Steve Madden: Handbags “on Fire”

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Summer 2012 style at Steve Madden

Long Island City, NY—Double-digit growth in its wholesale footwear and accessories business helped give Steve Madden a 13% increase in its second quarter profit.

For the quarter ended June 30, Steve Madden posted Thursday net income of $26.9 million, or 61 cents a share, up from $23.8 million, or 55 cents a share, a year ago. Total revenue jumped 38% to $288.7 million.

Analysts’ average estimate expects earnings of 62 cents a share on sales of $280.8 million

“We delivered solid sales and earnings results in the second quarter despite a challenging retail environment,” said Edward Rosenfeld, chairman, ceo. “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.”

Sales at the company’s wholesale division were up $248.1 million compared to $175.2 million last year. Helping boost those sales were growth in footwear and accessories as well as its acquisitions of Topline, Cejon and SM Canada.

In a conference call with analysts, Rosenfeld cited handbags as being particularly strong.

Bestseyville Brand to Launch in JCPenney

“Our handbag business is absolutely on fire,” he said. “Steve Madden handbag net sales increased over 100% year-over-year for the second consecutive quarter, with strong gains in key customers like Macy’s and Dillard’s…We will start shipping Steve Madden handbags to Nordstrom for the first time next month.”

Rosenfeld said that the best of the company’s handbag business is “extremely strong: Betsey Johnson handbags, Big Buddha handbags and our Madden’s own private label handbag business were all up over 40% in sales in the quarter compared to the prior year.”

Gross margin in the wholesale business narrowed to 31.6% 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 % in the quarter.

The company’s retail net sales grew 19.4% to $40.6 with comparable store sales up 6.8% on top of an 11.6% increase a year ago. Retail gross margin decreased to 63.7%, due primarily to increased markdowns in sandals.

Looking ahead, Rosenfeld said Steve Madden’s next brand introduction is the launch of Betseyville, an exclusive brand with JCPenney. The merchandise, which will hit the floor in September, consist of footwear, handbags, fashion scarves, cold weather accessories and sunglasses in house as well as licensed jewelry, watches, intimate apparel and hosiery. Betseyville will be carried in about 600 JCPenney doors.

Due to its strong second quarter, the company increased its full year earnings estimate to $2.67 to $2.77 a share, up from $2.62 to $2.72 a share, and affirmed its revenue outlook for a 24% to 26% increase or $1.2 billion to $1.22 billion.

Analysts’ average estimate expects $2.67 a share on sales of $1.22 billion.


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