Steven Madden Ltd (SHOO) 2015 Q4 法說會逐字稿

Good day, and welcome to the Steve Madden fourth-quarter 2015 earnings conference call.

Today's call is being recorded and at this time I'd like to turn it over to Megan Crudele of ICR.

Please go ahead.

Thank you.

Good morning, everyone.

Thank you for joining us today for the discussion of Steve Madden's fourth-quarter 2015 earnings results.

Before we begin, I would like to remind you that statements made on this conference call that are not statements of historical facts constitute forward-looking statements under the meaning of the Private Securities Litigation Reform Act of 1995.

Such forward-looking statements involve risks and uncertainties and other unknown factors that could cause actual results of the Company to differ materially from historical facts or any future results expressed or implied by forward-looking statements.

These statements contained herein are also subject to the risks and uncertainties as described from time to time in the Company's reports and registration statements filed with the SEC.

Also please refer to the earnings release for information on the factors that could cause actual results to differ.

Finally, please note that any forward-looking statements used on today's call cannot be relied upon as current after this date.

I would now we turn the call over to Ed Rosenfeld, Chairman and CEO of Steve Madden.

Thanks, Megan.

Good morning, everyone, and thank you for joining us to review Steve Madden's fourth-quarter and FY15 results.

With me to discuss the business is Derek Browe, the Company's Director of Finance and Investor Relations.

We delivered solid financial performance in 2015, bouncing back after a tough 2014, successfully capitalized on some new fashion footwear trends, recorded strong growth in both sales and earnings in our retail and e-commerce business, made significant progress in building our newly acquired Dolce Vita and Blondo brands, and further expanded our international presence.

As expected, our earnings performance improved as the year progressed and we finished 2015 with both net sales and EPS up about 5% for the year.

The year ended on a good note in the fourth quarter despite an overall tough retail environment.

We delivered EPS growth of 27% in Q4 on the strength of margin improvement in both wholesale and retail.

We achieved this growth during one of the warmest seasons on record, which pressured seasonal products like boots and cold weather accessories and contributed to a heavily promotional retail environment.

Before I turn the call over to Derek to walk you through the financials, let me spend a few minutes recapping the year in a little more detail.

First, Steve and his design team did a great job in 2015 of creating fashion-forward product that resonated with our consumers.

Our dress and fashion-sneaker offerings were particularly outstanding.

The on-trend merchandise assortment led to a dramatic improvement in our retail-segment performance.

Retail-comparable store sales were up 11.1% for the year and operating margin for our retail business expanded 260 basis points.

We remain pleased with the momentum in our retail business and expect continued improvement in 2016 as we work toward our goal of a 10% operating margin in this segment.

While the strong product assortment also resulted in improved sell-through performance in the wholesale channel, our overall wholesale footwear financial results were negatively impacted by a number of factors during the year, including the lingering effects of a challenging 2014, the West Coast port slowdown in the first half, and the extremely unfavorable weather in the back half.

As we enter 2016, we have better momentum with our key wholesale partners than we did a year ago and are confident that we can show sales and earnings improvement versus 2015 in this segment.

That being said, the overall tone among most of our largest wholesale customers is one of caution and we are planning our business accordingly.

Within the wholesale footwear segment, the biggest highlight in 2015 was the progress we made with our newest brand acquisitions.

In Dolce Vita, our strategy of focusing our efforts on the flagship Dolce Vita brand paid dividends.

Dolce Vita was a clear outperformer at retail in a tough fall season and as we head into 2016, the brand's positioning with both retailers and consumers is stronger than it has ever been.

We also executed on a number of operational initiatives and the result was a business that went from losing money in 2014 to a 7% operating margin in 2015.

For spring 2016 we have relaunched the Diffusion brand DV as an exclusive brand at Target in footwear and handbags and for fall 2017 we are launching Dolce Vita apparel under a licensing agreement with Amerex Group.

Overall, we couldn't be happier with the direction we're headed in Dolce Vita.

We are also really pleased with what we're seeing in Blondo, the waterproof boot brand we acquired in early 2015.

Blondo sales in the US were up approximately 50% in our first year of ownership of the brand.

Overall sell-through performance was good, particularly in light of the unfavorable weather and we expect another year of strong growth in 2016.

Turning to wholesale accessories, we had a solid year in 2015 with net sales up approximately 5% compared to 2014.

Our handbag business performed well; both branded and private label had strong gains for the year, but we did see pressure on this business in Q4 which we expect to continue into Q1 2016 due to overall weakness in the handbag market and excess inventory in the channel.

Our cold-weather accessories business was, of course, challenged in 2015 by the historically warm weather in the back half and we see opportunity for improvement in that division in 2016.

Overall we are expecting our wholesale accessories business to be approximately flat in 2016 compared to last year.

Finally, we continue to make significant progress on our most important long-term growth initiative which is growing our business internationally.

Overall international sales were up 33% in 2015.

Our net sales international distributors were up 23% compared to the prior year with particularly strong gains in Asia and the Middle East.

And our SM Mexico business, which we acquired in late December 2014, had an outstanding first year under our ownership with retail comps in excess of 20% and wholesale sales up over 50% in local currency.

In sum, we had a good year in 2015, stabilizing our core business after a challenging 2014 and taking significant steps forward on our key initiatives.

We enter 2016 with positive momentum.

Our brands are outperforming the competition and we are confident in the strength of our current product assortments.

That said, we're cognizant that many of our wholesale customers are taking a cautious approach to initial orders in the wake of a tough fall season and therefore we are planning our business conservatively in the near term.

As we look out farther, however, we remain as optimistic as ever about our Company's long-term growth prospects given the underlying strength of our brands in our business model as well as the significant opportunities we have available to us.

With that, I will turn the call over to Derek to review our financial performance in more detail and provide our outlook for 2015.

Thanks, Ed, and good morning, everyone.

Turning to our financial results for the fourth quarter, consolidated net sales grew 0.5% to $344.3 million compared to prior-year net sales of $342.6 million.

During the quarter, sales growth in both our wholesale footwear and retail businesses was mostly offset by a decline in our wholesale accessory business.

Our wholesale net sales in the quarter decreased 1.8% to $265 million.

Wholesale footwear net sales increased 3.3% to $202.4 million.

Excluding sales from acquisitions, the wholesale footwear segment was down 2.4%.

Overall, the boot category was soft, particularly tall shaft boots, though we did have strong success with over-the-knee boots and some of our ankle booties.

Additionally our dress and sneaker offerings were strong during the quarter as they have been throughout 2015.

In wholesale accessories, net sales declined 15.2% to $62.6 million in Q4 compared to $73.8 million in the prior-year period.

The decline was partially driven by the unseasonably warm weather which had a strong negative impact on our cold-weather accessories business.

The decline was also attributable to a shift of handbag sales from Q4 into Q3 and lower sales through our off- price channel.

In our retail division, net sales increased 8.9% to $79.3 million.

Our comps were once again strong at 6.1%, an impressive result given we had a comp decline in the boot and bootie category which accounts for more than half of our retail mix in the fourth quarter.

During the quarter we opened one full-price store in Mexico and three outlet locations in the US.

We ended the quarter with 169 Company-operated retail stores including 40 outlets and four e-commerce stores.

Turning to other income, our commission and licensing income net of expenses was $3 million in the quarter versus $2.3 million in last year's fourth quarter.

Despite the headwinds from a very promotional environment, we increased our consolidated gross margin by 180 basis points to 36.1% compared to 34.3% in the prior year with increases in both wholesale and retail.

Wholesale gross margin increased to 28.2% from 26.9% last year due to improvements in both the wholesale footwear and accessory segments.

Gross margins in the retail division increased to 62.3% compared to 61.6%, as strong product performance resulted in higher full-price selling and lower promotional activity as compared to the prior year.

Operating expenses for the quarter were $88.5 million or 25.7% of net sales, which was consistent with the same period last year when operating expenses were $87.8 million or 25.6% of net sales.

Operating income for the quarter totaled $38.7 million or 11.2% of net sales compared to last year's fourth-quarter operating income of $32 million or 9.3% of net sales.

Our effective tax rate for the quarter was 34.1%, compared to 35% in the same period last year and net income for the quarter was $25.7 million or $0.43 per share diluted, compared to $21 million or $0.34 per share diluted in the fourth quarter of 2014.

Now I would like to briefly touch on full-year results.

Consolidated net sales for the year increased 5.3% to $1.4 billion, compared to $1.3 billion in 2014.

Operating income for the year totaled $171.7 million or 12.2% of net sales compared to 2014 operating income of $167.6 million or 12.6% of net sales.

Operating income for 2015 included a net benefit of $3 million related to an early release termination of our Fifth Avenue store location as well as a $3 million loss related to the partial impairment of our Wild Pair trademark, both in the first quarter of this year.

Our net income for 2015 was $112.9 million or $1.85 per diluted share.

This compared to net income of $111.9 million or $1.76 per diluted share in 2014.

Our balance sheet remains strong.

As of December 31, 2015, we had $193.3 million of cash and marketable securities and no debt.

Inventory increased 10.1% to $102.1 million compared to $92.7 million in the prior year.

Our consolidated inventory turns for the last 12 months ended December 31 was 8.7 times and our CapEx in the quarter was $5.9 million, bringing our full-year CapEx to $19.4 million.

During the quarter we repurchased approximately 1 million shares for approximately $31 million and for the full year we repurchased over 3.7 million shares for approximately $136 million.

Now turning to guidance.

For FY16 we expect that net sales will increase 2% to 4% over net sales in 2015.

Diluted EPS for FY16 is expected to be in the range of $1.93 to $2.03.

Now I would like to turn it over to the operator for questions.

(Operator Instructions)

Camilo Lyon, Canaccord Genuity.

If we could start off, Ed, and could you talk about how the different channels are performing with regard to your wholesale footwear business?

Where are there incremental pockets of weakness or caution as you're seeing the first of the year starts out to flow through?

And if we think about the good product that you are bringing to market compared to the overall cautionary stance by your wholesale partners, where is there an opportunity for a reorder scenario to occur should demand trends normalize after we get out of this lingering Q4 holiday cold weather scenario?

In terms of the first part of your question which was about the difference in performance by channel, I actually think we're not seeing as much variation by channel currently.

So whereas that was something that we were calling out for a good chunk of 2015, right now I don't think we're seeing a big difference between what we are seeing in, say, department stores, off-pricers, private label accounts, et cetera.

I think what we are seeing is that overall on the whole, wholesale customers across the spectrum are pretty cautious.

A lot of fall holiday sales overall were not great.

A lot of folks missed their sales plan.

A lot of folks had elevated inventory levels and they have moved to try to get those in line and they have also turned a little bit more cautious with their order patterns going forward.

The good news is, for us, that we believe we have been an outperformer with the vast majority of our big wholesale customers in terms of sell-through.

We clearly have momentum with the brand and with our product, which you can see with our own retail comps.

We believe that we're going to do better than our peers and that, in fact, our big wholesale customers are planning our business better than our peers.

But clearly it's, overall, a cautious environment.

Think the second part of your question was where is there ability for upside here; is that right?

Yes.

Just going into the top line guidance of 2% to 4%, it just seems that we strip out some of the acquisition benefit, that you are looking for flattish to maybe up 1% or so in the front half, and it seems like that is running through the year.

First, is that correct; is that a correct read?

And, second, it sounds like -- it looks like you are taking the conservatism that is being placed in your Q1 business and running that through.

Is that, in fact, what you are doing and really not anticipating any material improvement in the business?

First of all, I want to clarify, I know you understand this, Camilo, but just for everybody listening that we have anniversaried all of the acquisition, so there isn't any inorganic growth here.

I think what you were referring to is that some of the more recent acquisitions have the potential for stronger growth in the near term.

But it is -- it is not growth through acquisition, per se, I guess.

I want to clarify that.

Yes, the guidance does assume that -- it does not assume, I should say, any dramatic improvement in the overall environment.

If inventories get cleaner and the wholesale customers see good sell-throughs and start to get more aggressive with order patterns, that would certainly be an opportunity for upside and I think we would be very well-positioned to benefit from that and to chase into that demand should it develop.

On that topic of inventory, it's come down from last quarter, still a little bit elevated, I think probably more than you would like it to be.

Can you talk about the composition of that inventory and if there were an increase in demand, when would we likely, when would we see that materialize?

It is probably not in Q1, but when could there be a matching of inventory that you have on hand versus incremental demand from your wholesale partners?

You're asking about our inventory on our balance sheet not on the channel, correct?

Correct.

I feel actually pretty good about the inventory level for us.

If you strip out the acquired businesses, SM Mexico and Blondo, we're up about 5% at year end.

And I think more importantly, I feel good about the composition of inventory and the inventory content there.

In fact I think, particularly in our retail segment, the composition of that inventory is a little bit healthier than it was a year ago.

I think you will continue to see inventory levels converge towards sales, that is something that has been happening recently.

Keep in mind, I don't think they should be exactly in line with sales growth on a consolidated basis, because our retail business is growing faster than our wholesale.

And as you know, our wholesale business turns 3 to 4 times faster than our retail business.

On a consolidated basis, when retail is growing faster you are always going to see inventory growing faster than sales.

Just the last one I had on you mentioned the strength in retail despite some of the cautionary stance at the wholesale channel.

You have had really good comps pretty much throughout the year.

You are coming up against some very difficult comparisons in 2016.

Can you help us understand how we should think about some of the progression around your retail comps given the incremental product you are bringing to market that has been received well and some of the positive trends you are seeing in the business today?

We are going up against double digit comps for each of the next few quarters, but I still continue to feel good about the momentum we have in our retail business.

And I think we do have an opportunity to comp positively against the double-digit comps.

We have cautioned people that clearly Q2, in particular, is a very tough comparison.

We were up 18.5% comp in last year's 2Q, but overall we continue to feel good about what we're seeing in our retail business.

Thanks a lot.

I'll jump back in the queue.

Good luck.

Erinn Murphy, Piper Jaffray.

I guess circling back on one of Camilo's questions on the sales guidance of the year of 2% to 4% decelerating from the 5% last year.

Is that more of a nod to the overall environment decelerating or is there something else fundamentally that we should be aware of, of that step function change?

I guess I would have thought the organic growth would have come back a little bit stronger.

And I know there's some caution around replenishment or stuff that is not fully in there.

But any help you can give us on the magnitude of the deceleration would be very helpful.

I guess I wouldn't characterize it as deceleration because, in fact, if you strip out acquisitions, we were actually down, I think it was 0.5% last year.

So we are expecting an improvement from that to the 2% to 4% because there is no acquisition growth again in 2016.

As to why it is not faster than that, yes, I think that is really a function of the overall environment.

We are still over 80% wholesale and most of our wholesale customers are quite cautious right now.

The other thing is we did call out some near-term headwinds in the handbag category, so we're looking at our wholesale accessories business to be about flat this year.

And then I guess the last thing I would touch on is that we do have some negative FX impact in our international businesses, particularly Canada and Mexico, which have created a little bit of a drag.

If you were to then think about, now that the acquisition growth is now organic and in the base, could you maybe [for shrink] for us how you're thinking about the biggest drivers of growth within the DV, Blondo and I guess SM Mexico as well, as we go into 2016?

Where are you expecting to see the most growth out of the newly acquired businesses?

I think you have them in the right order.

I would say Dolce Vita is first, Blondo would be second and SM Mexico would be third.

Part of that is a function of the size of those businesses, though.

Dolce Vita is a significantly bigger business than the other two.

On a percentage basis, we expect to see quite strong growth in Blondo.

And SM Mexico, again, on a constant currency basis, we're looking for strong growth.

But unfortunately, at this moment, when we translate that back to US dollars, that FX impact is chewing up a lot of that growth.

Got it.

In terms of some of the newness you are seeing in footwear, now that we are cycled through the winter season, can you talk about what you are seeing in terms of dress, sneakers or any other categories that are really standing out to you guys right now?

Clearly fashion sneakers is a category that we are really excited about what we're seeing there, so it has really exceeded our expectations and we have really developed a really strong presence in that category.

We went from having one real Hall of Fame style to now having a full collection in the category with high-tops, low-tops, slip-ons, lace-ups all performing.

And I think, particularly if you look at really fashion players, fashion footwear players at our price point, we have really developed a market leadership position in this category, so we're really excited about that.

Dress shoes, you mentioned and you hit the nail on the head there because that has also been a really strong category for us, particularly the opened-up dress shoes, the dress sandals we're really excited about, particularly some of the things we're doing out of Brazil.

We're having an opportunity to do more product out of Brazil because of the strength of the US dollar against the real, and we think we have some great product coming out of there with a real strong price value proposition and the customer is really responding to it.

Those are a couple categories that we're probably the most excited about.

I guess I would also call out heavy heels is something that is really important right now.

Anything with a leg wrap continues to do well.

We have got a good amount of trends to sink our teeth into, which we are pleased about.

I guess longer term, you guys have talked about an operating margin in the mid teens.

How comfortable are you with that target at this point and how are you thinking about the path or the timeframe to get there?

Thanks.

I think we continue to think that that is the right long-term target.

I don't think there is anything structurally that would lead us to believe that we can't get there.

However, we're looking this year to be essentially flat, the guidance implies essentially flat out margins.

And so I think we have to -- It's going to be a couple of years before we can get to that (inaudible) target.

Got it.

One more clarification.

The buyback is not included in your EPS guidance for the year' is that correct?

Correct.

Jay Sole, Morgan Stanley.

Wondering if we can dig into the guidance a little bit on gross margin, SG&A, how you're thinking about those two line items, as well as the cadence for earnings growth as we go through the four quarters of the year?

I mentioned the flat op margin.

I think that we think there is some opportunity for modest gross margin improvement, but at this sales growth rate we would give a little bit of that back in terms of higher SG&A as a percentage of sales.

And that's how we get to the flat operating margin for the year.

In terms of the earnings throughout the year or the quarterly breakdown, I don't think there is a heck of a lot to call out in terms of seasonality that is different from what you have seen previously, other than that in some respects I think Q1 is our toughest quarter, at least in comparison to the prior year.

I think that we are looking for little to no EPS growth in Q1.

The reason for that, in addition to just what we have already laid out, which is wholesale customers taking a cautious approach coming off this tough fall holiday season.

But in Q1 is really where we are seeing the pressure on the handbag business.

And we have seen, particularly in the off-price channel, we have seen a pull-back in that handbag category.

We felt that in Q4; we're feeling that again in Q1 as those off-price retailers have elected to -- or because there is so much excess inventory out there, they have elected to buy closeouts as opposed to up-front buys from us.

So that is creating some pressure on Q1.

The good news is that we see that coming back for Q2 and our order files supports that.

I think that pressure will ease as we go forward, but that is definitely a little bit of a headwind in Q1.

Got it.

If I can ask one fashion question.

Can you touch on men's?

How has that business been developing and what is your expectation for the year in men's?

Men's was another business that came under pressure in Q4 and as business slowed down, as boots did not perform well and we saw retailers start to pull back because they were seeing their inventories get a little out of whack, we actually felt that pretty acutely in men's, even more so than in women's in Q4.

So we had a decline in the men's business in Q4.

Again, that is another one that we have got some pressure on Q1 as retailers continue to try to get their inventory in line.

But, again, here we see this business picking back up for Q2 based on the order file we have in hand and the conversations that we had with our retailers at the platform show in Las Vegas last week.

That business, again, little bit of pressure in Q1, but we see that coming back in for Q2.

And you asked about the fashion.

The thing that is helping us I think in Q2 and going forward is that the dress category, specifically the fashion dress category, is coming back and that is a category that we have a very nice position in.

Corinna Van Der Ghinst, Citi.

Could you maybe talk about or give us a sense of percentage-wise maybe of how much of your second-tier business is moving towards an in-line model as opposed to purchasing SMU's upfront?

And are you concerned about the change in visibility that that creates and just in terms of potential cannibalization from your more traditional in-line wholesale accounts like Macy's?

No, we're definitely not concerned about it.

In fact, I think it is a positive development for some of these retailers to do more of that business and really have the most fashion-forward product that we have and it is also helping them to raise their AURs to some degree.

In terms of a percentage, it's still a relatively small percentage of that overall pie that you are talking about.

I do not have the number but it is a small percent still.

Great.

I was wondering how e-commerce performed versus your expectations this quarter?

Did you guys see a greater shift within your direct-to-consumer channel this holiday?

And can you maybe talk about some of the initiatives that you have on the docket this year as you lap the replatforming from last year?

E-commerce did outperform bricks and mortar for us in Q4, as it did for most.

We were up about 13% comp in our E-com business.

That does not include the growth which was much stronger than that in Canada because we launched the new StevenMadden.ca last year.

But that will come into the comp, I believe, in Q2 of this year.

We are continuing to see real strong performance out of our e-commerce business.

We're very pleased with what we are seeing from that channel and there is a lot of things we continue to work on to strengthen it.

As you know, we are still in the process of bringing some of our brands onto the new platform and the next one is going to be Dolce Vita, which we hope to get up on our new platform sometime in June/July.

Great.

Just lastly a bigger picture question on supply chain.

You guys have clearly had a competitive advantage in terms of your speed to market.

Just as the broader industry also shifts from initial open to buys to more at-once orders, are you guys seeing more of your competitors move to a faster model or model that is closer to home?

Or can you give us your thoughts on where you guys stand versus the competition?

I think everybody is trying to get faster and that just creates pressure on us to continue to try to get faster as well.

At this moment, I still think we have a speed to market advantage over our key competitors and it is going to be a strategic imperative for us to continue with that.

Taposh Bari, Goldman Sachs.

Ed, question for you.

A lot of your retailers are struggling.

This has been an ongoing theme for a while, not sure when it ends, but I guess the question for you is do you feel like your fate is dependent on their success at a high level?

Maybe ask this a different way: You have things like acquisitions, international DTC opportunities, I'm curious to see if those are areas that you are looking to accelerate in light of the environment that you are managing through in the US?

I think that's a good point you are raising and certainly we do have to look for some alternative places to grow when some of our key wholesale customers are not showing a lot of growth.

International is clearly a big priority here.

You saw the strong performance we had in 2015, and we are very focused on continuing to grow that business.

You are seeing us grow our direct-to-consumer business faster than the wholesale business.

We are adding particularly new stores on the outlet side as well as growing our e-commerce business.

In fact, the growth from the new brands, all of that is important.

That being said, the US wholesale footwear in particular market is still very, very important to us and we need to find out how to grow there, and we're working pretty hard with our wholesale partners to do that.

We're also looking at some of the channels that are showing faster growth.

So whether that is some of the peer play e-commerce guys or some of the off-price retailers, we are looking at ways to grow with them.

Great.

Just a quick follow up on the category, call it fashion footwear for teen, women, that you obviously are concentrated in.

About a year ago, it feels like that is when your tone improved for the first time in a while.

Do you feel like -- are you still feeling equally as optimistic on the fashion cycle for the product that you are operating in?

And if not, what has changed?

I do.

I feel quite good about where we are in the fashion cycle and the opportunities that we have available to us in terms of fashion trends to capitalize on.

That part I am not worried about.

Jessica Schmidt, KeyBanc Capital Markets.

Just given some of the heavier inventories in the channel, can you talk about what you are seeing in terms of pre-buys with the off-price channel?

I know you mentioned fewer upfront orders in handbags, but what are you seeing in footwear?

I think if you look at, at least our numbers compared to last year, it looks a little bit better in footwear.

But keep in mind, we had a pull- back in 2015 for that very reason, that some of the off-pricers were electing to buy fewer upfront goods and focusing more on closeout.

I think that business has now stabilized and we can grow off that slightly smaller base.

But we have not really -- I also want to say we haven't seen the pendulum swing back either to where it was pre-2015.

We are looking for modest growth in that channel in footwear and, again, some pressure in that channel in handbags.

Just quickly on the handbag market, it seems like that has gotten more challenging.

You mentioned excess inventory, I guess where are you seeing this and just given some of the changes you've made in 2014 to your offering, how are you positioned if the environment does get more promotional?

In terms of where we are seeing the promotions, I think that is pretty widespread across the spectrum.

It was, particularly in holiday, a pretty promotional category.

In terms of what we're doing from a product perspective, I still feel we're on the right track.

And as I said, despite the near-term headwind in Q1, we do see that with this business starting to rebound in Q2 and I think we will be back on a better path as we move into the back half.

Just quickly, are you seeing any performance differences by region?

I know you had talked about some tourist-impacted areas a while ago.

I was wondering if you were seeing anything in maybe some oil- impacted regions and if any of the tourist markets have seen some improvement?

In terms of the regions that would be impacted by oil, we just don't have a very heavy exposure there.

We have seen some impact to traffic in sales, but it is not a needle mover for our overall retail business or our overall consolidated results.

The one thing that we have called out that we continue to see is this weakness in New York City which we attribute to the tourism impact.

Again in Q4, while we had a 6% consolidated comp, we had a down comp in New York City and I think we are still seeing pressure there.

Hopefully, we're going to start to lap this in a couple of months and be able to start to see some positive comps there again, but we are not there yet.

Jeff Van Sinderen, B. Riley.

Just a follow-up on the retail segment.

Maybe you can touch a little more on the performance of your outlet stores versus full price?

And then maybe also how your newest outlet units are performing versus your plan?

And then I know you also mentioned -- I think there was a closure of one New York store?

Maybe if you can touch on that.

The outlets are performing well.

We're pleased with what we are seeing there.

They were actually stronger than the full-price stores in fourth quarter.

For the full year, outlets were up about 13.3% and full-price stores were up 10.5%.

Both quite strong, but a little bit stronger in outlet.

We're also pleased with what we're seeing from the profitability there, the four-wall operating margins are a touch higher now in outlets than they are in full-price stores.

In terms of the new stores, we are also on track in terms of productivity of the new stores, so we are pleased with what we're seeing there and you will see us open another, say, 10 to 12 outlets again in 2016.

In terms of the store closure, I think you might be referring to in first quarter of last year we closed our Fifth Avenue location.

I cannot think of anything else in New York that closed since then.

Got it.

That is what I was thinking of, thanks.

As far as international, maybe any more color you can give us on where you are most confident that you can grow this year, what progress we should look for, maybe by country there this year?

Overall, again, international remains a real important growth opportunity for us.

I think I still view the Middle East as a really important growth region for us.

I think we should see some nice growth there in 2016.

We've got a very strong partner in the UAE, as well as in Saudi Arabia, as well as in Israel, so we are excited about that.

We are working on some things in Europe which, hopefully, we will be able to talk about on the next call which should field some growth in that region as well.

Finally, is there anything in terms of opportunities you might have this year for sourcing, supply chain, anything that is shifting there that could potentially help you?

I think the biggest thing is what I mentioned earlier which is because of the strength of the US dollar, we are able to work more in terms of in some other regions that we haven't been able to as much of late.

So we are doing a lot more sourcing out of Brazil.

That is probably the most important, but we're also doing more sourcing out of Italy.

We think we are able to get product that really has a real value to the consumer out of those countries, and it is product that, frankly, was not affordable for our price point a few years ago.

That is probably the most significant thing.

Obviously there has been the revaluation in China as well and we are capturing some benefit from that.

Some of that we're putting back into the product to try to increase the value proposition there and some of it we will capture in gross margin and, of course, some of it we will have to share with our wholesale customers.

Got it, okay.

Thanks very much and good luck for the rest of the quarter.

Sam Poser, Sterne Agee.

Ed, real quick, what share count should we use for the full year?

Given that we don't have any buybacks in the guidance, it should be pretty similar to where it was in 2015.

So about $61 million?

Yes, that is a round number.

When you look at the same-store sales for the year ahead, you had some really good numbers.

Should we be thinking about low single digits with Q2 being in the flat range?

Is that a good way to think about it?

Or do you think you can do a little better than that?

We really do not provide comp guidance, so I will leave that to you to build your model there.

You can always change what you do.

(Laughter) I appreciate the offer.

When we looked at Macy's and Dillards just came out with their numbers the other day, and their inventories look like they were pretty much in line with sales.

Are they beginning to get clean?

The guidance that you are providing, was that guidance basically as what you were seeing as of December 30 or is this guidance as to what you are seeing today?

The guidance incorporates our most updated thinking.

In terms of inventory in the channel, yes, I do believe that retailers -- many of our wholesale customers have moved through a lot of inventory recently.

I think they are getting cleaner.

I wouldn't say that across the board everybody is exactly where they would like to be.

They're certainly much better than they were at the end of December.

At platform, there was some commentary on some of your new product, I believe it was some of the open-toed dress, some of the sneakers and a few others, and I think some of the flat sandals, that you were already starting to see some reorders now.

I think it was one of the first questions asked, the guidance you are giving is basically your visibility now, but that is going to probably change a lot by the end of March when Easter comes and depending what the spring looks like.

Is that a fair statement?

Yes, that is a fair statement.

As you know, Sam, relative to many of our competitors or many of the companies that you guys look at, we work close to season and we chase pretty darn well, because of our speed-to-market capability.

So there is clearly potential for things to get better, but this is what we see today.

Lastly, you talked about Brazil and Italy.

Can you give some idea of the percentage that you produced in 2015 out of those markets or shipped out of those markets versus what that percent of your total buys are looking like for 2016, because I would think you are going to save a lot of money on freight and you can make smaller runs without it costing you a fortune out of those markets as compared to China, if I am not mistaken.

I would say if you look at what we are ordering right now, and we're just talking about the Steve Madden line because, of course, many of the more moderately priced lines are still exclusively out of China.

But if we think about just Steve Madden, it is only around 50% out of China.

We have got 15% out of Brazil, another 15% out of Mexico, 10% out of Italy, and about 10% other, which would include India and some other places.

I hope that added up to 100%.

I think it was a little more, but --

At any rate, I don't have, off the top of my head, what Brazil and Italy were last year but meaningfully smaller than that.

When you combine Mexico, which I also would gather would be growing, when you add Mexico in those three countries, you are talking about the ability to come a lot faster to market and significantly less freight cost, I would think, on a year-over-year basis.

That is right.

Well, thank you very much and good luck.

Scott Krasik, Buckingham Research Group.

Just some follow-ups, international what percentage of sales was it in 2015?

11%.

11%.

DV, how much in sales roughly?

It is around $80 million in 2015.

Blondo, if I remember correctly, the US portion when you bought it was sub $10 million; is that --?

Yes.

Good, thanks.

The DV at Target rollout, both shoes and handbags, is that all 1Q, is that spaced out over 1Q, 2Q?

What is the expectation for fall?

And generally speaking, how meaningful can this be?

One clarification on Blondo, it was sub $10 million when we bought it in the US, not anymore.

In terms of DV, the initial shipments there were in Q4 of 2014 -- excuse me, 2015, so you did have that showing up in last year's numbers in December.

You will see more of that throughout the year.

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

Just what is the plan for fall going forward and then how meaningful it is compared to maybe Candie's, or Peek or some of the other big programs you have had?

It is an important brand for them.

It is all door, in shoes and bags, and it is doing very well.

It is exceeding plan.

In terms of what the sales numbers look like, particularly for something like that this is one account, we don't disclose that.

But you are going forward for fall in both categories?

Yes, we expect this to be a long-term brand in the store.

Seems like there are a lot of tailwinds in terms of the gross margin outlook for 2016, but you are only guiding to modest improvement.

We would have expected, I guess, a little more recovery.

What is holding that back?

I just think it is a challenging overall environment, that's all.

I hope that we can get a little bit more than what I articulated earlier, but this is what we're seeing at the moment.

So assumptions around additional markdown support could be an upside, a place for upside?

Or you are just forced to compete and to get market share you have to give better term up-front pricing?

What's the --?

We have not assumed any material improvement over 2015 in terms of markdown support, so if we can do better than we did last year, that would be upside.

That makes sense.

Did you say how many stores you were going to open in 2016?

We didn't discuss what we're doing.

The plan is to do five to seven full-price store openings, but that is going to be mainly in Canada and Mexico.

And then on the outlet side, I think Ed commented that is an area we will continue to focus openings.

We're looking at 10 to 12.

Corinna Freedman, BB&T.

Quick question on the apparel for Dolce Vita.

It does appear to be a bit more refined than its previous foray into apparel.

I'm wondering if you can talk about the changes in strategy there going forward?

And does this open the door for standalone retail stores that would include apparel?

My second question is on the core Steve Madden line.

Are there any opportunities in dress and athletic to take up pricing?

It does seem like you have more styles over $100 this year than you did last year.

Thank you.

In terms of the Dolce Vita apparel, as you point out, prior to us acquiring the business, they did have an apparel line for a few years and it actually did pretty well.

It was not a tiny business.

But they had closed it prior to us acquiring the business, and the reason that I think they felt that, while it was doing well, it wasn't 100% aligned with the footwear, and wasn't really consistent with the vision for the brand.

So we have now licensed it out and worked very closely with the licensee to make sure that this apparel line really has that Dolce Vita brand essence.

And I think it is much more in line with what we're doing in the shoes and we are really pleased about it.

So we are excited to see how that does when it starts shipping in fall of this year.

In terms of AURs, we will see selectively where we can try to push price.

If we have great quality dress shoes, for instance, out of Brazil, there may be an opportunity to get a little bit more on those products.

But given an overall environment that is not particularly robust, we also want to be careful about trying to push price too much.

We really want to make sure we are delivering great value for the price.

Steven Marotta, CL K (sic) & Associates.

Considering the seasonal weather patterns play such a large role in retail traffic trends and there's an inventory overhang currently with a little bit of winter merchandise in the wholesale channel, what is better for Steve Madden in the next four weeks if we were to look for mile markers as it pertains to weather?

Is it cold weather in order to clean up what is this winter overhang in the wholesale channel or is it warmer weather in order to spur your full price [going].

What are you rooting for?

I think we would still rather have warm weather and sell out to spring goods.

That's helpful.

The second question is I had to join the call late, did you comment at all on quarter-to-date trends, either at wholesale or Company-owned retail?

We did not.

Still a few minutes left in the call.

(Laughter) I don't think so.

No worries.

Thank you much.

With no further questions in queue, I would like to turn it back to Management for any additional or closing remarks.

Thanks, everybody, for joining us on today's call.

We look forward to speaking with you on the next call.

Have a good day.

That concludes today's conference.

We thank you for your participation.