Steve Madden reported second quarter net sales increased 38.0 percent to $288.7 million. Retail comparable store sales increased 6.8 percent for the second quarter.

Second quarter net income was $26.9 million, or $0.61 per diluted share. Net income included a $2.5 million charge for a class action lawsuit related to unauthorized text messaging and a $1.8 million charge for impairment of a note receivable from the Company's former licensee for Betsey Johnson retail and apparel. On an after-tax basis, these charges negatively impacted net income by $2.6 million, or $0.06 per diluted share. The Company also recorded a $2.8 million, or $0.06 per diluted share, tax benefit for the year-to-date impact of a portion of earnings from the Company's foreign operations that have been reinvested indefinitely. Net income for the second quarter of 2011 was $23.8 million, or $0.55 per diluted share.

Edward Rosenfeld, Chairman and Chief Executive Officer, commented, “We delivered solid sales and earnings results in the second quarter despite a challenging retail environment. Overall the momentum in our business remains strong, with double-digit organic sales growth in each of our wholesale footwear, wholesale accessories and retail segments supplemented by meaningful contributions from our recent acquisitions. With our diversified platform spanning multiple brands, product categories, distribution channels and geographies, we believe we are well-positioned to drive top and bottom line growth in the second half of 2012 and beyond.”

Second Quarter 2012 Results

Second quarter net sales totaled $288.7 million compared to $209.2 million in the comparable period of 2011, an increase of 38.0 percent. Net sales from the wholesale business were $248.1 million compared to $175.2 million in the second quarter of 2011, driven by double-digit organic growth in wholesale footwear and accessories as well as the impact from the acquisitions of Topline, Cejon and SM Canada. Retail net sales grew 19.4 percent to $40.6 million compared to $34.0 million in the second quarter of the prior year. Same store sales increased 6.8 percent following an 11.6 percent increase in the prior year's second quarter.

Gross margin was 36.1 percent in the second quarter of 2012 as compared to 40.2 percent in the same period last year. Gross margin in the wholesale business was 31.6 percent compared to 35.4 percent in the prior year's second quarter. The decline was due primarily to sales mix shifts as a result of the acquisitions of Topline and Cejon as well as the growth in the Adesso Madden wholesale private label business, which increased 68.0 percent in the quarter. Excluding these mix shifts, wholesale gross margin was modestly higher compared to the same period in 2011. Retail gross margin decreased to 63.7 percent, compared to 64.8 percent in the second quarter of 2011, due primarily to increased markdowns in the sandal category.

Operating expenses as a percentage of sales were 23.1 percent compared to 24.5 percent in the second quarter of 2011, due to leverage on higher sales and an increased mix of wholesale, which has lower operating expenses as a percentage of sales than the retail business.

Operating income for the second quarter was $37.5 million, or 13.0 percent of net sales. Excluding the aforementioned charges for a class action lawsuit and note receivable impairment, operating income for the second quarter was $41.8 million, or 14.5 percent of net sales, as compared to operating income of $37.2 million, or 17.8 percent of net sales, in the same period of 2011.

Net income for the quarter increased 13.1 percent to $26.9 million, or $0.61 per diluted share. Net income included a $2.5 million charge for a class action lawsuit related to unauthorized text messaging and a $1.8 million charge for impairment of a note receivable from the Company's former licensee for Betsey Johnson retail and apparel. On an after-tax basis, these charges negatively impacted net income by $2.6 million, or $0.06 per diluted share. The Company also recorded a $2.8 million, or $0.06 per diluted share, tax benefit for the year-to-date impact of a portion of earnings from the Company's foreign operations that have been reinvested indefinitely. This compares to net income of $23.8 million, or $0.55 per diluted share, in the prior year's second quarter.

The Company opened 4 Steve Madden full-price stores, 1 Steve Madden outlet store, 1 Superga store and 1 Superga Internet store in the second quarter. The Company ended the quarter with 96 company-operated retail locations, including eight outlets and two Internet stores.

Six-Month 2012 Results

For the first six months of 2012, net sales increased 47.9 percent to $554.7 million from $374.9 million in the comparable period last year.

Net income was $48.8 million, or $1.11 per diluted share, for the first six months of 2012 compared to $41.6 million, or $0.97 per diluted share, in the first six months of 2011.

At the end of the second quarter, cash, cash equivalents and marketable securities totaled $189.8 million.

Company Outlook

For fiscal 2012, the Company continues to expect that net sales will increase 24 – 26 percent from 2011. Diluted EPS is now expected to be in the range of $2.67 – $2.77, compared to previous guidance of $2.62 – $2.72. The current EPS guidance includes an expected tax benefit related to foreign operations in the second half of approximately $0.08 that was not included in the previous EPS guidance.