Steven Madden, Ltd. (SHOO) Earnings Call Transcript & Summary

Okay. Good morning. I'm Ed Rosenfeld, Chairman of the Board of Directors, and CEO of Steven Madden, Ltd. and I will act as Chair of this annual meeting of stockholders. I'd like to welcome you all to our 2021 Annual Meeting of Stockholders and to take this opportunity to thank you for joining us this morning. It's now 10'o clock, and I'm pleased to call the annual meeting to order. Due to the ongoing COVID-19 pandemic and the limitations on in-person meetings that have been established as a result, we are hosting this year's annual meeting in a virtual format. We have stockholders attending via the web portal. We will conduct the business portion of our meeting first, followed by a brief overview of the company's performance and then answer questions after the adjournment of the meeting. Although we may not be able to answer all of your questions, we will do our best to provide answers to as many as possible. Shareholders may ask questions in the designated field on the web portal. Out of consideration for others, please limit yourself to 1 question. Joining us today from the company are Al Ferrara and Mitch Klipper from our Board of Directors as well as Zine Mazouzi, our Chief Financial Officer; Awadhesh Sinha, our Chief Operating Officer; and Lisa Keith, our General Counsel and Secretary. Also present by invitation are Mike Petrane and John Ready, partners of the accounting firm of Ernst & Young LLP, our independent registered public accounting firm. And finally, Mr. Barry Shapiro, a representative of Broadridge Financial Solutions, Inc., who has been selected to serve as the inspector of election, is also with us today. Certain formalities are required to convene this annual meeting, after which the proposals stated in the notice of annual meeting and described in the proxy statement that you received will be addressed. I'd like to begin by calling your attention to the agenda for the annual meeting, which is available on the website provided to you. The business of this annual meeting will follow the order set forth in the agenda. Unless otherwise invited, only stockholders or holders of their proxies eligible to vote at this annual meeting may participate in the annual meeting. And now I'd like to present Lisa Keith, the company's General Counsel and Corporate Secretary, who will act as the secretary of this annual meeting. Lisa, would you please address some of the other administrative formalities relating to this annual meeting?

Thank you, Ed. Good afternoon, everyone, and welcome -- good morning, everyone, and welcome. The list of holders of record of the company's common stock at the close of business on March 29, 2021, the record date for this annual meeting is available for inspection by stockholders of record for any purpose germane to this annual meeting on the virtual meeting page. Further, I have received the affidavit of distribution, executed on behalf of Broadridge Financial Services Solutions, Inc. as to the mailing of the notice of this annual meeting, the company's annual report for the fiscal year ended December 31, 2020, the company's 2021 proxy statement and the proxy card. The affidavit of distribution will be appended to the minutes of this annual meeting. As mentioned earlier, Mr. Barry Shapiro, a representative of Broadridge Financial Services Solutions, Inc. has been duly selected to serve as inspector of election at this annual meeting. Mr. Shapiro has signed an oath of office to faithfully execute the duties of inspector with strict impartiality and according to the best of his ability. The oath of the inspector will be appended to the minutes of this annual meeting. For purposes of compliance with The Delaware General Corporation Law, which covers this meeting, the polls for the matters to be voted upon at this meeting will open today, Wednesday, May 26, 2021, upon the conclusion of the preliminaries of this annual meeting. If you have already voted by proxy, there is no need to submit another proxy. If you have not yet voted and wish to do so or if you have voted and wish to change your vote, you may do so by clicking on the voting button on the web portal and following the instructions there. I have received from the inspector of election, his quorum -- his report as to quorum. The report indicates that according to a certified stockholder list from American Stock Transfer & Trust Company, the company's stock transfer agent, there were 82,823,862 shares of the company's common stock outstanding and eligible to vote as of March 29, 2021, the record date for this annual meeting. The report also indicates that the number of shares of common stock represented at this annual meeting in-person or by proxy is not less than 78,600,126, which is 94.9% of the shares eligible to vote and constitutes a quorum for the purpose of transacting business at this annual meeting. Accordingly, the annual meeting is legally convened. The report will be appended to the minutes of this annual meeting. This completes the administrative formalities, I turn the annual meeting at to the Chairman.

Well, thank you, Lisa. And now we will proceed to the formal items of business before this annual meeting. I now declare the polls open. The polls will remain open until all of the proposals have been presented. Any stockholder who wishes to vote may do so now until the polls are closed. Please note that we will afford stockholders an opportunity to comment on the proposals themselves after all proposals have been presented. As indicated in the notice of annual meeting of stockholders and the proxy materials provided to you by management of the company, the purpose of this annual meeting is: One, to elect 9 directors to the Board of Directors of the company; two, to ratify the appointment of Ernst & Young LLP as the company's independent registered public accounting firm for the fiscal year ending December 31, 2021; and three, to approve on a nonbinding advisory basis, the compensation of certain executive officers as disclosed in the 2021 proxy statement. Lisa, will you present the proposals, please?

Yes. The first proposal is the election of 9 Director nominees. Mr. Chairman, on behalf of the Board of Directors, I nominate the following individuals to serve as directors of the company to serve until the next annual meeting of our stockholders and until his or her successor is elected and qualified or their earlier death, resignation or removal from office: Edward R. Rosenfeld, Al Ferrara, Mitchell S. Klipper, María Teresa Kumar, Rose Peabody Lynch, Peter Migliorini, Ravi Sachdev, Robert Smith, and Amelia Newton Varela. The second proposal is the ratification of the appointment of Ernst & Young LLP as the company's independent registered public accounting firm for the fiscal year ending December 31, 2021. The Board of Directors unanimously recommends a vote in favor of this proposal. The third proposal is the approval on a nonbinding advisory basis of the compensation paid to the company's executive officers, Edward R. Rosenfeld, Amelia Newton Varela, Arvind Dharia, Awadhesh Sinha, and Karla Frieders, as described in the 2021 proxy statement in the section captioned Compensation Discussion and Analysis and Executive Compensation, and in the Summary Compensation Table included in the 2021 proxy statement. The Board of Directors unanimously recommends a vote in favor of this proposal.

Thanks. If any stockholder would like to make a comment regarding any of the proposals that have been presented, please submit your comment through the web portal. Okay. I don't see anything. So the polls are now closed. The inspector of election will now tabulate the votes. All right. The inspector of election has completed his preliminary tabulation of the votes and has delivered his report as to the voting. As shown by the report, the stockholders have: One, elected the following persons as directors of the company until the company's next annual meeting of stockholders and until their respective successors shall be duly elected and have qualified or their earlier death, resignation or removal from office: Ed Rosenfeld, Al Ferrara, Mitch Klipper, María Teresa Kumar, Rose Peabody Lynch, Peter Migliorini, Ravi Sachdev, Robert Smith, Amelia Newton Varela; two, ratify the appointment of Ernst & Young LLP as the company's independent registered public accounting firm for the fiscal year ending December 31, 2021; and three, approved on a nonbinding advisory basis, the compensation of certain executive officers as disclosed in the accompanying proxy statement. The final report as to the voting will be appended to the minutes of this annual meeting and disclosed as required by applicable SEC rules. So there being no further business to come before this annual meeting, the 2021 Annual Meeting is now adjourned. And now I'd like to take the opportunity to speak to you about the company and its performance, followed by our question-and-answer session. But first, Danielle will make a statement.

Thanks, Ed. I'd like to remind you that matters discussed at this annual meeting by the company's officers or directors may include certain forward-looking statements as defined in the federal securities laws regarding our expectations or predictions about the future. Generally, these statements relate to projections involving anticipated revenues, earnings or other aspects of the company's operating results. Because these statements are based on current assumptions and expectations, they above known and unknown risks, uncertainties and factors not within the company's control. And as such, our actual performance and results may differ materially from these statements. Our annual report and other reports filed with the SEC from time to time include detailed discussions of the risk the company faces, and we urge you to refer to these. Specifically, the COVID-19 pandemic has had and is currently having a significant impact on the company's business operations and results. Such forward-looking statements with respect to the COVID-19 pandemic include, without limitation, statements with respect to the company's plans in response to this pandemic. At this time, there is significant uncertainty about the duration and extent of the current -- of the impact of the COVID-19 pandemic. Due to the dynamic nature of these circumstances, statements made at this meeting regarding the company's response to the pandemic could change at any time. And any forward-looking statements represent our judgment as of the time of this meeting and cannot be relied upon as current after today's date. We disclaim any intent or obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required under applicable law. With that, I'll turn it back to you, Ed.

Well, thanks, Danielle, and thanks again to all of you for joining us today. I also want to take a moment to express my heartfelt gratitude to our employees for their efforts over the past year. I was truly inspired by their hard work, resilience and resourcefulness under extraordinarily difficult circumstances. Due to the devastating impact of COVID-19, the year 2020 was the most challenging in our company's history. But while the pandemic had a severe negative impact on our business in our financial results, we relied on our strengths, an agile business model, a strong balance sheet, and our talented and resourceful employees to successfully navigate the crisis and position the company for an accelerated recovery. We continued investing in our brands and our digital capabilities while reducing expenses in other areas. And we utilized our test and react strategy, and speed to market capability to quickly adjust our product mix to align with changing consumer preferences. We also made significant progress on our ESG initiatives. Let me briefly touch on the highlights. First and foremost, our top priority since the crisis began, has been protecting the safety and well-being of our employees and the broader community. And I'm proud of the steps we took to safeguard the health of our employees and our customers including proactively closing our stores earlier and keeping them close longer than most of our peers. And how we supported our communities through donations of medical-grade mass to hospitals, non-medical face coverings to homeless shelters, meals for healthcare workers, financial assistance for organizations combating hunger and more. Second, when the severe impact of COVID-19 became clear, we quickly implemented a number of precautionary measures to preserve liquidity and enhance financial flexibility, including suspending dividends and share repurchases, cutting operating expenses, capital expenditures and inventory receipts, and putting in place a new $150 million asset-based revolving credit facility. These actions enabled us to generate strong free cash flow through the crisis. And as of March 31, we had $273 million in cash and short-term investments and no debt. Based on our strong financial position, in the first quarter of 2021, we reinstated our quarterly cash dividend of $0.15 per share and resumed our share repurchase program. Third, with COVID-19 driving meaningful shifts in consumer behavior, we took swift action to address the rapidly changing marketplace. In terms of product, we utilized our test and react strategy and industry-leading speed to market capability to quickly adjust our merchandise assortments to align with changed consumer preferences. Pivoting toward more casual and comfortable styles while deemphasizing dressier products. And with respect to distribution, we significantly accelerated our digital commerce initiatives, increasing investment in that area even as we pulled back spending in other parts of the business. We added high level talent to the organization, invested in our data science capabilities, accelerated digital marketing spend, launched our new try before you buy payment option, rolled out buy online pick up in-store to all U.S. full price retail stores, introduced new enhanced delivery and return options and more. Overall, our company-operated e-commerce revenue grew nearly 50% in 2020 on top of 58% growth in 2019. This momentum continued into the first quarter of 2021, with company-operated e-commerce revenue increasing 89% in the quarter, including 112% growth in our Steven Madden e-commerce business. And fourth, the challenges we all faced in 2020 emphasize to us our responsibility to all our stakeholders and the opportunity we have to create positive change for our people and our communities. In addition to the COVID-19 relief efforts I mentioned earlier, we made donations to Black Lives Matter, The NAACP, The Trevor Project and more. And in December, we announced a partnership with the Fearless Fund, an organization working to bridge the gap in venture capital funding for women of color. We also made progress in lessening our environmental impact by among other things, introducing new Steven Madden shoe boxes that are 100% recyclable, partnering with industry's trade group FDRA on a pre consumer waste management project, piloting a new shoe takeback program in our stores and increasing the use of recycled and renewable materials in products across our business. This spring, we launched Cool Planet by Steven Madden, a new brand, offering fashion footwear using recycled, renewable, and other environmentally preferred materials. For every pair of Cool Planet shoes sold, we will plant a tree in partnership with One Tree Planted, a nonprofit organization dedicated to reforestation efforts around the world. Overall, we are committed to meaningful and measurable improvement in the impacts we have. And to being transparent about our actions. In July of 2020, we published our first sustainability report, which outlines our overall Corporate Social Responsibility road map and how we intend to ensure that CSR and sustainability are embedded in everything we do going forward. And we look forward to updating you on our progress when we publish our next report in a few months. Overall, our company was tested like never before in 2020, and I'm extremely proud of how our teams responded and all they were able to accomplish. As we've moved into 2021, our focus remains on creating trend-right products and getting it to market quickly, deepening connections with our consumers through enhanced marketing, driving our digital commerce agenda, expanding in international markets, and efficiently managing our inventory and expenses, all while working to create positive change for our people and communities. We're off to a good start in 2021, with first quarter results that significantly exceeded our expectations. Steve and our design teams have created outstanding trend-right product assortments that are resonating with consumers, as evidenced by the performance in our retail segment, where first quarter revenue increased 27% from the prior year period and 7% compared to pre-COVID-19 first quarter 2019 on the strength of exceptional growth in our digital business. Looking ahead, we know we will continue to face some near-term challenges due to the impact of the pandemic, but I'm confident that the steps we have taken during the crisis, combined with the strength of our brands and our business model, leave us well positioned to capitalize on market share opportunities and create value for our stakeholders over the long-term. Thank you again for joining us today and for your continued support of Steven Madden. With that, I'd be happy to take your questions. Okay. Well, I'm looking in the portal, and I don't see any questions. So if there are no questions, just want to thank you again for your attendance and your support of Steven Madden. And hope everybody has a great day and a wonderful holiday weekend.