cheap ugg boots australia Steven Madden's CEO Presents at Citi Global Consumer C

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Steven Madden's CEO Presents at Citi Global Consumer Conference Transcript
Thank you so much for joining us at our Global Citi Consumer Conference. For those of you who don't know me, I am Kate McShane, Citi's footwear, apparel and retailing hardlines analyst. We are very happy to be conducting a fireside chat today with the CEO of Steve Madden, Ed Rosenfeld. Ed will kick it off with some prepared comments, and then we thought it would be helpful to walk through some of the bigger picture topics with Ed's say, with regards to (inaudible) the consumer, longer term growth trends for the company, their acquisition strategies, and their view on retail versus e commerce. We have plenty of time for Q at the end of today's session.
Great. Well thank you,cheap ugg boots australia, Kate, and thank you to all of you for joining us for the presentation on Steve Madden. We are going to jump into the fireside chat in a moment, but quickly I am just going to take you briefly through our presentation, that outlines what we see as the key investment highlights for Steve Madden.
And we think about value drivers for Steve Madden, the very first thing that comes to mind, is the strength of our brand portfolio, and in particular,ugg cardy 5819 boot sale, the strength and power of our flagship brand Steve Madden. Steve Madden is currently doing over $1 billion in sales at retail, annually; and we have a tremendous following among our core demographic.
You can see here, that in a recent survey upper income teens, when asked their favorite footwear brand, girls named Steve Madden number two, behind only Nike. So we have a pretty powerful brand at the core of our company in Steve Madden. But in addition to that, what we have done is assemble a diversified portfolio of other brands, that enables us to sell into all tiers of distribution. For luxury, all the way down to value.
I think this chart really illustrates how we use our portfolio brands, both owned and license, to sell everybody from Neiman Marcus to the top, to Walmart to the bottom, and virtually everybody in between.
Now turning briefly to our business model; currently, about 85% of our sales come from our wholesale business, with the balance coming from our company owned retail stores. We currently have 110 company operated retail stores, including three e commerce stores. We also have two businesses that are recorded as other income on the income statement, so they don't contribute to the topline, but they do contribute to operating income; those being our first cost business, where we act as a buying agent in procuring private label footwear for various retailers and our licensing business where we collect royalty income for the use of our brand names on various products.
What we have done over the last several years, is to work to diversify each of our principal segments. Today, nearly a third of that wholesale business comes from our growing accessories and international businesses. Today 18% of our retail sales come from our e commerce properties and 8% come overseas.
Our success in all of these brands, channels and business models is predicated on our unique ability to create trend right footwear and accessories and get them to market in a timely fashion.
So how we've been able to do that so consistently, season after season? Number one, it is a testament to our design team. We believe we assembled the best design team in our industry, led of course by our founder, Steve Madden. But in addition to that, there are a couple things about our business model that helps to differentiate us from our competitors and help us to mitigate fashion risk.
The first is our test and react model; where we test products in our retail stores and leverage selected winners into the wholesale channel. That has been absolutely critical to our ability to hit the trends over the years, and then we have married that up with an industry leading speed to market capability. We have managed to shorten leadtimes, to short at six to eight weeks, versus the industry standard of three to four months, which has been another primary competitive advantage in the fast moving trend business in which we operate.
So if you need proof that this model works, you need look no further than our performance over the last handful of years. You can see that since 2009, we have grown both net sales and EBITDA to approximately 30% per year on a compounded annual basis, currently have net sales for the trailing 12 months of over $1.2 billion and EBITDA of just over $200 million. Net income and EPS have grown at a similar rate over that period, and our guidance for 2013, which I can reaffirm today, is   diluted EPS in the range of $2.95 to $3.05.
We also have a very strong financial foundation. As of the end of the most recent quarter, we had nearly $280 million in cash, and no debt, and we turned our inventory an industry leading 10.5 times a year; that approximately once a quarter in retail, and approximately once a month in wholesale.
So that all sounds pretty good, but how are we going to keep it up? Now I'd just like to touch briefly on the multiple growth opportunities that we believe will enable us to continue to drive top and bottom line gains in the balance of 2103 and beyond.
First, we see meaningful opportunities to grow our core Steve Madden women's wholesale business. We are particularly excited about the opportunity we have here with Macy's, where we recently transitioned Steve Madden out of the junior department, where it has been historically, and into the department that they call Impulse. Since we have made that transition, our sell through to that account has improved materially, and that is in turn, leading to expanded   the doors and SKUs with Macy's.
Number two, we are going to look to continue to grow our direct to consumer business. 2012 was our biggest year ever in terms of retail expansion. We opened 15 new full price stores, and five new outlets, and over the next handful of years, we expect to continue to grow the store base. Particularly excited about the opportunity in outlets, where we only have 11 outlets today, and what we have targeted to get to 50 to 60 outlets over the next several years.
Third, we will be looking to continue to grow our business outside of footwear. Our in house accessories business has been the fastest growing segment in the company over the last year or two. You can see that we are up 32% in the trailing 12 month period, and we have particular momentum in the handbag business, our Steve Madden handbag business was up over 100% last year, year over year.
That's what we do in house, and we also have a growing licensing business. It's a relatively small business for us right now, but we are actively introducing new categories. In spring, we launched Betsey Johnson dresses and Steve Madden intimate apparel, and for fall, we will be launching Steve Madden watches and Steve Madden jewelry, under license.
Next is the international opportunity. International is only about 8% of sales currently, but it has been on a very strong upper trajectory. We have grown that business over 50% per year, each of the last three years,ugg 5854 boot for sale, and if we look out over the next, let's say, five years, we believe this is a single greatest revenue and profit opportunity for the company.
And last but not least, there are new brands. New brands have been an important part of the growth strategy over the last several years, and we have launched seven new brands since 2010. Most recently,ugg classic boots sand, we introduced Superga, a high end fashioned secret brands, which launched in spring 2012, and MadLove, a surf inspired brand that is distributed exclusively at Target, which we launched at Target in spring of 2013. As we move forward, we will be looking to grow these newer brands, and we will also be evaluating additional brands to add to the portfolio, whether we own them or license them.
So when we put that altogether, it's a pretty exciting time at (inaudible). We have strong brands, a proven business model and a whole host of meaningful growth opportunities, which we believe will enable us to continue to grow our business and create value for our shareholders.
Now I'd be happy to go for the fireside chat.
Thank you very much. We can start off by adjusting your view on the health of the consumer currently. Can you help us understand who your core consumer is and what this customer is facing in the current environment?
Sure. Well we have   as you saw, we have a portfolio of brands that enables us to sell customer shopping at various distribution channels. So we reach a bunch of different consumers, in terms of income and financial position, as we pointed out [virtual] equipment. We sell at Payless and Walmart, we sell virtually everybody in between.
We do focus primarily on the younger fashion forward woman customer, that's our primary customer. We believe that there a lot of positive things happening for the consumer. Obviously, we saw some very strong consumer confidence numbers, [have been in] the positive. The challenge has been of course, that the weather has not been so cooperative this spring. But with some of the positive developments that we are seeing from the overall   the underlying health of the consumer, we feel good going into the fall.
Okay great. Maybe just on the weather, which has been a big issue for a lot of the retailers and wholesalers that reported,ugg women boots for sale, can you talk a little bit about your flexibility to address changes in the environment, and what you did to make it, so that you didn't have as much inventory as the quarter ended, and what you can expect going forward?
Sure. Well that's one of the benefits of our model, is that we had this [stack] turn model, where we turn our inventory about once a month in wholesale, and as we pointed out in the prepared remarks, we managed to shorten our lead times to about six to eight weeks, we make a lot of progress out of Mexico, for instance, which enables us to work faster than if we are working out of China, and enable us to be a little bit more nimble; and when we do see changes happening in season, we are able to adjust our inventory levels, and we have been able to do that, and we feel pretty comfortable about where we are, in terms of inventory.
Okay. And then with regards to your relationship with your wholesale customers, how closely do you work with them in terms of taking back products, and how do you deal with markdowns outside of a typical markdown relationship?
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