Madden Buys Topline

Steven Madden Ltd. has a new business in its stable.

The Long Island City, N.Y.-based firm has acquired The Topline Corporation for $55 million in cash, it said today.
Topline, a privately held producer and marketer of private-label and branded footwear founded in 1980, had net sales of about $189 million in 2010 and is expected to be add between 5 and 7 cents to Madden’s earnings for the full fiscal year.
Topline runs a large private label business, and the firm’s owned brands, which include Report, Report Signature and R2 by Report, are distributed to specialty retailers and department stores.

“Topline’s private-label business is one of the best in our industry and is highly complementary to our existing private-label footwear business,” said Edward Rosenfeld, chairman and CEO of Steve Madden, in a statement. “Its brands are currently exhibiting outstanding growth and represent great additions to our brand portfolio.”
Speaking to FN on the phone, Madden’s founder, Steve Madden, said Topline “has the best sourcing base in Northern China, and we’re excited about leveraging that. It will help value go up.”
Analysts agreed, saying said the deal was a strong, synergistic and accretive one for Madden.
“Importantly, Report’s groundbreaking sourcing platform in China is 100-percent direct, versus Madden’s current sourcing model that is 90 percent through agents. This leads to better sourcing prices and potentially higher gross margins, metrics of consistent quality and on-time delivery dates,” said B. Riley analyst Jeff Van Sinderen.
“Topline made sense [because] Report is a solid well-known juniors’ brand with unique design expertise,” said Scott Krasik, analyst at BB&T Capital Markets. “Topline also gives Madden access to Payless Shoe Stores, Topline’s largest private-label customer, with which Madden currently does not have a relationship. We believe that Payless could represent 35 to 45 percent of Topline’s sales.”
Topline’s management team will remain in charge of running its brands.
“Bill [Snowden, CEO] has built one of the best shoe businesses in America in the last 10 years. He’s such a genius that we wouldn’t want him to go anywhere. We may be buying the company, but we are keeping the whole thing intact. I see it as a merger,” said Madden.
“We’ll do things together, maybe some joint ventures with brands and Macy’s, source the shoes for Material Girl,” Madden added.
On Topline’s part, the deal represents “the best opportunity to take the company to the next level, as the visions of both Steve and Bill Sr. meshed together,” Bill Snowden, Jr., Topline’s SVP.
Topline will also get the opportunity to expand to international markets, Snowden added. “Madden’s brands are in places the Report brands are not currently. So the international piece of the business is a quick and easy-to-identify opportunity that we could move forward on together.”

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