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Reuters
Published
May 4, 2012
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Steven Madden's private label business hits margins

By
Reuters
Published
May 4, 2012

Shoemaker Steven Madden Ltd's quarterly profit failed to surpass analysts' expectations for the first time in more than two years, as the expansion of its private-label business continued to weigh on margins.


Photo: Steve Madden

Steven Madden - which has beat analysts' estimates for the past nine quarters - has seen its margins decline as it shuffles its product mix and offers more private-label items, which typically carry lower margins.

The company counts retailers including Target Corp among its private-label customers.

Last May, it bought Topline Corp and Cejon Inc, which make store-branded products that mostly sell at lower prices to name brands.

Gross margins fell to 36.1 percent in the first quarter from 41.7 percent a year earlier.

The company, which, according its website, was founded by designer Steve Madden in 1990 with just $1,100 in his bank account, is best known for its thick, chunky-heeled shoes.

Shares of the company fell as much as 6 percent on Thursday even after it reported quarterly sales above estimates and raised its full-year forecast.

C.L. King & Associates analyst Steven Marotta, however, reiterated his "buy" rating on the stock and said the new business model is effective and the company's fundamentals are still strong.

"It was a terrific quarter but it's not reflected in the stock price because expectations might have been a little bit higher than what (Steven Madden) hit," Marrotta said.

First-quarter profit was $21.9 million, or 50 cents per share, in line with analyst expectations.

Revenue rose about 60 percent to $266.0 million, handily beating Wall Street estimates of $249.9 million.

Steven Madden also raised its 2012 earnings forecast by 2 cents to between $2.62 and $2.72 per share.

Analysts, on average, were expecting earnings of $2.67 per share for the full year, according to Thomson Reuters I/B/E/S.

Full-year sales are expected to grow in the range of 24 to 26 percent, compared with the company's previous outlook of a 21 to 23 percent rise. Analysts were expecting revenue to rise about 22.9 percent.

The company's shares were down 2 percent at $43.31 on Thursday on the Nasdaq.

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