Earnings Call Transcript
STEVEN MADDEN, LTD. (SHOO)
Earnings Call Transcript - SHOO Q3 2023
Operator, Operator
Good day and welcome to the Steven Madden, Ltd. Third Quarter 2023 Earnings Conference Call. All participants will be in a listen-only mode. Please be advised that 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.
Danielle McCoy, VP of Corporate Development and Investor Relations
Thanks, Abigail, and good morning, everyone. Thank you for joining our third quarter 2023 earnings call and webcast. Before we begin, I'd like to remind you that 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 today on the call 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?
Edward Rosenfeld, Chairman and CEO
Thanks, Danielle, and good morning, everyone, and thank you for joining us to review Steven Madden's third quarter 2023 results. We were pleased to return to year-over-year earnings growth in the third quarter, demonstrating the strength and durability of our business models in challenging operating environments. After a tough first half, where we saw significant year-over-year declines in revenue and earnings, we drove strong improvement in our financial performance in Q3. On a consolidated basis, revenue for the quarter declined 1% versus the prior year period, operating margin expanded 90 basis points to 15.1%, and diluted EPS rebounded sharply to increase 11% over the comparable period in 2022. In a challenging and uncertain environment, our team remains focused on controlling what we can control and executing our strategy for long-term growth. That strategy starts with utilizing 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 and get them to market ahead of the competition. We then support that great product with an always-on full marketing and consumer engagement strategy. By consistently combining our standing product and effective marketing, we create deeper connections with our consumers, which, in turn, enables our success with our forward key business drivers. The first of those drivers is growing our business in international markets. In the third quarter, our international revenue increased 5% compared to the prior year period and accounted for just under 20% of consolidated revenue, a new quarterly high. Our EMEA region was a standout. We continue to see strong momentum in Europe, where third quarter revenue rose 18% compared to the same period in 2022. Our success in the region was recently recognized by the leading U.K. industry trade publication, Draper's, which named Steve Madden the Women's Footwear Brand of the Year for 2023. In September, we opened a flagship store on Oxford Street in London with our local partner, allowing us to showcase the brand to customers from around the globe in one of the world's most important shopping destinations. We also continued to develop our business in the Middle East through our new joint venture in the region. The JV opened five new stores in the quarter, drove strong performance in e-commerce, and made significant investments in marketing, both offline and online, to build brand awareness. While it's a smaller market, I also want to call out our South Africa joint venture, where we experienced explosive growth, with revenue increasing 87% versus the prior year period, driven in large part by outstanding performance in sneakers, where we've seen multiple products go viral in the market. Closer to home, in our Americas region, our directly owned subsidiary in Mexico continued its strong momentum, growing revenue 31% compared to the prior year period, including a 23% gain in wholesale and a 46% increase in DTC. This was offset by a decline in Canada, where trends continue to be softer overall, and some large wholesale orders moved out of Q3 and into the beginning of Q4. Our second key business driver is expanding in categories outside of footwear, like accessories and apparel. In the third quarter, our overall accessories and apparel revenue increased 27% versus the prior year period. Our Steve Madden handbag business was the primary growth driver. It had another outstanding quarter, increasing revenue 52% compared to the third quarter of 2022, including a 46% gain in wholesale and a 90% increase in DTC. We also continue to make meaningful progress in apparel. Our Steve Madden apparel business is having a strong fall season, with robust sell-through rates in our key accounts. Based on this performance, we see meaningful opportunity for both door growth and expanded assortments within existing doors in our most important accounts in 2024. Last month, we enhanced our apparel platform with the acquisition of privately held Almost Famous, a designer and marketer of women's apparel. Almost Famous markets products in the wholesale channel under its own brands, primarily Almost Famous, as well as private-label brands for various retailers. It has also been the exclusive licensee for Madden NYC Apparel since its launch in 2022 and has had outstanding success with that brand so far. Almost Famous' core expertise is in the junior apparel category and in value-price distribution channels, making it a strong complement to our existing Steve Madden apparel business, which is focused on contemporary styling and is primarily distributed in department stores and e-commerce retailers. Our top priorities will be to use the Almost Famous platform to introduce Madden Girl apparel and to grow Madden NYC apparel. This will enable us to implement the same strategy in apparel that has been so successful for us in footwear and accessories, which is to utilize the Steve Madden brand portfolio, including Steve Madden, Madden Girl, and Madden NYC, to reach customers in all tiers of distribution from premium channels down through mass. Almost Famous had revenue in the 12 months ended September 30, 2023, of approximately $163 million. The acquisition was completed for $52 million in cash, subject to a working capital adjustment, plus an earn-out provision based on future financial performance. We are extremely excited about the addition of Almost Famous, the capabilities it brings, and the opportunities it creates to continue the expansion of our business outside of footwear. Our third key business driver is driving our direct-to-consumer business led by digital. In the third quarter, DTC revenue declined 2% versus the prior year period, a sequential improvement from the 5% decline we experienced in the second quarter. We also delivered a 250 basis point improvement in gross margin in DTC, enabling us to expand operating margins and drive higher EBIT than in the prior year period, despite the revenue decline. It is important to note that our DTC business continues to be over 50% bigger than it was pre-COVID. On a trailing 12-month basis, DTC accounted for 26% of consolidated revenue, up from 18% in pre-COVID 2019. The fourth and final key driver is strengthening our core U.S. wholesale footwear business. As we have discussed on prior earnings calls, this business has been under significant pressure this year as our wholesale customers pulled back on orders across the board as they prioritized inventory control. While we are still not all the way back to where we'd like to be, we saw significant improvement in the third quarter. U.S. wholesale footwear revenue decreased 6% in the quarter, a 1,500 basis point improvement compared to the first half trend. We expect sequential improvement again in the fourth quarter. Putting it all together, we are pleased with the progress we are making on our key strategic initiatives. As we execute against our plan and focus on the long term, we are also cognizant of the challenging operating environment and disciplined in how we manage the business in the near term. In the third quarter, we, one, expanded gross margin for the fourth consecutive quarter with gross margin increases in both wholesale and DTC channels, despite an increasingly promotional retail landscape. Two, managed our inventory with discipline, reducing inventory by 16% at the end of Q3 compared to the prior year. Three, controlled expenses and drove cost efficiencies with operating expense dollars declining year over year for the second consecutive quarter, even as we continue to invest in product innovation, consumer engagement, and our long-term growth initiatives. As we look ahead, this operating discipline will remain important because we continue to face a challenging macro environment. Trends across our industry softened beginning in September, which combined with the impact of the crisis in the Middle East on our Israel and Middle East joint ventures leaves us incrementally more cautious on the near-term outlook. Looking further out, we remain confident that our core strengths, our people, brands, and business model will enable us to deliver sustainable revenue and earnings growth over the long term. Finally, as we navigate these challenges and execute our strategic initiatives, we also continue to embrace the opportunity and the responsibility we have to create positive change for our people, planet, and communities. We seek to embed corporate social responsibility and sustainability in everything we do. In the third quarter, we published our 2022 Sustainability Report, which outlines the progress we have made on our Let's Get Real sustainability strategy and our goals going forward. You can find the report on the sustainability section of stevemadden.com, and I encourage you all to check it out. Now I will turn it over to Zine to review our third quarter financial results in more detail and provide our updated outlook for the year.
Zine Mazouzi, CFO
Thanks, Ed, and good morning, everyone. Our consolidated revenue in the third quarter was $552.7 million, a 0.7% decrease compared to the third quarter of 2022. Our wholesale revenue was $433.5 million, down 0.3% compared to the same period in the prior year, a strong improvement compared to the 20% year-over-year decline we experienced in the first half. Wholesale footwear revenue was $306.1 million, a 7.5% decrease from the third quarter of 2022. While wholesale customers remain cautious in their approach to orders, we are encouraged by the sequential improvement we are seeing in this business and expect to return to year-over-year revenue growth in the fourth quarter. Wholesale accessories and apparel revenue was $127.4 million, an increase of 22.7% compared to the same period last year, driven by the outstanding growth of Steve Madden handbags in both domestic and international markets. In our direct-to-consumer segment, revenue was $116.4 million, a decrease of 1.8% compared to the same period last year. Our brick-and-mortar business outperformed our e-commerce business, and international outperformed the United States. We opened 13 new stores and closed four stores during the third quarter, all in international markets, ending the quarter with 251 brick-and-mortar retail stores, including 71 outlets, as well as five e-commerce websites and 22 company-operated concessions in international markets. In our licensing segment, royalty income was $2.9 million in the quarter, compared to $3.5 million in Q3 last year. Turning to gross margin, consolidated gross margin was 42.1% in the quarter, expanding 90 basis points from the third quarter of 2022, with margin improvement in both wholesale and DTC. Wholesale gross margin rose 60 basis points year-over-year to 35.9%, driven by improvement in the wholesale accessories and apparel business. Direct-to-consumer gross margin was 63.7%, a 250 basis point improvement compared to the same period last year, driven by lower freight expenses and a reduction in promotional activity. Operating expenses in the third quarter were $149.3 million, a 0.8% decrease compared to the third quarter of 2022, reflecting our ability to control costs while continuing to invest in marketing and our long-term growth initiatives. Operating income for the quarter totaled $83.4 million, or 15.1% of revenue, up from $79 million, or 14.2% of revenue in the same period last year. We drove operating margin improvement in both wholesale and DTC channels. Our effective tax rate for the quarter was 22.8%, compared to 22.9% in Q3 2022. Finally, net income attributable to Steve Madden Limited for the quarter was $65.1 million, or $0.88 per diluted share, up from $61.5 million, or $0.79 per diluted share in the third quarter of 2022. Moving to the balance sheet, our financial foundation remains very strong, and as of September 30, 2023, we had $206.4 million of cash, cash equivalents, and short-term investments, and no debt. Inventory at the end of the quarter was $205.7 million, compared to $244.3 million at the end of the third quarter in 2022, a reduction of 15.8%. Our CapEx in the quarter was $6.1 million. During the quarter, we spent $40 million on repurchases of the company's common stock, which includes shares acquired through the net settlement of employee stock awards, bringing the 2023 year-to-date spend to $104.2 million. Our board of directors approved a quarterly cash dividend of $0.21 per share. The dividend will be payable on December 29, 2023, to stockholders of record as of the close of business on December 15, 2023. Turning to our full-year outlook, we are updating our revenue and earnings per share guidance. We now expect revenue for 2023 to decrease approximately 7% compared to 2022. We expect diluted EPS will be approximately $2.40. This updated guidance includes a contribution from the Almost Famous acquisition of approximately $30 million to $35 million in revenue and $0.01 to $0.02 in EPS. It also includes a negative impact related to the crisis in the Middle East on our Israel and Middle East joint ventures of approximately $8 million to $9 million in revenue and $0.03 in EPS.
Operator, Operator
Thank you. Our first question comes from Paul Lejuez with Citi. Your line is open.
Unidentified Analyst, Analyst
Hi, everyone. This is Kelly on for Paul. Thanks for taking your question. I guess, can we just dig into 4Q guidance a little further now? It looks like you're more in the core business. Some of that is due to the Middle East and Israel JVs, but outside of that, can you just talk about where you're kind of lowering the core business outlook? Seems like wholesale is going to sequentially improve versus the fourth quarter. So just trying to figure out where we're seeing that. We'll start there and I have another follow-up. Thanks.
Edward Rosenfeld, Chairman and CEO
Yes, good morning, Kelly. Essentially, we're taking, if you back out the impact of Almost Famous and the impact from the crisis in the Middle East, we're going to the low end of both the revenue and the earnings guidance. So revenue would be down about eight if you exclude those two impacts. What is moving us towards that low end is a reduction in our forecast for DTC. Wholesale is pretty down close to where it was before, but we have taken the DTC down based on this softening trend that you've probably heard about from others that's really happened across the industry since September.
Unidentified Analyst, Analyst
And I know you've talked a lot about the customer kind of showing up when there's reasons to shop. So I guess, taking all that into account, the health of the consumer, some of maybe the fashion trends you're seeing out there, are you feeling optimistic that those trends could improve or is there just not enough happening on the newness fashion side to make you more optimistic?
Edward Rosenfeld, Chairman and CEO
Well, I think that the point you raise is a good one that we have continued to see customers, the shopping pattern is becoming more and more event-driven. Customers are showing up on those holiday weekends, those promotional times, but then in between, the valleys have been a little deeper. Certainly, we're hopeful that as we move into this holiday period and Black Friday, Cyber Monday, etcetera, which is clearly the biggest event of the year, that the customers will really show up. Is it possible that we could do a little bit better than this? Yes, but essentially what we've done to build this forecast is rule the recent trend forward through the end of the year.
Unidentified Analyst, Analyst
Just one more for me on the wholesale side. Wholesale came in a little bit better than expected. Did you see retailers place orders? How are they feeling about taking any need back? Is there fashion out there that they're excited about and how does that outlook look when we look to spring 2024? Just how the wholesale partners are behaving.
Edward Rosenfeld, Chairman and CEO
Yes, I think there is some new fashion. I do feel good about our product assortments. We're getting very good feedback from our wholesale customers about our spring assortments. However, the sentiment amongst the big wholesale customers remains quite cautious, and we still see a pretty conservative approach to order patterns.
Unidentified Analyst, Analyst
Got it. Thank you.
Operator, Operator
One moment for our next question. Our next question comes from Aubrey Tianello with BNP Paribas. Your line is open.
Aubrey Tianello, Analyst
Hey, good morning. Thanks for taking the questions. I wanted to touch on the Almost Famous acquisition and why now was kind of the right time to do the deal. Going forward, how do you see the landscape for M&A opportunities from here? Do we see a pickup in activity? Are you more focused on these types of platform acquisitions? Or could brands be in the cards too?
Edward Rosenfeld, Chairman and CEO
Okay. Well, good morning, Aubrey. Thanks for the questions. Regarding 'Why Now,' we just feel pretty excited about the path we're on in apparel. We were excited about expanding our business in that category, expanding our platform and our capability in that category. We bought BB Dakota in 2019, which was our entree into apparel. We feel very good about the path we're on there, and we thought it was time to expand the platform to add this capability that Almost Famous brings, which, as a reminder, their expertise is in the trend-driven junior part of the market and in value-price distribution channels. This is a very strong complement to what we do in Steve Madden apparel, which is contemporary styling and primarily distributed in the premium channels like department stores and better department stores, and pure-play e-commerce retailers. With this transaction, we now have capabilities similar to what we have in shoes and accessories where we will be able to sell into all tiers of distribution from premium down through mass. We feel quite good about that strategy and are very excited about what we can do with this new capability. In terms of the overall landscape for M&A, I don't think there's any big update there. We obviously have the wherewithal to continue to do more. If we find the right transaction, we'll continue to keep our eyes and ears open. There's nothing else imminent, but we'll continue to look for the right transactions. Additionally, while we integrate Almost Famous, we'll continue, as always, to focus on our international opportunities and international joint ventures in addition to what we normally do.
Aubrey Tianello, Analyst
Got it, thank you. Just as a follow-up, I think earlier this year, you called out some strength in your outlet business. Wondering if you're starting to see any trade-down effect happening as the consumer environment softens a bit, and just how we should think about how you're positioned if the customer does start migrating down toward lower price points.
Edward Rosenfeld, Chairman and CEO
Yes, well, with respect to our own brick-and-mortar retail business in the United States, we see outlets significantly outperforming full-price stores. In Q3 and so far in Q4, we're looking at more than 1,000 basis points better comp in outlet than in full-price stores. So I think that's reflective of a customer that is focused on value. One of the things we like about our business is we're very well diversified by channel. We operate in regular price channels, and we also operate in the more value-price channels. Thus, we should be able to go where the customer goes.
Operator, Operator
One moment for our next question. Our next question comes from Tom Nikic with Wedbush. Your line is open.
Tom Nikic, Analyst
Hey everyone, thanks for taking my question. Following up on Kelly's question earlier about DTC, I believe you said you're more cautious on DTC now than you were three months ago. Can you give us any sort of quantification? Previously, you thought DTC would be up most of the digits for the year. How should we think about it for the full year?
Edward Rosenfeld, Chairman and CEO
Yes, thank you, Tom. That's a good question. So that's right, our previous forecast had built in about a 1% increase in DTC for the year, and we've now lowered that to down close to 4.5% for the year. The bridge from that 1% to close to down 4.5% accounts for about a 150 basis point negative impact from the crisis in the Middle East and the impact that's had on our DTC business. There’s also about a 50 basis point impact from non-comp stores whose openings we have delayed, and the balance of close to 350 basis points is due to a lower comp assumption because of this slowdown that we talked about, starting really in September.
Tom Nikic, Analyst
Understood, and I'm not sure if you mentioned this earlier, but has there been any improvement in the DTC trend, quarter to date or with the cooler weather or anything like that?
Edward Rosenfeld, Chairman and CEO
No, unfortunately. We talked about it being slow in September. October was even weaker than September, and November has really been in line with October.
Tom Nikic, Analyst
Understood, all right, thanks Ed, and best of luck with all of these.
Edward Rosenfeld, Chairman and CEO
Thanks, Tom.
Operator, Operator
One moment for our next question. Our next question comes from Laura Champine with Loop. Your line is open.
Laura Champine, Analyst
Thanks for taking my question. I wanted to ask about the private label slowdown that happened in Q2. Did you get catch-up sales from that in Q3, or was it just a return to normal wholesale volumes from private label customers in Q3?
Edward Rosenfeld, Chairman and CEO
Good morning, Laura, thank you. So I wouldn't say we had catch-up sales from Q2, but private label did get much better in Q3. This was really a function of the comparisons from the prior year. It was Q3 of last year when we began to see that steep slowdown in private label as the big customers there cut orders to try to get their inventories back in line. Thus, we were anniversarying much easier numbers beginning in Q3 and that's why you saw that business get much better on a year-over-year basis. There was also a little bit of a shift from Q4 into Q3 between Q3 and Q4, so private label was up nicely in Q3, but it will be down again in Q4, but for the back half, it will be up in total.
Laura Champine, Analyst
Understood. And then on the EPS guidance towards the low end of your prior range, how much pricing are you giving? Because otherwise I think your gross margins would be really strong in Q4.
Edward Rosenfeld, Chairman and CEO
We built in a little bit more. We've assumed it particularly in DTC that it is a very promotional fourth quarter. I think from here on out, you're going to see a lot of promotions across the industry. We built a little bit of that into our guidance. In wholesale, I don't really see us giving any price back.
Zine Mazouzi, CFO
Yes, as far as Q4, I think we were very clear with the guidance that $2.40 for EPS. I might as well tell you that the gross margin will also be somewhere around 42%, about 40 basis points or so lower than last year. This is primarily driven by benefits from freight, and we discussed it earlier, for 100 basis points. The offset is the mix of the business, involving the penetration of DTC, penetration of private label, and the addition of Almost Famous into the mix, which is 140 basis points the other way.
Laura Champine, Analyst
Got it, that's very helpful, thank you.
Zine Mazouzi, CFO
Thanks, Laura.
Operator, Operator
One moment for our next question. Our next question comes from Janine Stichter with BTIG. Your line is open.
Janine Stichter, Analyst
Hey, good morning. I wanted to dig a little bit more into the slowdown that you've seen in September and beyond. It's been pretty well documented across the industry, but just love your thoughts on what you think is driving that. I'm curious if you have any sense of what's happened in terms of sell-throughs at wholesale and just your views on the inventory industry-wide, if any of the department stores have kind of been caught off guard by the slowdown and what inventories look like in the channel.
Edward Rosenfeld, Chairman and CEO
Sure, yes. I think the first question was what's driving the slowdown? There's a lot of macro data that we can point to about pressure on the consumer, whether it's credit card debt, continued inflation, or the resumption of student loan payments, etcetera. I can't tell you exactly what's driving what we're seeing, but I think it matters that it's happening. We need to make sure that we manage our business accordingly. You asked about sell-throughs at wholesale. We have seen a similar impact in wholesale. On a relative basis, we feel we're still doing well and better than our direct competitive set in terms of wholesale sell-throughs, even over the last couple of months, but we have seen the rate slow down a bit. In terms of inventory in the channel, I think that generally speaking, I still don't think inventories are very out of whack in the channel, although there are certainly categories where there's probably too much inventory, like in boots for instance, where the booty category has been weaker than expected, and there's probably some excess inventory building in the channel there.
Janine Stichter, Analyst
Thanks a lot.
Edward Rosenfeld, Chairman and CEO
Thank you.
Operator, Operator
One moment for our next question. Our next question comes from Corey Tarlowe with Jefferies. Your line is open.
Corey Tarlowe, Analyst
Hi, good morning. Just to follow up on the Almost Famous acquisition, could you talk a little bit about what you think the longer-term sales and margin opportunity for the acquisition could be as we think about the growth or the potential growth for that business ahead? Additionally, you mentioned that you’ve controlled expenses and you’re driving cost efficiencies. Where are some other areas where you think you could fine-tune the business to further optimize costs ahead?
Edward Rosenfeld, Chairman and CEO
Sure. Thanks, Corey. I'll take the first one, then I'll turn it over to Zine to talk about expenses. In terms of Almost Famous, as we disclosed, it's just a little over $160 million business in revenue currently. In its most recent fiscal year, it had about a 7% operating margin. We believe we see a clear path to increasing that over time as we gain the benefits of combining our two companies. Therefore, we can increase that margin into the high singles and, over time, most likely into the low doubles in terms of operating margin. Regarding revenue growth, we believe there are significant revenue synergies from combining with our company. We mentioned the introduction of Madden Girl Apparel as something we want to do. We’re not willing to quantify exactly how big this business can be at this moment, but we certainly see significant revenue growth and operating margin opportunity in this business. Zine, would you like to address the operating expenses?
Zine Mazouzi, CFO
Sure. For Q3, we came in at negative 0.8% against last year's dollar. As we said before, we continue to try and control the controllables in this choppy environment. We put a lot of controls around our supply chain, mainly our warehouses, to ensure we control those expenses. That drove a significant portion of the drop versus last year. We also have variable expenses related specifically to retail and e-commerce that came in favorably since sales were lower. However, those variable expenses were partially offset by our investment in marketing, innovation, and IT. For Q4, just to give you a little guidance, we expect operating expenses to be up around 4%. This increase is primarily due to the inclusion of Almost Famous into the base. Without Almost Famous, we expect to be below a 1% increase in Q4. Going forward, we always strive to run lean as a company, and we did some significant cuts back in the COVID days. We continually seek savings wherever possible, utilizing technology and automation in our supply chain for further cost reductions.
Corey Tarlowe, Analyst
Very helpful. Thanks so much.
Operator, Operator
One moment for our next question. Our next question comes from Samuel Poser with Williams Trading. Your line is open.
Samuel Poser, Analyst
Good morning. Thanks for taking my questions. A lot of them have been answered. But I'd like to know, are you seeing a variance in your sell-through rates or consumer appetite within the Steve Madden brand, within your wholesale accounts? How does that compare to what you're seeing with DTC?
Edward Rosenfeld, Chairman and CEO
Thanks, Sam. No, I don’t think there's a big distinction to call out at this moment in terms of consumer demand across channels.
Samuel Poser, Analyst
But you did say that you felt like you were sort of outperforming, let's say, your peers or how other brands are doing on, say, the Macy's floor. Still, there’s reticence from those wholesale accounts to write fill-ins for the best-selling stuff. Is that a fair statement?
Edward Rosenfeld, Chairman and CEO
That is accurate. We feel for the fall season that our sell-throughs are better than those of our direct competitors. However, that isn't resulting in many reorders, given the overall environment. Still, I believe this situation bodes well for spring. We're getting good feedback from our wholesale customers regarding our plans for spring.
Samuel Poser, Analyst
Two other things. One, do you think they're actually buying to the trend? Are they still buying cautiously below it? Secondly, one of your larger accounts is a vendor-managed program. Can you sort of talk to the difference between the vendor-managed program and the non-vendor-managed program? Are you making any headway in convincing the non-vendor-managed programs to become vendor-managed programs?
Edward Rosenfeld, Chairman and CEO
Regarding orders, it is still cautious. I would say it remains below what we view as underlying consumer demand. We are actively working with our wholesale customers to rectify that. You mentioned the vendor-managed program with a big wholesale customer. Over the past few years, that’s been one of our most successful businesses, owing in part to our influence over the assortment at that account. We're continually trying to work more closely with our key wholesale customers to ensure we have the right goods in the right stores at the right time.
Samuel Poser, Analyst
Well, actually, can you tell me the variance between that vendor-managed program and the non-vendor-managed program?
Edward Rosenfeld, Chairman and CEO
No, I cannot.
Samuel Poser, Analyst
Well, you could, but you won't. But I appreciate it. Thank you.
Edward Rosenfeld, Chairman and CEO
Good try, as always. Thanks.
Operator, Operator
One moment for our next question. Our next question comes from Jay Sole with UBS. Your line is open.
Jay Sole, Analyst
Great. Thank you so much. Can I just ask for an update on the handbag and apparel parts of the business, like the BB Dakota business? How have you seen those trends in the quarter? Are they different from what you're seeing in footwear?
Edward Rosenfeld, Chairman and CEO
Yes, thank you, Jay. Handbags have shown strong growth. We've seen double-digit growth year after year for several years, and our Steve Madden handbag business continues to perform exceptionally, up over 50% overall in Q3, with 46% in wholesale and 90% in our own direct-to-consumer channels. Regarding apparel, we discussed our positive efforts in this area in September. Our product assortment is the best it's ever been, and we are outperforming key competitors in our top accounts. We expect door growth and expanded assortments at better department stores and some pure-play e-commerce retailers. Thank you so much for joining us this morning. Have a great holiday season, and we look forward to speaking with you on the next call. Have a great day.
Operator, Operator
Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.