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Steven Madden wholesale & retail divisions post double digit sales growth

Aug '05
Fashion footwear seller Steven Madden Ltd announced financial results for the second quarter and six months ended June 30, 2005.

In line with recently updated expectations, second quarter net sales increased 17.1% to $101.0 million from $86.2 million in the same period last year.

Gross margin increased 20 basis points to 38.1% from 37.9% and operating expenses as a percent of sales improved to 32.2% versus 32.4% in the comparable period. This resulted in operating income of $8.7 million, or 8.6% of sales, versus $6.6 million, or 7.6% of sales, for the same period last year. Net income increased 29.2% to $5.3 million, or $0.39 per diluted share, versus $4.1 million, or $0.28 per diluted share, in the prior year period.

Retail revenues during the quarter increased 23.5% to $32.6 million from $26.4 million in the comparable period last year. Same-store sales increased 13.6% for the quarter on top of a 15.2% increase in the second quarter last year. The Company opened three new stores, ending the quarter with 95 Company-owned retail locations, including the Internet store.

Revenues from the wholesale division comprised of the Company's seven brands, Steve Madden Womens, Steve Madden Mens, Stevies, l.e.i., Steven, Candie's, and UNIONBAY, increased 14.2% to $68.3 million versus $59.8 million in the year-ago period.

As previously announced, wholesale performance reflects particularly strong results in Madden Mens and improvements in Candie's, as well as better-than-expected aggregate gross margin for the wholesale division.

"They are quite pleased that both the wholesale and retail divisions posted double digit sales growth over the prior year period, signifying broad-based strength in the business," stated Richard Olicker, President.

"Moreover, while they continued to face certain challenges during the quarter, they were able to deliver strong product to market, control costs, and improve inventory management in a number of divisions. This enabled us to make significant progress in our long-standing and focused effort to improve overall margins.”

"During the quarter they also announced the appointment of Awadhesh Sinha as Chief Operating Officer, signifying our commitment to even further improving various aspects of our operations by identifying and executing additional efficiencies in the business. I look forward to partnering with Awadhesh and having the benefit of his experience as they work diligently to drive both top and bottom line growth going forward."

For the first six months of 2005, net sales increased 11.7% to $184.3 million compared to $165.0 million in the same period last year. Net income was $6.2 million, or $0.46 per diluted share, versus $8.2 million, or $0.57 per diluted share, in the comparable period last year.

Arvind Dharia, Chief Financial Officer, said, "They continue to be very proud of the solid financial foundation that is in place. Our strong balance sheet boasts $83.8 million in cash, cash equivalents, and investment securities, no short- or long-term debt, and $166.4 million in total stockholders' equity."

Company Outlook As previously announced, based on the positive year-to-date sales trends, coupled with projections for the business in the second half, the Company currently expects 2005 net sales will increase in the mid single digits over 2004. With respect to expectations for earnings per diluted share, initial guidance for the year assumed an improvement in the second half of 2005 versus the comparable period in the prior year.

Further, the Company remains cautious about the balance of 2005 and continues to expect challenges related to sustained margin pressure in the wholesale and retail businesses. Taking all of these factors into account, the Company currently anticipates that full year earnings will be between $0.90 and $0.93 per diluted share.

Jamieson Karson, Chairman and Chief Executive Officer, commented, "They are pleased with our year-to-date performance and are particularly gratified by the second quarter.”

The results show that they are gaining traction from a number of key initiatives designed to strengthen and expand our management team, grow the top line, streamline costs, and improve margins and profitability.

They believe our recent performance also reflects an excited and re-energized Company in conjunction with the return of Steve Madden, its founder and Creative and Design Chief. Steve is an enormous talent in the fashion industry and is a true inspiration for all of our Company's employees. They are thrilled to once again be benefiting from his vision and creative and design expertise.

"As they enter the second half of the year, they will continue to explore ways to further improve operations, diversify the business, and build the Steve Madden brand.

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