Madden Expects Strong 2011 Despite Price Hikes

Steven Madden Ltd. is well positioned for a good 2011, driven by a strong core business, opportunities in its new brands and pricing power in the face of rising costs, said analysts.

“At the end of the day, a key concern about passing prices on to the consumer is how to raise them and have them stick. Madden has an advantage when it comes to a very strong product proposition at retail, and their customer is willing to pay a little bit more,” said Jeff Van Sinderen, an analyst at B. Riley & Co.

Sam Poser, an analyst at Sterne Agee, agreed, writing in a research note that “based on our discussions with retailers and the strong response to the new product at recent trade shows, we believe that Madden will have pricing power and [that] boot sales will remain robust [in 2011].”

In a call with analysts last Tuesday, Steven Madden Chairman and CEO Ed Rosenfeld confirmed the firm was “raising prices on select items with fresh materials or styling and so far not seeing resistance to these price increases.”

He added that the company continued to see increases in the cost of goods from southern China, averaging roughly 5 percent to 8 percent and that “our goal is a net neutral impact to gross margin from all these changes in 2011.”

For the fourth quarter, Madden’s total revenue rose 15 percent to $161 million. Wholesale revenue jumped 18 percent to $115.8 million, while retail revenue grew 10 percent to $45.3 million. Comparable-store sales increased 14.1 percent for the quarter, driven by boots and booties.

Total revenue also benefited from an accounting change, where $4.7 million of revenue from the private-label businesses with Walmart and Target is now recorded as sales instead of commission income.

This year’s top line will be driven by, among other things, an expansion of the footwear piece under the Big Buddha brand, the firm said.

“We’re extremely excited about the shoe opportunity [in Big Buddha]. We should be able to do a minimum of $10 million [in sales] in 2011. It’s a different product from anything we have in the building, and we don’t believe it will cannibalize Steve Madden or Madden Girl,” said Rosenfeld.

Addressing acquisitions, which the industry expects Madden to make this year, Rosenfeld said the firm remains interested in “businesses that would provide us with category expertise in complementary categories [in order to] penetrate certain channels where we’re not as well penetrated.”

The Long Island City, N.Y.-based firm’s net income for the fourth quarter rose 30 percent to $17.6 million, or 62 cents a share, up from $13.6 million, or 49 cents, from the same quarter a year ago, beating expectations, which came in at 55 cents a share.

For the full year, net income surged 51 percent to $75.7 million, or $2.68 a share, from $50.1 million, or $1.82, in fiscal 2009. Net sales increased 26 percent to $635.4 million, from $503.6 million in 2009.

Steven Madden closed the year with cash and cash equivalents of $66.2 million.

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