Madden Inks JCP Deal, Posts Strong Earnings

BOSTON — With a spike in third-quarter earnings, a new licensing agreement and an optimistic full-year outlook, Steven Madden Ltd. continues to be a standout.

The firm last week announced a licensing deal to manufacture footwear for Olsenboye, a new line created by Dualstar Entertainment Group, the management firm of Mary-Kate and Ashley Olsen, that will be available exclusively at select JCPenney stores this holiday. A full launch in 600 doors is set for spring.

“This deal solidifies our position with JCPenney and as a brand with great potential for both our footwear and accessories brand portfolios,” Steven Madden Chairman and CEO Edward Rosenfeld said on the firm’s post-earnings conference call last Tuesday.

He added that the firm has had “a great start” with the Olsen’s contemporary line, Elizabeth & James, whose shoes Steven Madden manufactures. The brand had $1.9 million in sales during the third quarter and has had “significant reorders, enabling this brand to exceed our expectation for third-quarter sales,” Rosenfeld said. Elizabeth & James footwear is sold at such high-end retailers as Saks Fifth Avenue and Neiman Marcus.

Indeed, Steven Madden’s licensing business is growing. Licensing royalty income in the third quarter increased 81 percent, to $716,000 from $396,000 the prior year.

And the firm is keeping an eye out for acquisitions. Rosenfeld noted on the call that Steven Madden expects to complete a deal by the end of the year that could be in the $30-to-$40-million range.

Nevertheless, Sam Poser, an analyst at Sterne Agee, recommended in a report that investors buy shares of the footwear firm. “Steven Madden remains one of our favorite companies as it offers growth — both organic and through acquisitions — broad distribution [and] a focus on a core consumer,” he wrote. “The business model leaves Steven Madden as one of, if not the best-positioned company in our research universe to grow earnings even in the absence of a traditional economic recovery.”

Regarding the third quarter, Rosenfeld said on the call that boots were a strong seller. By brand, Steven by Steve Madden saw an increase in shipments to its largest customer, Nordstrom, and sales for the brand jumped 70 percent to $8 million. The Steve Madden men’s branded footwear division had an 8 percent increase in sales to $11.6 million, which Rosenfeld said was the first quarter of growth for the brand since the third quarter of 2006.

The firm reiterated that it expects full-year sales to rise 7 percent to 8 percent, with EPS in the range of $2.55 to $2.65. Analysts’ expectations are for a profit of $2.64.

“With the advent of another strong boot season, resonating styles and an improving retail business, we believe the EPS guidance [by Steven Madden] will prove conservative,” Poser wrote.

Steven Madden posted last Tuesday a 61 percent pop in third-quarter earnings to $17.8 million, or 97 cents a diluted share, matching analysts’ consensus estimate. Net sales rose 9 percent to $140.1 million. Wholesale revenues increased 15 percent to $112 million. Retail sales slipped to $28.2 million from $30.7 million, with same-store sales down 7.6 percent.

“The [comps] decline was driven primarily by lower average unit retails compared with last year. The good news is that we have reversed this trend so far in the fourth quarter, with positive comps and an increased average unit retail versus last year,” Rosenfeld said on the call.

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