Steve Madden Financial Analysis for 2011

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With distribution channel expansion through E-commerce and international business, product line expansion through acquisition of Topline and Cejon’s businesses, and organic growth through both wholesaling and retailing, SHOO experienced an increase of net sales accompanied by a decrease of gross margin and an increase of COGS/Sales ratio. Segment-wise speaking: * Wholesale footwear segment’s net sales increased 58% due to: 1. The inclusion of net sales from acquired Topline business. 2. The transition of Target business to wholesale model. 3. The increase of international business. 4. The organic growth in Steve Madden Women’s and Madden Girl brands and two new brands--Big Buddha shoes and Betsey Johnson shoes. * Wholesale accessories segment’s net sales significantly increased by 79% resulting from: 1. The acquisition of Cejon. 2. Strong organic growth driven by core handbag brands—Big Buddha, Steve Madden, Madden Zone and Betsey Honson. * Retail segment had an increase of 15% due to organic growth, first cost segment had a decrease of 43% due to the transaction of Target private label and Olsenboye footwear from first cost to whole sale model. Licensing segment had an increase of 66% driven by Betsey Johnson’s licensing business. However, some of the drivers that boosted net sales also resulted in a lower gross margin and a higher COGS/Sales ratio: * Despite the increase of gross margin in retail segment from 60.6% to 61.4% due to a decrease in promotional selling and selective price raising, the overall growth margin of SHOO decreased from 43.4% in 2010 to 37.4% in 2011 because of the following reasons: 1. The transition of Target and Olsenboye business from first cost to wholesale model, which carries a lower gross margin than SHOO’s overall business. 2. Faster growth in the lower margin international business, which is less profitable than the

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