Madden Banks on Back Half

Analysts are upbeat on Steven Madden Ltd. after the firm’s fourth quarter beat estimates Tuesday.

Sam Poser, analyst at Sterne Agee, said, “The core Steve Madden business remains very healthy at both retail and wholesale. Key items such as hidden-wedge sneakers, combat boots and others should drive revenue throughout 2013.”

Poser also called the firm’s full-year guidance for 2013 conservative, a sentiment that Citigroup analyst Kate McShane echoed.

“Fiscal 2013 guidance is conservative based on ongoing momentum behind the core Steve Madden and Superga brands, as well as management’s recent comments on 2013 growth drivers, including growth in non-footwear categories, especially handbags,” said McShane.

For his part, Edward Rosenfeld, chairman and CEO of the firm, said opportunities for growth are stronger in the back half.

He told analysts on a conference call that the first quarter will be the toughest quarterly comparison due to the favorable weather and the strong early selling of sandals a year ago, “so we expect EPS in the first quarter of 2013 to show only modest year-over-year improvement.”

Additionally, Topline is losing about $12 million in sales due to two retail accounts that have left, citing cannibalization with the Steve Madden brand. And Big Buddha’s footwear line, which did $8 million last year, has been discontinued due to “a confusing brand message” with its handbags.

But reasons to be bullish in the latter two quarters include the transition of the Steve Madden brand to the Impulse department at Macy’s from its previous position in the juniors’ department.

“This change has enabled us to put more elevated product into Macy’s that has sold through at a much improved rate, positioning us for sales and profitability growth with that account in 2013,” said Rosenfeld.
Superga also shows promise, with key retailers significantly expanding business with the brand in 2013, the firm said.

Retail remains a priority in 2013 for Madden, which expects to bow five to seven new outlet locations, along with four to six new full-price stores. In the fourth quarter, retail revenue surged 27 percent to $68.3 million, with lace-up booties and wedge sneakers standing out as top performers.

By comparison, wholesale revenue grew 9.4 percent in the quarter.

For the period ended Dec. 31, the Long Island City, N.Y.-based firm earned a net income of $33 million, or 74 cents a share, compared with $23.8 million, or 55 cents, a year ago.

Net sales for the period increased 12.8 percent to $315.5 million. Analysts were looking for EPS of 71 cents on revenue of $314.4 million, as polled by Yahoo Finance.

For the full year, Madden earned $119.6 million, or $2.71 a share, compared with $97.3 million, or $2.25. Revenue crossed the billion-dollar mark, coming in at $1.23 billion, or a 26.7 percent improvement over 2011.

Looking to 2013, the company said it expects net sales will increase between 6 percent and 8 percent from 2012’s level. EPS is expected to come in between $2.95 and $3.05, representing an 8.9 percent to 12.5 percent year-over-year increase.

At the end of the year, Madden’s cash and cash equivalents totaled $168.8 million.

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