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Steven Madden, Ltd (NASDAQ:SHOO)
Q2 2021 Earnings Call
Jul 28, 2021, 8:30 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, and thank you for standing by. Welcome to the Quarter Two 2021 Steve Madden Limited Earnings Conference Call. At this time all participants are in a listen-only mode. After the speakers presentation there will be a question-and-answer session. [Operator Instructions].

I would now like to hand the conference over to your speaker today, Danielle McCoy. Please go ahead.

Danielle McCoy -- Director of Corporate Development & Investor Relations

Thanks, Misti, and good morning, everyone. Thank you for joining our second quarter 2021 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. Such statements may also include discussions involving the ongoing COVID-19 pandemic including its current and expected impact on our business operations and results, as well as the company's plans and response to such uncertain and dynamic events.

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 as 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 are Ed Rosenfeld, Chairman and CEO; and Zine Mazouzi, CFO.

With that, I'll turn the call over to Ed. Ed?

Edward Rosenfeld -- Chairman & Chief Executive Officer

Thanks, Danielle. And good morning, everyone, and thank you for joining us to review Steve Madden's second quarter 2021 results.

We're really excited about the strong and accelerated recovery we are seeing in our business. The outstanding trend-right product assortments created by Steve and our design teams are driving strong consumer demand for our brands. Our owned and operated e-commerce business continues to have exceptional momentum.

Our retail stores have rebounded sharply and are now comping well above pre-pandemic levels. And while our wholesale shipments remained below pre-pandemic levels in the quarter, our sell-through performance was robust positioning us for strong improvement in that business going forward. Overall, our second quarter results significantly exceeded our expectations with earnings slightly ahead of pre-COVID-19 second quarter 2019.

Turning to our performance by segment. Our retail business was the highlight in the quarter and the source of the outperformance versus our expectations. Overall, retail revenue increased 63% compared to the second quarter of 2019. Our digital commerce business was the primary driver as it accelerated once again with revenue increasing 105% on top of 86% growth in the prior-year period, including 119% growth in our Steve Madden global digital business, on top of 85% growth last year.

We continue to see strong returns on our increased investment in digital marketing, as well as tangible results from our ongoing efforts to add and optimize features and functionality on the site.

Our brick-and-mortar business was also strong. On an open-only basis, our global brick-and-mortar comparable store sales were up 8% in the quarter compared to 2019. We achieved this revenue performance with significantly reduced levels of promotional activity in both digital and brick-and-mortar channels, which in turn drove segment gross margin up over 500 basis points compared to the comparable period in 2019, for the second consecutive quarter.

We also continue to benefit from the cost savings measures we implemented over the last year, including rent savings from restructured leases. For the first six months of 2021, our retail segment has contributed $31.4 million in EBIT compared to an EBIT loss of $3.8 million in the first half of 2019.

In our wholesale business, revenue in the quarter was as expected down to the comparable period in 2019. Our sell-through performance however was strong across shoes, accessories and apparel. Our core Steve Madden Women's footwear business had particularly outstanding sell-throughs with success across a range of categories including sandals, dress shoes, and sneakers.

While the industry overall benefited from increased consumer demand and spending on fashion over this time period, our performance at retail outpaced the competition and our wholesale customers are reacting with increased purchases for fall. We expect strong sequential improvement in the back half in our wholesale business with Q3 down low to mid-single digits through 2019 and Q4 returning to growth versus 2019.

As we drive this accelerated recovery in our business results, we also continue to focus on advancing our diversity, equity and inclusion and corporate social responsibility initiatives. In Q2, we expanded our partnership with the Fearless Fund, a venture fund which seeks to bridge the gap in venture capital funding for women of color founders. We established a new partnership with Howard University in which we'll work with the business school to reimagine its retail curriculum starting this fall. And we launched our first collection of Steve

Madden Kids adaptive footwear, fashion forward styles, which were developed in partnership with children with disabilities and their families.

In the coming weeks, we will be putting out our second annual sustainability report. I encourage all of you to check it out, so you can see the progress we have made on our sustainability goals, as well as our targets and roadmap for the future.

Overall, we are very pleased with the progress we are making and the trends we are seeing in the business. The outstanding results in our retail segment and robust sell-through performance in wholesale demonstrate the health of our brands, the strength of our product assortments, and the momentum we have in digital channels. While we still face challenges due to COVID-19 including but not limited to continued supply chain disruption across the globe, we are confident that based on the strength of our brands, our business model and our people, we are well positioned to drive sustainable revenue and earnings growth and create value for our stakeholders over the long term.

With that, I'll turn it over to Zine to review our second quarter 2021 financial results in more detail and provide our fiscal year guidance.

Zine Mazouzi -- Chief Financial Officer

Thanks, Ed, and good morning everyone.

Our consolidated revenue in the second quarter was $397.9 million, a 178.6% increase compared to 2020 and an 11.5% decrease versus 2019. Our wholesale revenue was $262.1 million, up 162.2% compared to the prior year and down 27.9% compared to 2019.

Wholesale footwear revenue was $198.1 million, a 154.1% increase from 2020 and a 30.8% decline from 2019. Wholesale accessories and apparel revenue was $64 million, up 190.7% to last year and down 17.2% versus 2019. In our retail segment, revenue was $132.7 million, a 226% increase compared to 2020 and a 62.8% increase compared to 2019.

E-commerce drove the growth versus 2019. E-commerce revenue grew 105.2% compared to 2020, an 282.2% versus 2019. E-com accounted for 54% of our total retail segment sales in the quarter compared to 23% in 2019.

We ended the quarter with 216 company-operated retail stores, including 66 outlets, 6 e-commerce -- and 6 e-commerce sites, as well as 15 company-operated concessions and international markets. As of June 30, when the last 10 stores in Canada reopened, we now have 100% of our stores opened worldwide.

Turning to our licensing and First Cost segments. Our license and royalty income was $2.8 million in the quarter compared to $1.2 million last year, and $3.1 million in 2019. First Cost commission income was $0.3 million compared to the prior year and down from $1.6 million in 2019.

Consolidated gross margin was 42.7% in the quarter, up from 39.1% in the prior year and 37.8% in 2019. Wholesale gross margin was 30.6% compared to 26.6% last year, and 32.1% in 2019. The decline compared to 2019 was the result of increased freight rates and the non-renewal of GSP.

Retail gross margin was 65.4% compared to 67.4% last year, and 59.7% in 2019. Compared to 2019, we saw strong margin improvement in both e-commerce and stores due to less promotional activity, which more than offset the higher freight rates. Operating expenses were $119.1 million in the quarter compared to $76.9 million last year and $120.9 million in 2019.

Operating income for the quarter totaled $51 million or 12.8% of revenue, up from last year's operating loss of $21 million and 2019's operating income of $49.1 million or 10.9% of revenue. Our effective tax rate for the quarter was 20.7% compared to 26.9% in 2020, and 22.4% in 2019.

Finally, net income attributable to Steven Madden Limited for the quarter was $39.7 million or $0.48 per diluted share, up from last year's net loss of $14.7 million or $0.19 per diluted share and 2019's net income of $39.5 million or $0.47 per diluted share.

Moving to the balance sheet, our financial foundation remains very strong and as of June 30, 2021, we had $302.7 million of cash, cash equivalents and short-term investments, and no debt. Inventory totaled $125.5 million up 21.5% compared to last year, but down 14.1% to 2019. Our CapEx in the quarter was $1.2 million.

During the quarter, we repurchased approximately 876,000 shares for $37.2 million, which includes shares acquired through the net settlement of employee's stock awards. There is approximately $81 million remaining on the share repurchase authorization.

The company's Board of Directors approved a quarterly cash dividend of $0.15 per share, the dividend will be payable on September 27, 2021 to stockholders of record as of the close of business on September 17, 2021.

Turning to our guidance for fiscal 2021, we expect revenue to increase 43% to 47% compared to 2020, and we expect diluted EPS to be in the range of $2 to $2.10. When comparing to 2019, we expect revenue and diluted EPS to increase mid-single digits on a percentage basis in Q3 and that will accelerate in Q4.

Now I would like to turn the call over to the operator for questions. Operator?

Questions and Answers:

Operator

[Operator Instructions] Your first question comes from the line of Paul Lejuez with Citi.

Paul Lejuez -- Citi -- Analyst

Hey, thanks guys. Curious if maybe you could talk about the comp drivers behind that 8% open only comp when you compare that to the second quarter of 2019. And Ed maybe just a supply chain outlook. Just any timing of delivery issues that you might be seeing how you guys are mitigating, any pressures that you're seeing in the supply chain that might impact flow for the second half? Thanks guys.

Edward Rosenfeld -- Chairman & Chief Executive Officer

Sure, well good morning, Paul. Thanks for your question. So, in terms of the comp drivers, look we're seeing traffic improve, but it still remains negative to '19 and double-digit negative to '19. But we've seen improved conversion and a significant increase in AUR. We've raised some prices selectively in terms of our initial prices but the bigger driver there is much reduced promotional activity. So that's really driving the big increase in AUR which is contributing to that-we're a big driver of the comp store increase that we're seeing in bricks-and-mortar.

In terms of the supply chain, look there is a lot of we can talk about this all day. There are challenges throughout the globe, there is port congestion, both in the U.S. and in China. There're COVID outbreaks at factories. There are challenges getting containers. We could go, we could go on and on.

So we are seeing a pretty significant increase in the lead time still, and the supply chain disruption remains a significant challenge. We've tempted to build that into the guidance that we've provided, and we planned for it. And we've taken what steps we can to mitigate it. I think I believe we've talked to you about how we've moved about half of the Steve Madden Women's production to Mexico and Brazil for fall, and so a big move out of China.

That has helped, although there are challenges in both Brazil and Mexico as well. Brazil has had some COVID outbreaks, there has been challenges getting space on airplanes. If we want to fly the goods in China, excuse me, in Mexico, some of the components, come from China and there has been delays. So it's helps moving to Mexico and Brazil, but still remains a challenge.

Paul Lejuez -- Citi -- Analyst

Got it, thanks. And were you limited at all in the second quarter. Do you feel like you're missing sales and missing some deliveries within the wholesale business as a result of some of these supply chain pressures?

Edward Rosenfeld -- Chairman & Chief Executive Officer

Oh yes, there was a very significant impact in Q2, particularly in the wholesale business from the supply chain challenges yield. In a normal year if we had the types of sell-throughs that we had this spring, we would have chased into a lot more business in second quarter, a lot more reorders in second quarter, but we were not able to do that due to the supply chain disruption.

Paul Lejuez -- Citi -- Analyst

Got it. Thank you. Good luck.

Edward Rosenfeld -- Chairman & Chief Executive Officer

Thanks, Paul.

Operator

Your next question is from Camilo Lyon with BTIG.

Camilo Lyon -- BTIG -- Analyst

Thanks, good morning everyone, and we are excited to hear that you're excited about the trends that you see in your business. I wanted to focus on two topics. On the first is this e-com strength that you talked about triple-digit strength even as stores are now starting to get traffic back. As you think about your customer and the fact that she is now or she is predominantly an online shopper? How are you guys thinking about what e-com can ultimately be and as a part of the retail mix, and how does that influence any sort of product assortments that might lean toward the retail and e-com first, and then I have a second question on channel?

Edward Rosenfeld -- Chairman & Chief Executive Officer

Yes, well look, we're already at this point a majority digital company in our retail segment. So, it's now been I think five quarters in a row where e-commerce has made up more than 50% of our retail segment revenue. And we expect that to continue, and that's going to continue to be a major focus for us, and I think a growth driver.

In terms of products, are there products that perform better in e-commerce than in stores? Yes, there are some differences, but generally speaking, we're trying to make great shoes that resonate with our consumer and we're not necessarily designing into e-commerce versus stores.

Camilo Lyon -- BTIG -- Analyst

I was more talking about timing of stocks that would favor your direct channel over some of the wholesale in terms of trying to creating more segmentation that would lean more toward the direct channels over time?

Edward Rosenfeld -- Chairman & Chief Executive Officer

Yes, well certainly given growth in that channel and frankly the improved profitability that we've seen in that channel, we are really prioritizing our owned and operated e-commerce in a way that we never had before.

Camilo Lyon -- BTIG -- Analyst

Got it. And the follow-up question I had on channel is, just if you could provide any commentary on demand within your different channel partners if there's any difference there. And then lastly if you could just provide an update on the early days sell-through of what you're seeing at the anniversary sale -- there were some anniversary sale that will be helpful?

Edward Rosenfeld -- Chairman & Chief Executive Officer

Sure. Look, there is nothing really to call out in terms of the difference by channel. Obviously some retailers are performing better than others, etc. But generally speaking we're seeing strong consumer demand in all the channels in which we play. And we're really pleased with the performance and the sell-through in all the channels in which we distribute our products.

And then in terms of anniversary, can't get into too many of the details other than to say, we're very, very pleased with our performance so far, particularly in the Steve Madden brand.

Camilo Lyon -- BTIG -- Analyst

It sounds like you might be even excited about the early performance of it.

Edward Rosenfeld -- Chairman & Chief Executive Officer

Yes, we are.

Camilo Lyon -- BTIG -- Analyst

Okay. I'll turn it over to the queue. Thanks a lot and good luck with the balance of the year.

Edward Rosenfeld -- Chairman & Chief Executive Officer

Thanks Camilo.

Operator

Your next question is from Susan Anderson with B. Riley.

Susan Anderson -- B. Riley -- Analyst

Hi, good morning. Nice job on the quarter. I guess just a follow-up on the wholesale channel. So it sounds like the demands they are so, I'm wondering if you were able to plan more inventory for that channel for the back half to meet that demand. I guess should we expect the spread between wholesale and retail performance to narrow a bit in the back half. And then really quick on the gross margin by the channel, I think retail was down a bit, while wholesale is up. So just curious what the divergence of the two were there. Thanks.

Edward Rosenfeld -- Chairman & Chief Executive Officer

Sure. Yes, you will see that gap between wholesale and retail narrow in the back half. And as we indicated in the prepared remarks, we think wholesale when comparing to 2019 also improved to down low to mid singles in Q3 and then be back to positive versus '19 in Q4.

So you asked about the gross margin, I think you were comparing it to Q2 of last year. I think, really, the better comparison is to Q2 of '19. There were so many unusual things happening in Q2 of 2020. So I think if you look at Q2 of 2019 is actually the inverse of what you said, which is that wholesale was down to 2019, and that was all driven by the increased freight rates and the impact of the nonrenewal of GSP. So if you back those two things out, we were positive, where we had gross margin improvement relative to Q2 2019. And then in the retail segment, we had a very substantial increase in gross margin compared to Q2 of 2019. And as Zine pointed out, it was -- we had strong improvement in both stores and in e-com due to the reduced promotional activity.

Susan Anderson -- B. Riley -- Analyst

Okay. Great. That's helpful. And then how are you thinking about the puts and takes of gross margin in the third quarter and the back half? I guess, should those benefits seen in second quarter continue into third quarter and then the impact of the higher freight, should that be a similar impact as in second quarter? Or is it more or less as you may be air freight a lot of products still?

Edward Rosenfeld -- Chairman & Chief Executive Officer

Yes. You're still going to see the same -- the same impact from freight and GSP or a similar impact. That's going to continue to be a headwind. Obviously, we hope that GSP gets renewed at some point and that goes away. But we have built in an impact from GSP throughout the year.

In terms of the overall gross margin, look, it should be a little bit lower than -- I don't think we're going to see the 42.7% that we saw in Q2 just because wholesale will make up a bigger percentage of the mix in the back half than it did in Q2, which obviously carries a lower gross margin, but we still do expect to see gross margins to start with a 4% in the back half.

Susan Anderson -- B. Riley -- Analyst

Great. That's really helpful. Thanks so much. Good luck for the rest of the year.

Edward Rosenfeld -- Chairman & Chief Executive Officer

Thank you.

Operator

Your next question is from Jay Sole with UBS.

Jay Sole -- UBS -- Analyst

Great. Thanks so much. So just a follow-up on the last question. If we just think about SG&A dollars in Q3 and Q4, are there any incremental drivers, maybe investments or more e-commerce marketing or anything that could be an impact on that? And maybe could you give us a little bit of guidance on how you're thinking about SG&A for the back half? Thank you.

Edward Rosenfeld -- Chairman & Chief Executive Officer

Sure. Yes. We have taken up our forecasted SG&A in line with the -- with our increased expectations around revenue for the year. So I think previously, for the full year, we had said that we thought SG&A would be lower than 2019, I think at least at the high end of our guidance. We'll now see SG&A above 2019 for the full year. And of course, that means above in the back half as well. And the change there is really incremental investment in marketing, particularly digital marketing, to support the very strong trends we're seeing in the owned and operated e-commerce business as well as other variable expenses.

And those are the two big buckets. To a lesser extent, we have started to add back some of the payroll that we had cut from the reduction in force last year as we see the strong recovery in the business.

Jay Sole -- UBS -- Analyst

Got it. Understood. And if I could ask one more. How would you characterize some of the gross margin improvement in the retail business? Is the increased full price selling really a byproduct of having just really on-trend product? Or is it more of a factor that there's just low inventory across the channel? Demand is better than supply, generally speaking, and that's what's driving it. I guess the idea is sort of how do we think about next year? And like the -- how sustainable are the gross margin gains that you're seeing in that retail business?

Edward Rosenfeld -- Chairman & Chief Executive Officer

Well, I think it's really both of the things that you mentioned. So I think that we have to acknowledge that inventory levels across the industry are low. And the levels of promotional activity, not only -- it's not just us that's reduced promotional activity, many of our peers and competitors have done the same. And so you're seeing gross margins, I think, increase across the space.

We also believe that we have particularly strong product that's really resonating with the consumer. And so that's another reason we've been able to, I think, pull back on promotions even incrementally compared to some others. But it's definitely a combination of those two factors.

Jay Sole -- UBS -- Analyst

Got it. Thank you so much.

Edward Rosenfeld -- Chairman & Chief Executive Officer

Thank you.

Operator

Your next question is from Janine Stichter with Jefferies.

Janine Stichter -- Jefferies -- Analyst

Hi. Good morning. Want to dig a bit more into the acceleration in performance that you're expecting between 3Q and 4Q. Is that just reflective of how long it takes you to meet the demand that's out there right now? Or is there any assumption around underlying improvements in wholesale demand? And then also curious on 4Q, what your expectation is right now about reorders and your ability to meet them just given what's going on with the supply chain. Thank you.

Edward Rosenfeld -- Chairman & Chief Executive Officer

Sure. Yes. Well, in terms of the sequential improvement from Q3 to Q4, I think we're just seeing ongoing sequential improvement in the business as we recover from the impact of COVID-19 and as our wholesale customers increase orders. I think the other -- there is also an impact here from the supply chain disruption. And there is some product that I think that is moving out from the end of Q3 into the early part of Q4 in our forecast. But generally speaking, we just feel the momentum building. In terms of reorders, of course, we've got a plan for reorder in Q4. We've tried to bake into our assumption there all the challenges around the supply chain disruption. And we feel comfortable with where that's sitting.

Janine Stichter -- Jefferies -- Analyst

Okay. Great. And then I just wanted to follow-up. I think you had said dress shoes still very strong. I'm curious if you're seeing any of your competitors able to get into that category at this point or if you still feel like you have a much broader assortment.

Edward Rosenfeld -- Chairman & Chief Executive Officer

Yes. I think that was a big advantage for us in spring. I think we had really, really strong dress shoes and many of our competitors had really deemphasized that category. And we took a lot of share in that category as that category -- demand in that category started coming back. I think it's safe to assume that our competitors have seen that, and there's going to be more competition in that category in fall. But we feel very good about our positioning with the consumer in that category and about our product assortment. So I think it's still going to be a nice driver for us.

Janine Stichter -- Jefferies -- Analyst

Okay. Thanks very much.

Operator

The next question is from Erinn Murphy with Piper Sandler.

Erinn Murphy -- Piper Sandler -- Analyst

Great. Thanks. Good morning. Two questions for me as well. First, Ed, for your wholesale business overall, given the strength of sell-through, can you just speak to where your market share gains are currently in that channel? And then do you expect this to translate to further shelf space as we move through the back half of this year and into next year?

And then secondly, could you just speak to the performance of the business outside of the U.S. Would love to hear how you're up in Canada are starting to track in the recovery. Thanks.

Edward Rosenfeld -- Chairman & Chief Executive Officer

Sure. Yes. Well, in terms of the market share, yes, certainly, in the spring season, our sell-throughs exceeded those of our key competitors in our largest wholesale customers. And our wholesale customers are reacting to that. So at least certainly in our core -- in our core businesses, Steve Madden women's at the top of the list. The plans that we have from our customers for fall exceed what they're planning for their overall department and what they're planning for our competitors. So we are taking shelf space and we're excited about that.

In terms of some of the markets outside the U.S., Europe continues to be a real highlight for us. That business was actually up over 100% in Q2 compared to Q2 of 2019. So tremendous momentum there. Again, continues to be driven by digital channels, both our owned and operated, but also what we do in the wholesale channel with folks like Zalando and ASOS. So really excited about that business.

Canada has obviously had more of a -- or a slower recovery from COVID-19. And so that business has been tougher, although we're starting to see some improved results over the last couple of weeks.

Erinn Murphy -- Piper Sandler -- Analyst

Great. And then if I could just add one more. On Dolce Vita, can you just speak to how that brand is performing currently. We're seeing it in a lot more just in social media and influencers, I would love an update on how that brand is performing overall. Thanks so much.

Edward Rosenfeld -- Chairman & Chief Executive Officer

Yes, I really appreciate the question because Dolce Vita is doing great. I think they had a really incredible spring season, the best, I think, that they've had in a long time. Really strong selling across a number of products and categories but also one sort of home run item, that's probably the best item they've had since we've owned them, I think, it's got to be up there. So great momentum in the wholesale channel, also on dolcevita.com. And that's one also where without -- if not for the supply chain disruption, they would have really been able to capture a lot more business. And that is the one area of caution with Dolce Vita going forward, is that we make the majority of our Dolce Vita products, pretty much all of our first tier products, in Vietnam, which is obviously dealing with a lot of challenges with COVID right now. And in fact, a number of their Dolce Vita factories are shut down. So we have factored that into our guidance. But generally speaking, consumer demand for the brand is very, very strong.

Erinn Murphy -- Piper Sandler -- Analyst

Excellent. Thanks so much.

Edward Rosenfeld -- Chairman & Chief Executive Officer

Thank you.

Operator

Your next question comes from Sam Poser with Williams Trading.

Sam Poser -- Williams Trading -- Analyst

Good morning. Thank you for taking my questions, Ed and company. I have a few. One, what is -- the wholesale appetite early in the year didn't appear to be that great. And then your business came up, the appetite got better, and you couldn't ship most of the good because of the supply chain. But when we look at the wholesale appetite now both for the balance of the year and into next spring, what are you starting to see?

Edward Rosenfeld -- Chairman & Chief Executive Officer

Yes. Well, it's improved dramatically. And that's why we've guided to this very significant improvement in our wholesale revenue in the back half. Again, that's down low to mid-singles in Q3 versus '19 and then positive in Q4 versus '19.

Sam Poser -- Williams Trading -- Analyst

Thanks. And then you mentioned that the gross margin, you expected it to start with 4% in the back half of the year. Is that in both quarters do you think it's going to start with the 4%? Or would it be -- would it be likely better in Q3 because the -- from the penetration it will move around a little more in Q4. How should we think about that?

Edward Rosenfeld -- Chairman & Chief Executive Officer

I was speaking about the back half in total. And in fact, it will be better in Q4 because of the higher penetration of retail in Q4.

Sam Poser -- Williams Trading -- Analyst

Okay. And then lastly, just -- I have actually two more. One, what's the story with Anne Klein and other licenses now? How -- what is going -- how are you handling that? I know it's a small business, but you acquired it and then it sort of probably dried up a bit.

Edward Rosenfeld -- Chairman & Chief Executive Officer

Yes. So Anne Klein, along with, I would say, Men's is probably the businesses that took the biggest hit from COVID, just based on their positioning. And good news about Anne Klein is that we have seen a pretty strong improvement in sell-through over the last couple of months. So we're seeing some nice signs of life there. We're going to see a nice improvement in the back half from where we've been, but we'll still be below -- that's a business where we will still be below pre-pandemic levels in the back half. So encouraging signs, but we still have some work to do there.

Sam Poser -- Williams Trading -- Analyst

Thanks. And then just quick lastly, the tax rate for the full year, what are you guys thinking?

Edward Rosenfeld -- Chairman & Chief Executive Officer

It should be right around where it was last year. I think last year, we were at 20.6%, I think right around there.

Sam Poser -- Williams Trading -- Analyst

Okay. Great. Thanks. Continued success.

Edward Rosenfeld -- Chairman & Chief Executive Officer

Thanks, Sam.

Operator

The next question is from Marni Shapiro with Retail Tracker.

Marni Shapiro -- Retail Tracker -- Analyst

Hey, guys. Congratulations. Perhaps your stores have been so busy, you need inventory. Could you just talk a little bit about the back half of the year. We know we heard all about the deliveries and delays and things like that. I guess, how are you planning promotions for the back half of the year for Christmas? I know they've been much lower now. There's a lot of demand, not a lot of inventory out there. But as the consumer comes into the holiday season, is there assumption that you'll still be looking for some kind of promotion? So how are you working with your wholesale partners for holiday promotions? And how are you guys thinking about it?

Edward Rosenfeld -- Chairman & Chief Executive Officer

Yes. Thanks, Marni, for the question. And yes, we did really need inventory.

Marni Shapiro -- Retail Tracker -- Analyst

Definitely. I can give you a list of stores.

Edward Rosenfeld -- Chairman & Chief Executive Officer

We're working on it as fast as we can. In terms of promos, look, I think -- we and our key wholesale customers are all operating with the plan to continue with this lower level of promotional activity. Inventories are very well controlled in the channels. As you pointed out, probably too well controlled, probably too low, not only for us but for our key wholesale customers. And so I do anticipate that levels of promo activity will be less than they were in '19. It doesn't mean there's not going to be any. We all know that at a holiday time, customers expect some level of promotional activity, but I think it should be well controlled.

Marni Shapiro -- Retail Tracker -- Analyst

And then can I just ask a follow-up to some of the sellout questions that we've been talking about, because you've had some really killer items that are coming in and you watch them come in and go out the door. I guess how quickly can you get back into some of them? Or are these fashion items that it doesn't make sense? Like I look at, I don't know how to pronounce it, I'm guessing it's the KENLEY, which is just a hot, hot, hot item. Does it make sense to chase that item? Or by the time you get it back in, the customers moved on to the next thing? How are you guys balancing that? I know you've always had to do it in the past, but I feel like right now things are moving exponentially faster.

Edward Rosenfeld -- Chairman & Chief Executive Officer

Yes. Look, it's a different answer depending on the item, but it has been a big challenge. We're not able to get back into things as quickly as we normally do. As you know, that's one of the hallmarks of our company, how quickly we can chase and our speed-to-market capability. And we're not as fast as we normally are. I think we're still faster than our peers. But our lead times are three, four weeks longer than normal in many cases. And so that's made a challenge. There are some things that we're going to -- we'll continue to go after. And then there are some opportunities, more seasonal products, that we've had to just kind of walk away from maximizing. We move on to the next season.

Marni Shapiro -- Retail Tracker -- Analyst

Thanks so much. Best of luck for the fall season.

Edward Rosenfeld -- Chairman & Chief Executive Officer

Thanks, Marni.

Operator

Your next question is from Dana Telsey with Telsey Advisory Group.

Dana Telsey -- Telsey Advisory Group -- Analyst

Good morning and congratulations on the nice progress. Ed, can you give us an update on how the private label businesses do in the discounters and what you're seeing there? And then also the margin impact of freight and how you're planning that going forward.

Edward Rosenfeld -- Chairman & Chief Executive Officer

Sure. Yes, the performance of private label with the mass merchants is very good. In Q2, it was down. And I think we called out some of the -- like a big onetime program that we did not anniversary from 2019 down -- I'm talking about down to 2019 because of not anniversarying a big onetime program. That happened in the wake of the Payless bankruptcy. But generally speaking, our sell-through is good with the mass merchants, and we feel good about our performance there. Zine, do you want to address the freight?

Zine Mazouzi -- Chief Financial Officer

Sure. So for freight, for Q1, if you recall, we talked the impact was about 110 basis points. For Q2, the impact was 270 basis points. And as far as Q3 is concerned and Q4, I think we're looking at for right now around 260 basis points, with Q3 similar to Q2 and then maybe a little relief toward the end of Q4.

Dana Telsey -- Telsey Advisory Group -- Analyst

Got it. And then any update on accessories and apparel and what you're seeing in those categories and how they are planned for the back half?

Edward Rosenfeld -- Chairman & Chief Executive Officer

Yes. So in terms of the wholesale, if you're asking about the wholesale segment revenue plan, really in line with what we said for overall wholesale versus '19, meaning the down low to mid-singles to '19 in Q3 and then improving in Q4. But in terms of what we're seeing in the business, I'm really happy about that. And the first thing I want to highlight is what we're seeing in apparel because that BB Dakota Steve Madden business is really seeing strong traction. Again, very strong sell-throughs there. The dress category, in particular, has been great for us, but great performance with our big customers, bricks-and-mortar or omnichannel guys like Nordstrom and Bloomingdale's but also our e-com -- our pure-play e-com retailers like REVOLVE and a really strong performance in the Nordstrom anniversary sale so far. So really excited about the trends there and the momentum that we have in apparel.

And then on the handbag side, also feeling very good. Steve Madden handbags, I think, are stronger than they've ever been and having a lot of success, a lot of product categories, cross-bodies are phenomenal for us, but also doing well with our weekenders, our satchels. And it's not only in wholesale, we've seen a big improvement in that business in our direct-to-consumer -- in our direct-to-consumer segment and seeing the penetration go up significantly there. So excited about the nonfootwear categories.

Dana Telsey -- Telsey Advisory Group -- Analyst

Great. And just lastly, how are sneakers doing given the improvement that we've been seeing in dressy.

Edward Rosenfeld -- Chairman & Chief Executive Officer

Yes. Sneakers are still performing very well. The number one product in the company is a fashion sneaker with Rolling Stones. So that continues to be a very important category for us.

Dana Telsey -- Telsey Advisory Group -- Analyst

Thank you.

Edward Rosenfeld -- Chairman & Chief Executive Officer

Thanks, Dana.

Operator

There are no further questions. I will now turn the call back over to Ed Rosenfeld.

Edward Rosenfeld -- Chairman & Chief Executive Officer

Great. Well, thanks so much for joining us on today's call. Enjoy the rest of the summer, and we look forward to speaking with you on the Q3 call. Have a great day.

Operator

[Operator Closing Remarks]

Duration: 43 minutes

Call participants:

Danielle McCoy -- Director of Corporate Development & Investor Relations

Edward Rosenfeld -- Chairman & Chief Executive Officer

Zine Mazouzi -- Chief Financial Officer

Paul Lejuez -- Citi -- Analyst

Camilo Lyon -- BTIG -- Analyst

Susan Anderson -- B. Riley -- Analyst

Jay Sole -- UBS -- Analyst

Janine Stichter -- Jefferies -- Analyst

Erinn Murphy -- Piper Sandler -- Analyst

Sam Poser -- Williams Trading -- Analyst

Marni Shapiro -- Retail Tracker -- Analyst

Dana Telsey -- Telsey Advisory Group -- Analyst

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