Steve Madden reported fourth-quarter sales increased increased 12.8 percent to $315.5 million. Retail comparable store sales increased 5.9 percent.

Gross margin improved to 39.3 percent compared to 35.5 percent in the fourth quarter of 2011.

The effective tax rate was 35.0 percent compared to 38.6 percent in the prior years fourth quarter due to the reinvestment, indefinitely, of a portion of earnings from the Companys foreign operations in such foreign operations.

Net income was $33.0 million, or $0.74 per diluted share. Net income included a $1.0 million benefit related to a greater-than-anticipated recovery in the bankruptcy process of a note receivable from the Companys former licensee for Betsey Johnson retail and apparel, a portion of which was charged to impairment expense in the second quarter of 2012. On an after-tax basis, the benefit positively impacted net income in the fourth quarter by $0.6 million, or $0.01 per diluted share. Net income in the fourth quarter of 2011 was $23.8 million, or $0.55 per diluted share.

Edward Rosenfeld, Chairman and Chief Executive Officer, commented, “We are pleased to have delivered strong results in the fourth quarter, capping off an outstanding year for the Company. Our flagship Steve Madden brand was the key driver in the quarter, with robust growth across categories, channels and geographies. The strength in our flagship brand, combined with the opportunities we have with our newer brands, gives us confidence that we can continue to drive sales and earnings growth as we move ahead.

Fourth Quarter 2012 Results

Fourth quarter net sales increased 12.8 percent to $315.5 million compared to $279.8 million in the same period of 2011. Net sales from the wholesale business grew 9.4 percent to $247.2 million compared to $225.9 million in the fourth quarter of 2011, driven by strong growth in the Steve Madden footwear and handbag divisions, as well as the benefit from the acquisition of SM Canada. Retail net sales rose 27.0 percent to $68.3 million compared to $53.8 million in the fourth quarter of the prior year. Same store sales increased 5.9 percent following a 15.9 percent increase in the prior years fourth quarter.

Gross margin increased to 39.3 percent in the fourth quarter of 2012 compared to 35.5 percent in the same period last year. Gross margin in the wholesale business expanded to 32.6 percent compared to 28.9 percent in the prior year’s fourth quarter, with improvements in both the wholesale footwear and wholesale accessories businesses. Retail gross margin increased to 63.7 percent in the fourth quarter of 2012 compared to 63.1 percent in the fourth quarter of 2011, driven by the benefit from the acquisition of the higher-margin SM Canada retail business.

Operating expenses as a percent of sales increased to 24.8 percent for the fourth quarter compared to 23.1 percent in the same period of the prior year primarily as a result of an increased mix of retail and the re-classification of certain expenses from cost of goods sold and other expenses to operating expenses. The increase was also due to an increased bonus provision for the accessories business and increased expenses in the e-commerce business related to marketing and providing customers with free shipping.

Operating income for the fourth quarter was $49.8 million, or 15.8 percent of net sales. Operating income included a $1.0 million benefit related to a greater-than-anticipated recovery in the bankruptcy process of a note receivable from the Companys former licensee for Betsey Johnson retail and apparel, a portion of which was charged to impairment expense in the second quarter of 2012. Excluding this benefit, operating income for the fourth quarter was $48.7 million, or 15.4 percent of net sales, compared to operating income of $38.6 million, or 13.8 percent of net sales, in the same period of 2011.

Fourth quarter net income was $33.0 million, or $0.74 per diluted share. Net income included the aforementioned benefit related to a greater-than-anticipated recovery in the bankruptcy process of a note receivable, which, on an after-tax basis, positively impacted net income by $0.6 million, or $0.01 per diluted share. Net income in the fourth quarter of 2011 was $23.8 million, or $0.55 per diluted share.

The Company opened six Steve Madden full-price stores, three Steve Madden outlet stores and one Betsey Johnson e-commerce store in the fourth quarter and ended the quarter with 109 company-operated retail locations, including 11 outlets and three Internet stores.

For the Full Year Ended December 31, 2012:

For the full year ended December 31, 2012, net sales increased 26.7 percent to $1.2 billion from $968.5 million in the comparable period last year.

Net income was $119.6 million, or $2.71 per diluted share, for the year ended December 31, 2012. Net income included a $2.5 million charge for settlement of a class action lawsuit related to unauthorized text messaging and a $0.8 million net charge for impairment of a note receivable from the Companys former licensee for Betsey Johnson retail and apparel, in addition to a $5.1 million impairment charge and a $0.9 million charge for bad debt, both related to the bankruptcy of Bakers Footwear Group. Taken together, on an after-tax basis, these items negatively impacted net income by $5.7 million, or $0.13 per diluted share. Additionally, net income included a $6.0 million, or $0.14 per diluted share, tax benefit related to the reinvestment, indefinitely, of a portion of earnings from the Companys foreign operations in such foreign operations. Excluding all these items, net income for fiscal 2012 was $119.4 million, or $2.70 per diluted share. Net income for fiscal 2011 was $97.3 million, or $2.25 per diluted share.

At the end of the year, cash, cash equivalents and marketable securities totaled $266.3 million.

Company Outlook

For fiscal year 2013, the Company expects that net sales will increase 6-8 percent from 2012. Diluted EPS is expected to be in the range of $2.95-$3.05.

Steve Madden makes footwear under the Steve Madden, Steven by Steve Madden, Madden Girl, Stevies, Betsey Johnson, Betseyville, Report Signature, Report, Big Buddha, Wild Pair, Cejon and Mad Love names. It is also the licensee of various brands, including Olsenboye for footwear, handbags and belts and Elizabeth and James, Superga, l.e.i. and GLO for footwear.