Madden Forges Ahead Despite Trend Obstacles

NEW YORK — It hasn’t been an easy year for Steven Madden Ltd., but the firm is looking forward.

The Long Island City, N.Y.-based company is banking on an expanded product mix,acquisitions and international expansion to drive business in the next several quarters.

“Steve Madden is diversified enough to weather this moment,” said Danielle McCoy, VP of Equity Research at Wunderlich Securities, following thefootwear group’s third-quarter earnings report on Thursday. “They have better, expanded assortment of casual now, and I see their orders for spring ’15 are in line with last year, which is a key positive for me.”

As Madden revealed its disappointing results — in line with previously announced expectations — executives again cited the lack of fashion direction and the rise of athletic influences. “As we’ve discussed the last couple of quarters, in the young trendy footwear space where we do most of our business, there are relatively few significant fashion trends at the moment with the exception of sneakers. The category is performing well for us, [but it] represents a small percentage of our overall business,” said Chairman and CEO Ed Rosenfeld in a call with analysts.

Market watchers, however, have been particularly upbeat on the recent Dolce Vitaacquisition. The sale, which was completed in August for more than $60 million, has helped to diversify Madden’s holdings.

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“Dolce Vita is right in their wheelhouse,” said analyst Steve Marotta with C.L. King & Associates. “It’s a similar customer but not the same. It’s a similar price point but not the same. For them to be able to layer on a brand that isn’t cannibalistic to their own platform is highly attractive and profitable.”

U.S. retail has been a weak spot over the past several quarters. Retail comps were down 7.4 percent as overall sales for the quarter fell slightly to $392 million versus the same quarter last year.

The global retail and wholesale business has been stronger, however.

During the third quarter, the firm announced the acquisition of its Mexican licensee SM Holdings from parent company Grupo Dicanco. Madden also entered into a majority-stake partnership in South Africa with House of Busby. The company aims to open three to four more retail stores in South Africa in 2015, in addition to the four current locations and 20 shop-in-shops in Edgars, a large South African retailer.

“While it is undoubtedly a challenging time in the fashion footwear business, and we are cognizant of the need to manage our existing business prudently, we are not playing defense when it comes to investing in growth,” Rosenfeld said in the call.

While Madden looks for new opportunities, analysts are watching closely. “The balance of 2014 will be challenged due to a fairly directionless retail environment,” Sam Poser of Sterne Agee wrote in a note. “Steve Madden executes as well as, if not better than, anyone in the fashion space. That, along with easing comparisons and the recent acquisitions, will create positive momentum as we head into 2015.”

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