Good morning. My name is Lisa and I will be your conference operator today. At this time, I would like to welcome everyone to the Q4 and Full Year 2019 Steve Madden, Ltd. Earnings Conference Call. [Operator Instructions] Thank you. I would now like to turn the conference over to Ms. Danielle McCoy. Please go ahead..

Thanks, Lisa and good morning, everyone. Thank you for joining our fourth quarter and full year 2019 earnings call and webcast. Before we begin, I'd like to remind you that during our call, we may make 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 involve 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 risks the Company faces and we urge you to refer to these.

Any forward-looking statements represent our judgment as of the time of this call 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 required under applicable law.

The financial results discussed 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 the call today is Ed Rosenfeld, the Chairman and CEO of Steve Madden. With that, I'll turn it over to Ed.

Ed?.

Thanks Danielle. Good morning, everyone and thank you for joining us to review Steve Madden's fourth quarter and full year 2019 results. We are pleased to have achieved diluted EPS at the high end of our guidance range for the fourth quarter and full year 2019.

Overall, 2019 was a strong year for the Company with revenue and diluted EPS increasing mid-single digits on a percentage basis compared to the prior year, despite significant headwinds from the bankruptcy of Payless ShoeSource and the tariffs implemented on accessories, footwear and apparel from China.

We also made progress on a number of key initiatives that position us for growth going forward. Let me briefly touch on the highlights. First and foremost, we had an outstanding year in our flagship Steve Madden brand.

Once again, Steve and his design team created trend-right product assortments that resonated with consumers and enabled us to outpace the competition and take market share.

On the wholesale side, our core Steve Madden Women's US footwear business had another strong year, growing revenue by 7%, despite the challenging overall performance of many of its largest wholesale customers.

Our Steve Madden US wholesale handbag business grew even faster, despite operating in an even more challenging category, recording 28% growth in revenue for the year, our third consecutive double-digit annual increase in that division.

In our retail segment, we delivered a 6.1% overall comparable store sales increase for the year, powered by a 60% sales increase on stevemadden.com.

We saw the benefits of a number of the initiatives we implemented in 2018, including the introduction of free two-day shipping, the migration to the Shopify Plus platform and the addition of the Afterpay payment option and we built on that with new initiatives in 2019, including enhanced paid social advertising and influencer collaborations.

Finally, our flagship brand continued to build momentum in international markets. Steve Madden brand international revenue increased high-single digits on a percentage basis in 2019. The highlight was the performance in our European joint venture, which continues to expand with both existing and new wholesale accounts.

Like in the US, growth was strong in both footwear and handbags. Overall, as we enter 2020, we believe our flagship Steve Madden brand is stronger than ever. We also completed two acquisitions in 2019 that provide the Company with meaningful growth opportunities going forward.

In mid-August, we acquired GREATS, a Brooklyn-based digitally native sneaker brand. Founded in 2014, GREATS has attracted a devoted following particularly among millennials based on stylish classic designs that fit today's more casual lifestyle along with unique marketing that connects the brand to culture.

Since the acquisition, we have developed and expanded product assortment and begun the process of selectively expanding wholesale distribution. Consumers will begin to see new styles and new points of distribution by second quarter of this year. We've also opened two pop up stores, one in Miami and one in Brooklyn.

Also, in mid-August, we acquired BB Dakota, a California-based contemporary women's apparel company. We've been following BB Dakota for many years as we have long thought that the BB Dakota brand and product assortments were aligned with the spirit of the Steve Madden brand and that BB Dakota would make an ideal apparel partner for us.

So we were thrilled when the opportunity arose to acquire.

Beginning fall 2020, we are transitioning the majority of the BB Dakota offering to become a co-branded BB Dakota Steve Madden line and we see significant opportunity for the BB Dakota Steve Madden collection in BB Dakota's existing distribution as well as new distribution to both domestically and abroad.

We have just recently begun showing the BB Dakota Steve Madden collection and branding to retailers and initial feedback has been very positive. Finally, in 2019, we continued to utilize our strong balance sheet and healthy free cash flow to return capital to shareholders.

We bought back approximately 3 million shares or approximately 4% of the Company for $102 million, including open market repurchases and shares acquired through the net settlement of employee stock awards. We also raised the quarterly dividend by 7% and paid a total of $48 million in dividends to our shareholders in 2019.

Putting that altogether, it was a very good year at Steve Madden, and as we look ahead, we are optimistic given the strength of our brands and the numerous long-term growth opportunities we see across our business. In 2020, our focus is as follows. First and foremost, we will seek to further enhance and strengthen the Steve Madden brand.

Product is king at Steve Madden and our top priority this year as it is every year is to create trend-right products and get them to market ahead of the competition. We also plan to continue to ramp up our marketing support for the brand.

We increased our marketing investment in the Steve Madden brand significantly in 2019 and we are planning another significant increase in 2020. Second, we will look to continue to expand our e-commerce business, building on the outstanding performance in 2019, not only on stevemadden.com, but on our other sites as well.

Our third priority is growing our business in international markets, with a particular emphasis on Europe. And fourth, we will focus on positioning our newer acquisitions, GREATS and BB Dakota for profitable growth.

So as we look ahead, we are excited about the initiatives we have under way and the opportunity they present for long-term top and bottom line growth.

That said, we are cautious on the near-term outlook as we face a number of significant headwinds in 2020, including the impacts from the coronavirus outbreak, China tariffs, the termination of the Kate Spade footwear license and a higher anticipated tax rate.

On a combined basis, we estimate that these factors will have an adverse impact to EPS in 2020 compared to 2019 of approximately $0.35. Based on these headwinds, we are forecasting 2020 diluted EPS to be in the range of $1.70 to $1.80 compared to $1.95 in 2019.

Now, we never like guiding earnings down from the prior year, but it's worth noting that none of these headwinds relate to the underlying health of our core business.

Our Steve Madden brand is the leader in its market, our business model is proven and we have a whole host of opportunities that position us for long-term sales and earnings growth once these near term challenges are behind us. With that, I'll turn it over to Danielle to review our financial results and our 2020 outlook in more detail..

Thanks Ed. Before I begin, please note that we reclassed commission and licensing fee income to total revenue and reclassed its respective expenses into operating expenses from previously labeled commission and license fee income net on our consolidated statement of operations. This reclass does not have an impact on operating income.

In the fourth quarter, our total revenue increased 0.7% to $419.6 million compared to prior year total revenue of $416.8 million. Our Wholesale segment declined 1.1% to $313.8 million compared to $317.4 million in the prior-year period, driven by a decrease in wholesale accessories and apparel segments.

Wholesale footwear revenue of $233.4 million was approximately flat compared to the prior-year period with a gain in private label, offset by a decline in the branded business.

In wholesale accessories and apparel, revenue decreased 3.6% to $80.4 million, driven by declines in private label handbags and cold weather accessories, partially offset by the addition of BB Dakota. In our retail segment, revenue increased 8.7% to $101.4 million.

Our same-store sales increased 6.7% on top of a 4% increase in the fourth quarter last year. Our e-commerce business continues to drive the growth in this segment. We ended the quarter with 227 Company-operated retail stores, including 68 outlets and eight e-commerce stores, as well as 31 Company-operated concessions in international markets.

Turning to our Licensing and First Cost segments. Our licensing royalty income which is now included in total revenue was $3.1 million in the quarter compared to $3.8 million in last year's fourth quarter, due primarily to the reduction in royalties in connection with the Payless ShoeSource bankruptcy.

First Cost commission income which is also now included in total revenue was $1.6 million in the fourth quarter of 2019 compared to $2.7 million last year, due primarily to the Payless ShoeSource bankruptcy. Consolidated gross margin was 37.8% compared to 38.1% in the prior year, while gross margin declined to 29.2%.

Excuse me, wholesale gross margin declined to 29.2% compared to 30.1% in the prior year driven by the tariffs on goods imported from China. Retail gross margin was 61.6% compared to 61% in the prior-year period, driven by a reduction in promotional activity in stevemadden.com.

Operating expenses for the quarter increased to $125.7 million or 30% of total revenue compared to operating expenses of $120.9 million or 29% of total revenue in the same period last year, driven by the addition of GREATS and BB Dakota.

Operating income for the quarter totaled $33 million or 7.9% of total revenue compared to last year's fourth quarter operating income of $37.9 million or 9.1% of total revenue. Our effective tax rate for the quarter was 6.3% compared to 9.2% in the same period last year. Finally, net income attributable to Steve Madden Ltd.

for the quarter was $32.2 million or $0.39 per diluted share, compared to $35.7 million or $0.42 per diluted share in the fourth quarter of 2018. Now I'd like to briefly touch on full year results. Total revenue for 2019 increased 6.5% to $1.8 billion from $1.7 billion in the prior year. Net income attributable to Steve Madden Ltd.

was $162.8 million or $1.95 per diluted share for the year ended December 31st, 2019, compared to $157.7 million or $1.83 per diluted share for the year ended December 31st, 2018. Moving to the balance sheet, our financial foundation remains strong. As of December 31st, 2019, we had $304.6 million of cash and marketable securities and no debt.

Inventory totaled $136.9 million, slightly down compared to the prior-year figure of $137.2 million. Our consolidated inventory turn for the last 12 months ended December 31st, 2019 was 8.1 times and our CapEx in the quarter was $9.1 million.

During the quarter, we repurchased approximately 590,000 shares for $25.3 million, which includes shares acquired through the net settlement of employee stock awards. Last, the Company's Board of Directors approved a quarterly cash dividend of $0.15 per share.

The dividend will be payable on March 27, 2020 to stockholders of record as of the close of business on March 17th, 2020. Since 2013, we have returned over $865 million to our shareholders in the form of share repurchases and dividends. Now turning to our guidance.

For the full year 2020, we expect revenue growth of 0% to 1% and diluted EPS in the range of $1.70 to $1.80.

As Ed mentioned earlier, the guidance range includes the total negative impact compared to the prior year of approximately $0.35 related to coronavirus, tariffs, the termination of the Kate Spade license and a higher forecasted tax rate of approximately 22%. Please note that the impact of these headwinds is significantly larger in the first half.

As such, first half revenue is expected to decline mid-single digits on a percentage basis and first half diluted EPS is expected to decline approximately 25%. We expect to return to growth in revenue and EPS in the back half. Now I'd like to turn it over to the operator for questions.

Operator?.

[Operator Instructions] Your first question comes from the line of Erinn Murphy with Piper Sandler..

I guess, I'll start with the last part, Ed, for you on the guidance. Can you guys kind of parse out - I mean, the flow through of the negative mid-single-digit in the first half seems pretty significant. Could you just help us think about kind of the major input between coronavirus and tariffs in particular? And then I have a couple of follow-ups.

Thank you..

Sure.

So is the question about the first half or the year overall?.

The first half just being down mid-single and then the flow through..

Yes..

I think you said EPS down 25%. Just trying to help understand....

Sure..

Some of the puts and takes there. Thank you..

Yes. So just from coronavirus and tariffs, we have about a $0.20 EPS headwind in first half. That's - those two items we've only got - we've got a forecast of a $0.22 headwind for the first - for the year overall. So it's almost all in the first half.

In terms of revenue, the two big revenue headwinds are really coronavirus and then also Kate Spade and that's about a $50 million impact in the first half..

And then I guess also in the first half, if you could talk a little bit more about what you are seeing in the North American wholesale climate. We've heard from some other peers of yours that, things really haven't picked up in the first half. So just curious on what you're seeing here. Thank you..

Yes. I think, overall, I would say it is somewhat - it has been a somewhat soft start to the year for a lot of our big wholesale customers at least as they have reported to us.

Certainly in the footwear category, the boot season that we are optimistic about it early, we had some good early reads, did not end up being as strong as we or our wholesale customers thought it would.

And so that impacted us in fourth quarter, but it's also - you sell a lot of boots in the first month or two of the year here in first quarter and that part of the business has been soft as well. The good news is that the early selling on sandals and opened up dress shoes has been quite positive. So that's encouraging as we move forward..

And then just last question for me. Just on the retail business, you guys have done a really nice job over the last several quarters, with strong mid-single-digit comp growth. The profitability hasn't been as great.

And I think a lot of that's just tied to kind of deleverage of fixed cost in fixed cost in your stores, but just curious on if you see kind of a level of stabilization in the retail business. Thank you so much - from an EBIT perspective. Thank you..

Yes. In fact, we did - we did see EBIT improvement in each of the last two quarters. So you'll see when the segment profitability comes out that we were up a couple of 100 basis points in Q4, still not where we want to be, but definitely making progress. And keep in mind, that is also absorbing a loss at GREATS. So on an organic basis, we were up….

Your next question comes from the line of Kelly Crago with Citi Research..

Just could you elaborate a little bit on the coronavirus impact? Is this related to production delays in China or what are you baking in for demand impact specifically? I'll start there and then I have a couple of follow-ups..

Sure. First of all, let me start off by saying that our hearts go out to all the people in China and around the world that have been impacted by the coronavirus. And as a Company, our top priority is ensuring the health and well-being of our associates.

Like everybody else, we've taken a number of precautionary measures to protect our team members and feel good about that. In terms of the business impact, Kelly, as you know, we have a - our business in Asia is very small. So the primary impact that we are seeing currently is related to supply chain.

As of this week, approximately 90% of our Chinese factories are open and in operation. That's up from about 70% last week and about 15% the week prior to that. The issue is, however, that even the factories that are open are not operating at their normal productivity.

So we estimate that approximately 35% to 40% of the factory workers have returned to the factories as of this week and that the factories are operating at roughly 30% to 35% of normal productivity. So this is obviously a very fluid situation, but currently we're looking at, on average, production delays of about three weeks.

Obviously, there are some goods that are on time, there are some goods that are going to be delayed more than three weeks, but the average as of now is three weeks. So what does that mean for us? Well, number one, we will be flying a lot more goods. We will be utilizing lot more air freight and obviously there is a gross margin impact there.

But we certainly can't put everything on an airplane. And so there will be a lot of shipments that will be delayed. They will be moved out, and we have to assume that there is going to be a loss of sales associated with that, because, when you have fewer weeks on the floor and fewer weeks to sell the goods, that's going to impact your reorders.

And that's what we've factored into the guidance that I just spoke about..

Got it. That makes sense.

Just moving on, just wanted to clarify that Steve Madden Women's wholesale business, how did that perform in 4Q specifically? And then how are we thinking about that business in 2020 maybe even first half, second half, all excluding what you can from the sort of one-time items?.

Sure. Steve Madden Women's was down in Q4. That was expected because of the shift in our boot deliveries from Q4 into Q3. You recall, we've been talking about the fact that we felt that we shipped in boots a little bit too late last year. So boots were up in Steve Madden over 20% in Q3 and then down about 20% in Q4.

So there was a big shift there, but again for the year, Steve Madden up 7% in shipping and our sell-through is actually up more than that to the consumer, the account. So, a very strong year in Steve Madden. Going into this year, look, at this point, we're not going to give guidance by brand or by division.

Certainly we expect that growth rate to moderate this year and given the impact of the coronavirus, I think we have to - we're taking a somewhat conservative look at all of our businesses. But the momentum in the brand, I think remains good..

Your next question comes from the line of Matthew Degulis with KeyBanc Capital Markets..

So I think you guys did a good job with inventory this quarter given the wholesale slowdown.

So, can you speak to your level of conservatism in ordering inventory this year and what would give you guys confidence to step-up orders at any point this year to chase some growth?.

Look, I think that we're attempting to manage the business as we always do with lean inventory. That's really the model here. Right now our concern is having enough of it and getting goods out of China.

So at this point, that's really the - the focus is trying to make sure that we have orders - or, excuse me, we have inventory to fulfill the orders that we have..

And so given the planned marketing for the Steve Madden brand, it's probably pretty fair to assume ROI on that spend has been strong.

So I'm wondering what your expectations are on ROI this year, especially given that it's an Olympic and election year and ad prices are likely to increase?.

Sure. Yes, you've seen - you've seen obviously the strong performance that we've had in our overall retail comp, but specifically driven by stevemadden.com. A lot of the marketing investment is in digital and we have been seeing a strong ROI there. That's something that we can tweak up and down as we go based on the performance.

So we'll continue to monitor it. But, yes, we do continue - we do - we will continue to increase the investment and we'll look to get a good return on it and continue to drive growth digitally..

Your next question comes from the line of Janine Stichter with Jefferies..

Just wanted to ask a little bit more about the boot category. I think you mentioned it didn't kind of come in according to plan after you had some strong initial reads. Do you think this was more weather related or did the fashion trends does not play out? And then can you remind us what the percentage of the mix is in 1Q relative to 4Q? Thank you..

Sure. Yes. I think there was a confluence of factors. I don't think weather helped, but again, for us, we never really - we're a fashion boot player, not a cold weather boot player for the most part. So we never think that weather is the primary driver. I think that the fashion trend didn't turn out to be quite as strong as we anticipated.

Also, we ran into some difficulties. We did, in light of tariffs, attempt to move a lot of boot product from China to Mexico quite quickly and did run into some difficulties there including some late deliveries. We are about three weeks late on some key boots and I think that hurt us.

But overall, I think across the industry, there was disappointment in how the boot season turned out..

And then just on private label handbags, I think that has been an area of strength, did anything change during the holiday season?.

No. Well, that business was down considerably in Q4 and we've been telegraphing that all year. As you recall, though, our overall wholesale accessories business was up 38% in Q4 last year.

And so we've been essentially since that point telling folks, we were going to be down in this Q4, because we weren't going to anniversary some big sell into private label programs, but overall the private label business grew in 2019 and we expect it to grow again in 2020..

Your next question comes from the line of Laura Champine with Loop Capital..

It's on the wholesale footwear business. I certainly hear your comments about a slowdown in boots relative to initial expectations. But the Steve Madden brand itself seemed pretty strong in our check.

So what's going on in the rest of the portfolio that took the wholesale footwear category to a slight decline in Q4?.

Well, again, the shipping in Steve Madden was down. So the checks may reflect sell through to the end consumer, which ultimately is probably is the most important. But again, we had a shift from Q4 into Q3 in terms of our timing of deliveries..

In Q1, I'm guessing that most of the supply chain issues you're seeing with coronavirus slip into Q2.

Should we look at a significant difference in the sales cadence from Q1 to Q2?.

No. In fact, and I think this is probably maybe a little bit different for us than some others, but because of our lean inventory and quick turn model, we will have or we do expect to have a significant impact from the coronavirus in Q1.

And in fact, I think that there could be about a $20 million revenue impact related to corona impact - coronavirus in Q1..

Your next question comes from the line of Sam Poser with Susquehanna..

It's Will on for Sam.

I just wanted to start with how much - what percentage of your total product is now made in China and how much do you expect to have in FY '20 to be manufactured in China?.

Sure. Yes. So for spring, on an overall basis, we're currently at about 73% in China. That's down from 88% for the full year 2019 and 94% for the full year 2018. So we have moved a lot of products. And in fact, if you look at the products that are on the tariff list, so List 3, List 4A, we're actually running in the low 50s as a percentage.

So we've moved a lot of those goods. The challenge is that a lot of the other products that are not in the tariff list and that's a lot of lower priced footwear, including the private label is almost all in China and that's why we're still at 73% overall. Look, we're going to continue to push that number down.

We'll try to get that into the 60s relatively quickly. But it's a - that's a dynamic situation..

And just - and keeping on this topic, so as far as tariffs go, to what degree are price increases being taken to offset the impact of tariffs and as well as concessions from factories?.

Well, we continue to offset - again, when we're talking about the tariff impact that we have provided - and that's roughly $0.10 for the year. That's --and just to be clear, that's an incremental impact on top of what we had last year. So that's not the total tariff impact, that's just what's incremental to the prior year. That is after mitigation.

So - and that - the gross impact is multiples of that. So we're mitigating the vast majority of that through price concessions from our factories, through moving production out of China and through the price increases that we have put through. But even after that, we see an additional $0.10 incremental impact this year..

And I guess just switching topics, can you just talk about the sneaker trend and what you're seeing there.

I think you've said before that it's kind of peaking, but I'd wonder if you could just talk to that, what do you expect going forward with that category?.

Yes, sneakers remains a very important part of the business. It will be close to 30% of our Steve Madden Women's wholesale business in Q1 here. So it remains very meaningful. But it's not growing. In the back half, we were approximately flat in sneakers. So it does appear to have plateaued a bit.

Some of the - what we're calling the dad sneakers, the bigger bottom seekers have really slowed down, and we're still seeing success with wedge sneakers and some lower profile sneakers, all over white sneakers are doing very well.

So we've got some trends that are performing in sneakers, but certainly not seeing the growth that we were seeing in that category. On the other hand, dress shoes, which have been quite weak for a while, appear to be on a nice upswing..

Your next question comes from the line of Susan Anderson with B. Riley..

Thanks for taking my question. I guess, maybe just a follow-up on the wholesale channel.

And I guess I'm kind of curious, going into spring, how the wholesalers are feeling after the boot issue this winter and excluding the coronavirus impact, how should we think about I guess Q1 growth versus Q4? Should it be similar or maybe a bit better given it sounds like sandals are doing better so far? And then also, I'm curious how your wholesale customers are handling the coronavirus if they're waiting on the product or if it's late enough, is there a risk of losing that sale? Thanks..

So the first one was, wholesale footwear in Q1 relative to Q4..

Yes..

Excluding the coronavirus. Yeah. So, yes, excluding the headwinds that we face, so excluding coronavirus and excluding the loss of Kate Spade, we would have anticipated that wholesale footwear would have been better, would have grown in Q1 and been better than Q4. However, based on the headwinds, it will be in fact weaker than Q4.

What was the second part of the question?.

And then just on the coronavirus and how the wholesalers are handling that.

Is there a risk if it's too late that they will just decide not to take the product?.

Yes, look, those discussions are ongoing.

At this point, we believe that we'll get them to take in - to take the goods in, but again we've assumed that we lose goods on the back end, so that we lose reorders, if there are flow orders, meaning you have an order for a certain number of pairs, but you are not supposed to ship it all at once, you are supposed to ship it over time, we're already canceling off, maybe the back end of that, because we have assumed that the retailers won't want to take those in..

And then I guess in retail, did the performance in fourth quarter kind of mirror, I guess, the performance in wholesale with boots on the weaker end and maybe other products outperforming or was there divergence in performance there by products?.

We did have an increase in boots in our own DTC business..

But they were still weaker than other products within retail or....

No, actually the increase in boots was in excess of the overall comp..

Your next question comes from the line of Chris Svezia with Wedbush..

I've got a couple. I guess, first, just Ed, on the EPS impact $0.35, so you threw out $0.22 in the first half of the year due to virus and the tariffs. I guess, Kate Spade is roughly $0.08 and then, I guess, tax makes up the remaining $0.05.

Do I have that right, the reconciliation?.

Yes..

In terms of revenues, I know you mentioned sort of the first half $50 million hit on virus and Kate Spade.

Can you maybe talk to what's organic versus some of the acquisitions versus divestitures, virus, apply that to the annual revenue outlook, flat to up 1%, how do we think about the different puts and takes?.

Yes. So round numbers, Kate Spade and coronavirus together is about 400 basis point headwind, so that 0% to 1% would become 4% to 5% excluding those two items..

Okay.

And the acquisitions, GREATS, BB Dakota?.

So you do have an offset with the acquisitions, that might add $30 million-ish that's not organic. The offset to that and the one piece that we do expect to be down organically is the private label footwear business.

We had some initial sell-ins of new programs last year, particularly in the wake of the Payless bankruptcy to some of our other private label customers and we don't anticipate to anniversary the amount of the initial sell-in and so that piece will be down..

And in terms of just sourcing, when you mentioned 30%, 35% normal productivity right now, I know this is hard to kind of think about this, but as you start thinking about Q2, are you assuming it's 100%? Are you assuming it's 75%? Just kind of what assumptions you're baking in for an improvement as you inflected into the second quarter from a sourcing perspective?.

Yes. We've assumed gradual improvement each week from here on out. So if we're 30% to 35% now, we've assumed that we get to 55% to 65% by the middle of March, 70% to 80% by the middle of April. And then we get to back to relatively normal operation at the end of second quarter. And that's how we've built this forecast..

And just in terms of product delays, any color about what specifically on that three week delay and then air freight, I guess, that's incorporated into the outlook as well, correct?.

Yes. Air freight is incorporated, the three weeks, it's all different products. I mean, there is no - I don't think there's any kind of theme that I could help you think about it..

Okay.

Final thing for me, just in Q1 and Q2, is there any difference down mid-single digits in the first half of the year, is one down more than the other in terms of the decline or how should we think about that?.

It's a very challenging question to answer right now, because there is - every day the coronavirus situation is so fluid and it's very challenging to know what is going to go out at the end of March and what's going to slip into April. So at this very moment, I think the sales will be a little weaker in second quarter than in first.

And I think the EPS growth or EPS reduction rather will be approximately the same in Q1 and Q2 on a percentage basis, but again this is such a dynamic situation that it's challenging to give you a lot of specificity..

[Operator Instructions] Your next question comes from the line of Dana Telsey with Telsey Advisory Group..

As you think about the expense impact from coronavirus and the air freight that you're going to be doing, in a typical year what do you - how much is air freight or what percentage is air freight? How do you think about it this year, because even ramping back up to full production.

It certainly sounds like you don't want to get in the goods quickly, so that you're prepared for the second half of the year? And are there any other expense items that I may not be thinking of from the bucket that impacts corona to get you back up to your regular production schedules?.

Yes. I think there is a sales loss, which we've talked about. In terms of expense, I think the big one is the one that you've outlined, which is air freight. We air freight a lot of goods in our retail business. So that could be on average or in a normal year approximately 20% of the goods. In wholesale, it's much lower. We're talking about maybe 2%.

Where that's going to land over the next few months? I can't say exactly. Could it be 25% higher? Yes. Could it be 50% higher? Probably not. But it will be in that range.

And then I guess the other thing that I should point out is, as I'm thinking through your question more, as we are moving a lot of goods or moving more aggressively out of China, there is a cost to that as well. And typically, we're going to be paying more for the goods and we may have to fly goods from some of these other locations as well.

If you're making more goods in Brazil, you're going to be flying a lot more, although the air freight from Brazil is considerably more cost effective than or considerably less expensive than from China..

And then as you think to your retail performance, how was the stores bucket versus the e-comm bucket and was there a difference with outlet and regular stores?.

Yes. It was still all - the growth is all driven by e-comm. So we were again down in stores and then up dramatically in e-commerce and within the store portfolio, we were down in both full price and outlet, but outlet has performed better than full price..

And just lastly, as you think about this upcoming spring season and you talked about you're only selling on sandals and open up dress shoes has been quite positive.

Any other categories or any other product trends we should be watching for as we go into spring-summer?.

Those are the big ones. Look, as I said, sneakers are continuing to be very important. So I don't want to - I don't want anyone to get the idea that sneakers are dead here. Trees don't grow to the sky, so eventually the growth rate was going to slow. It's still a very meaningful category for us.

But really I think where we're seeing the growth and a lot of excitement is in this sandals and open dress..

Just one last thing, price increases, how are you seeing price increases in wholesale and retail? Any different than what you had previously talked about, low-single-digit and then mid-single-digit price increases to the customer?.

Yes, I think it's really right. That's really where we landed for spring. As you move forward, now that the tariff has been reduced from 15% to 7.5%, you will see on average those prices come back in a little bit on the footwear side, but that's still the right range..

Your next question comes from the line of Tom Nikic with Wells Fargo..

I wanted to ask, embedded in the guidance, I think the acquisitions before you were talking about them being roughly EPS neutral, but with - I'm not sure if the supply chain disruptions effect them as well. So I was wondering if maybe you expect now those acquisitions to be dilutive this year..

I still think neutral is a good way to think about it..

And then, you talked a lot about the core Steve Madden brand, but I was wondering maybe some of those, the other brands, the Blondos, Dolce Vitas, like how did they perform in the quarter and how are you thinking about them for 2020?.

Yes. Blondo had a more challenging quarter than it's had. In some time Blondo has been such a superstar performer. But like Steve Madden, they were - they did not have a strong of a boot season, or at least strong of a performance in Q4 as we were anticipating.

Good news is, I think that we've got some great new product for 2020 and hopefully you can get that moving on an upward trajectory once again. Dolce Vita continues to see improvement in their sell-through. Their fall was better than the prior year and they are off to a good start in terms of spring sell-through as well.

So we feel like we're on the upswing there. I'm trying to think of the other ones. Anne Klein, that's another one where it's overall had a good year, but again boots in the fourth quarter was a challenge. We have made an exciting new hire there.

We've actually brought in a new group president over Anne Klein and Blondo, very experienced shoe executive that's run some very big businesses. And he is really working on modernizing and updating the product assortment at Anne Klein and we think he is going to be a real difference maker both there and in Blondo..

And there are no further questions at this time..

Okay, great. Well, thank you very much for joining us on today's call and we look forward to speaking with you again on the first quarter call, which is scheduled for April 24. Have a great day..

This concludes today's conference. You may now disconnect..