0001628280-25-037646
SEC filingQ2 revenue grew 6.8% to $559M from Kurt Geiger acquisition, but net loss of $39.5M vs prior-year profit due to acquisition costs and tariff impacts.
For the three months ended June 30, 2025, total revenue increased 6.8% to $559,000, primarily due to incremental revenue from the newly acquired Kurt Geiger business, partially offset by a decline in the organic business attributable to tariff-related impacts. Gross profit was $226,027, or 40.4% of revenue, down from 41.5% in the prior year. The gross margin contraction of 110 basis points was driven by tariff impacts across all segments and a purchase accounting fair value adjustment of $8,251 on Kurt Geiger inventory, partially offset by a favorable mix shift toward higher-margin direct-to-consumer sales. Operating expenses surged to $263,865, or 47.2% of revenue, compared to 31.3% in the prior year, due to significant acquisition-related costs including $38,819 in compensation expense from the reallocation of seller proceeds, $8,135 in acquisition and joint venture costs, $4,741 in litigation settlements, and $2,420 from a change in contingent payment valuation. This resulted in a loss from operations of $40,258, compared to income from operations of $46,870. Net loss attributable to Steven Madden, Ltd. was $39,477, or $(0.56) per diluted share, versus net income of $35,376, or $0.50 per share, in the prior year. The effective tax rate was (11.2)% versus 23.4% due to non-deductible acquisition expenses.
Wholesale Footwear revenue decreased 7.1% to $220,139, reflecting tariff-driven declines in off-price and mass merchant channels, partially offset by Kurt Geiger contributions. Gross margin fell to 31.1% from 33.4% due to tariffs and a $1,443 purchase accounting adjustment. Operating income dropped to $24,905 (11.3% margin) from $38,939 (16.4%). Wholesale Accessories/Apparel revenue declined 5.3% to $140,449, with gross margin contracting to 28.3% from 32.7% due to tariffs and a $1,814 inventory step-up. Operating income fell to $5,909 (4.2% margin) from $15,554 (10.5%). Direct-to-Consumer revenue surged 43.3% to $195,502, driven by Kurt Geiger's 73 stores, 72 concessions, and 2 e-commerce sites. However, gross margin declined to 58.7% from 64.3% due to lower-margin concessions and a $4,994 inventory step-up. Operating expenses soared to $159,157 (81.4% of revenue), including $38,819 in compensation expense and $7,222 in acquisition costs, resulting in an operating loss of $44,334 versus prior-year income of $15,082. Licensing income increased to $2,910 with operating income of $2,357. Corporate expenses rose to $29,095.
Management highlighted ongoing macroeconomic challenges including tariff uncertainty, elevated inflation, and high interest rates pressuring consumer spending. Strategic priorities focus on product innovation, marketing investment, international expansion, growth in non-footwear categories, direct-to-consumer digital expansion, and operational efficiency. The acquisition of Kurt Geiger is expected to provide long-term growth but near-term profitability was significantly impacted by transaction costs. No specific financial guidance was provided. The company maintained its quarterly dividend at $0.21 per share, reflecting confidence in liquidity despite the net loss. Normalization of earnings is contingent on the integration of Kurt Geiger, stabilization of tariff impacts, and successful execution of cost management.
Cash and cash equivalents fell to $111.7M, down $78.2M from year-end, reflecting the $371.6M cash used for the Kurt Geiger acquisition partially offset by $395M in debt draws. Short-term investments were nominal at $0.1M. Total debt stood at $293.5M (net of unamortized costs), consisting of a $300M term loan (gross) and no revolver borrowings. The company's leverage increased significantly, with debt covenants requiring a Total Net Leverage Ratio below 3.00x; as of June 30, 2025, all covenants were met.
The only material purchase commitment disclosed was a minimum royalty and advertising commitment of $9M under a license agreement expiring December 31, 2026. No other purchase obligations (e.g., inventory, capacity) were reported. Operating lease liabilities totaled $245.6M, with annual minimum lease payments of $286.7M over the remaining lease terms (weighted average 5.7 years). Contingent payment liabilities from acquisitions aggregated $20.4M, including $14.9M related to Kurt Geiger.
Note 14 provides detailed segment performance. Wholesale Footwear revenue declined 7.1% YoY to $220.1M, but maintained an 11.3% operating margin. Wholesale Accessories/Apparel revenue fell 5.3% to $140.4M, with a 4.2% margin. The Direct-to-Consumer segment surged 43.3% to $195.5M, driven by Kurt Geiger's 53 stores and e-commerce, but reported a deep operating loss of $(44.3M) due to acquisition-related costs and depreciation. Licensing income grew 57.8% to $2.9M. Geographically, international revenue more than doubled to $190.9M (34.2% of total), reflecting Kurt Geiger's UK and European operations.