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

Good day, and thank you for standing by. Welcome to the Fourth Quarter 2024 Steve Madden Limited Earnings Conference Call. [Operator Instructions] Please be advised today's conference is being recorded. I would now like to hand the conference over to your speaker today, Danielle McCoy, VP of Corporate Development and Investor Relations. Please go ahead.

Thanks, Kevin, and good morning, everyone. Thank you for joining our fourth quarter and full year 2024 earnings call and webcast. Before we begin, I'd like to remind you that on our -- our remarks that follow, including answers to your questions, contain statements that we believe to be forward-looking statements within the meaning of the Private Securities Litigation Reform Act. These forward-looking statements are subject to risks that could cause actual results to materially differ from those expressed or implied by such forward-looking statements. These risks include, among others, matters that we have described in our press release issued earlier today and filings we make with the SEC. We disclaim any obligation to update these forward-looking statements, which may not be updated until our next quarterly earnings conference call, if at all. The financial results discussed on today's call are on an adjusted basis unless otherwise noted. A reconciliation to the most directly comparable GAAP financial measure and other associated disclosures are contained in our earnings release. Joining me on the call today is Ed Rosenfeld, Chairman and Chief Executive Officer, and Zine Mazouzi, Chief Financial Officer. With that, I'll turn the call over to Ed. Ed?

All right. Well, thanks, Danielle, and good morning, everyone, and thank you for joining us to review Steve Madden's fourth quarter and full year 2024 results. We are pleased to have delivered earnings results at the high end of our guidance range for the fourth quarter of 2024, capping off a strong year in which we grew revenue 15% and diluted EPS 9% compared to 2023. These results demonstrate the power of our brands and the strength of our business model as well as our team's disciplined execution of our strategy. So let me walk you through the highlights. First and foremost, our top priority is always to win with product. In 2024, our teams utilized our proven model, which combines talented design teams, a test and react strategy and an industry-leading speed-to-market capability to create trend-right product assortments across our various brands and product categories that resonated with consumers. We then supported this great product with increased investment in our full funnel marketing strategy, highlighted by our global marketing campaign for the Steve Madden brand in the fall that we called Never Miss A Beat, a love letter to our hometown of New York City, featuring the iconic Deee-Lite song groove is in the heart. Together, this combination of outstanding product and effective marketing enabled us to deepen our connection with our consumers and drive results across our 4 key business drivers. The first of those key business drivers is expanding our business in international markets. In 2024, our international revenue grew 12% versus the prior year. Revenue in the EMEA region increased 18%, including a solid gain in Europe despite a challenging retail environment, strong expansion in the Middle East and explosive growth in South Africa. In the Americas ex U.S., revenue grew 9%, including mid-single-digit percentage gains in Canada and Mexico as well as the contribution from our new joint venture in Latin America, which is off to a strong start. We also continue to transition from the distributor model to an ownership model in key markets. In addition to the aforementioned joint venture for certain countries in Latin America, which we formed in the second quarter of 2024, we also converted our distributor business in Southeastern Europe, including Serbia and Croatia to a joint venture with our partner fashion company in Q2 2024. Then in the fourth quarter, we formed a JV for Singapore with leading regional player Valiram Group. And in January, we converted our partnership with Valiram in Malaysia to a majority-owned JV structure. We currently operate 14 stores in e-commerce through the joint ventures with Valiram and also in January, we formed a new JV in Australia, where we currently operate 8 stores in e-commerce and have wholesale distribution in retailers, including David Jones and Myers. Our second key business driver is expanding in categories outside of footwear like accessories and apparel. In 2024, our overall accessories and apparel revenue increased 53% compared to 2023 or 25% excluding Almost Famous. Our Steve Madden handbag business was outstanding, crossing the $300 million mark in revenue for the first time and increasing 31% compared to the prior year. Since 2019, Steve Madden handbag revenue has increased 23% per year on a compounded annual basis. Steve Madden apparel also continued to gain traction, with revenue up 23% versus 2023. And the Almost Famous division exceeded expectations in its first full year under our ownership, contributing $179 million in revenue with an operating margin of nearly 11%. Our third key driver is growing our business in direct-to-consumer channels. DTC revenue in 2024 was $550 million, a 9% increase versus 2023 or 5% growth on a comp basis. Steve Madden DTC revenue increased 6%, while Dolce Vita DTC revenue grew 36%. And our last key driver is strengthening our core U.S. wholesale footwear business. While many of our key wholesale customers continue to take a cautious approach to orders as they prioritize inventory control, we were pleased to return to revenue growth in this business in 2024, with a 2% increase compared to 2023. So overall, 2024 was a strong year for Steve Madden, with robust top and bottom line growth driven by tangible progress on our key strategic initiatives. We also demonstrated our ongoing commitment to returning capital to our shareholders with nearly $160 million in combined dividends and share repurchases. As we look ahead, however, we are cautious on our outlook for 2025 as we face meaningful near-term headwinds. Most notably, our earnings will be negatively impacted by new tariffs on goods imported into the United States, and by our efforts to aggressively diversify production out of China. We also expect our handbag business, which has been a leading growth driver for us in recent years to face pressure this year, as handbag inventories in certain parts of the wholesale channel have backed up, resulting in constrained open to buys and more cautious ordering from key wholesale customers. That said, we have a proven ability to navigate difficult market conditions with our agile business model. And we are also looking forward to adding a powerful new growth engine to the company with the acquisition of Kurt Geiger, which we announced on February 13 and expect to close in the second quarter of 2025. The Kurt Geiger London brand has exhibited exceptional growth over the last several years as its unique brand image, distinctive design aesthetic and compelling value proposition have driven success across multiple categories, led by handbags. Its differentiated and elevated positioning in its alignment with our strategic initiatives of expanding in international markets, accessories categories and direct-to-consumer channels, make it a highly attractive and complementary addition to our portfolio. In addition to Kurt Geiger London, Kurt Geiger's brand portfolio includes KG Kurt Geiger and Carvela. And the company also operates footwear concessions within luxury and premium department stores in the United Kingdom, including Harrods and Selfridges where it sells both its own and third-party brands. For the 12 months ended February 1, 2025, Kurt Geiger had revenue of GBP 400 million. The purchase price of the transaction reflects an enterprise value of GBP 289 million with GBP 275 million pounds in cash due at closing and the balance payable to management over a 5-year period upon achievement of certain financial targets. Importantly, all members of the executive management team have agreed to stay on and continue to lead Kurt Geiger under our ownership, including CEO, Neil Clifford, who has led Kurt Geiger for over 20 years. So in sum, we are pleased to have delivered strong revenue and earnings growth as well as meaningful progress on our key strategic initiatives in 2024. And while we clearly faced some headwinds in 2025, we are confident that the combination of our strong brands and proven business model, supplemented by a significant new growth driver in Kurt Geiger, will enable us to drive sustainable revenue and earnings growth over the long term. Now I'll turn it over to Zine to review our fourth quarter and full year 2024 financial results in more detail and provide our initial outlook for 2025.

Thanks, Ed, and good morning, everyone. In the fourth quarter, our consolidated revenue was $582.3 million, a 12% increase compared to the fourth quarter of 2023. Our wholesale revenue was $402.9 million up 13.6% compared to the fourth quarter of 2023. Wholesale footwear revenue was $227.4 million, a 1% increase from the comparable period in 2023. Also, accessories and apparel revenue was $175.4 million, up 35.4% to the fourth quarter in the prior year, driven by strong growth across the board with double-digit percentage gains in accessories and apparel categories, domestic and international markets and branded and private label businesses. Our wholesale business in the quarter also benefited from approximately $13 million of shipments to the mass channel that were expected to ship in January 2025 and were moved up to the end of Q4 2024. In our direct-to-consumer segment, revenue was $176 million, an 8.4% increase compared to the fourth quarter of 2023 with increases in both the brick-and-mortar and e-commerce businesses. Comp sales rose 4.5% in the quarter. We ended the year with 291 company-operated brick-and-motor retail stores, including 68 outlets as well as 5 e-commerce websites and 42 company-operated concessions in international markets. Our licensing royalty income was $3.5 million in the quarter compared to $2.7 million in the fourth quarter of 2023. Consolidated gross margin was 40.4% in the quarter compared to 41.7% in the comparable period of 2023. Wholesale gross margin was 30.5% compared to 31.7% in the fourth quarter of 2023, primarily driven by a greater mix of private label businesses. Direct-to-consumer gross margin was 62% compared to 62.7% in the comparable period in 2023, driven by an increase in promotional activity. While we did not run more or deeper promotions, we saw a higher concentration of consumer spend during the promotional periods compared to the prior year. Operating expenses were $182.9 million or 31.4% of revenue in the quarter compared to $163.9 million or 31.5% of revenue in the fourth quarter of 2023. Operating income for the quarter was $52.6 million or 9% of revenue compared to $53 million or 10.2% of revenue in the comparable period in the prior year. The effective tax rate for the quarter was 21.4% compared to 14.3% in the fourth quarter of 2023 driven by lower discrete benefits related to stock-based compensation. Finally, net income attributable to Steve Madden Limited for the quarter was $39.3 million or $0.55 per diluted share compared to $45 million or $0.61 per diluted share in the fourth quarter of 2023. Now I would like to touch briefly on full year results. Total revenue for 2024 increased 15.2% to $2.3 billion compared to $2 billion in 2023. Net income attributable to Steve Madden Limited was $192.4 million or $2.67 per diluted share for the year ended December 31, 2024, compared to $182.7 million or $2.45 per diluted share for the year ended December 31, 2023. Moving to the balance sheet. Our financial foundation remains strong. As of December 31, 2024, we had $203.4 million of cash, cash equivalents and short-term investments and no debt. Inventory was $257.6 million, up 12.5% to the prior year. Our CapEx in the fourth quarter was $9.3 million and for the year was $25.9 million. During the fourth quarter and full year 2024, the company spent $2.6 million and $98.4 million, respectively, on repurchases of its common stock including shares acquired through the net settlement of employee stock awards. The company's Board of Directors approved a quarterly cash dividend of $0.21 per share. The dividend will be payable on March 21, 2025, to stockholders of record as of the close of business on March 10, 2025. Turning to our outlook. We expect revenue for 2025 to increase 17% to 19% compared to 2024, and we expect diluted EPS to be in the range of $2.30 to $2.40. This outlook assumes the Kurt Geiger acquisition closed on May 1 and includes Kurt Geiger from that date. Excluding Kurt Geiger, we expect revenue to increase low single digits on a percentage basis and we expect diluted EPS to be in the range of $2.20 to $2.30. In the first quarter, we expect diluted EPS to decline approximately 30% to 35% versus the first quarter of 2024 as Q1 represents our toughest comparison to last year. We are also significantly increasing our year-over-year market investment in Q1, and our DTC business has been under pressure quarter-to-date. Now I would like to turn the call over to the operator for questions. Kevin?

[Operator Instructions] Our first question comes from Paul Lejuez with Citi.

Can you maybe talk about how you're thinking about gross margin pressure throughout the year, just given the tariff impact and what your plans are to mitigate as you move throughout the year? And then also on the Kurt Geiger investment, curious, if you are baking in any needed investment into that business as you kind of get it looped in, if there's any drag that we should be thinking about that occurs this year from needed investment versus what you'll see going forward?

Yes. Thanks, Paul. So in terms of the first question, yes, obviously, we are dealing with pressure from tariffs this year. The plan to mitigate is really essentially the playbook that we've outlined previously, it's number one, diversifying production out of China, and we are making significant progress with respect to that part of the strategy already. You'll recall that on the last call, we said at that time that on the goods that we imported to the United States that about 71% of those were coming from China, sitting here today based on what we've already brought in so far this year and what's on order, that number is already down to 58%. So almost a 20% reduction since the last call, and we expect to continue to make further progress throughout the year. You'll recall that our goal was to be down to the low 40s in terms of goods that we're placing a year from the election. So essentially in November of this year when we're placing goods, we are targeting low 40s, and we think we're marching towards that goal. The other pieces of the mitigation plan are, of course, going back to the factories and looking for price concessions, and those discussions are ongoing. And then the third piece is we will be selectively raising prices. And we're -- it's not going to be an across-the-board price increase, but we will be surgical about it, and we're we think that we can get a little bit more for the goods, we will do that starting in fall. In terms of specific gross margin guidance, I think essentially, given all the uncertainty here and the fluidity, we're not going to provide specific gross margin guidance today. We're signing up for the revenue and the EPS that we've disclosed, but not prepared to make any commitments around gross margin or a specific tariff impact today. But obviously, as we go throughout the year and get more clarity here, we will provide you more color at that time.

[indiscernible] the Kurt Geiger announcement...

Sorry. I apologize. I forgot to respond to the second part. Yes. So on Kurt Geiger, no, I don't think there's any meaningful investment required upfront. We certainly see a lot of opportunity to grow that business, and we'll be investing. But there's no operating margin drag in the first year or 2 for big investments.

And then just going back to the gross margin, Ed. Any color just in terms of the first half, second half pressure, your ability to execute on some of those mitigation efforts? Are you seeing that come through as an offset in the first half? Or is that not -- is that something that we won't see for the second half?

Look, again, first of all, we don't provide quarterly guidance in the first place. And this is a situation that's even more uncertain. So I'm hesitant to try to give too much color around the quarterly cadence there. Obviously, the longer -- the further out we are, the more the mitigation efforts have an impact. But in the near term, we're also engaging in certain discussions with our factories and seeing what we can do to give us a little bit of help in the near term as well.

Our next question comes from Anna Andreeva with Piper.

A couple from us. First, you mentioned DTC is under some pressure quarter-to-date. Can you just parse out what are you seeing in January versus February? Any improvement in Feb? And do you think this is mostly macro and the tariff conversation, but is weather hurting you guys as well. And then we have a follow-up.

Yes. We have seen a slow start to the year. I would say, in particular, we've seen a slow start to the selling of spring products, including sandals, and overall weak traffic to stores. And I think this is not something that is just a Steve Madden phenomenon, we talked to a lot of folks in the industry, and we're hearing something consistent from a lot of the other retailers that we speak with. I'll say that in my conversations with other folks, I think at this point, while we are loath to blame the weather, we are hearing from a lot of other folks in the industry that they're attributing a lot of this slow start to the year to weather, it's obviously been very cold across the country. But look, I think we have to -- we're going to have to monitor that because there are some other signs that we need to be watching. Obviously, I think we've all seen the consumer confidence figures over the last couple of weeks that have shown a pretty significant drop in consumer sentiment. So we'll have to monitor that carefully. Not any major difference between January and February in terms of the trend?

Okay. That's super helpful. And secondly, on KG, and congrats on the acquisition. Can you talk about why you think now is the right time to make this acquisition? How do you guys think about offsetting the tariff exposure there? I think over 80% of their production is in China. And you mentioned the revenue contribution from the business, how should we think about EPS contribution for this year?

Sure. So in terms of why now, look, this is -- this opportunity became available. And fundamentally, we want to make this acquisition because we think the Kurt Geiger London brand can be a very big and very profitable brand. As I mentioned in the prepared remarks, it's a brand with a really unique and differentiated brand image and design aesthetic. And that, combined with a really strong price value proposition, is really resonating with consumers. It plays in a really attractive part of the market, what we would call, for lack of a better term, accessible luxury, led by handbags with obviously a very strong shoe business as well. And it's a brand that's generated outstanding growth and sustained brand heat over the last several years. So it was a brand that was up over 25% last year, over 35% per year on a compounded annual basis since 2019. If you look just at the U.S., it's a business that was under $10 million in the U.S. in 2019 and did over $170 million last year. But despite all that exceptional growth in recent years, I think what's exciting about it is that it's still really in the very early innings of its growth journey. It's still lots of runway, and untapped growth potential ahead of it. It also -- I think it's just a really good fit with our company. It's a brand that has a very different image, very different aesthetic, very different positioning, very different price point from the other brands in our portfolio. So it's complementary in that respect, and it advances the strategic initiatives that we've been talking about for the last several years, which is -- because it increases our penetration in international and accessories, and in DTC. So I think it's a pretty perfect fit for us, and we're really excited about it. And frankly, we think we got it at an attractive value for such a high-quality and high-growth assets. In terms of the tariff exposure, it's a good question. I do want to point out that different from us, only 35% of their overall business is done in the United States. So while they do have tariff exposure, it's considerably less just because by virtue of the fact that the majority of the business is done outside the U.S. on that 35% that is in the U.S., you are right, they do have a significant exposure to China. It's about 85% of their sourcing coming from China today. And that's something we think that we'll be able to help them with. And we'll be working with them. There's a -- we have a plan in place to diversify them, and I think that based on their product mix being majority handbags as well as their higher price points, I do think there's a clear path to diversifying over a relatively short period of time. In terms of the EPS impact, it's about $0.10 that we've built in for this year. Again, that's for the partial year May 1 through the end of the year.

Our next question comes from Janine Stichter with BTIG.

So on the low single-digit growth that you're planning for the year organically, can you just unpack how you're thinking about wholesale versus DTC? And then maybe within wholesale, how you're thinking about the different segments, whether it's the Steven Madden branded business, mass and off-price?

Yes. So within that low singles on a consolidated basis, excluding KG, we're looking at down low single digits in wholesale and up high single digits in DTC. And if we unpack wholesale a little bit, that's up low singles in wholesale footwear and down mid-single digits in wholesale accessories and apparel. In terms of branded versus private label. We actually think branded will grow -- will have better growth than private label in 2025, different from what we saw last year.

Great. And then within the wholesale accessories and apparel down mid-single digits. I assume that would mean handbags down more significantly. How are you thinking about the apparel growth this year now that you've started to lap the Almost Famous acquisition?

Yes, I think -- that's right. I think that -- we think that we've talked about the pressure on the Steve Madden handbag business, and we are looking at that being down double digits at this point. In terms of apparel, we're bullish on the Steve Madden apparel business and I think we'll continue to see nice growth there. We do have a private label apparel business as well and there, we do expect to see some pressure. Part of that is just a good chunk of that is just a move. I think Zine called out in his prepared remarks that there was a fairly significant move of goods that typically would go out in January into December. And so that's causing a little bit of pressure there.

Our next question comes from Marni Shapiro with The Retail Tracker.

I just actually follow up on that last comment. The pressure from the shift into December from January, once you're past that, are there any other shifts or anything we should be aware of? Or is it just a general kind of pressure on the private label apparel side?

I think it will -- I think that's a big piece of it. But I do expect to see a little pressure on that side as well. We are seeing some of those mass customers get a little bit more conservative with their orders.

That makes sense. And then could you just -- by the way, the Steve Madden branded apparel at retail looks fantastic, beautiful sets at the stores and growing. It's nice to see, could you talk a little bit about the slowdown you're seeing in the bag? I think you said it was a little bit too much inventory in the pipeline and in shoes. Are you seeing it at every level at mass all the way up to Dolce Vita's customers? Or is it more specifically at the mass level?

Yes. Well, first of all, thank you for the comments about Steve Madden apparel. We're really excited about the progress that we're making there, and I feel really good about that. In terms of handbags, where we're seeing that most acutely is in that Steve Madden handbag business and that tier of distribution. And that is obviously the bulk of our business, that's the business that's been driving so much growth for us, and has been such a strong tailwind for us in recent years. And so it does put some pressure on the overall numbers and handbags when that one slows down because that's the bulk of it.

And can I sneak in one more, just following up on the tariff conversation. I guess how much of your spring product were you able to bring in before? Because obviously, you've been shipping spring product over the last month or so. It's going to continue to come in. Those goods came in before the tariffs went back in. So when is sort of, I don't want to call it peak tariff, but when does the product that came in pre-tariffs start to wane and you start to really feel the impact. Is that Q2 or Q3? Or is it -- any guidance around that?

Yes. I mean the only thing I'll say is that in contrast to some of the other companies that you may follow, because we turn our inventory so quickly. We still turn our inventories faster than just about anybody else in the industry, we will feel this earlier than others. And particularly in our wholesale channel, we turn our inventories close to 10x a year, which means that if the tariffs went into effect in early February, we're going to start to feel it even at the end of first quarter on certain goods.

Got it. That makes sense. Best of luck, the product looks fantastic, guys.

Our next question comes from Laura Champine with Loop Capital.

I concur that the valuation on Kurt Geiger was attractive. Is that widespread? Are you seeing that kind of across the board? And if so, would you be open to other M&A this year? Or is this a big enough transaction that you feel like this is one and done for this year?

This is a really important transaction for us. We think this is a super impactful opportunity going forward. So I think that our focus this year is going to be on integrating this and setting this up for success. I'll never say never, but we'll be certainly oriented towards focusing on Kurt Geiger for the time being.

Understood. And then on the wholesale footwear business, you mentioned that gross margin was pressured because of higher penetration of private label, would wholesale footwear have grown in Q4 without growth from the mass channel?

The branded business was down about 3% in Q4.

Okay. And is that similar to -- do you have an expectation for improvement in 2025?

Yes, I do. I think it will get better. I think we should be able to turn positive in Q1, but up low singles. And that's really how we're thinking about it for 2025.

Our next question comes from Sam Poser with Williams Trading.

I've got a handful. Hopefully, we can get to at least half of them. Just some housekeeping on what you're anticipating the interest expense to be for the year as we look out to the back half?

Well, we're not going to guide to every line on the income statement, Sam. But what I would -- I guess what I would tell you is the -- we are incurring debt to do the new transaction. We've built that in, again, we've assumed that, that transaction closes May 1 that the new term loan there will be at SOFR plus 200 to start. So hopefully, that gives you enough to do your modeling.

You know me well enough to know that it's not accurate, but okay. Anyway, with the changes in moving the JVs to subsidiaries or distributors to JVs and so on, how much revenue -- like how does that work on sort of -- on how much of that lift the revenue, all other things being equal in those places where you've done it or planning to do it?

Yes. That does give us a revenue bump. I would say the incremental revenue from those changes this year is probably going to approach $25 million. Unfortunately, there's also a negative exchange rate impact this year from translation, which is actually more than $25 million. So all that and more is being offset by a stronger dollar.

Okay. And then, when you look at -- with the Kurt Geiger business, I mean, do you -- what other synergies do you initially foresee, let's say, help the international growth of Kurt Geiger and just what percent of the Kurt Geiger business in Europe is U.K.? And how might having Kurt Geiger plus their concessions help maybe grow some of the other businesses that you have, I guess, primarily in the U.K.

Sure. Yes. So if you look at Kurt Geiger's revenue by geography, it's about, as we mentioned, 35% in the U.S., a little over 50% in the U.K. and the balance is in the rest of the world, of which Europe is obviously important. If we look at it, excluding those concessions, just at the branded business, it's about 50% in the U.S., a little over 30% in the U.K. and then the balance in the rest of the world. So we do think that, that is one area of pretty significant synergy opportunity is utilizing our Steve Madden network to expand Kurt Geiger into some new international markets, and capitalizing on the relationships and the infrastructure that we have in some of these markets. And that's going to be really a top priority for us once we close the transaction to start to work on those synergy opportunities. In terms of the concessions that they have, look, we already -- we have already been partnering with Kurt Geiger for years, and they already have Steve Madden in their concessions. They also operate 2 stores for us in London, but we'll obviously look to expand that relationship and roll out more stores in the U.K. under Kurt Geiger operation, and that's another piece of exciting synergy here.

Our next question comes from Aubrey Tianello with BNP Paribas.

On Kurt Geiger, could you give more color on how we should think about the longer-term growth and margin profile there? I think it grew double digits last year. Is that the right rate to think about long term? And then how do the margins compare to your existing business? And what are the opportunities to expand there?

Sure. Yes, we are forecasting double-digit growth for Kurt Geiger this year. And frankly, I think that there's runway for that -- for this business to grow double digits for a number of years here. In terms of the margin profile, last year, they had EBITDA margins of a little over 11%. Now for this year, we've taken a small haircut to that just because of tariff impact. And then when you take out depreciation and our current estimate for amortization of intangibles, which has not been finalized, we're looking at an operating margin this year about 7.5%, but certainly, long term, there's a clear opportunity for this to be a double-digit operating margin business, don't think I want to provide a time line on how quickly we'll get there on today's call. But once we get the transaction closed, and work with the team there, we'll come back to you with more specifics on how we'll get there.

That's great. And then maybe just in terms of balance sheet leverage. Is the plan to get back to a net cash position? And what's the time frame to kind of get to whatever your target is?

Yes. Look, we've been operating with this net cash position of approximately $200 million in net cash. I don't think we need to be there. We will have a small net debt position at closing. We're talking about half a turn of net debt to EBITDA, though, so pretty modest. And I think the plan would be to try to get back to net debt of 0, sort of a neutral position. And at that point, we would then look to most likely resume share repurchases and go from there.

our next question comes from Dana Telsey with Telsey Advisor Group.

Ed, as you think about tariffs and as we go through the year and you mentioned price increases, how do you think about the price increases either by category compared to what you did last time, I think it was almost $10 an item or payer. And then Almost Famous, how did they do this year or this quarter? And what's the outlook? And then marketing investment, you said was increasing by how much? And what are you doing differently, is the social media effective? How are you thinking about it?

Yes. So in terms of price increases, look, I do think we have to be careful here. Obviously, we have a consumer who has been exhausted by price increases over the last several years. And so what I don't think we can do is just raise prices across the board or take the exact same styles and just raise them $10, but we do need to get some price increases pushed through here to mitigate some of the impact of tariffs. And so what we're really focused on is, again, being surgical, looking for where we have newness, where we have a very -- where we're delivering a really strong price value proposition and raising those prices and then there will be other items that will not come up at all. And that's one of the things that we really have focused on is we're looking at the fall line is really elevating the materials and the detailing so that there is increased perception of value in the product, and we can raise product, and therefore, we can raise prices. In terms of Almost Famous, had a very strong Q4, a very strong year overall in 2024, as we mentioned, they did benefit from a move in of some shipments that otherwise normally would have gone out in January that went out in Q4. So that will impact them in 2025. But overall, I feel very good about the branded business there and how they're doing with Madden Girl and Madden NYC, I am more cautious on the private label piece in 2025. And then the last question was about marketing. Dana, could you just repeat the question about marketing?

Well, on marketing, how much is investment going up in 2025? And anything special that you're doing in any quarter that we should be mindful of?

Sure. Yes, I think you will see marketing increase in 2025. I think as a percentage of revenue, again, excluding Kurt Geiger, it should be relatively in line. However, Q1, there is a significant increase in marketing investment in Q1 because we had that very successful fall campaign that we think drove really great results, and we wanted to follow that up with something similar. And we think even better for spring, so we've got a really exciting new campaign that we're calling House of Steve that's going to launch next week. And in support of that, there is a significant increase in marketing investment in Q1. Once we get into Q2, you will not see -- essentially be more in line with what we've seen in the prior year for the balance of the year.

Our next question comes from Corey Tarlowe with Jefferies.

Great. I was wondering if you could talk a little bit about your inventory. It was up double digits relative in line with sales, but just curious if you could talk about the health of that inventory, the newness that you're flowing in, what's working, and then also if you could touch on the performance of boots as the weather has gotten colder.

Okay. So I'll take the first part of the question as it relates to the 12.5% increase, if you look at our inventory at the end of Q4, obviously, we feel very good about the composition of it. And the increase is primarily due to the fact that we're accounting for inventory for a longer period of time due to transit times. On average, globally, our transit times are around 6 days longer, and that's where both China and Cambodia as an example. But if you look at it in the U.S., it's probably around 5 days longer to get goods here and international businesses, it could peak to 30 days when you look at the Middle East as an example. So if you take those 6 days of inventory out of the balance at the end of the year and you look at it from an apples-to-apples perspective versus last year, were up low single digits, and that's consistent with how we're expecting next year to be.

Great. And then in terms of boots, yes, we had a very good boot season. And we felt that, particularly with our tall-shaft boots that we really outperformed in the market because we had the right styles. We did great in suede boots, brown suede in particular, some good stretch boots, a lot of good things working in that category. And as we've come into first quarter, of course, with the cold weather in the first part of the year, we've continued to sell quite a lot of boots. But obviously, right now, our focus is on getting that consumer to transition to the spring styles. Now the one thing I will say is boots are still going to remain important in spring because we do have a very strong festival package that we're very excited about. And as we've been talking about, boots is more of a year-round category for us these days, but obviously, not as big this time of the year as what we saw in Q4.

Got it. That's very helpful. And then just to follow up on an earlier question to comments you made at about your -- the international changes that you've made. How much more work do you think there is to be done in terms of some of the shifts in business structures that you've made in international markets? And where else do you think there's further opportunity to optimize the structure of these agreements internationally?

Yes. I mean that's an ongoing process. We've done a lot. We still have some distributor markets that I think, over time, could make sense to transition to the joint venture model. And I could also see some of these joint ventures becoming wholly owned subsidiaries over time. From a regional standpoint, I think the biggest opportunity, though, is in APAC, we're doing -- we've got a very meaningful business in EMEA now that continues to see very strong growth. We've also got a big business in the -- we call the Americas ex U.S., Canada, Mexico, Latin America, et cetera. But APAC is still a relatively small region for us. And so that's going to be a big focus for us over the next couple of years is making that more meaningful.

Our next question comes from Sam Poser with Williams Trading.

I got another chance. Okay. So with the shift that's moving from China to other areas as you move product out, Zine, you said it was taking 6 days longer, total 5 days longer to the U.S. What -- how does that -- as you move more product to Vietnam, I guess, primarily, but other places as well and with sort of the unknown going on with Mexico, I guess, we'll find out next week, how do you -- how is that going to change your speed to market and again, I guess, the visual look at the inventories in future quarters, see inventory increases in the future...

So just to clarify, the 5 to 6 business days is not just diversification. That's also the pressure on the supply chain that we're seeing for 2 reasons: one, Chinese New Year being earlier and also the front-loading that a lot of folks were doing was clogging up the supply chain. And add to that, basically, the Canal of Suez and everything that we always know about. So that was the main reason behind the 5 to 6 days that I mentioned earlier. But as we move forward in our diversification, I think as we said earlier and either on calls or in the meetings that we had, we're looking at, basically, it takes about a week to 10 days longer to get from these other countries versus China, and that's what we would expect to see. And as I said, our inventory is in line and the only thing that seems to impact it is just the transit days at this point in time, and we expect it to continue as we move forward. And it will also be impacted by the penetration of DTC to total.

And just to follow up on that, Sam -- go ahead...

Go ahead.

I was just going to say, obviously, speed to market is absolutely critical to the way we operate. And we're not going to accept any meaningful reduction in how fast we can be. So we have to operate under that under those guidelines. And so we have to plan around that. There -- as Zine mentioned, when we move to some of these other countries in Asia, we do have slightly longer lead times, but we can plan around that. We can leave the certain things in China where we need to move faster. Obviously, you mentioned Mexico. Mexico, has been a priority for us to move products, particularly in the Steve Madden brand because there, we can actually be faster due to the obviously much shorter transit times, now there's been a little bit of a monkey wrench going into that plan because of the potential tariffs that are scheduled to start next week. But we'll monitor that situation. Hopefully, that will get resolved, and we can focus on Mexico again.

Okay. And then with Kurt Geiger, I mean, what is there, how does -- in footwear, how does their time frame work? And is that something that using your resources, you could speed up as well?

Yes. Look, we'll have to get into that with them. I imagine their lead times are a little bit longer. It's also a different, it's a different kind of a business. And I think that by the nature of their product assortments, their price points, their positioning, they don't necessarily need to have the same test and react speed-to-market model that we do. But where there are areas for us to collaborate and utilize our sourcing capability to help them, we will certainly do that.

Our next question comes from Paul Lejuez with Citi.

This is Kelly on for Paul. Just a follow-up on your previous comments. What are you embedding in terms of your tariff assumptions this year? Are you assuming just China tariffs? Or are you including Mexico tariffs as well? And just maybe I missed this, but did you say how much of your first income is from Mexico currently.

Sure. Yes. We have included an impact from Mexico as well, -- that's about mid-single digits as a percentage of our overall sourcing. And -- but we also have assumed that if those tariffs are in effect, that we would then move products back out of Mexico in fall. And so the primary impact that we've built in would be over the next few months, things that are already in work or on the way. And then there's also an impact in the country of Mexico because they have also implemented anti-dumping additional duties on goods from China, and that's embedded in the guidance as well.

And I'm not showing any further questions at this time. I'd like to turn the call back over to Ed for any closing remarks.

Great. Well, thanks so much for joining us on the call today. Have a great day, and we look forward to speaking with you on the next call.

Thank you. Ladies and gentlemen, this does conclude today's presentation. You may now disconnect, and have a wonderful day.