Steve Madden’s Q4 Profits Surge on 17.1% Sales Gain

Retail comparable store sales increased 7% for the fourth quarter.

Operating margin reached 15.0% of sales in the fourth quarter 2009, compared with operating margin of 10.3% in the same period of 2008.

Edward Rosenfeld, chairman and CEO, commented, “We are pleased with our accomplishments in 2009 as we delivered record sales and earnings and achieved our 15% operating margin goal well ahead of our 2012 target date. Steve and his team continued to stay ahead of the fashion trends, resulting in exceptional performance in our core business despite a challenging retail environment. In addition, we embarked upon several new business initiatives that benefitted our performance in 2009 and should provide additional growth in 2010 and beyond.”

Fourth Quarter 2009 Results

Fourth quarter net sales were $139.5 million compared to $119.1 million reported in the comparable period of 2008. Net sales from the wholesale business were $98.4 million compared to $79.1 million in the fourth quarter of 2008, driven by strength in the Steve Madden Womenâ€s, Madden Girl, Steven by Steve Madden, and Steve Madden Menâ€s divisions. The addition of international sales into the top line and the introduction of the new Elizabeth and James brand also aided in the growth of the wholesale business. Retail net sales grew 2.7% to $41.1 million compared to $40.0 million in the fourth quarter of the prior year despite a smaller store base. Same store sales increased 7%.

Gross margin improved to 44.1% from 40.4%, reflecting margin improvement in both the wholesale and retail divisions. Gross margin in the wholesale business increased to 37.9% from 31.9% in the prior year’s fourth quarter due primarily to fewer close-outs and higher initial mark-ups. Retail gross margin increased to 58.7% from 57.1% in the comparable period of the prior year, also benefitting from higher initial mark-ups as well as less discounting than in Q4 2008.

Operating expenses as a percent of sales were 31.8% versus 32.8% in the same period of the prior year, due to leverage on increased sales.

Operating income for the fourth quarter increased to $21.0 million, or 15.0% of sales, compared with operating income of $12.2 million, or 10.3% of sales, in the same period of 2008.

Net income increased 88.2% to $13.6 million, or $0.73 per diluted share, compared to $7.2 million, or $0.40 per diluted share, in the prior year’s fourth quarter.

During the fourth quarter of 2009, the Company opened one store.

Full Year 2009 Results

For the full year fiscal 2009, net sales increased 10.2% to $503.6 million compared to $457.0 million in fiscal 2008.

Net income totaled $50.1 million, or $2.73 per diluted share, for the year, compared to $28.0 million, or $1.51 per diluted share, in fiscal 2008. Fiscal 2008 results included a one-time pre-tax charge of $4.9 million, or $0.16 per diluted share, resulting from payments associated with the resignation of the Companyâ€s former Chief Executive Officer. Excluding this one-time charge, fiscal 2008 net income totaled $31.0 million, or $1.67 per diluted share.

The Company opened two stores, closed seven underperforming stores and licensed out three stores during 2009, ending the year with 89 retail locations, including the Internet store.

At the end of the year, cash, cash equivalents and marketable securities totaled $155.0 million.

Arvind Dharia, Chief Financial Officer, commented, “We ended 2009 with a strong balance sheet driven by operating cash flow and prudent capital management.”

Company Outlook

For fiscal 2010, the Company expects sales to increase 11%-13%. Excluding the transition of one of the Companyâ€s mass merchant customers from a buying agency model to a selling agency model, net sales are expected to grow 7% to 9%. Diluted EPS is expected to be in the range of $3.10 to $3.30. Capital expenditures are planned to be approximately $4 †$5 million in 2010 as compared to $3.4 million in 2009. The Company plans to open one to three stores and to close between six and nine locations in 2010.