SEC Filing | Steven Madden Ltd

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): August 2, 2005 STEVEN MADDEN, LTD. ------------------------------------------------------ (Exact name of registrant as specified in its charter) Delaware 000-23702 13-3588231 - ---------------------------- --------------------- --------------- (State or other jurisdiction (Registration Number) (IRS Employer of incorporation) Identification No.) 52-16 Barnett Avenue, Long Island City, New York 11104 ------------------------------------------------ --------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (718) 446-1800 -------------------------------------------------------------- (Former name or former address, if changed since last report.) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

ITEM 2.02. RESULTS OF OPERATIONS AND FINANCIAL CONDITION. On August 2, 2005, Steven Madden, Ltd. (the "Company") issued a press release announcing its financial results as of and for the quarter ended June 30, 2005. A copy of the Company's press release announcing these financial results is attached as Exhibit 99.1 hereto, and is incorporated by reference into this report. Also on August 2, 2005, the Company held a conference call to discuss its financial results for the quarter ended June 30, 2005. The Company's script for that conference call is attached hereto as Exhibit 99.2. The information included in this Current Report on Form 8-K (including Exhibits 99.1 and 99.2 hereto) that is furnished pursuant to this Item 2.02 shall not be deemed to be "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section or Sections 11 and 12(a) (2) of the Securities Act of 1933, as amended. The information contained herein and in the accompanying exhibit shall not be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing, unless expressly incorporated by specific reference into such filing. ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS. (c) Exhibits 99.1 Press Release dated August 2, 2005 regarding the Company's announcement of its financial results as of and for the quarter ended June 30, 2005. 99.2 Script for a Conference Call held by the Company on August 2, 2005. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, Steven Madden, Ltd. has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. STEVEN MADDEN, LTD. By: /s/ JAMIESON KARSON ------------------------------------ Name: Jamieson A. Karson Title: Chief Executive Officer Date: August 4, 2005

EXHIBIT INDEX DOC. NO. DOCUMENT DESCRIPTION - -------- -------------------- Exhibit 99.1 Press Release dated August 2, 2005 regarding the Company's announcement of its financial results as of and for the quarter ended June 30, 2005. Exhibit 99.2 Script for a Conference Call held by the Company on August 2, 2005.

EXHIBIT 99.1 Company Contact: Richard Olicker, President Steven Madden, Ltd. (718) 446-1800 Investor Relations: Cara O'Brien Media: Melissa Merrill Financial Dynamics (212) 850-5600 FOR IMMEDIATE RELEASE STEVEN MADDEN, LTD. ANNOUNCES SECOND QUARTER RESULTS - Total Sales Grew 17.1% and Same-Store Sales Increased 13.6% - - EPS Increased 39.3% to $0.39 - LONG ISLAND CITY, N.Y. - August 2, 2005 - Steven Madden, Ltd. (NASDAQ: SHOO), a leading designer, wholesaler and marketer of fashion footwear for women, men and children, today 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. "We 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 we continued to face certain challenges during the quarter, we 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 we 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 we 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.

Page 2 - Steven Madden, Ltd. Announces Second Quarter Results Arvind Dharia, Chief Financial Officer, said, "We 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, "We are pleased with our year-to-date performance and are particularly gratified by the second quarter. Our results show that we 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. We 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. We are thrilled to once again be benefiting from his vision and creative and design expertise. "As we enter the second half of the year, we will continue to explore ways to further improve operations, diversify the business, and build the Steve Madden brand. Specifically, we will expand our retail base by opening 10 to 12 new stores for the year and will continue to evaluate potential strategic acquisitions. Additionally, we will consider additional licenses similar to the recently announced handbag agreement which is designed to expand our offering and further validate Steve Madden as a contemporary lifestyle brand." "For all of these reasons, we are optimistic as we move forward. We believe our business is better positioned than ever before and we are confident that we will drive revenue and profitability growth and deliver enhanced shareholder value over the long-term," concluded Mr. Karson. Conference Call Information - --------------------------- Interested shareholders are invited to listen to the second quarter earnings conference call scheduled for today, Tuesday, August 2, 2005 at 10:00 a.m. Eastern Time. The call will be broadcast live over the Internet and can be accessed by logging onto: http://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=113367& eventID=1104622 An online archive of the broadcast will be available within one hour of the conclusion of the call and will be accessible until August 16, 2005. Additionally, a replay of the call can be accessed by dialing (877) 519-4471, pin number 6305899 and will be available through August 4, 2005. Steven Madden, Ltd. designs and markets fashion-forward footwear for women, men and children. The shoes are sold through Steve Madden retail stores, department stores, apparel and footwear specialty stores, and on-line at www.stevemadden.com. The Company has several licenses for the Steve Madden brand, including handbags, eyewear, hosiery, and belts, and owns and operates 93 retail stores under its Steve Madden brand and two retail stores under its Steven brand. The Company is also the licensee for l.e.i. Footwear, Candie's Footwear and UNIONBAY Men's Footwear.

Page 3 - Steven Madden, Ltd. Announces Second Quarter Results Statements in this press release that are not statements of historical or current fact constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other unknown factors that could cause the actual results of the Company to be materially different from the historical results or from any future results expressed or implied by such forward-looking statements. In addition to statements which explicitly describe such risks and uncertainties readers are urged to consider statements labeled with the terms "believes", "belief", "expects", "intends", "anticipates" or "plans" to be uncertain and forward-looking. The forward looking statements contained herein are also subject generally to other risks and uncertainties that are described from time to time in the Company's reports and registration statements filed with the Securities and Exchange Commission. (Tables Follow)

Page 4 - Steven Madden, Ltd. Announces Second Quarter Results CONSOLIDATED STATEMENT OF OPERATIONS (in thousands, except per share data) (unaudited) Three Months Ended Six Months Ended ----------------------------- ----------------------------- June 30, 2005 June 30, 2004 June 30, 2005 June 30, 2004 ------------- ------------- ------------- ------------- Net Sales $ 100,958 $ 86,234 $ 184,294 $ 165,002 Cost of sales 62,448 53,522 117,466 101,018 ------------- ------------- ------------- ------------- Gross profit 38,510 32,712 66,828 63,984 Commission and licensing fee income 2,619 1,811 4,566 3,227 Operating expenses 32,472 27,947 61,516 54,055 ------------- ------------- ------------- ------------- Income from operations 8,657 6,576 9,878 13,156 Interest and other income, net 456 475 894 1,009 ------------- ------------- ------------- ------------- Income before provision for income tax 9,113 7,051 10,772 14,165 Provision for income tax 3,827 2,961 4,524 5,949 ------------- ------------- ------------- ------------- Net income $ 5,286 $ 4,090 $ 6,248 $ 8,216 ============= ============= ============= ============= Basic income per share $ 0.40 $ 0.31 $ 0.47 $ 0.62 ============= ============= ============= ============= Diluted income per share $ 0.39 $ 0.28 $ 0.46 $ 0.57 ============= ============= ============= ============= Weighted average common shares outstanding - Basic 13,079 13,299 13,154 13,276 ============= ============= ============= ============= Weighted average common shares outstanding - Diluted 13,475 14,391 13,639 14,382 ============= ============= ============= ============= ~ more ~

Page 5 - Steven Madden, Ltd. Announces Second Quarter Results BALANCE SHEET HIGHLIGHTS (in thousands) June 30, 2005 Dec 31, 2004 June 30, 2004 Consolidated Consolidated Consolidated ------------ ------------ ------------ (Unaudited) (Unaudited) ------------ ------------ Cash and cash equivalents $ 38,072 $ 30,853 $ 16,287 Investment securities 45,730 49,124 50,994 Total current assets 135,654 121,094 112,506 Total assets 197,430 186,430 180,573 Total current liabilities 28,613 19,677 12,180 Total stockholder's equity $ 166,396 $ 164,665 $ 166,397 ###

EXHIBIT 99.2 - -------------------------------------------------------------------------------- FINAL TRANSCRIPT - -------------------------------------------------------------------------------- Thomson StreetEvents (SM) [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- Conference Call Transcript SHOO - Q2 2005 Steven Madden Earnings Conference Call Event Time: Aug. 02. 2005 / 10:00AM, Event Duration: N/A - -------------------------------------------------------------------------------- Thomson StreetEvents streetevents@thomson.com 617.603.7900 www.streetevents.com 1 - -------------------------------------------------------------------------------- (C) 2005 Thomson Financial. Republished with permission. No part of this publication may be reproduced or transmitted in any form or by any means without the prior written consent of Thomson Financial.

Final Transcript - -------------------------------------------------------------------------------- Aug. 02. 2005 / 10:00AM, SHOO - Q2 2005 Steven Madden Earnings Conference Call - -------------------------------------------------------------------------------- Jamie Karson - SHOO - CEO, Chairman Good morning and thank you for joining us to review Steven Madden, Ltd.'s results for the second quarter ended June 30, 2005. With me to discuss the business are Richard Olicker, our President, Arvind Dharia, our Chief Financial Officer, and Awadesh Sinha, our Chief Operating Officer. I will begin the call by providing a brief overview of our second quarter performance. Then Richard will review in detail the financial results for the period. Following our formal remarks, we will be available for any questions you may have. Our performance during the second quarter indicates that we are making significant strides in the effort to strengthen the business and effectively combat the various challenges we are facing in the marketplace. Specifically, in the second quarter, we delivered on a number of the goals that we had enunciated earlier. We are driving top line growth, increasing gross margin, leveraging our cost structure, improving inventory productivity, further building the Steve Madden brand, and enhancing shareholder value. Despite challenging conditions, we experienced pockets of strength in our business during the quarter. To this end, we are pleased with our overall performance. We delivered consolidated top line growth of 17%. This reflects an increase in retail sales of 23%, including a same store sales increase of 13.6%. Wholesale contributed a 14% sales increase to this top line expansion, which is better than we anticipated, and was driven by very strong results in Madden Men's and improvements in Candie's. In addition to top line growth, gross margin improved, and SG&A as a percentage of sales decreased versus the comparable period last year, contributing to increased operating profit margin for the quarter. As a result, we posted earnings per share of $0.39, which was ahead of our internal plan. This compares to earnings per diluted share of $0.28 in the second quarter last year. Turning for a moment to the balance sheet, we remain in excellent financial health. We ended the quarter with a solid debt-free balance sheet, with approximately $83.8 million in cash, cash equivalents, and marketable securities, and total stockholder's equity of $166.4 million. Finally, during the quarter, we spent $2.2 million purchasing 135,000 shares of common stock in open market transactions, verifying our commitment to maximizing long-term shareholder value. Before I turn the call over to Richard, I'd like to remind everyone that during the second quarter we also welcomed back to the Company our founder, Steve Madden. Steve's return is a very significant event in our Company's continued evolution. His creative energy inspires all of our employees, and his exceptional talent is highly regarded throughout the fashion industry. We are very happy to be able to once again leverage his creative and design expertise, and look forward to working together with him to further enhance our brand and our position as one of the indisputable leaders in the footwear industry. It is also important to note, and as some of you may have seen, we recently amended Steve's contract. At the crux of our long-term strategy is the plan to build the Steve Madden brand beyond footwear, by expanding into new lines and categories, and licensing the brand. The amended contract terms tie Steve's compensation directly to performance and brand building efforts, and very closely align his professional goals with the top priorities of the Company and its shareholders. Going forward, Steve will be focused on overseeing the design and creative function of the Company, so that we can effectively extend and leverage our brand into new categories and businesses. We are confident that the contract will bring great value to our Company, and will contribute to the continued growth and success of Steven Madden, Ltd. Also, we are pleased to welcome Awadesh Sinha to our management team as Chief Operating Officer. We look forward to benefiting from Awadesh's significant industry experience, as we work to even further improve our operations, and to drive both top and bottom line growth going forward. Now I'd like to turn the call over to Richard, who will go through the quarter's results in a bit more detail. - -------------------------------------------------------------------------------- Thomson StreetEvents streetevents@thomson.com 617.603.7900 www.streetevents.com 3 - -------------------------------------------------------------------------------- (C) 2005 Thomson Financial. Republished with permission. No part of this publication may be reproduced or transmitted in any form or by any means without the prior written consent of Thomson Financial.

Final Transcript - -------------------------------------------------------------------------------- Aug. 02. 2005 / 10:00AM, SHOO - Q2 2005 Steven Madden Earnings Conference Call - -------------------------------------------------------------------------------- Richard Olicker - SHOO - President Thanks Jamie. Let's review in detail what took place during the second quarter. Total net sales increased 17% to $101 million, versus $86.2 million in the same period last year. This increase reflects strong sales increases in Steve Madden Men's, and the retail division, as well as contribution from Candie's and the Womens Wholesale division, offset by projected declines in l.e.i., Steven, and Stevies. As for the divisional sales breakdown, retail represented 32% of the total net sales, versus 31% of the total in the second quarter last year. We also generated sizeable increases in commission revenue from our Adesso-Madden private label business. And this contributed nicely to our other income line. In line with our recently updated expectations, net income increased 29% to $5.3 million, versus $4.1 million in the same period last year. Earnings per share increased 39% to $0.39 per share, on 13,476 diluted shares outstanding, compared to $0.28 per share on 14,391,000 diluted share outstanding in the comparable period of 2004. With respect to gross margins, while the market has remained challenging, overall gross margins increased by 20 basis points to 38.1%. This increase is largely based on improving margin contribution from our larger wholesale business. To go a bit deeper into the mix, our wholesale gross margin improved 140 basis points, which reflects increased sales out of the high margin Madden Mens open stock program, and expanded gross margin in Candie's and l.e.i., which both benefited from recently implemented cut to order inventory controls. Our retail division margins did come under some pressure versus the year ago period, declining 350 basis points, primarily as a result of our decision to liquidate under-performing and obsolete inventory. Bottom line results were further bolstered by an improvement in our operating margin, which increased to 8.6% versus 7.6% last year. Operating expenses, as a percentage of sales, declined 20 basis points versus the comparable period last year. Also, it is noteworthy that this SG&A percentage improvement was generated, despite certain prudent accounting measures in the quarter. First, we took a reserve of $1.1 million in the quarter for the settlement of litigation with our former handbag licensee. Separately, we took a goodwill write off of $500,000 in the quarter, associated with the closing of all but one of our shoe biz retail locations. Excluding these charges, operating expenses would have improved 190 basis points versus the comparable period last year. Let me now review what happened in each division during the quarter. The Company's wholesale division is comprised of seven segments -- Steve Madden Womens, Steve Madden Mens, l.e.i., Stevies, Steven shoes by Steve Madden, Candie's, and UNIONBAY. Net sales for the wholesale division for the quarter increased 14.2% to $68.3 million versus $59.8 million last year. Revenues in our flagship Steve Madden Womens brand increased 2% to $31.5 million versus $31 million. The sales increase reflects our ongoing successful transition into new categories, to meet shifting industry trends. Womens wholesale successes included a broad variety of styles, from bling to bohemian. Wedges covered in cork, raffia or wood were highlights. Woven fabric, beaded and sequined uppers were strong, as were vintage thongs, and more basic mid-heel slides. Our reactive model served to help us deliver a broad array of the right shoes at the right time. At the same time as growing this breadth of assortment, which served to differentiate us and drive our top line in the second quarter, we focused on managing our inventory and keeping them current. And we are extremely pleased to report inventories in our Steve Madden Womens wholesale business increased by 14% over the same period last year. Additionally, during the quarter, we marked down Spring '05 inventories to their realizable value. This write-down was more substantial than in the second quarter of '04, and did have a negative effect on our gross margin in the quarter. Finally, we are encouraged by early Fall reads on select items. As mentioned in our pre-release, Mens was a standout. And revenues increased 138% to $15.4 million versus $6.5 million last year. Building upon its positive momentum from Fall '04, and early Spring successes, Madden Mens led an upturn in the fusion, sport casual men's business. In particular, our growth was driven by an increase in doors at Dillard's and Nordstrom, the addition of new catalog and online customers, and deeper product assortment rollouts at Journey's. While jean friendly products continue to drive our business, our dress offerings were also best sellers, giving us a broad and more balanced collection, and providing us with a stronger foundation for future growth. Men's gross margins were bolstered by increased shipments out of the high margin/low mark-down men's open stock program. Open stock represented approximately 45% of total shipments of men's product during the second quarter, a result we anticipated and planned for with increased investment in men's open stock inventories. - -------------------------------------------------------------------------------- Thomson StreetEvents streetevents@thomson.com 617.603.7900 www.streetevents.com 4 - -------------------------------------------------------------------------------- (C) 2005 Thomson Financial. Republished with permission. No part of this publication may be reproduced or transmitted in any form or by any means without the prior written consent of Thomson Financial.

Final Transcript - -------------------------------------------------------------------------------- Aug. 02. 2005 / 10:00AM, SHOO - Q2 2005 Steven Madden Earnings Conference Call - -------------------------------------------------------------------------------- Net sales for l.e.i. were $8.7million versus $10.6 million last year. As we've communicated in recent periods, we anticipated and planned for declines in l.e.i., based on our decision to shrink or exit accounts with little potential for future profitability, and as we found fewer channels receptive to the brand. While l.e.i.'s first quarter performance at retail was challenging, its second quarter retail performance improved. And we anticipate this leading to lower mark-down and allowance liability going forward, as well as for somewhat improved third quarter sales prospects. Acknowledging our distribution strategy and the sales and profit performance of l.e.i. over the past several quarters, we've taken measures to cut SG&A expenses in the division. Additionally, better controls and the cut to order inventory management initiative under which l.e.i. now operates resulted in an inventory decline up 15% over year ago levels. l.e.i. inventories are now matched to support our sales and turn projections for the third quarter. Net sales in our Candie's division increased 53% to $5.7 million versus $3.7 million in the second quarter of '04. The overriding reason for the sales increase was the initial shipment of product to Kohl's in both the children and womens footwear category. As sizeable initial shipments with no Candie's markdown carry forward liabilities, these shipments to Kohl's assisted in generating improved gross margins over the second quarter last year. The Candie's at Kohl's launch, which is now underway, promises to be a significant media and marketing event. Hillary Duff has been selected as the Candie's spokesperson and model. And Kohl's has produced and is running a commercial featuring Hillary and Candie's on network and cable TV, as well as running print ads this fall in issues of entertainment and lifestyle magazines such as 17, Teen People, Elle Girl, Us Weekly, Star and Teen Vogue. We are very excited about the strength of this launch. It's a terrific association and a great opportunity. Revenues for our Stevies children's division were $1.9 million versus $2.2 million during the second quarter last year. Acknowledging the sales and profit performance of Stevies over the past several quarters, we have taken measures to cut SG&A expenses in the Stevies division. Also, as was the case with l.e.i., the cut to order inventory management initiative, under which Stevies now operates, resulted in an inventory decline of 41% over year ago levels. The continuing challenges in our children's business have led us to not only undertake management changes and inventory controls, but also to investigate more flexible modeling of our children's business, to embrace first cost, commission and royalty-based opportunities, which carry no inventory risk. Net sales from our UNIONBAY division improved to $314,000, versus $45,000 in the second quarter of '04. This was a result of higher sales to the mid-tier channels. Given the somewhat frustrating delay in gaining sales traction in UNIONBAY, as was the case in Stevies, we've adopted a more flexible operating strategy here as well, to embrace first cost, commission and royalty-based opportunities, which carry no inventory risk. This is intended to enable our customers to achieve high margin goals, at the same time as allowing us to operate on a leader operating expense structure, carrying no inventory risk. Net sales of our Steven by Steve Madden division were $4.8 million, versus $5.8 million in the second quarter last year. As a result of last Fall's lackluster boot season, this year Steven's wholesale customers trimmed initial boot budgets, and were less aggressive in receiving in early boot inventories. This had the effect of lowering our full price Steven boot shipments in the month of June. Product successes for the Steven line included an assortment of embellished footwear and metallic leathers. Espadrilles, as well as flat sandals, jeweled sandals, wedges, and dressy sandals, drove the business, while summer mocks were disappointing. Steven further penetrated existing retail accounts, such as Bloomingdale's, and also added additional doors at Marshall Fields and Macy's West. New accounts added during the quarter included the Victoria's Secret Catalog and Nordstrom Direct. Moving on to our retail division, as of June 30, there were 95 stores in operation, including our Internet store. During the quarter, we opened three new stores, and we had no store closings. Retail sales increased 23% to $32.6 million versus $26.4 million in the comparable period last year. Same store sales increased 13.6%. And this was on top of an increase of 15.2% in the second quarter last year. Both women's and men's footwear sales were strong. And we also saw improved contribution from other categories, notably handbags and belts. As I mentioned earlier, retail gross margins were negatively affected by the clearing of obsolete inventory to a larger expense than in the year ago period. Store productivity remains strong. Our stores generated an average of $662 per square foot. That's $662 for the 12 months ended June 30. - -------------------------------------------------------------------------------- Thomson StreetEvents streetevents@thomson.com 617.603.7900 www.streetevents.com 5 - -------------------------------------------------------------------------------- (C) 2005 Thomson Financial. Republished with permission. No part of this publication may be reproduced or transmitted in any form or by any means without the prior written consent of Thomson Financial.

Final Transcript - -------------------------------------------------------------------------------- Aug. 02. 2005 / 10:00AM, SHOO - Q2 2005 Steven Madden Earnings Conference Call - -------------------------------------------------------------------------------- Moving to our other income, the Company's commission and licensing fee income line increased by 45% to $2.6 million versus $1.8 million last year. The increase resulted from improvement in our private label division, Adesso-Madden, which generated commission revenue increases of 86%, to $2 million this year, versus $1.1 million last year. Commission revenue increased primarily as a result of significant increases from our largest private label customer, notably, not only in women's, but also in children's and men's categories. We also recognized increased commission contributions from international sales, most notably from growth in our business with Canada. There have been some developments on the international front, which we'd like to update you on. Our current distribution agreements cover Canada, Central America, Mexico, Australia, the Philippines, South Africa and Turkey. In June, we elected to amicably terminate our relationship with our European distributor. Our brand was sold only to better select retailers, and considerable sums were spent in promoting Steve Madden in Europe. And we look forward to leveraging this visibility with an alternative European distribution arrangement in the future. In addition to wholesale distribution, we have existing agreements granting rights to open retail stores in Canada and Australia. Our partners currently operate two retail stores in Montreal, with a third planned for Toronto in the near future, and one which opened just last month in Melbourne, Australia, with a second Melbourne location planned. These are exciting ventures, as they are our best brand vehicles, and are beginning to broaden our exposure overseas at low or no financial risk. Licensing income was $596,000 in the quarter. We are very pleased and excited about our announcement last week of our license to Daniel Friedman & Associates for the design, manufacture and distribution of Steve Madden and Steven handbags, belts, and small leather goods. Daniel Friedman has been our belt licensee for approximately three years. They are a leading and well respected manufacturer and distributor of fashion handbags and accessories. And they offer a tested and successful business model that aligns with our own. We look forward to a long, prosperous, brand enhancing relationship with Daniel Friedman, and to finding other strategic brand building partners in the future. As part of the process in securing the best, most talented licensing partners, and managing them in the image and spirit of Steve Madden, we've begun to selectively invest in key personnel to ensure the success of this initiative. Turning to marketing, it was a busy quarter. We undertook a win an internship contest at select colleges and on college job boards, where job seekers were encouraged to write and submit a short essay, telling us why they should win a paid summer internship working with the Steve Madden marketing department. In just 30 days, this competition generated over 14,000 entries. And on June 20, our very talented marketing intern, Stephanie, started working. We ran retail promotions for tickets to the New York screening of House of Wax, featuring Paris Hilton. R&B music sensation Nina Sky, d.j.'d, danced and shopped with our customers at our (Dadeland) (ph) store opening. And we partnered with the Sagamore Hotel to drive traffic to our new Stevens store on Lincoln Road, and with Marie Claire for an evening of cocktails and shopping at our Stevens store in SoHo. Big men were also drawn to our brand, as Andrew Bogut, Sean May, Deron Williams and Bracey Wright all visited our stores on their way to their NBA draft debuts. This year marked the third anniversary of our sponsorship of the Miss USA Pageant, where we supplied custom made shoes to each delegate for the opening number and swimsuit competition. We received great visibility during this program. We also sponsored the footwear category at the (FIT) (ph) Next Generation Awards, where we were not only acknowledged, but had the opportunity to recognize some of the brightest future talent in the footwear industry. In conjunction with Teen People, we also sponsored a private listening lounge, featuring the Back Street Boys. These highlights were complimented by an active advertising calendar. We continued our consumer magazine presence, now promoting three divisions. In 17, Teen People, Cosmo Girl and Lucky for Women, in Complex magazine for men, and in Cosmo, In Style and Marie Claire, were Steven by Steve Madden. We continued to be active in outdoor media as well, particularly on billboards in New York and L.A., and on bus shelters and phone kiosks. These, together with other events that ran on virtually a daily schedule, helped us to welcome Steve back and served to raise the visibility of the Steve Madden brand. With respect to our overall financial condition, as Jamie mentioned, we have maintained a pristine balance sheet, which speaks volumes to the health and viability of the Company. As of June 30, 2005, our cash, cash equivalent, and investment securities were $83.8 million. Total inventories were up 6% to $31.1 million. Our inventory turn was 7.7 times in the 12 months ending June 30. Wholesale inventories were up 8%. Retail inventories were up 3.9%. Every wholesale division recorded reduced inventories over a year ago, with the exception of Candie's, for which receipts were accelerated to support the flow of merchandise to Kohl's, and Men's, for which increases were planned and anticipated to support a larger open stock division. We are extremely pleased with the progress of our inventory management initiatives. - -------------------------------------------------------------------------------- Thomson StreetEvents streetevents@thomson.com 617.603.7900 www.streetevents.com 6 - -------------------------------------------------------------------------------- (C) 2005 Thomson Financial. Republished with permission. No part of this publication may be reproduced or transmitted in any form or by any means without the prior written consent of Thomson Financial.

Final Transcript - -------------------------------------------------------------------------------- Aug. 02. 2005 / 10:00AM, SHOO - Q2 2005 Steven Madden Earnings Conference Call - -------------------------------------------------------------------------------- As I said on the call, the only division where we had increases were Mens, where it was anticipated, in support of the open stock program, and Candie's, where we were accelerating receipts for the Kohl's program. So it's matched inventory. There's no obsolescence there. Every other wholesale division was down. Retail was only up 3.9% against their comp and total store top line contribution, which I think is exceptional. - -------------------------------------------------------------------------------- Sam Poser - Mosaic Research - Analyst Just one other -- two other questions actually. Just to follow-up again, you seem to be very conservative or cautious on the outlook. But with your inventories as clean as they are, and your concern about the margin pressures, I mean it's understandable when you had the carry-over at the beginning of the year. But at this point, it's so clean, I mean how do you -- ? Where is that? Can you give us more color on the concern? - -------------------------------------------------------------------------------- Richard Olicker - SHOO - President Well, I think part of it is retail. And where you have, as I said, as we differentiate our product and broaden out the assortment, we lose some of the leverage on the sourcing side. And we are competing with larger competitors in the marketplace that are setting retail price thresholds, within which we have to compete. So I think we get a little bit of a margin pressure there. Having said that, internal projections do account for some improvement, but not dramatic improvement on the gross margin line. - -------------------------------------------------------------------------------- Sam Poser - Mosaic Research - Analyst And then one last question, if I may be -- can you talk about just the -- you just signed the one license. But you've been talking about licenses for over a year now. Jamie, can you give us a little more color on just why it's taking quite as long as it is to get the license signed? - -------------------------------------------------------------------------------- Jamie Karson - SHOO - CEO, Chairman Sure. Well actually Sam, we've been talking about licensing for longer than a year. But we -- take the handbag license that we just signed, for example. I mean we effectively terminated our handbag license in '03. And we met with lots of people, and went through certain analyses to determine whether we should license it or own it. And we keep saying this, and I keep reiterating this. And I guess maybe I have to do it again and again. The key is finding the right partner. Once you're comfortable with the right partner, whether you own the category or you do it yourself, you've taken a big variable out of the equation. We think that we've found the right partner in Danny Friedman and his team. Now his team has changed over time too. I mean it wasn't the same team that he had three years ago. We will continue to look for people that understand our brand, understand the essence of the Steve Madden Company, and can translate that into product that will not only sell, but will enhance our brand. And we work on it every day. - -------------------------------------------------------------------------------- Sam Poser - Mosaic Research - Analyst Thank you very much. Congratulations on a great quarter. - -------------------------------------------------------------------------------- Operator [Robert Longnecker] from Barrington. - -------------------------------------------------------------------------------- Robert Longnecker - Barrington Research - Analyst Could you please give a little more color on the write-down of inventory you were talking about in Steve Madden Womens, both in terms of exactly what happened there, and kind of what the dollar amount you're talking is? - -------------------------------------------------------------------------------- Unidentified Company Representative - SHOO The write-down on inventory Rob? - -------------------------------------------------------------------------------- Thomson StreetEvents streetevents@thomson.com 617.603.7900 www.streetevents.com 14 - -------------------------------------------------------------------------------- (C) 2005 Thomson Financial. Republished with permission. No part of this publication may be reproduced or transmitted in any form or by any means without the prior written consent of Thomson Financial.