Steven Madden Ltd (SHOO) 2014 Q4 法說會逐字稿

Good day and welcome to the Steve Madden Ltd fourth-quarter 2014 earnings conference call.

Today's conference is being recorded.

At this time, I would like to turn the conference over to Jean Fontana of ICR.

You may begin.

Good morning, everyone.

Thank you for joining us today for the discussion of Steve Madden's fourth-quarter 2014 earnings results.

Before we begin, I would like to remind you that statements made in this conference call that are not statements of historical facts constitute forward-looking statements within 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 results or any future results expressed or implied by forward-looking statements.

These statements contained herein are also subject generally to other 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 risk 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 like to turn the call over to Ed Rosenfeld, Chairman and CEO of Steve Madden.

Thanks, Jean.

Good morning, everyone.

Thank you for joining us to review Steve Madden's fourth-quarter 2014 results.

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

Our Company faced a number of challenges in 2014, including a tough retail landscape, a lack of significant fashion footwear trends, and toward the tail end of the year, headwinds from the west coast port slowdown, as well as challenges caused by production delays on goods from Mexico.

The result was financial performance of the fourth-quarter and full year 2014 that was not up to our standards.

In the midst of this challenging year, however, we remained steadfastly focused on what was controllable in our business, in order to ensure we are well-positioned for future growth.

To that end, we made a number of investments during 2014 that we believe strengthen the business and enhance its growth prospects for the long term.

During the year, we added two strong brands to our portfolio with the acquisitions of Brian Atwood and Dolce Vita.

Brian Atwood is the first true global luxury brand in our portfolio and we believe there is a significant untapped potential in both Brian Atwood and the B Brian Atwood diffusion brand.

We will be relaunching B Brian Atwood for fall 2015, with a product assortment that will include both footwear and handbags.

In Dolce Vita, we acquired one of the premier contemporary brands in the footwear industry, and a strong complement to our portfolio as it targets a customer and price point that we do not address with our other brands.

While Dolce Vita is a powerful band with a loyal following and a well-earned reputation for outstanding design, there are significant opportunities for operational improvement in this business.

Inventory management is one such opportunity and in fourth quarter, our first full quarter of ownership, we moved aggressively to clear out excess inventory.

Dolce Vita with dilutive to earnings by approximately $0.03 per share.

Going forward, we believe we have a solid plan in place to improve gross margins and rationalize expenses.

We think we can begin to see modest EPS accretion from this acquisition in the back half 2015.

In addition to adding a couple strong brands to our portfolio during the year, we also further expanded our footprint in international markets, [acquiring] our distributor in Mexico and forming a joint venture in South Africa.

On December 30, we closed the acquisition of our Mexican distributor SM Mexico.

SM Mexico has marketed the Steven Madden brand in Mexico since 2005 and distributes products in the wholesale channel, as well as 21 Steven Madden branded retail stores.

We see great opportunity in Mexico and plan to continue to grow in this important market by enhancing our presence in leading department stores like El Palacio de Hierro and Liverpool, expanding into new wholesale accounts, growing our retail store base, and introducing certain of our other brands, like Dolce Vita, into the Mexican market.

In addition, we expand our partnership with House of Busby in South Africa during the year.

We've worked with Busby as our distributor for the Steven Madden brand in the country since 2011.

Based on the success we've seen thus far, elected to expand the pressure by forming a joint venture.

We now own 50.1% of the business in South Africa, which includes 4 Steve Madden retail stores and 20 Steven Madden's shop-in-shops in the leading South African retailer, Edgars.

On top of all that, during the year, we launched a new interactive e-commerce site that enables stronger brand engagement with our customers.

A new StevenMadden.com integrate social sharing, editorial commerce, and improved targeting to offer customers a speedier and superior shopping experience, particularly on mobile devices.

We've been pleased with the results thus far, which include a nice improvement in conversion rate on the site.

We've also gotten great feedback from consumers.

They enjoy being able to interact with both the brand and other Steve Madden fans in more and deeper ways, and they are responding to the ability to draw fashion, music, and lifestyle inspiration from the site.

Overall, we made significant progress on a number of key initiatives in 2014 and remain focused on continuing to make important investments in our future as evidenced by our acquisition of Blondo last month.

Blondo is a 100-year-old brand that specializes in weather-resistant footwear that marries fashion with function.

With 70% of Blondo's business done in Canada currently, we see significant expansion opportunity in other markets, particularly the United States, where the brand is performing well at retailers like Nordstrom but remains underpenetrated.

Given the seasonal nature of the product, we expect that this acquisition will begin to benefit earnings in the back half of 2015 and be slightly accretive for the full year.

Finally, in 2014 we also returned $142 million in capital to our shareholders in the form of share repurchases.

We bought back 4.3 million shares during the year, or over 6% of the Company, at an average price of $33.38.

As we look forward, we are encouraged by a number of positive signs we are seeing currently, including emerging fashion footwear trends, improving performance in our retail stores, and better sell-throughs at our wholesale partners on new spring product in both footwear and handbags.

That being said, we are cautious on the first half of the year, given challenging comparisons in our wholesale business, the lingering impact from a tough 2014, and the impact of the west coast port slowdown, as well as earnings dilution from Blondo and Dolce Vita, both of which we expect to be EPS accretive for full year, but which will be dilutive in the first half.

When we reach the back half, all those issues should be behind us, and based on the positive trends we are seeing, as well as the benefits from the acquisitions and other strategic initiatives we outlined earlier, we believe earnings will inflect, resulting in earnings growth for the full year 2015.

Summing up, while 2014 was a challenging year, we managed our business with discipline and focused on making strategic investments that we believe will enhance our growth prospects over the long-term.

Today, our core Steve Madden business remains a market leader, our portfolio of brands is stronger than ever, and we are making progress on a number of growth initiatives that should enable us to grow the business in 2015 and for years to come.

Now I would like to turn it over to Derek to walk you through the details of the financial performance for the quarter.

Thanks, Ed, and good morning, everyone.

Our consolidated net sales for the quarter were $342.6 million compared to prior-year net sales of $342.9 million, with a modest increase in our retail business offset by a slight decrease in the wholesale business.

Our wholesale net sales in the quarter were $270.9 million compared to $273.4 million the prior-year fourth quarter.

Wholesale footwear net sales were $197 million as compared to $199.4 million in Q4 of 2013.

Excluding sales from Dolce Vita, sales for the wholesale footwear segment were $182.3 million, an 8.6% decline versus the prior year, with decreases from both branded and private label businesses.

In wholesale accessories, we recorded net sales of $73.8 million in Q4 compared to $74 million in the prior-year period.

During the quarter, we saw solid gains in both our Betsey Johnson and private label handbag businesses, which were offset by declines in Steven Madden and Big Buddha handbag businesses.

In our retail division, net sales were $71.7 million compared to $69.5 million in last year's fourth quarter.

Comparable store sales in the quarter decreased 2.3%.

We did, however, have sequential improvement during the quarter and comps turned modestly positive in December, our first month with positive comps in over a year.

During the quarter, we opened 2 full price stores and 4 outlet locations.

We also acquired 21 retail locations in Mexico, with the closing of our acquisition, bringing us to 160 Company-operated retail stores, including 32 outlets, 4 e-commerce stores, and 4 joint venture stores in South Africa.

Turning to other income, our commission and licensing income net of expenses was $2.3 million in the quarter versus $2.6 million in last year's fourth quarter.

First cost commission and income net of expenses was down, while licensing royalty income net of expenses was up modestly.

Our consolidated gross margin in the quarter was 34.3%, as compared to 37.8% in last year's fourth quarter.

Our wholesale gross margin was 27% versus 31.8%, due primarily to increased mark down allowances that impacted Dolce Vita and higher freight costs resulted from the west coast port issues.

Gross margin in the retail division was 61.7% compared to 61.4% as a result of decreased promotional activity versus the prior year.

Our operating expenses were $87.8 million in the fourth quarter, or 25.6% of net sales, compared to $79.5 million, or 23.2% of net sales, in the same period last year.

The increase in operating expenses as a percentage of net sales is the result of deleverage on lower organic sales and the impact of Dolce Vita.

Operating income of the quarter totaled $32 million or 9.3% of net sales compared to last year's fourth-quarter operating income of $53.6 million, or 15.6% of net sales.

Operating income in the fourth quarter of 2013 included a $1 million benefit related to the recovery from prior year's text message litigation settlement.

Excluding this benefit, operating income for the quarter of 2013 was $52.6 million, or 15.4% of net sales.

Our effective tax rate for the quarter was 35% and net income for the quarter was $21 million or $0.34 per share diluted compared to $53.7 million, or $0.54 per share dilutive in the fourth quarter of 2013.

Net income for the fourth quarter of 2013 included the aforementioned benefit.

On an after-tax basis, the benefit positively impacted fourth quarter 2013 by $600,000, or $0.01 per share dilutive.

Excluding this benefit, net income for fourth quarter of 2013 was $35.1 million, or $0.53 per diluted share.

Now I'd like to just briefly touch on our full-year results.

Consolidated net sales for the full year increased 1.6% to $1.33 billion compared to $1.31 billion in 2013, as the increase from the Dolce Vita acquisition was offset by a decline in our organic business.

Operating income for the year totaled $167.6 million, or 12.6% of net sales, compared to 2013 operating income of $202.9 million, or 15.4% in sales, [excluding] the aforementioned benefit related to the recovery from prior year's text message litigation settlement.

Our net income for 2014 was $111.9 million, or $1.76 per diluted share.

This compared to net income of $131.4 million or $1.97 per diluted share, excluding the after-tax impact of the text message litigation settlement.

Turning to our balance sheet, as of December 31, 2014, we had $203.1 million of cash and marketable securities and no debt.

We ended the quarter with inventory of $92.7 million.

Excluding inventory associated with Dolce Vita, SM Mexico, and our South African JV, inventory totaled $83.4 million compared to $73.7 million in the prior year.

The increase in inventory was driven primarily by an increase in our in-transit inventory due to the west coast port issues.

Our on-hand inventory, excluding the acquisition, was only up 1.6% versus the prior year.

Excluding the acquisitions, consolidated inventory turn the last 12 months was 10.7 times versus 10.3 times in the prior year.

CapEx in the quarter was $5.7 million, and during the quarter, we repurchased 1.3 million shares for approximately $40.5 million, bringing our total repurchases for the year to approximately 4.3 million shares, for $142.2 million.

Turning to our guidance, for FY15, we expect that net sales will increase 7% to 9% over net sales in 2014.

Diluted EPS for FY15 is expected to be in the range of $1.85 to $1.95.

As Ed touched on earlier, earnings are expected to be more back-half weighted this year compared to 2014.

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

(Operator Instructions)

We will go first to Erinn Murphy of Piper Jaffray.

Great.

Thanks.

Good morning.

I was just hoping, Ed, that you could maybe speak a little bit more about that cadence of earnings and sales this year.

You talked briefly about it being more back-half weighted, but if you could just maybe give some further context?

And then maybe what some of the lingering issues could still be, given the port congestion, that would be helpful.

Thank you.

Sure.

Yes, as we indicated in the prepared remarks, we do expect EPS to be down in the first half of the year, and to be up in the second half of the year.

And obviously up more in the second than it's down in the first, and that's how we get to the full-year guidance that we put out there.

In terms of sales, we will be down in first quarter, flattish in second quarter, and then we should see growth in each of Q3 and Q4.

The second part of the question was about the port?

Yes, just on the port; what you are seeing currently.

Clearly, there was a little bit of resolution this weekend, but it seems like there's still some backlog.

So, just how do we think about that going through the supply chain, if you balance between your wholesale and retail?

Yes, we are very pleased that they have reached an agreement, but there is going to be an impact in both Q1 and Q2.

To some degree, there has been some damage that's already been done.

Some of that is quantifiable, and some of it is not.

We do know -- I think what's easier to quantify is that there is additional freight expense that we have incurred and will incur related to this.

There's additional air freight; and to a lesser degree, there is some additional expense associated with some of the product that we've diverted to the east coast.

So you're looking at, at least, I would say, a couple million bucks, or around $0.02 a share in additional freight so far.

Depending on how long it takes them to move through the congestion that is there right now, that could go up a little bit.

But what's actually more impactful, and really is harder to quantify, is what is already the damage that's been done because we are already late with spring delivery.

So, when you're late, there is a number of impacts: number one, there could be some cancellations, and we would have to find somewhere else to go with those goods and close them out.

That is one potential impact.

Number two, we may have to give discounts to certain retailers to get them to take the goods in.

Then, additionally, even when the goods do hit the floor, because they are getting there late, it is a shorter selling season.

So, number one, it could impact the overall seasonal sell-through, which might mean more markdown allowances at the end of the season.

Number two, it's definitely going to impact the reorders; and that is something that we are very cognizant about as we look at our second quarter -- is that we do think that this port issue is going to impact reorders for a second quarter.

Then, the last thing I would point out is, because we do some upfront or program business with shoe chains and off-price retailers -- because folks like TJ Maxx, as an example of an off-price retailer -- because they are pretty confident that, given this disruption, there's going to be a lot of excess inventory that they can buy in-season opportunistically, they are going to be less inclined to place a lot of orders upfront.

So, there's an impact there as well.

So, there's a whole bunch of ripple effects from this port slowdown.

The good news is, based on the agreement that they reached on Friday, we do believe that this should really be behind us after Q2.

But it's definitely going to be a challenge for the first half of the year.

Thanks for all that.

That's very helpful.

And then just last on your retail business, it does seem like you have had some emerging trends that have started to really pick up in the first quarter.

Could you just talk a little bit more about what's working, and any key nuances between your store portfolio, southern versus northern, that are really starting to turn right now?

Thanks.

Sure.

I'll take the second part first.

One of the things that is encouraging for us is that we are seeing stronger results in our warm-weather locations; and that's something that we started to see in December, and that has continued throughout first quarter, running double digits in places like Florida and California -- double-digit positive.

So, that's very encouraging, and that's really on the strength of our new spring merchandise.

There's a couple of -- a few different things working.

One of the things we've called out is this closed-up casual category, and that could include espadrilles; that includes some of our fashion sneakers.

One of the things we like about that category is that it's what we call transitional footwear.

And so, in some of the recent years, there hasn't been a lot between boots and sandals.

So, these closed-up casuals are shoes that the customer can buy when she's looking to start to get into spring merchandise, but isn't quite ready to be wearing an opened-up sandal.

So, that's encouraging.

We're also seeing some really nice trends in dress shoes.

The top two shoes in our retail stores the last couple of weeks have been dress shoes.

We've got some single-sole dress shoes that are working.

We've also got one or two on a bigger platform -- a chunkier platform -- that are working well.

So, that's a category that we are feeling good about.

Great.

Thank you.

I'll jump in the queue; best of luck.

Thanks, Erinn.

We'll go next to Camilo Lyon of Canaccord Genuity.

Thanks.

Good morning.

Hey, Derek.

Good morning.

Just following up on the comment you just made, Ed, about doubled-digit comps in warmer-weather markets: Traditionally or historically, have double-digit comps in warmer markets resulted in a similar rate of comp growth for the overall base?

How telling and indicative are those markets for the overall store portfolio, once you get through the full season?

I don't think we can say that just because we're up double digits in those warm-weather markets, that we are going to be up double digits everywhere else when the weather turns, but it's definitely a positive indicator.

If you look at the Florida business, for instance, there are other things that are driving some nice performance in south Florida, but it's certainly -- (multiple speakers)

Is it fair to say that what's working well there should also work in the rest of the country, once the weather reaches that point?

Yes, I believe so.

Great.

And then, on the transitional product that you talked about -- we've been hearing great things about it as well.

Can you talk about what kind of risk factor there is for that product, being that it's been brought in for spring, and a lot of it is sitting on the boats on the west coast.

What's the markdown risk of that product?

Or maybe said another way: Is there another part of the season or part of the year that you could sell that product?

Yes.

The good thing is that this is product that's not necessarily limited to one season.

When we talk about transitional product, this is stuff that's going to work as we transition from fall to spring, and we believe it will also work as we transition from spring to fall.

So, a lot of this should be very good, let's say, around back-to-school time.

Great.

So, the way I read that is there is little markdown risk to that product, even though you're missing some of the spring selling window?

Yes, certainly less than other types of seasonal products.

Okay.

Great.

Then, just thinking about Dolce Vita and the cadence there, it sounds like you're focusing on right-sizing the profitability of the business structure, and that should start to benefit EPS in the back half, I think you mentioned.

2016 -- is that the year where you start to focus on the re-acceleration of the top line?

And if that is the case, how do you think about what kind of growth you want to inject into the brand?

And is it more SKU growth, store growth, or international growth?

Yes, definitely 2016 is when we would be looking to grow sales in Dolce Vita again.

Not going to put a target on that yet, but I think there is opportunity in a lot of the areas you mentioned.

There is going to be some distribution channel opportunity.

There are some retailers in the US where they are very underpenetrated; so, we will be looking to accelerate that, starting in the back half of 2015, but really going into 2016.

We're getting very nice interest in the brand from international partners; and Mexico is a place where we're actually very excited about what we're seeing.

We're going to go into both Palacio de Hierro and Liverpool this year, which is really unheard of, for a brand to be able to launch in both of those simultaneously.

I should say unusual; I don't know if it's unheard of.

Then, potentially, we will be looking to expand into other categories as well.

We have a lot of interest in folks about a Dolce Vita apparel license.

We will go to our next question from Jay Sole from Morgan Stanley.

Hey, good morning.

Good morning.

Could we talk about your gross margin outlook for 2015?

Would it be possible to maybe talk about what the impact the west coast port issues are having, and maybe the impact of the new businesses and whatever else might be driving it one way or the other?

Sure.

We are really looking for gross margins to be approximately flat for the year.

Keep in mind that Dolce Vita is a negative in 2015.

Dolce Vita we expect to negatively impact us by about 60 or 70 basis points, but we think the organic business can be upped to offset that.

So, we're really looking at flattish gross margins.

Okay.

Then, if we think about just the west coast port issues, increased air freight, things that you were talking about in your prepared remarks and earlier, do you think that is going to have a negative impact on gross margin, and is that more of, I assume, a first-half issue?

Yes, definitely that's going to -- that will impact us in the first half.

It's hard to quantify exactly what that will be; could it be 50, 60 basis points, something like that?

But we think we have some opportunity in the organic business, particularly on the retail side, for improvement versus last year.

And so, that's how we think that we can get to flat organically -- excuse me, flat overall.

Got it.

And then, just one more -- just talking about the sales that you expect to add to the Business from the new businesses, from Brian Atwood and Dolce Vita and Blondo.

Is it possible to quantify what that is going to contribute to overall sales growth for the year?

If we look at all of the acquisitions combined, you're looking at, round numbers, $120 million from the acquisitions.

Keep in mind that is not all incremental, because I think we did about $29 million in the back half, with Dolce Vita.

Got it.

All right.

Thanks, Ed.

Thanks so much.

We will go next to Jeff Van Sinderen of B. Riley.

Good morning.

Just a couple questions as follow-up: Ed, what are you seeing so far in the quarter, as far as your retail comps?

I know you said December turned positive.

We typically do not provide quarter-to-date comp performance.

All we've said is that we do expect to be positive for Q1.

I don't think we are going to provide any more detail beyond that.

Okay.

And then, on Q1, just order of magnitude -- I know you said you expected revenues to be down.

Any more you could give us on that, in terms of -- should we think down low-single digits?

I know you only usually give guidance for the year.

Then, any other sense of where you think -- how much earnings might be down in Q1?

We typically don't really provide quarterly guidance.

I don't want to get into too much more detail, but if you want to think of low to -- I'd say maybe 3% to 5% in sales growth.

And, yes, EPS, I'm not going to get into any more specifics.

Okay, fair enough.

And then, would it be fair to say that, overall, the reaction to product at platform -- at the recent Vegas platform show -- was positive overall?

It was.

People are really encouraged by the early selling on our spring product.

So, sentiment was a little better than it's been over the last year or so.

And we will go to our next question from Taposh Bari of Goldman Sachs.

Hey, guys.

Good morning.

Another follow-up on product trends: Ed, most of last year you were speaking about a strong casual athletic trend.

That proved challenging for your Business.

Seems like your tone has obviously turned more positive.

So, what has changed?

Has the trend changed?

Are you better equipped to compete in that trend, or do you think that the Steve Madden brand actually has more credibility in casual athletic than maybe a year ago?

I do think that our assortment in that category is stronger right now, but I also think that the trend is evolving a bit.

And there are -- while, overall, fashion sneakers is still an important -- continues to be a very important trend, what we are seeing is a lot of customers who are interested in playing that trend, but with more of a fashion twist.

So, whereas earlier in the trend, you had a lot of customers who just wanted the basic -- they wanted the traditional Converse or traditional Vans -- obviously, those brands are still doing well.

But we are now seeing a fashion customer who says: I'd like to have a sneaker, but I want something a little different; maybe I want the quilting material that Steve Madden is doing, or maybe I want a double-decker -- a higher version.

So, we're having a lot of success with those types of fashion versions of sneakers.

Got it.

And do you think that the retail community has picked up on that as well, and reallocating shelf space accordingly?

I do.

One of the frustrations, though, for us with the west coast port slowdown is we knew that we were in a little bit of a year where it was going to be a show-me year.

Coming off of 2014, we couldn't expect huge upfront orders from our wholesale customers.

We knew we'd have to get the products in, show them the selling, and then chase the goods.

And we feel that we're in a -- with the product that we have and the sell-throughs that we're getting, we're actually in a position to do that; although some of this disruption, because of the west coast port, has hurt our ability to do that in first half.

Got it.

And that hurts everybody, right, in theory, right -- everybody that's importing goods?

It does.

Okay.

Just a couple quick ones on guidance -- just factual questions.

First, the Canadian currency: Is that impacting your earnings at all in 2015?

And if so, how much?

Two, share repo: Is that reflected in your current guidance?

And, three, are you expecting any growth out of your organic business in 2015?

Sure.

In terms of Canada, yes, there is approximately a $0.02 negative impact from the currency.

In terms of the third part of the question -- was organic sales growth, correct?

Organic EPS growth.

I think sales growth comes out to around flat to [2%] is what I backed into, based on what you had said earlier.

Right.

If that's -- you can correct me if I'm wrong.

No, you got it right.

And then, EPS [growth] (multiple speakers) too?

You got it right.

At the high end of the guidance, yes, there's modest EPS growth.

I'd have to do the -- pencil that out, frankly.

Definitely not in the first half, but definitely the organic earnings are down in the first half, and up in the back half.

Okay, and then buyback?

Then, Derek, you want to address the share repurchase -- what's in the guidance?

Yes, all things equal, we will remain committed to our share repurchase program.

Our Board actually approved an additional $150 million to that program on Friday.

So, we're likely to continue at a similar pace to what we've been doing -- $30 million-ish a quarter.

Having said that, we haven't done much of anything this year to date.

So, it could be slightly down; we might look to $100 million to $120 million for the year.

Yes, in the guidance is $100 million.

Got it.

It was $100 million.

So, if we continue at the pace of last year, there's a little bit of upside to that.

Perfect.

Thanks, guys.

We will go next to Kate McShane of Citi Research.

Thank you.

Hi, Ed.

It's [Cori] Van Der Ghinst on for Kate.

Most of my questions have been answered, but can you give a little more color on how the inventories look at retail currently?

Are you guys light overall across categories from the port disruptions?

And given the colder weather in the northeast, is the lack of inventory as big of an issue?

And then, finally, are there categories in addition to the transitional product where you guys can maybe prolong the spring season?

In terms of inventory in the channel, yes, in some cases it's a little bit light.

Obviously, the cold weather has helped people move through their leftover fall stuff or a fall holiday product.

And then, because of the port, there's been some delays in spring delivery.

I would say that inventory is a little bit light out there.

What was the second and third part of the question?

Just given the colder weather in the northeast, is the lack of inventory as big of an issue right now, as consumers are really facing colder temperatures?

And then also if there might be other categories, aside from the transitional product, where you can prolong the season?

Sure.

Yes, okay.

I suppose that -- I think that's right, that in places where there's very cold weather, it's less of an issue that the spring merchandise isn't there.

In terms of prolonging the season, one of the things that we've seen is that when spring breaks late, and then it tends to last longer.

Or if spring selling breaks late, then you tend to sell deeper into the year -- spring merchandise.

If it continues to be very cold in certain parts of the country, and we don't see spring break until later, then hopefully we will be able to extend the selling season on sandals and other spring merchandise.

Great.

Thank you.

Thanks.

We will go next to Jessica Schmidt of KeyBanc Capital Markets.

Thanks for taking my question.

Just first, given your focus on fast-turning inventory, do you think that the port delay has had a greater impact on your inventory than your competitors?

And do you think that this might have caused you to lose some share at wholesale?

I do think it's definitely a challenge for a company like us that has this fast-turn model.

And we rely on our speed to market, and we turn our inventory very quickly.

So, it's not like we have a lot of inventory sitting around in the warehouse to fulfill demand at a time like this.

In terms of -- did we lose share?

I don't really -- I don't believe so, no.

We've -- the good news is this is getting resolved, or looks to be getting resolved.

And at this moment, we are seeing pretty strong sell-throughs -- really outpacing those of the competition.

So, I don't see any risk of losing share over this.

Okay.

And just as a follow-up, can you talk about some of the competitive trends you're seeing in accessories, specifically in handbags?

I know that you've made some adjustments to your assortment to be more competitive in the promotional environment.

So, can you just talk a little bit more about this, and how the lower-price product is performing?

The big thing is that, in Steve Madden, we're starting to see some improvement.

We are seeing better sell-throughs on the floor.

That business was down for us in 2014, and it was down again in Q4, but we believe that we're going to return to year-over-year growth in Q1 of 2015.

We worked very hard to introduce some edgier, and more directional and fashion-forward product in Steve Madden, and we are getting a very good response to that.

We think that, for a while, we had gotten a little too basic in that brand, in terms of our styling.

So, that's something we're encouraged by.

Our Betsey Johnson brand has been very strong all year.

That was really a pretty strong outperformer in that PVC category; one of the leading, if not the best, selling-through brand in that category for the department stores in 2014.

So, we continue to have very strong momentum there; looking for another strong double-digit gain in that brand in Q1 of 2015, as well.

So, overall, we are starting to feel better about the trends in our branded handbag business.

Thank you.

I will pass it on.

We will go next to Scott Krasik of Buckingham Research.

Hi, Ed.

Good morning.

Good morning.

Just a couple clarification questions on the guidance: I know you didn't want to go too deeply, but again, can you confirm -- you said that total sales in 1Q would be down about 3% to 5%?

In that range, yes.

Okay.

So, then, given that you will get --?

(multiple speakers)

I'm sorry.

I may have misspoken.

I was attempting to give an organic total sale.

Organic.

Good.

Okay.

That's better.

I apologize if I misspoke earlier.

It should be 3% to 5%, including the acquisitions.

Okay.

Good.

Thank you.

3% to 5% on a [reported] basis.

That's helpful.

If I gave you -- (multiple speakers)

Having a heart attack here.

So, how would you frame the assumption?

You talked about a lengthy list of what could go wrong with the west coast slowdown resolution.

But can you just frame -- are you assuming a lot of those issues in the current guidance -- about lost sales and selling to [off-price]?

Yes.

What we know to date we've included in the current guidance.

Okay.

That's good.

And then, it just seems like this is very early for dress to be trending.

It usually falls off after holiday.

So, what do you make of that category, and how big is that, remind us, as a percentage of your sales?

We're very encouraged by what we are seeing in dress shoes.

We feel that that's going to be a category that will be on the upswing this year.

It is about a quarter of our women's shoe business.

And we will go to our next question from Corinna Freedman of BBT.

Hey, good morning, guys.

Just wanted to dig into your retail gross margins; obviously, very positive there.

Could you break out the acquired Mexican stores versus the existing portfolio?

Is it that the Mexican stores maybe have a much higher gross margin?

And then, if you could talk about square footage growth for the upcoming year, any store closings, any openings?

Do you also expect to acquire more international or more JVs in the upcoming year?

In terms of gross margin, Mexico is very -- is in line with our overall retail margin.

So, that's not the driver of the improvement that we are expecting for 2015.

We are expecting improvement in the core business, based on less [promotional activity].

Okay.

In terms of openings and closings, Derek, do you want to talk to that?

Yes.

We expect, from a full-price store standpoint, a net three to four openings, will be primarily in Mexico and Canada, offset by a couple closures.

From an outlet standpoint, five to six outlet openings in the year expected.

Okay.

And then finally a [housekeeping]--?

(multiple speakers)

Just to clarify on that: It's actually three to four openings, and then offset by a similar number of closings -- flat overall.

Okay.

Great.

Thanks.

That's helpful.

And then, if you guys can talk about your tax rate guidance for the upcoming year and your interest expense?

It seems to be a little bit low this quarter.

If you could talk about that for the full year?

That's all I have.

Thank you.

Derek, do you want to do the tax, and then I'll talk about interest?

Sure.

On taxes, we expect that the 2015 rate would be in line with our full-year rate to 2014, which ended up around 34.3%.

With our growth in international, the investments we're making there, we will still be able to benefit from using that international cash, as well as benefiting from some of the state apportionment benefits we had this year.

[All right].

And then, interest -- definitely you do have to look at that as lower in 2015 than it was in 2014.

Our cash balance is lower than it was a year ago, as we've used cash for, not only share repurchase, but for the acquisitions.

Okay.

That's helpful.

Thank you so much.

We'll go next to Steve Marotta of CL King & Associates.

Ed, good morning.

You mentioned a $0.02 negative delta due to Canadian currency.

Are there other exposures that you can speak to, as it pertains to 2015?

For FX?

Correct.

[Other than Canada], correct.

The only other meaningful impact to us is going to be in our Mexico business.

We've paired our accretion estimates for that business modestly, due to what's happened with the peso.

Okay.

As it pertains to your read-and-react model, do you fly in everything that you're trying to get reads on, or does the west coast port issues cloud your ability to read some of the newer styles?

Do we fly in everything -- can you repeat the question?

Do you fly in all new styles that you intend to get reads on, or does the west coast port issue cloud at all your ability to read and react at this moment?

I don't think it's hurt us.

I don't think it's hurt our ability to read and react.

We're certainly -- it's not hurting our ability to read.

It hurts our ability to react a little bit.

Right.

That's what I was driving at.

Yes.

Yes, and lastly, and I'm reading between the lines, but February weather dislocations that have plagued most of the east coast -- you're not laying anything at the feet of that yet; is that accurate?

In other words, there's no margin degradation or change in the promotional cadences that you expect, either in stores or in the wholesale channel, based on what's going on February to date?

Yes, I wouldn't say that there's anything meaningful at this point, that changes the way we think about the first quarter.

Terrific.

Thank you.

We will go next to Danielle McCoy of Wunderlich Securities.

Good morning, guys.

Could you just talk about what you are seeing in the men's right now, and what your outlook is for men's for 2015 and going forward?

Yes, men's has been a real bright spot.

It was up 18.5% -- our wholesale men's business up 18.5% in Q4.

It was up high-teens for the full year of 2014.

We've got a lot of nice momentum there.

Chukka boots continue to be outstanding for us.

We're having a lot of success for spring with some mixed materials.

Our casuals are improving.

So, we are very encouraged by what we see in the men's side, and we are looking for a double-digit gain in 2015, as well.

All right.

Great.

Thanks, guys.

Good luck.

Thank you.

(Operator Instructions)

We will go next to Sam Poser of Sterne Agee.

Hi.

Thank you for taking my question.

Hi, Ed.

What are your same-store sales expectation for the full year in the guidance?

We don't provide comp guidance.

And then, you talked about the buyback, but can you just give us an idea of what kind of average shares outstanding you're talking about for the year?

Yes, it should be around 61 million -- in there.

And just, what, starting off at 62 million, and then going down over the year kind of thing?

Yes, something like that.

I'm just trying to make sure.

I want to make sure I'm on the right -- with you guys on this.

Yes.

And then, when you think about your product mix now, compared to the way it was a year ago, and where you're going, I would assume that the response you're getting for spring was good, and the response as you move through the year, just based on what you've said, gets significantly better -- just what people looking out, the trade shows and so on?

Can you repeat that?

The point is that you're guiding very cautiously from a top-line perspective for the first half of the year, and then you're saying things are going to get better in the back half.

So, I assume that is a combination of organic improvement in the product that people are seeing for fall, as well as the addition of Blondo and Dolce started to get going?

Yes.

Yes.

And, frankly, the comparisons are easier in the back half, as well.

And just to clear -- I just missed it when you said it before -- the first half of -- the first quarter, you said business will be down 3% to 5% on an organic basis or is that a total basis?

No, that's organic.

Maybe I should just clarify this because I do think maybe -- it sounds like I misspoke earlier.

The Business from a top-line perspective should be up in all quarters on a consolidated basis (multiple speakers).

Can you give us an idea of how much it should be up in the first two quarters, because that's where--?

It should be up single digits in the first half, and low doubles in the back half.

And my comment about being down in the first half and up in the back half was on the organic sales.

When you're saying singles, I assume you're talking about low to mid in the front half, and then low doubles in the back?

Is that a fair statement?

You're not going to get -- it's a lot (multiple speakers).

You gave us low doubles in the front half, so do you (multiple speakers)?

I will bother you later.

Thank you.

At this time, we have no further questions.

I would like to turn the call back over to Mr. Rosenfeld for any additional or closing comments.

Great.

Thanks so much for joining us on the call.

We look forward to speaking with you on the first-quarter call.

Thanks.

That does conclude today's conference.

We thank you for your participation.