Steve Madden reported second quarter net sales increased 36.2% to $158.7 million. Net income increased 63.0% to $19.8 million, or 70
cents per diluted share, compared to $12.1 million, 44 cents per diluted share
in the prior year's second quarter.

Operating margin reached 20.2% of sales in the second quarter of 2010, compared with operating margin of 16.6% in the same period of 2009.

Edward Rosenfeld, Chairman and Chief Executive Officer, commented, “We are pleased to have reported the highest quarterly sales and earnings in our Company's history during our second quarter 2010. Our performance reflects broad-based strength in our business, with sales and profitability gains in the wholesale footwear, wholesale accessories and retail segments. We believe that our ability to deliver outstanding top and bottom line growth in a difficult retail environment demonstrates the strength of our business model and the creativity of Steve and our design team as they consistently deliver on-trend product that drives consumer demand. We are confident in our belief that the strength in our core business combined with the growth opportunities from some of our new businesses position us to achieve our long term goal of doubling EPS by 2014.”

Second Quarter 2010 Results

Second quarter net sales were $158.7 million compared to $116.5 million reported in the comparable period of 2009. Net sales from the wholesale business were $129.2 million compared to $88.2 million in the second quarter of 2009, a 46.5% increase driven by sales increases across all existing divisions as well as contributions from our recent acquisitions, Madden Zone and Big Buddha, and our new men's brand, Madden. Sales also benefitted from the transition of one of the Company's mass merchant customers from a buying agency model to a selling agency model. Retail net sales grew 4.2% to $29.5 million compared to $28.3 million in the second quarter of the prior year despite a smaller store base. Same store sales increased 7.4%.

Gross margin improved to 43.4% in the second quarter from 42.6% in the comparable period of 2009, reflecting margin improvement in both the wholesale and retail segments. Gross margin in the wholesale business increased to 38.7% in the second quarter from 36.8% in the prior year's second quarter driven primarily by improvement in our accessories division as a result of fewer markdown allowances and the addition of the higher margin Big Buddha business. Retail gross margin increased to 63.9% for the second quarter from 60.4% in the comparable period of the prior year as a result of less discounting.

Operating expenses as a percent of sales declined to 26.5% for the second quarter compared to 32.2% in the same period of the prior year, due to leverage on increased sales.

Operating income for the second quarter increased to $32.1 million, or 20.2% of net sales, compared with operating income of $19.4 million, or 16.6% of net sales, in the same period of 2009.

Net income increased 63.0% to $19.8 million, or $0.70 per diluted share, in the second quarter compared to $12.1 million, or $0.44 per diluted share in the prior year's second quarter.

During the second quarter of 2010, the Company closed one store, ending the quarter with 84 retail locations, including the Internet store.

Six-Month 2010 Results

For the first six months of 2010, net sales were $290.3 million compared to $223.9 million in the comparable period last year.

Net income was $35.2 million, or $1.25 per diluted share, for the first six months of 2010 compared to $18.7 million or $0.69 per diluted share in the first six months of 2009.

At the end of the second quarter, cash, cash equivalents and marketable securities totaled $164.0 million.

Arvind Dharia, Chief Financial Officer, commented, “We continue to maintain a healthy balance sheet through consistently solid financial performance combined with prudent capital management.”

Company Outlook

For fiscal 2010, the Company now expects sales to increase 22% — 24%. Diluted EPS is now expected to be in the range of $2.45 — $2.55, compared to previous guidance of diluted EPS in the range of $2.30 — $2.40.