Steven Madden Ltd (SHOO) 2015 Q1 法說會逐字稿

Good day and welcome to the Steve Madden, Ltd.

Limited first-quarter 2015 earnings conference.

Today's conference is being recorded.

At this time, I'd like to turn the conference over to Megan Crudele of ICR.

You may begin.

Good morning, everyone.

Thank you for joining us today for the discussion of Steve Madden's first-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 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 (technical difficulty) 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, Megan.

Good morning, everyone.

Thank you for joining us to review Steve Madden's first-quarter 2015 results.

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

We got off to a solid start in 2015, delivering first-quarter results that were on plan in both sales and earnings.

Our retail business showed strong improvement with comparable store sales up 11.6% for the quarter.

Our wholesale accessories business also gathered momentum, recording a 14.6% top-line increase compared to the year-ago period.

And in our wholesale footwear business, while sales excluding acquisitions declined as expected, our sellthrough at our retail partners improved significantly compared to the prior year, an encouraging sign as we move forward.

With respect to our footwear business overall, we were pleased to see stronger fashion footwear trends emerge as we anticipated.

Customers responded favorably to our new products across a number of categories, including dress shoes, casuals and sneakers.

These newer trends had a strong positive impact on our retail stores and we expect they will begin to drive improved results in our wholesale business where first-quarter sell-in was weak, but sellthrough was strong as we moved throughout the year.

As you are aware, we struggled with a lack of significant fashion footwear trends in 2014, so this is an encouraging development for the business.

On the accessories side, sales reaccelerated during the quarter due to improved performance in our branded handbag business.

We returned to year-over-year growth in Steve Madden bags, continued our strong momentum in Betsey Johnson handbags and saw a robust increase in Madden Girl bags.

We also reported another quarter of double-digit growth in our private label accessories business.

Another highlight in the quarter was the strong performance of our international business.

International sales were up 30% overall or 21% if we exclude the recently acquired Mexico operation, outstanding results in light of the pressures from a strengthened US dollar.

The integration with SM Mexico, which we acquired December 30, is moving along nicely and we are working diligently on a number of growth opportunities in Mexico., including introducing Dolce Vita and expanding Madden Girl, men's and handbags.

We also added another brand to our growing portfolio in the quarter.

In late January, we bought Blondo, a Canadian waterproof boot brand with a heritage that dates back more than a century.

Blondo has historically done the vast majority of its business in Canada and we see a meaningful opportunity to grow this business in the United States.

Initial discussions with US retailers about Blondo are going very well and we expect to grow this business in the US significantly over the next couple years.

Finally, we continue to prudently use our balance sheet to drive shareholder value through the return of capital to shareholders.

We repurchased over 1.4 million shares in the quarter for approximately $52.8 million.

Overall, we are pleased with the underlying trends we are seeing in early 2015 and are optimistic about our outlook for the full year 2015 and beyond.

That being said, we remain cautious on Q2 as we face the lingering headwinds from the West Coast port slowdown.

As we discussed on the last call, we expect the negative impact from the port delays to be greater for us in second quarter than it was in Q1.

While we were able to avoid significant order cancellations, we lost reorder business due to the late arrival of spring goods and also received fewer orders for upfront business with the off-price retailers due to their confidence that they would be able to find opportunities for closeout merchandise in the market as a result of the market disruption.

The good news is that these issues should be behind us in Q3 and we remain confident that earnings will inflect in the back half and that we are on track to meet our sales and earnings guidance for the full year.

Now I will turn it over to Derek to review our results in more detail.

Thanks, Ed.

Good morning, everyone.

As Ed stated, we are pleased to see some of the encouraging trends across our business segments and look forward to continued improvement as the year progresses.

Now turning to our financial results for the first quarter.

Consolidated net sales grew 6.3% to $323.9 million compared to prior-year net sales of $304.6 million.

During the quarter, we saw meaningful increases in both our wholesale accessories and retail businesses, as well as moderate growth in our wholesale footwear business driven by our recent acquisitions.

Our wholesale net sales in the quarter increased 4.5% to $277 million.

Wholesale footwear net sales increased 2.5% to $225.1 million.

Excluding sales from acquisitions, sales for the wholesale footwear segment were down 7% with decreases from both branded and private label businesses.

While wholesale footwear, excluding acquisitions, was down, we were pleased with our improved sellthrough versus the prior year.

Additionally, we were pleased with the performance of our international business and our continued success of our men's business.

In wholesale accessories, we recorded net sales of $51.9 million in Q1 compared to $45.3 million in the prior-year period.

We had double-digit gains in Betsey Johnson, Madden Girl and private label handbag businesses and as mentioned earlier, we are encouraged by our year-over-year growth with the Steve Madden brand in handbags.

Additionally, we had double-digit sales growth in our fashion accessories business, which included belts and scarves.

In our retail division, net sales increased 18.5% to $46.9 million.

As we mentioned on our last call, we saw comps begin to turn positive in December and this trend accelerated in the first quarter.

Our comparable store sales in the quarter increased 11.6%.

During the quarter, we opened one full-price store in Mexico and we closed three full-price locations in the US bringing us to 158 company-operated retail stores, including 32 outlets and four e-commerce stores.

Turning to other income, our commission and licensing income net of expenses was $3.9 million in the quarter versus $3.2 million in last year's first quarter.

First Cost commission income net of expenses and licensing royalty income net of expenses both grew compared to the prior year.

Our consolidated gross margins in the quarter were 34.4% as compared to 35.6% in last year's first quarter.

Our wholesale gross margin was 30.9% versus 32.6% due primarily to the impact of Dolce Vita and customer and mix shifts in the wholesale accessories.

Gross margin in the retail division was 55.1% compared to 55.7% as a result of increased promotional activity in our outlet stores versus the prior year.

Operating expenses for the quarter were $82.4 million, or 25.4% of net sales, compared to $75.5 million, or 24.8% of net sales in the same period last year.

Operating expenses included the benefit of $3 million related to the closure of our 5th Avenue store location.

The lessor of that location exercised the right under the lease to terminate the lease early in return for cash payments to the Company.

Excluding this benefit, operating expenses were $85.5 million, or 26.4% of net sales.

The increase in operating expenses as a percentage of net sales is primarily the result of deleverage on lower organic sales.

Operating income for the quarter totaled $29.8 million, or 9.2% of net sales, compared to last year's first-quarter operating income of $36 million, or 11.8% of net sales.

Operating income included the aforementioned benefit from the 5th Avenue store.

It also included a charge of $3 million related to the partial impairment of our Wild Pair trademark.

As these items offset, when excluded, operating income remained at $29.8 million.

Our effective tax rate for the quarter was 34.3% and net income for the quarter was $19.8 million, or $0.32 per share diluted, compared to $23.6 million, or $0.36 per share diluted in the first quarter of 2014.

Our balance sheet remains strong.

As of March 31, 2015, we had $168.7 million of cash and marketable securities.

We ended the quarter with $9.5 million of advances payable to our factor, which we have subsequently paid off.

Inventory at the end of the quarter was $76 million.

Excluding inventory associated with our recent acquisitions, inventory totaled $63.7 million compared to $58.3 million in the prior year.

The entire increase came from accessories and retail.

Wholesale footwear inventory, excluding the acquisitions, was down.

Excluding the acquisitions, consolidated inventory turn for the last 12 months ended March 31, 2015 was 10.5 times, the same as a year ago.

The CapEx in the quarter was $3.7 million and as Ed mentioned, we repurchased approximately 1.4 million shares during the quarter for approximately $52.8 million and did so at an average price of $36.79.

We are pleased that we remain on track to meet our guidance for the year.

We continue to expect that earnings for the year will be back-half weighted.

We expect Q2 earnings will decline versus last year at a similar rate as they did in Q1 due in part to the effects of the West Coast port slowdown that Ed mentioned earlier.

That said, we remain confident that we can reach our sales and EPS goals for the full year.

In fiscal 2015, we continue to expect that net sales will increase 7% to 9% over net sales in 2014 and diluted EPS for 2015 is expected to be in the range of $1.85 to $1.95.

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

(Operator Instructions).

Jay Sole, Morgan Stanley.

On the fashion trends that you're starting to see emerge, are you seeing these across different retail channels, or is it more focused in your own stores right now?

I guess that is a way of asking do you expect to see these trends become really broad-based.

Sure.

I would say that where we are seeing them resonate the most at this point is in our own stores and in our Steve Madden -- we call our in-line business, which is with the department stores, folks like Nordstrom, Macy's, etc.

Now historically what we have seen is that if trends start there, then they filter down into the other channels and that is certainly what we expect to see here.

And then you mentioned dress, casual.

Do you have any sense of if there's some boot trends that might work in the back half of the year?

And at the same time, if it is broad-based, how much of this just could be macro?

It's a better environment.

People are willing to shop in addition to just the fashion is better?

Sure, I'll take the second part first.

I think we feel pretty certain based on watching our own business for a long time that the big driver here is improved fashion trends.

We feel much, much better about where we are in the fashion cycle than we did a year ago, for instance.

The second part -- the first part was about boots, is that right?

Right.

Yes, I think we feel pretty good about some boot products that we have.

There are some -- without being too specific for competitive reasons, there are some materials and treatments that we did on non-boot products for spring that are working very well that we believe translate to the boot category for fall.

If we're talking about Q3, I think it is still going to be pretty heavily focused on booties and more casual looks.

The one thing we are seeing is that people are taking in boots and booties a little bit later this year.

So some of the 6/25 shipments from last year, people are electing -- folks are electing to take those in 7/25 this year.

Got it.

And then if I can just squeeze one more in.

Based on the fashion you are seeing, does it change the strategy to increase the amount of canvas in kind of athletic inspired product in the mix?

Definitely we are seeing very good traction with our fashion sneakers.

We've got a number of different types of looks that are working and that has become an increased percentage of the assortment and I think you'll see that continue for the near future.

Got it.

Thanks, Ed.

Camilo Lyon, Canaccord Genuity.

Good morning, guys.

Nice job on the quarter.

Ed, I was hoping you could just talk a little bit about your inventory position and how you see the margin risk of that inventory.

And I guess a little bit more in depth on the selling window of that product that is just now starting to come off the boats.

Sure, I feel pretty good about where we are from an inventory perspective.

Obviously the overall inventory is up something like 30%, but if you back out the acquisitions, we are up 9% year-over-year and if you then look one layer down and really break that down by division or segment, it gives us a lot of comfort.

So our wholesale footwear inventory is down 3% versus the prior year, which we feel comfortable with given our sales forecast for Q2 and then accessories and retail on a combined basis are up midteens, but obviously those businesses also grew midteens.

We just posted a midteens growth in those businesses in the first quarter.

So we feel pretty good about the amount and the composition of the inventory.

And as you said, we've got a lot of the products that are working right now we think have some life to them and will sell really through the back-to-school period.

So I think we feel pretty good about inventory level.

Sounds great.

And then I guess just related to that fashion component that is working so well for you, how would you describe the competitive landscape and are other brands you compete with on the floor come to market with similar fashions, or is this something that is more specific to Madden?

There are certainly other players out there with some similar looks, but I feel like we have a little bit of a jump on the competition and I definitely feel that, from a sellthrough perspective in the wholesale channel, the feedback we're getting from our retailer partners is that we are outperforming the competition right now and I think we really have the right items in these categories.

Great.

And then just last question, you mentioned handbags reaccelerating here.

Could you just talk about what you are seeing in the market?

I think you had mentioned a couple quarters ago that you saw some of the other brands in the space come down in price points and that was resulting in some share loss.

So I am surprised to hear that there has been a recoupment of that share it seems.

Any color there would be helpful.

Yes, we have worked very hard to stabilize that business, in particular in the Steve Madden business, to inject a little bit more directional and edgy fashion there.

I don't want to say that we are out of the woods yet.

Some of those competitive pressures that you referenced are still impacting us.

If you look at the department stores, they are still essentially reducing the footprint and the open to buy for that contemporary -- what they call the contemporary PBC department that we play in and really using those dollars to fund the designer brands or the traditional leather-based brands.

But in the face of that, we have been able to stabilize the business.

Actually saw a little bit of growth in Steve Madden and then supplemented that with very nice growth in Madden Girl and Betsey Johnson and our private label.

And that's what really drove the first-quarter increase.

Great.

Good luck with the balance of the year.

Erinn Murphy, Piper Jaffray.

Good morning and let me add my congratulations on the improved results.

Ed, I was hoping you could talk a little bit more about the wholesale business.

Very nice improved sellthrough coming off that; organic growth still down 7%.

So can you just help us think about the path of that organic wholesale volume within footwear throughout the course of the year?

And then if we were just to take a step back and just look at your overall wholesale growth across footwear and accessories, how should that look underlying your 7% to 9% total top-line growth for the year?

Sure.

In terms of the organic wholesale footwear business, as you pointed out, we were down 7% in Q1.

We expect to show improvement in Q2, but still have a decline and then we are looking to turn positive in the back half there.

In terms of the overall wholesale growth, which includes wholesale accessories, as well as the acquisitions, for the year, we are looking at 6% to 8% positive in wholesale growth.

Great.

That is super helpful.

And then just on the retail business, the gross margin pressure that you saw during the quarter, you talked about higher promotional activity in the outlets.

Can you just walk through how you see that, I guess, progressing as well throughout the year?

Sure.

The outlets, if they slowed down a little bit later than the full-price stores, they really started to experience pressure on comp in the back half of the year and so we did have some excess inventory that we wanted to clear and we moved through quite a bit of that in Q1 and that was a bit of a drag on the margin.

If you actually looked just at the full-price store margin, it was up a little bit over the prior year.

So it was outlets that did drag us down a bit.

I think there will still be a little bit of pressure in Q2 from outlets and then hopefully we will have that behind us when we move into the back half.

Okay, that is helpful.

And then just last question, does the earlier Easter impact your business at all in terms of wholesale volumes through the March quarter versus the June quarter?

Is there any kind of nuance in the total retail comp as people are buying shoes towards the end of March in anticipation for Easter?

I would say that, in wholesale, there's not a meaningful impact, but in retail, yes, I would say the Easter shift probably added one point to the comp in Q1.

Okay.

All right.

Thank you, guys and best of luck.

Kate McShane, Citi Research.

My question has to deal with the share repurchases.

It seemed like they accelerated a little bit in Q1.

What can we expect for the rest of the year with regards to that and how can we reconcile that with how you are thinking about acquisitions over the next year?

Derek, do you want to address that?

Sure, yes.

Q1, the shares were a little accelerated.

We would expect that that will taper down for the remainder of the year.

The Q1 acceleration had a little bit to do with how our option plans work and the level of stock option exercises where we buy back some shares related to that through a net settlement.

But we would tailor it back and maybe expect to be in line with what we guided to earlier.

Yes, which is $100 million for the year, which was the prior guidance.

In terms of the acquisitions, I don't think you should read anything into it.

It doesn't change our interest or capability to execute on acquisitions if something interesting arises.

Okay.

And can you comment at all about how you are viewing the athletic cycle and how you are seeing that as an opportunity for the Company and cyclically where you think we are going?

Obviously, we don't play in the true performance part of the business, but the fashion sneaker trend is still very good and we are doing some very nice business in that category right now.

And we expect that to continue certainly for the rest of the year.

Okay, thank you.

Taposh Bari, Goldman Sachs.

Two questions.

One, can you comment on retail comp cadence throughout the quarter?

Yes, January was strong, February slowed down and then March reaccelerated.

Do you care to comment on what you are seeing so far in April?

It is our practice not to do that.

The only thing I will say is that, for the rest of the year, we certainly expect to continue to deliver positive comps, but we want to caution people that the comparison first quarter was dramatically easier than any of the remaining quarters, so you should expect comps to slow down from the Q1 rate.

Great.

And then just a bigger picture question for you, Ed.

You've got some nice momentum in the business.

I'm trying to think about the profitability of this Company today and tomorrow versus where it was in the past.

I guess midteens is kind of a good rate if we look back historically, if we adjust for some of the license business shifts that you had in the past.

You are going to be in the 12, 13 range this year.

How do we think about where the margin structure could be at this Company over the long run?

I know some things have changed; the cycle turned on you.

The past couple years, you made some margin-dilutive deals that you should be able to obviously restore.

Can you walk us through the path over the next couple of years and what the most important variables are?

Sure.

Well, I think that you hit the nail on the head when you said midteens.

That is the goal.

That's what we want to get back to.

I would say that is really sort of a 2017, 2018 target for us and I think the way we are going to get there, there's a few things that we need to improve.

We need to get that retail operating margin back up.

That obviously took a pretty substantial dip in 2014 and so that's an important initiative for us.

We need to get the acquisitions, Dolce Vita being the most significant, up to an acceptable level of profitability.

That, as you point out, is obviously dilutive to the operating margin.

And if we can do those two things and recover some of the -- assuming that sales recover in wholesale, which we expect that they will -- we should be able to get to that midteen operating margin.

Great.

Sorry if I could sneak in one last one on your outlet business.

I don't know if you actually have traffic counters there, but I note that there is some noise around the margins there, but can you talk about just the general state of your outlet business, especially in light of gas prices?

Are you seeing traffic improve there?

The issue with the outlet business is it is so new for us and so many of the stores are new that we don't have a lot of year-over-year comparative data for traffic.

The traffic where we do measure it has not been stellar.

It has actually been stronger in the full-price stores and our overall performance in the full-price stores is much stronger.

Just to give you a statistic, in the first quarter, our comp store sales in US full-price stores were 13.4%; in outlets, they were 3.4%.

But I think some of that is a function of these newer fashion trends, which are really hitting that full-price customer and have not filtered through to the outlet customer.

Got it.

Thanks for your time.

Good luck throughout the rest of the year.

Jessica Schmidt, KeyBanc.

Can you talk a bit more on the West Coast port issues?

Were retailer cancellations maybe less than what you had expected and how did this impact the ability for some of the off-price retailers to get inventory?

I guess since they had lower preorders, were you still able to ship them units?

Yes, in terms of the West Coast port slowdown, as we indicated in the prepared remarks, it really is more of an impact for us in Q2 and I think you alluded to some of the issues.

One is we didn't get the reorders that we think we otherwise would have gotten because of the shorter selling season, the spring goods hitting the floor late, etc., but also this off-price retailer issue was tough for us because our business with them is primarily done on an upfront basis or a program basis where they buy the goods upfront.

And in a situation like we had this year where there's a lot of disruption, they are expecting there to be cancellations and lots of inventory available, they wanted to buy less goods upfront and to buy closeouts at the end of the season.

Now it's not our policy to try to have inventory in the middle of the season or excess inventory, so we are really not able to fulfill that demand, nor do we really want to, when that is the model that they are operating on.

So that really did cost us sales in -- and is costing us sales -- in Q2.

But hopefully that will return to normal for the back half.

Great, thank you.

Scott Krasik, Buckingham Research.

I've got three.

The first one just a clarification on the 2Q guidance comment that it would look similar to 1Q.

Is that in a percent rate or actually a penny comment?

That's percent.

Okay, perfect.

Thank you.

And then second, it seems like retailers, because of the West Coast port issues and for other reasons, have ordered seasonal inventory pretty lean in the spring.

I just wanted to see has weather impacted sandal sales at all and do you foresee any potential margin pressure with seasonal sales this season?

I think the weather in the Northeast generally delayed the start of sandal selling, but now we are seeing some pretty nice selling in sandals, particularly Bohemian earthy type sandals are doing quite well.

I think that all this disruption because of the port could mean some markdowns on sandals.

Frankly, I still think inventories in the channel at this very moment, at least in the actual stores, are somewhat light in some cases.

A lot of these goods have been released from the port, but then it caused congestion at the DCs and in the back rooms of the stores, so some of the merchandise hasn't necessarily made it out onto the floor.

When that all gets there, could there be some excess and could there be some markdowns, yes, but we are not terribly concerned about that based on what we see today.

Good.

Okay, that is helpful.

And then just sort of a random question on Betsey Johnson.

You have owned this for a few years.

It is probably your most diversified business from a category standpoint.

Are your price points where they are?

Can you invest behind the brand to grow it?

You've taken it in a wedding direction and some other ways.

What is the state of that and can you grow this business?

Yes, it has been a really great transaction for us.

We have built a nice business, as you point out, in a number of categories.

The handbag business is very strong and has been our fastest-growing handbag business over the last 18 months or so.

That is something we really continue to be excited about.

The shoe business has been growing nicely, as you point out.

We have really focused on some of the special occasion or social occasion footwear that we thought was a hole in our portfolio and a hole in the market.

And so that has been good.

And then the licensing business has grown nicely there as well and across a number of categories and we are actually looking at some potential new categories.

So it has been a good business for us.

I don't see any major investment beyond what we are doing right now at the moment, but we will continue to be opportunistic with it because we have been very pleased with how the customer responds to it.

Betsey really has a very devoted following.

The product is not for everyone, but she's got almost a cultlike following among her fans.

Is that because the design aesthetic is just too nichey to really be a big, big brand?

Well, it certainly is a -- it has a very identifiable DNA, which is not going to appeal to everyone.

Okay.

Well, good luck.

Keep it up.

Jeff Van Sinderen, B. Riley & Company.

Good morning and great to see the improvement in your retail comps.

I was wondering, on that, on retail comps, maybe you could just give us a sense of what the underlying drivers were there.

Just wondering about transactions, [UPT], that sort of thing.

And then also I know you closed 5th Avenue.

Can you just update us on plans on closures, openings?

Sure.

In terms of the retail comp, we had improvement in both traffic and conversion, which we like to see and that was offset a little bit by a decline in AUR due to the category mix.

We were selling fewer boots as a percentage of sales this year than we were a year ago.

Derek, do you want to address the openings and closings?

Yes, so for the full year, Jeff, including what we did in Q1, we would expect full-price stores, about 5 to 6 openings and that is going to be offset by 3 to 4 closures.

On the outlets, we are looking at 4 to 5 outlets opening and then we have our Canadian e-commerce, which I believe went live the other day.

So --.

Okay, good.

And then just as a follow-up on the ports, are you seeing now sort of more of a return to normalcy in terms of shipping times, delivery times and that sort of thing, or where do you think we are in getting back to normalcy there?

Yes, I think we are pretty darn close.

I really think that the backlog at the ports, we should really be worked through that sometime in May.

Again, what I pointed out earlier is then there's some congestion once the goods get through the port at some of the retailers, at the distribution centers, not so much -- I'm not talking about ours, but I am talking about our wholesale customers.

So that will take a little bit of time to work through as well, but we really think Q3 will be back to normal.

Okay.

Good to hear.

Thanks very much and good luck.

Sam Poser, Sterne Agee.

I've got a few basic questions.

Full year, what are you thinking about the share count right now?

I would say somewhere in 61.5.

Our estimate for that has gone up a little bit just based on the higher stock price.

When you do the treasury stock method calculation with the options, the option equivalent shares go up a little bit, so somewhere around 61.5 or maybe a touch higher.

Okay, thanks.

And then I've got some other stuff.

Based on what you are saying here, it looks like, in the full-year guidance, it looks like you are leaving a lot of not knowing built into what the retail comps are, even with the deceleration -- a bit of a deceleration to low single digits, you still can make the range of your number.

Am I my thinking about that right based on the high end of the wholesale, 6% to 8% in the wholesale range?

Yes.

I think that is probably right.

Keep in mind though that we also have the operating margin declining a little bit this year.

We're looking for gross margins origins to be basically flat, but a little bit of deleverage on the operating expense line.

No, I am more thinking about it from a revenue perspective, Ed.

From a revenue perspective (multiple speakers).

I understand, but I thought you were trying to translate it down to the EPS.

No, I was actually just trying to figure it out on the revenue basis.

And then in the second quarter, are you looking -- you said that the EPS would be down about the same as it would be in the first quarter, but are we thinking about the -- do the sales get more impacted by the port situation or is this a margin impact -- more deleverage in SG&A just because there is less sales.

How do we think about that?

That's a good question.

I really think the issue in Q2 is a sales issue due to the port.

In Q1, the impacts were more additional freight that we had to pay, some discounts that we had to offer the customers, etc., but Q2, it is really about sales.

We estimate we could have lost as much as $10 million in our wholesale business in top-line sales in Q2 based on the issues we discussed earlier.

So sales could be up on a similar amount, but you are up against a decrease from Q2 last year, so basically you could be up the same, but that would be less on a year-over-year basis?

Am I thinking about that about correctly being up against the negative 1% versus up 6% against a plus 9%?

You lost me.

You were up 6% against a plus 9% in Q1 versus a plus 9% last year and you are going up against an easier comparison in the second quarter, so you could still be up in that same range, but it's not -- on a year-over-year basis, it is not up as much and so am I thinking about that right?

Yes, then that is where the port hurt us.

You're right.

Right, okay, all right.

And then are you -- there has been a lot of talk about the comfort things.

You had put some memory foam in some of your shoes.

Are you using any comfort features in the other products that you are doing outside of athletic now as you build new product?

The biggest area where we are focusing on that is in Steven and we have put a lot of comfort elements into the Steven shoes.

We've got these products that we are calling yoga shoes with comfort bottoms and stretch material on the upper that are doing very well.

And in fact, the Steven wholesale business was up 29% year-over-year in Q1.

It's obviously not a huge business, but a very strong trend there and it was really on the strength of these yoga shoes.

Cool.

And then lastly, Dolce Vita, thinking about it in the back half of the year.

We have gone on their website, it looks like it's really getting condensed and not a whole lot of shoes.

So when we think about that coming out of the gate in the back half of the year, how are you looking at that just sort of holistically?

I think that we feel like we are on the right track with Dolce Vita, but we always knew that this year was going to be a year of transition as we repositioned the brands.

As you know, Sam, we are essentially taking DV, the brand DV out of the department stores and putting the emphasis in the better department stores on Dolce Vita and then DV will be relaunched for spring 2016 as an exclusive with one retailer.

So the challenge in 2015 is that you are sort of at an in-between moment where you have already taken DV out of the department stores, but you haven't replaced the volume with the exclusive relationship, which doesn't start until 2016.

That being said, we are getting great reaction to what we are doing with the Dolce Vita brand and I think you will start to see a modest earnings contribution in the back half.

We have said that we were really managing it for breakeven in the first half, which it looks like we are on track to achieve that and then the real -- we will really begin to see the fruits of our labor in 2016.

Thanks.

And then just lastly, I guess on the acquisition front, the Blondo acquisition could be much more, on a relative basis, much more profitable in the back half because there's much less to do from a changing things situation?

That is right.

Yes, Blondo, we expect to add let's say three pennies in the back half of accretion and we are off to a good start there.

The thing that we were excited about with Blondo was the expansion opportunity in the US.

It was a 70% -- 70% of the business was done in Canada and we thought that by utilizing our customer relationships and our infrastructure here that we could really grow that US business and we are off to a very good start.

Our fall orders for Blondo are up significantly in the US over where they were a year ago.

So we are excited about that.

Corinna Freedman, BB&T.

I wonder if you could give us a little color on e-commerce trends and specifically what impact you expect to have from Canada.

Sure.

Our e-commerce business is doing well.

We had a nice increase in Q1.

Overall, e-commerce, we were up 14%.

We were up actually a little bit more than that on SteveMadden.com.

The BetseyJohnson.com was a little weaker.

We have not put Betsey Johnson on the new platform, which we are going to be doing later this year and we expect that to help us get that business moving again.

But we are pretty excited about Canada.

We already shipped into Canada from SteveMadden.com, but it wasn't a good customer experience.

We didn't offer French.

The shipping was very expensive.

So we think that that will enable us to grow that business nicely.

Way too early to put a dollar figure on it, but we are excited about how the site looks and the selling from the first couple days.

I know you gave up a lot of details on the inventory composition.

What progress or where do you think you are in clearing the excess Dolce Vita or some of the other newer brands?

We have noticed a couple of gilt sales.

Do you think that you are more than halfway through that and will we expect to see more of that in 2Q?

I think we are well more than halfway through that.

I would say we are 90% through that.

Okay.

Those are my questions.

Thank you.

Steve Marotta, CL King & Associates.

I just have one question and I am sensitive to the competitive disclosure surrounding fashion trends, but given what is working in spring, can you talk a little bit to your confidence that these looks are translatable to fall, or do you think that there is going to be a whole new round of something new?

Again, sort of the common thread that would be the new fashion trend now through fall and back-to-School and holiday?

Thanks.

Sure.

First of all, I want to point out that a lot of what we have talked about is product that is -- that doesn't only work in the spring season.

So you haven't heard us talking -- sandals hasn't been the focus while we did comment that those had picked up recently.

The dress shoes have been a real strong performer for us.

Those are going to -- those translate into fall.

Some of these closed-up casuals and these sneakers, they also should be good, certainly in the back-to-School and early fall part of the year.

And then in terms of boots, as I said, we do think that some of the trends in terms of materials and treatments that we have used on some of these products are going to translate into particularly the casual boot and booty category.

So we feel good about that.

That is really helpful.

Thank you.

Danielle McCoy, Wunderlich.

Could you give us a little bit of update on Mad Love at Target?

Sure.

That's an exclusive brand that we do at Target.

It's between a $15 million and $20 million business there right now and we've got -- it's a nice little business for us.

I think that we are trying to figure out can we expand it into other categories.

Right now, it is really focused on footwear, but it continues to chug along and we like it.

The thing that we like about it is that it has got these surf-inspired looks that are very different from what we do in our private label business and we think that it was also a bit of a whitespace in the Target store.

And so we are pleased with the positioning that we have there because we think it is really incremental to what we do in our private label business and doesn't cannibalize anything else we do with Target.

Great.

And then in terms of men's, men's has been growing much faster than women's.

I feel like there's been a little bit of an increase in competition there.

How do you guys feel about your position within the market and what are your thoughts going forward?

Yes, as you point out, men's has been an outperformer for us.

While women's was tough last year, men's was growing very nicely.

We had another nice growth quarter in Q1 of this year.

We are up about 7.5% in men's.

The chukka boots continue to be very strong.

They are, in some cases, almost a third of the Steve Madden business.

We are also in a real casual run in men's and so we've seen our Madden business, which is our younger, more casual line, really start to show outsized growth.

But we continue to feel very good about our positioning there and the opportunity for continued growth in men's.

All right, great.

And then just lastly, in terms of collaborations, how is the Iggy Azalea collaboration going and any other ones in the future that we should look forward to?

Iggy is good.

I think we got a lot of attention about that one and we've got the shoes in our stores in certain wholesale accounts and they are performing well.

She certainly is a big star, so lots of PR benefit and attention from that collaboration.

Another one we did in the quarter was for Superga.

We did a collaboration with the luxury label Rodarte and that was really fantastic, got a lot of attention for the Superga brand.

We saw a big spike, 300%, 400%, on the website and places like Zappos.com and Nordstrom.com in the weeks surrounding the launch of that collaboration.

So that was exciting and we've got a couple other things that we are working on for Superga going forward.

Not ready to disclose yet, but one of them is with a well-known artists and then we are looking at doing something with a jewelry designer as well.

So we continue to think that collaborations can be an exciting way to get attention for our brands.

We are talking about doing another one for Madden Girl for spring of 2016.

Again, too early to disclose, but we have fun with them and we think that they give us a real nice marketing benefit.

All right, great.

Thanks.

Good luck, guys.

That does conclude our Q&A session for today's call.

I will now turn things back over to our speakers for any additional or closing remarks.

Great.

Well, thanks very much for joining us and we look forward to speaking with you on the Q2 call.

Have a great day.

That does conclude today's conference.

Thank you for your participation.