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Quarterly profit fall sharply at shoe maker Steven Madden

May '08
Steven Madden Ltd, a leading designer, wholesaler and marketer of fashion footwear and accessories for women, men and children, announced financial results for the first quarter ended March 31, 2008.

First quarter net sales were $100.5 million compared to $106.7 million in the first quarter of 2007. Gross margin increased to 40.0% compared to 39.6% in the first quarter of the prior year due to a margin increase in the wholesale division, partially offset by a margin decline in the retail division.

Operating expenses as a percent of sales were 40.5% versus 30.0% in the same period of 2007, due largely to a one-time pre-tax charge of $4.9 million resulting from the resignation of the Company's former Chief Executive Officer as well as reduced leverage on lower sales versus the prior year period. Operating income including the aforementioned one-time charge was $2.8 million, or 2.8% of sales, compared with operating income of $15.7 million, or 14.7% of sales, in the first quarter of 2007.

Net income was $2.1 million, or $0.10 per diluted share, compared to $9.5 million, or $0.43 per diluted share, in the prior year's first quarter. Net income includes a one-time after-tax charge of $3.0 million, or $0.15 per diluted share, resulting from the aforementioned resignation of the Company's former Chief Executive Officer. Excluding the one-time charge, first quarter 2008 adjusted net income was $5.1 million, or $0.25 per diluted share.

Revenues from the wholesale business were $75.6 million compared to $82.3 million in the first quarter of 2007 due primarily to revenue declines in Candie's and Stevies. Gross margin in the wholesale business increased to 37.4% from 36.2% in last year's first quarter, primarily as a result of margin improvement in the Daniel M. Friedman division.

Retail revenues increased 2.6% to $25.0 million compared to $24.4 million in the first quarter of the prior year, due to sales from new stores. Same store sales decreased 3.7%. Retail gross margin decreased to 47.8% from 50.9% in the comparable period of the prior year, due to increased promotional activity. During the first quarter of 2008, the Company opened one new Steve Madden retail store and closed two Steve Madden stores.

"While our results in the first quarter continued to reflect an overall challenging macroeconomic environment, we experienced an improvement in certain areas of our business compared to the latter half of 2007," stated Edward Rosenfeld, Interim Chief Executive Officer. "We were pleased with the sales increases we were able to achieve in Madden Girl, Steven and our newest line, Steve Madden's Fix.

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