Steve Madden is taking a cautious approach in 2023 as wholesale pressures weigh on the footwear brand’s results.

The company’s sales dropped 18.6% to $470.6 million in Q4 and net income was $31.8 million, or $0.42 per diluted share, both largely in line with the company’s expectations. For the full year, revenue increased 13.7% to $2.122 billion and net income was $216.1 million, or $2.77 per diluted share.

Steve Madden delivered a weak near-term outlook for 2023, with CEO Edward Rosenfeld citing a “challenging operating environment” and “conservative initial spring orders” from wholesale partners looking to control inventory excesses. The brand expects wholesale to be down 12% to 13% in 2023, with the worst impact occurring in the first half of the year.

In recent weeks, retailers have pulled back on orders amid inventory excesses and slowing consumer demand, which has meant bad news for brands that rely on department stores and other retailers to drive a significant portion of their business.

Steve Madden, which largely relies on wholesale customers for sales, told analysts earlier this month that it expects continued pressure in the wholesale channel in the first quarter of 2023.

In Q4, wholesale revenue was $308.8 million, down 24.8% compared to last year and relatively in line with prior predictions. Compared to Q4 in 2021, wholesale footwear revenue decreased 25.5% and wholesale accessories and apparel revenue decreased 22.8%. Gross profit as a percentage of wholesale revenue declined to 30.5%.

Wedbush analyst Tom Nikic, who met with Steve Madden management in early February, noted earlier this month that the brand has the “highest exposure to the U.S. wholesale channel,” in his coverage which could reflect poorly on future results. He also noted that the normalization of transportation times has helped the brand’s ability to “chase” demand.

“Steve Madden is a high-quality business with a strong management team, and it was prudent for them to take a cautious initial view of guidance,” Nikic said in Thursday note following the earnings report. “However, near-term trends in the business are clearly challenged given the exposure to the U.S. wholesale channel.”

Q4 DTC sales were $159.3 million, a 3.2% decrease compared to the prior year. This was driven by a decline in brick-and-mortar sales and offset by a slight increase in e-commerce.

Overall, Steve Madden expects revenues to decline between 6.5% and 8% in 2023 compared to 2022. Diluted EPS is expected to be in the range of $2.40 and $2.50.