wholesale, where kind of the first half of the year, I talked about order cancellations and now you're talking about orders ramping back up. I'm curious if is this the fact that the channels are doing better? Or is it that you see Steve Madden gaining more market share in these channels? How do you think about that?

I think it's both. Look, if my tone didn't get better from how I was talking when we had 145% tariffs and everybody canceled every order, then it would be pretty depressing. Look, some of that -- the external noise has abated a bit. I think things are normalizing in the wake of all the tariff disruption. In addition to that, we are also seeing improved underlying demand, improved sell-through, and that's causing the wholesale customers to come back to us with more aggressive plans.

Then if I could just squeeze one more in. it seems like the product is resonating really nicely. Intuitively, what do you think that means for promotions? What's embedded in your outlook for that?

Yes. I mean the good news is we have been able -- for instance, in our DTC channels, we have so far in Q4, reduced promotional days by a pretty meaningful amount compared to what we were doing last year. We've been able to be less promotional because of the strength of the product and the trend. We'll do -- obviously, we need to remain competitive when we get into the fall -- the part of the holiday season here when everybody is promotional, but we're going to attempt to continue to be less promotional where we can.

Our next question comes from the line of Tom Nikic with Needham.

I wanted to ask about the margin structure of the business. Obviously, 2025 between tariffs and the acquisition and maybe some tough first half of the year at the core brand or a tough first 9 months. There was quite a bit of margin erosion this year. How do we think about how much of that is recoverable and how much may be structural?

I'd like to think all of it is recoverable over time. I think it's going to take a little bit of time. I don't expect us to get it all back in 2026. Certainly, the over time, I do believe that the tariffs are going to find their way into the retail prices, and we'll be able to get back to our pre-tariff margins in the core business. Then the Kurt Geiger business is obviously lower margin than the legacy business. We think that business has a path to getting to where the Steve Madden levels or potentially even higher over time, so that's the goal.

Our next question comes from the line of [James Ross] with Williams Trading.

2 questions actually. The first being, how will the mix of business with the addition of Kurt Geiger impact gross margins in Q4? I know we kind of touched on it in the first question, but I was hoping you could sort of dig into that a little deeper maybe.

The second being, can you provide some color on brand growth and opportunities internationally and what that looks like going into next year?

Yes, go ahead.

As far as your first question related to Kurt Geiger impacting gross margin in Q4, I think it would be similar to what we've seen in Q3, somewhere around 300 basis points.

I'm sorry, what was the second part of the question?

Yes. The second part was, could you provide some color on brand growth and just generally the opportunities internationally and what that looks like going into next year?

Okay. Is this about the legacy business or Kurt Geiger? You asking about Kurt Geiger or the legacy Steve Madden?

Steve Madden and then also Kurt Geiger as well.

Sure. Yes. Steve Madden, we continue to have nice momentum in international markets. For 2025, we're looking at high singles revenue growth, and that's very similar across the 3 regions. Very similar growth in the -- our 3 key regions being EMEA, APAC and the Americas, ex-U.S. So nice momentum really across the board, and we'll look for continued growth into 2026.

Then Kurt Geiger, as we've said, they're in the really -- the early stages of their growth outside the U.K. and the U.S., so we'll be looking for very strong double-digit growth internationally out of them for a handful of years here.

Our next question comes from the line of Janine Stichter with BTIG.

I just want to follow up on the margin recapture. If you could help us out. I think the tariffs you had that hit gross margin a little over 200 basis points in Q2. How much was it in Q3? Then how to think about Q4? Maybe help us unpack that Kurt Geiger between that and the core business. I think Kurt Geiger had been hit a bit more in the front of the year just because you hadn't been able to move as quickly there.

Yes. As far as the tariff impact in Q3, given all the moving parts with the price increases, factory discounts, our renegotiated cost in as well as FOB differential between all the countries, I think it's best to look at it from a growth and mitigated perspective, and Q3 was about 100 basis points more than what Q2 was. I think you're asking about Q4 as well. I think it would be a little bit worse than that in Q4.

The Q4 is -- the 100 is mitigated and it will be worse in Q4 versus Q3?

Q3 was about 100 basis points worse than Q2, and we expect Q4 to be a little bit worse than Q3, but those are unmitigated, so the mitigation gets bigger over time. The net impact to gross margin will be considerably less in Q4 than it's been.

Then just maybe on the mitigation. I just want to clarify on pricing. I think you took 10% increases earlier this year. Have you taken more? Or do you plan to take more?

That's where we are right now. We'll have to look at it as we go forward. That obviously is still not enough to offset the full amount of the tariffs. Over time, we'd like to see if we can take more, but we want to be prudent about it.

Our next question comes from the line of Dana Telsey with Telsey Advisory Group.

As we think about the wholesale business, what differed by type? Were there off-price department stores mass? What did you see? What do you think of the outlook going forward?

Then on the DTC side, was there a difference between full price and outlet performance?

Yes. In wholesale, I would say we're seeing the strongest performance in the regular price channels, where we have had more pressure is in the value price channels like the off-price and the mass.

In terms of DTC, we're seeing much better performance in full-price channels. Outlet remains a drag. I think we're being hurt by a couple of things there. One is, 5 of our biggest 8 outlet stores are on the border with Mexico. Those stores are running down about 40% and so that's been a big headwind there. Then the other thing is that I think we were impacted more acutely there by some of the disruption from the supply chain in the wake of tariffs. Outlet has still been trending negative and full price stores have been much better.

Then just on the value side of the wholesale channel, are they just not taking orders? Are they waiting for newness? Are they waiting for more goods, not accepting the price increase? Any way to articulate it?

Well, they were the ones that pulled back most significantly. Again, it was during the period in April and May when China tariffs were 145%. They are coming back now, and we're seeing those businesses normalize, but that was where we felt a big part of the pullback in the last couple of quarters.

Just lastly, on marketing, as you think about Q4, anything we should be watching on the marketing side given your improved social that you've had in terms of marketing as we head into the holiday season?

No, we're just going to continue to keep doing the storytelling. I think that we see it's working. I think our marketing teams are hitting the bull's eye, and we got -- we're just going to keep investing and keep telling our and keep engaging with consumers.

Our next question comes from the line of Paul Lejuez with Citi.

Kelly again. I just wanted to follow up on an earlier question around the KG margin structure. In your disclosure, you said, KG was about 9% EBIT margin business in F '24. Curious where that's going to shake out this year with the tariffs. Then as we look to '26, how much can you recover? Can you get back to the 9% next year? Just longer term, I mean, you spoke pretty positively about KG margins. Where ultimately do you think this business can land? How do you get there? Is it through SG&A synergies, anything in the gross margin to speak about? Just any color on sort of how we should think about the KG margins as we look forward?

Yes. In terms of this year, for the partial period that we're going to -- that we own them from May on, I think that they're going to come in around 6%. In terms of next year, we'll talk in more detail about that on the next call. Certainly, we should see improvement from where we were today from where we were this year, but I think we'll postpone any further discussion of that until that call.

Then in terms of the -- the last -- the drivers to get longer term. Yes. I think there's opportunity in both gross margin and SG&A, but I think the bigger opportunity is in SG&A. There's some cost savings opportunities that they're going to get from the combination with us, which we're already -- all that work is already underway. We also think there's a significant opportunity to just leverage operating expenses over time as we grow that business.

Just curious where you maybe think that those margins could go longer term?

Yes. I think what we said earlier was that certainly the intermediate target would be to get to where Steve Madden, the legacy business was historically, but we think there's opportunity beyond that.

I'm showing no further questions at this time. I would now like to turn it back to Ed Rosenfeld for closing remarks.

Great. Well, thanks so much for joining us today. We hope you have a wonderful day, and we look forward to speaking with you on the next call.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

Good day, and thank you for standing by. Welcome to the Second Quarter 2025 Steve Madden Limited Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Danielle McCoy, VP of Corporate Development and Investor Relations. Please go ahead.

Thanks, Stephen, and good morning, everyone. Thank you for joining our second quarter 2025 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 that 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 on the call today is Ed Rosenfeld, Chairman and Chief Executive Officer; and Zine Mazouzi, Chief Financial Officer and Executive Vice President of Operations. With that, I'll turn the call over to you, Ed. Ed?

Thanks, Danielle. Good morning, everyone, and thank you for joining us to review Steve Madden's second quarter 2025 results. As anticipated, the second quarter was extremely challenging, driven largely by the impact of new tariffs on goods imported into the United States. As we highlighted on the last earnings call, our team moved swiftly to adapt to the changing landscape, sharply diversifying our sourcing out of China, negotiating meaningful discounts with suppliers and implementing surgical price increases.

That said, wholesale customers canceled orders and reduced open-to-buys, shipment delays led to lost sales and pushed deliveries to later periods and organic gross margins declined due to the significant increase in our landed costs, resulting in substantial pressure on both revenue and earnings. Since the last call, our team has remained focused on mitigating near-term impacts while positioning the company for long-term growth. We've continued to move forward with our sourcing diversification efforts, although due to the agreement reached with the Chinese government to temporarily reduce the new tariff on Chinese imports from 145% to 30% we have moved certain production for fall back to China, where we felt it would be difficult to ensure on-time delivery, appropriate product quality and/or reasonable pricing in an alternative country.

For fall 2025, we currently expect to source approximately 30% of our U.S. imports from China, down from 71% for the full year 2024. We are also selectively raising prices to wholesale customers and consumers. So far, we've been pleased overall with consumer acceptance of the price increases, particularly on new fashion, but it's still early, and we will continue to monitor the elasticity of demand carefully and react accordingly. While these short-term mitigating actions are important, our team's primary focus remains on positioning the company for long-term growth by executing our strategy to deepen consumer connections through the combination of compelling product and effective marketing.

Our design teams are delivering strong assortments, and we're seeing positive consumer response to new fashion offerings, particularly in the dress shoe and boot categories across both DTC and wholesale channels, including very strong performance in the Nordstrom anniversary event. And we are amplifying these assortments with marketing campaigns and initiatives designed to drive sustained brand heat and cultural relevance. In the flagship brand, we are capitalizing on Steve's appearance on fashion podcast, the cutting room floor, which sparks viral interest on TikTok by continuing to rebalance our marketing spend across the funnel, increasing our investment in top and mid-funnel tactics and diversify our spend by channel, expanding our investment in YouTube, Pinterest and Snapchat. And these efforts are driving results with measurable increases in awareness and consideration for the brand with our key Gen Z and millennial consumers. Another key priority is integrating our new acquisition, Kurt Geiger, which closed May 6.

The Kurt Geiger London brand continues to have strong momentum, and we are more confident than ever in its potential to be a significant driver of growth for the company in the years ahead. The integration is proceeding smoothly, and our teams are making strong progress on work streams related to revenue synergies, including expanding Kurt Geiger in international markets through the Steve Madden network and growing Steve Madden in the U.K. through the Kirk Geiger platform as well as cost savings opportunities in areas like freight and logistics.

So in sum, our financial performance in the second quarter was not up to our usual standards as we grappled with the impact of tariffs, and we know the path forward will continue to be bumpy in the near term. But as we look out further, we believe our core strengths, powerful brands, a robust balance sheet and a proven business model supplemented by a powerful new growth engine in Kurt Geiger, positioned us well to navigate the current disruption and deliver sustainable growth over time. And now I'll turn it over to Zine to review our second quarter 2025 financial results in more detail.

Thanks, Ed, and good morning, everyone. In the second quarter, our consolidated revenue was $559 million, a 6.8% increase compared to the second quarter of 2024. Excluding the newly acquired Kurt Geiger, consolidated revenue decreased 10%. Our wholesale revenue was $360.6 million, down 6.4% compared to Q2 2024. Excluding Kurt Geiger, our wholesale revenue decreased 12.8% Wholesale footwear revenue was $220.1 million, a 7.1% decrease from the comparable period in 2024 or down 11.7%, excluding Kurt Geiger.

Wholesale accessories and apparel revenue was $140.4 million, down 5.3% compared to the second quarter in the prior year or down 14.6%, excluding Kurt Geiger. The majority of the organic decline in wholesale revenue can be attributed to order cancellations, lost orders due to delivery delays or pricing, shipments moved out to the following quarter and other impacts related to the disruption from tariffs. In our direct-to-consumer segment, revenue increased 43.3% to $195.5 million. Excluding Kurt Geiger, our direct-to-consumer revenue decreased 3% with declines in both the brick-and-mortar and e-commerce channels.

We saw negative impact to DTC revenue in the quarter from canceled and delayed deliveries due to tariff-related disruption as well as systems migration we completed in the quarter. Looking ahead to the third quarter, we expect the continued impact from tariff-related disruption, but the systems implementations are behind us and should not have a further impact. We ended the quarter with 392 company-operated brick-and-mortar retail stores, including 98 outlets as well as 7 e-commerce websites and 130 company-operated concessions in international market. This includes 73 company-operated brick-and-mortar retail stores, including 27 outlets as well as 2 e-commerce websites and 72 concessions related to Kurt Geiger.

Our licensing royalty income was $2.9 million in the quarter compared to $1.8 million in the second quarter of 2024. Consolidated gross margin was 41.9% in the quarter compared to 41.5% in the comparable period of 2024. The impact of tariffs, net of supplier discounts resulted in 230 basis points of pressure to gross margin. This was offset by a significantly greater mix of higher-margin DTC business compared to the prior year due mostly to the acquisition of Kurt Geiger and a mix shift to DTC in the existing business. Wholesale gross margin was 31% compared to 33.1% in the second quarter of 2024, due primarily to pressure from tariffs.

Direct-to-consumer gross margin was 61.3% compared to 64.3% in the comparable period in 2024, due primarily to the addition of Kurt Geiger, which had lower DTC margin in the quarter than the existing business, driven by the concessions business as well as pressure from tariffs. Operating expenses were $211.6 million or 37.9% of revenue in the quarter compared to $162.8 million or 31.1% of revenue in the second quarter of 2024.

Operating income for the quarter was $22.6 million or 4% of revenue compared to $54.5 million or 10.4% of revenue in the comparable period in the prior year. The effective tax rate for the quarter was 25.6% compared to 23.4% in the second quarter of 2024. Finally, net income attributable to Steve Madden Limited for the quarter was $13.9 million or $0.20 per diluted share compared to $41.2 million or $0.57 per diluted share in the second quarter of 2024.

Moving to the balance sheet. Our financial foundation remains strong. As of June 30, 2025, we had $293.5 million of outstanding debt and $111.9 million in cash, cash equivalents and short-term investments for a net debt of $181.6 million. Inventory was $437 million compared to $241.6 million in the second quarter of 2024. Excluding Kurt Geiger, inventory increased 1% compared to the same period last year. Our CapEx in the second quarter was $7.7 million. And during the second quarter, the company did not repurchase any shares of its common stock in the open market. The company's Board of Directors approved a quarterly cash dividend of $0.21 per share.

The dividend will be payable on September 23, 2025, to stockholders of record as of the close of business on September 12, 2025. Due to the continued uncertainty related to the impact of new tariffs on goods imported into the United States, we will not be providing 2025 financial guidance at this time.

Now I would like to turn the call over to the operator for questions. Stephen?

[Operator Instructions] Our first question comes from the line of Paul Lejuez of Citi.

Curious if you can talk about which channels of wholesale where you see the significant order cancellations that impacted 2Q? And how has that ordering behavior changed as we've gotten a little bit more clarity on the tariff front? I think you mentioned some shipment timing. So if you can maybe just talk about that a little bit more. And then also on the gross margin pressure in the core business in the second quarter that you saw as a result of higher tariffs. Can you frame maybe what you expect in 3Q and 4Q relative to the 2Q pressure?

Okay. Great. So in terms of the channels that saw the pressure from the tariff-related disruption, it was really very concentrated in the value price channels. So specifically the mass channel and the off-price channel. And I can tell you actually that nearly -- if you look at the wholesale revenue shortfall in the organic business versus last year, approximately 95% of that shortfall came from off-price and mass. So I think that really illustrates the story there. In terms of how that's looking going forward, I still -- I think we're going to see continued pressure on those channels going forward. It should get better. There was a complete pause for a period there, and both of those channels are now once again taking in goods and placing forward orders, but you will see an impact in Q3 as well. In terms of the gross margin pressure from tariffs, again, we articulated that was about 230 basis points. That's not the gross. That's the net after we got the supplier discounts for Q2. Look, we're not providing guidance going forward. So we're not going to be specific there. But I think that you should still see -- you're still going to see a significant impact certainly in Q3. Hopefully, by Q4, that number will start to get smaller.

Does 3Q mark the weakest point in terms of the tax impact on gross margin at 3Q?

Again, I'm not going to try to get specific and there's so many moving parts here. But certainly, I don't think it will get better.

Our next question comes from the line of Aubrey Tianello of BNP Paribas.

I wanted to go back to your comments on price. And if you could maybe comment a little bit on just the consumer response to price increases, what you're seeing in terms of elasticity maybe by product category. And I think last quarter, you mentioned price increases on average about 10%. Is that still the way we should think about it given the change in tariffs?

Yes. We are still looking at average price increases of 10%. Again, that's not a one-size fits-all number. We're looking at this on a style level. But in average, we're looking at prices up about 10%. So far, I think we've been pretty pleased with the consumer acceptance of the price increases that we flowed through. And it's been pretty much what we expected that we've seen very little resistance on new fashion items and particularly in the categories that are really trending like dress shoes and our summer boots that have been performing very well for us. And I would say where we think there's less ability to take price was in the sandal category and in fashion sneakers. But I do want to caution you that it's still early because we started to layer in these prices in May, but on new deliveries in May, now that's really at the end of the season and then so you -- and then you go into sort of a markdown period. So we really won't know -- I think we'll know a lot more, I should say, once we get fully into the fall season, and you've got all the new deliveries in fall at the higher prices. And also, you'll have our competitors will have their products out at, we believe, higher prices, and we'll see what the consumer does then.

Got it. And then maybe on Kurt Geiger, you called it out as being on a journey to being a $1 billion brand. Now that you've owned it for a few months, can you talk about some of the things you've learned and how you're thinking about that path to potentially getting to $1 billion in revenue from Kurt Geiger?

Yes. Look, I mean, I think that we we feel better than ever after having spent more time really digging into the business here and working with the team. It's a very strong team, and we just believe that the brand has tremendous runway. The U.S. business has been such an incredible growth story for them over the last several years, but it's just scratching the surface of what it can be. And frankly, there's still a relatively low brand awareness. So one of the things that we really have to do in the coming years in the United States is to build that brand awareness. I think that retail stores will be an important part of that. They've opened now 6 retail stores in the U.S. that are performing very well. So I think that will -- and they're beautiful stores and really communicate -- it's really the best expression of what the brand is about, and I think communicate to the consumer what the Kurt Geiger lifestyle is about. So that will be a part of the story. Obviously, there will be some marketing investment. I think we'll focus on full-price stores initially, but clearly, I think there's an outlet store opportunity that should be big and profitable over time. They've got a very good wholesale business in the United States with limited partners and they've built a big business with just a handful of partners. And so I think there's some nice opportunity to grow that as well. And then, of course, the digital business is -- I probably should have said that first because that's extremely important and has extremely strong momentum. And so we're going to continue to fuel that. So that's the U.S. story. I think -- but there's also a huge opportunity around the world because, obviously, they've got a very strong business in their home market of the U.K. but relatively early stages of their growth in the rest of the world. And we've talked about Europe as being a huge opportunity for them. They're positioned in the key distribution points, image accounts in many -- most of the key European markets, and the brand is seeing very strong demand. So we know it resonates. But there's a big opportunity now to expand the distribution thoughtfully, of course, and really start to build that business. And then we've talked about they're having a lot of success in Mexico, for instance, but there's tremendous opportunity in the rest of Central and South Central and South America, I should say. And then Asia is really untapped. So a lot of just tons of runway really all over the world with this brand.

Our next question comes from the line of Marni Shapiro of The Retail Tracker.

I was wondering if you could just talk about a couple of quick things. The apparel business, you have -- I know it's a smaller part of the business, but you have an improving footprint in several stores and the product flow has been consistent and very good. So I'm curious if you could talk a little bit about that. And then also just touching back on the boot business. You had a strong boot business in spring. I was curious if it held through summer. And as we sort of turn the corner to back-to-school, what are you seeing as far as boots versus sneakers and just your instinct as to where the business is going for back-to-school?

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Yes. No, I appreciate your comments about Steve Madden apparel because we're proud of the progress that we're making there. That was one of the few businesses that was up for us in the quarter. So even in this tough environment, we had a nice revenue growth in Steve Madden apparel. As you pointed out, we've been slowly expanding the distribution there and keeping it in premium distribution, regular price distribution, but expanding the footprint there, expanding our assortments within existing doors. And most importantly, the product is selling through, and the team is doing a great job. So excited about the path that we're on there. And then you asked about boots. And yes, that was really a highlight for us -- has been a highlight for us this spring and summer is the performance of boots. It's really not such a seasonal category anymore. Girls are wearing a lot of boots with dresses and shorts and skirts and at this time of year. And I think we've really nailed that. It's a bigger play for us in our DTC channels than in wholesale because some of the wholesale partners are -- haven't fully gotten on board with the way consumers are shopping right now. But it's been very successful for us. These are primarily tall shaft boots, [indiscernible], et cetera, have been very good for us. And so we feel good about boots going forward. And to your point, we've seen more energy in that category. That's been on the upswing, whereas the fashion sneaker category has softened a bit.

That makes sense. And then could you just follow up? I think you said it was the off-price and the mass business that was slowing. And I think you mentioned very briefly -- or one of you guys mentioned briefly some cancellations. Were the cancellations coming out of the mass area? And is something -- is it their customer? Or is it just their caution or price increases that they can take? I'm curious what they're saying and seeing versus what the department stores are seeing.

I would say there were cancellations across channels, although, again, the biggest issues were in mass and off-price. And particularly in Q2, I just want to point out with the mass channel because we do that -- a lot of the business that we do in those channels on an FOB basis where our wholesale -- where our customers are bringing the goods in and they are the important record and therefore, they are responsible for the tariff. Certainly, when we were looking at 145% tariffs out of China, they were canceling a lot of merchandise. So that was a lot of what you're seeing there.

Our next question comes from the line of Sam Poser of Williams Trading.

I just want to follow up on that last question. You talked about the 95% of the downdraft was from those channels. Were there channels that were up in the quarter? And if so, what within wholesale or brands that were up like Steve Madden, the core Steve Madden business or Dolce and so on?

I think Betsy Johnson was up in the quarter. we're really outperforming there. The team is doing a great job with the product there. Other than that, I think the key brands and channels were down in the quarter.

And moving on to the sourcing. What's -- you were moving product to -- you were moving some product to Brazil, and now Brazil looks like an absolute headache. So how are you thinking about the shifting of sourcing -- because I thought Brazil and Mexico were going to become a much larger part, but now it looks like a 50% tariff might put a [indiscernible] on some of that in Brazil. So I was just wondering where you're going with that.

Yes. To your point, we were focused on moving a lot of product to Brazil. We're going to have to wait and see what happens. I think that really goes not just for Brazil, but for a lot of the countries that we work with. So we've tried to create a more diversified sourcing footprint. And -- but there's obviously a lot of uncertainty still about where the ultimate tariff rates will land by country. And so we're going to have to wait and see what happens and then react accordingly. That's all we can do.

And when we -- I know you're not guiding, but when we look -- it sounds to me like from a wholesale perspective, excluding Kurt Geiger, it looks like -- I mean, it looks like the back half of the year, Q3 will look similar to Q2 and maybe slightly less worse and then there could be -- I mean, how are you sort of thinking about it? Just -- I mean, I know you don't want to give us guidance, but how are you sort of thinking about the responses that you're seeing and so on right now from more on the wholesale side of things?

Well, yes, we're not giving guidance, but I think you should assume that there will be continued impact from the tariff-related disruption. I think that's all as much as we're going to say about that.

And have you seen it hit the consumers yet? Or is this more like nervousness from the -- from your wholesale partners ahead of what they're nervous about with consumers, if that makes sense?

Yes. Overall, I think the consumer is basically hanging in there. I would say it's not the most robust consumer spending environment for fashion I've ever seen, but it's okay.

And then lastly, within your DTC business ex Kirk Geiger, can you talk about maybe a variance between what the store comps were and your e-commerce comps were in the DTC business? Were store -- did the stores outperform e-commerce -- or did e-commerce from a year-over-year outperform...

E-commerce was quite a bit better than stores.

For the core Steve Madden, excluding Kurt Geiger?

Correct.

Our next question comes from the line of Corey Tarlowe of Jefferies.

Just had a question for you on inventory. Is there any way to dimensionalize what was AUR versus units and the Kurt Geiger acquisition, just so we can have a bit of a more color and dimensionalization of what that up significantly number, what that number kind of dissects into?

Yes. So look, if you back out Kurt Geiger, the inventory was only up 1% year-over -- versus the Q2 of last year. And keep in mind, there's a couple of things impacting that. One is the tariffs that we pay, those inflate the inventory value or increase the inventory value. And then also, there's an impact to -- in transit from longer transit times. And there's really 2 pieces to that. One is as we diversify the transit times for our sourcing, the transit times from Cambodia, for instance, are longer than the transit times from China. And then also there -- just because of the overall disruption, there's sort of apples-to-apples increase in transit times. So China to China is a little bit -- it's about 3 days longer and so does Cambodia than it was a year ago. So those are really the 2 reasons. If you back those out, our inventory year-over-year, excluding Kirk Geiger, is really right in line with the revenue decline.

Okay. That's really helpful. I was wondering, could we also just run through a similar exercise with the OpEx as well because that was also up quite substantially, and it would be good to get a bit more color as to kind of what drove that.

Yes. Excluding [indiscernible], OpEx was up a little less than 3%.

Our next question comes from the line of Janine Stichter of BTIG.

You have Ethan [indiscernible] on for Janine. For my first question, I was just wondering on Kirk Geiger. Could you provide some more color on how the brand has performed since the acquisition closed as well as the current margin profile for the brand and where China sourcing sits today compared to the 80% number you gave last call?

Yes, the brand continues to perform. As I mentioned, we continue to see very strong growth, double-digit -- strong double-digit growth in digital. Particularly in the U.S., very strong performance and momentum there. As I mentioned, the new stores that they've opened are performing extremely well, ahead of where we expected them to be and on track to drive very strong 4-wall profitability. And then the brand is comping positively in the home market of the U.K. and its existing footprint. So continue to feel very good about the momentum there. In terms of the margin profile, again, look, we're not providing guidance, but what we've said, just to remind you is that last year, the business had EBIT margins of about 9.3%. That was in the year prior to our acquisition of them. We do expect that number to come down a bit this year because of pressure from tariffs. But obviously, over time, we think we can -- this will be double digit and then profitability.

Got it. And then on the China sourcing, just where it sits today compared to the 80% number you gave last call. Yes, I'm sorry.

Yes. So I think that they're in the low 60s currently out of China.

Our next question comes from the line of Anna Andreeva of Piper Sandler.

Two, just a follow-up on DTC on systems implementation. Did you say what that impact was to the second quarter? And curious what are you guys seeing in the DTC business quarter-to-date? And then to Ed, you've talked about getting back to double-digit margins in the past. Can you just talk about how we should think about that path of a margin recapture and just any time frame that you guys could provide?

Yes. Yes, I'll take those. So in DTC, yes, we did do -- we completed an ERP implementation in our DTC business and also a new POS in Q2. And I think the team did a great job. But as always, there's going to be a little bit of disruption. There were certain related to sort of moving inventory around, and we were limited in what we could do from an allocation standpoint for a period, couldn't do the fulfilling e-commerce orders from stores from a certain point, what we call send sales where we take an order in a store and send from another store. So anyway, we were limited for a period of time. We estimate that hit us about 110 basis points of comp in the quarter, something like that. And then we also had inventory disruptions from tariffs in the quarter. That was probably another 160 basis points or so because we canceled orders or had delayed orders because of the tariff disruption. So that did impact DTC in the quarter. But the good news is the system stuff is completely behind us, and we don't expect that to impact us going forward. we have seen a slight improvement in July versus Q2 in terms of comp quarter-to-date. In terms of getting the overall margins, EBIT margins back to double digits, look, there's no way we can provide any kind of time frames right now with all the uncertainty until we understand what the tariff regime is and can react to that, we can't provide any color around that. But as soon as we know what the rules of the game are, we'll be happy to tell you the path and the timing.

Okay. That's very helpful. And just as a follow-up, do you think KG should be a higher-margin business over time than the core business?

I certainly think there's an opportunity for it to be, yes.

Our next question comes from the line of Tom Nikic of Needham.

This is Matt [indiscernible] on for Tom. Can you just talk a little bit more about how the international business performed in the quarter, excluding Kurt Geiger you've seen any differences in performance by region?

Yes. We continue to see nice performance in our international business. Excluding Kirk Geiger, it was up about 8% in revenue or about 10% constant currency in the quarter. And we're on track to have high single-digit growth for the year in dollars, again, double digits in constant currency. And it's really -- we're seeing growth across all of the 3 primary regions. So EMEA, APAC and Americas ex U.S., all on track to see that kind of high single-digit type growth in U.S. dollars.

Our next question comes from the line of Dana Telsey of Telsey Advisory Group.

As you think about current trends Z, how was the Nordstrom anniversary sale? Is there any indicators from that as I've always thought about it as a read forward to potential holiday and what you're seeing? And then when you think about the trends at Kurt Geiger and what you're seeing sell-through there, how is it different or the same of what you're seeing with your brands? And then a follow-up.

Sure. Yes. The Nordstrom anniversary event went very well for us. We're really excited about what we saw there. I think it was the best sell-through performance that we've had in that event in a number of years. And so that gives us a lot of optimism going forward about fall and the products that our design team is creating. In terms of KG -- excuse me, Kurt Geiger sell-through, again, continues to be very strong, as we said, overall. And it's just a brand with very good momentum. But we're seeing good strong sell-through in Steve Madden and Dolce Vita and other brands as well.

Got it. And then on Kurt Geiger, the small portion that is in the U.S., are they -- are you increasing the prices a similar amount to what you're increasing for Steve Madden? And when does distribution of Kurt Geiger in any format, how do you see that expanding in the U.S. in terms of timing-wise? Is it this year or next year?

Yes. In terms of price increases, it's pretty similar to what we're doing in our other brands, maybe a little bit more in Kurt Geiger. I think we have a little bit more room there. And so we'll probably test going a little bit higher there. And then in terms of distribution, I think in the U.S., the big difference would be just opening more of our own retail stores over the -- in the coming years.

Our next question comes from the line of Jay Sole of UBS.

This is Natalie Colman on for Jay Sole. I wanted to ask about the amount of inventory you have on hand, especially for inventory coming from non-China. I mean do you have enough to last you through Q3 before the higher rates we're seeing from Cambodia, Vietnam and other countries go into effect? Or when would you expect the higher rate to kind of start flowing through the P&L?

Yes. Most of what we're going to deliver in Q3 would not be impacted. But as you know, we turn our inventory very quickly. And particularly in our wholesale business, we turn our inventory in and around 10 times a year. And so we do feel these impacts from tariffs when they're implemented earlier than others because we're bringing goods in and shipping them right out. So let's just keep that in mind.

I am showing no further questions at this time. I would now like to turn it back to Ed for closing remarks.

Okay. Well, thanks so much for joining us today. We hope you all have a great day, and we look forward to speaking with you on the next call.

All right. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.