Difficulties expected for Steve Madden as tariffs loom on the horizon

Steve Madden, the American footwear and fashion accessories company, reported a loss from operations of $40.3 million in Q2 2025, marking a 7.2% decrease in revenue compared to the same period last year. This decline is attributed to the ongoing tariff-related challenges and changes in the company's sourcing strategy.

In a bid to diversify its sourcing base, Steve Madden initiated an initiative after President Donald Trump's reelection in November 2020. This move was prompted by concerns about product quality, on-time delivery, and pricing from sourcing from other countries. In response, the company shifted some of its production back to China for the fall of 2025.

For the first quarter, Steve Madden planned to source a mid-teens percentage of goods from China. However, for the fall season of 2025, the company expects to source about 30% of its imports from China, down from 71% a year ago.

The largest tariff-related impact was seen in mass and off-price channels, accounting for about 95% of the wholesale revenue shortfall. To mitigate some of these effects, Steve Madden has selectively raised prices for both wholesale customers and individual consumers, with price increases averaging about 10%.

The company's wholesale business has been affected, with a 6.4% year-over-year decline. However, the acquisition of the Kurt Geiger brand has helped Steve Madden log a revenue increase for Q2 2025, with $559 million, a 6.8% year-over-year increase. Without Kurt Geiger, Steve Madden's revenue would have fallen 10% in Q2 2025, according to Jefferies analysts led by Corey Tarlowe.

Steve Madden's wholesale business would have fallen 12.8% without Kurt Geiger, the company's largest brand. Steve Madden owns other brands besides Kurt Geiger, including Almost Famous, Dolce Vita, and Betsey Johnson. DTC revenue rose 43.3% for Steve Madden, but fell 3% excluding Kurt Geiger.

The tariff situation is expected to have a "significant impact" on Q3, with hopes for improvement by Q4. Tom Nikic, managing director of Needham & Company, expects the tariff-related demand impact to remain at least through the end of the year.

Steve Madden is also facing a lawsuit regarding the ownership of stripes with Adidas. Despite these challenges, the company is optimistic about its future and is waiting to see what happens following Trump's announcement of a 40% tariff on Brazil, a potential sourcing destination.

The departure of Steve Madden's chief merchandising officer, whose name is not explicitly named in the available search results, has also contributed to the company's challenges in Q2 2025. The company faced challenges such as canceled wholesale orders, reduced open-to-buys, and shipment delays during this period.

Despite these setbacks, Steve Madden remains committed to its diversification strategy and is looking forward to a more stable business environment in the future.