Feb 23, 2009
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Steven Madden to buck retail slump with 'Bonanza' sales

Feb 23, 2009

* What: Steven Madden reports Q4 results

* When: Feb. 24, Tuesday

* Profit to beat Street

* Sales to get lift from stylish boots

By Anne Pallivathuckal

BANGALORE, Feb 23 (Reuters) - Steven Madden Ltd's (SHOO.O) young customers were drawn to the shoe maker's flat suede boots during the holidays, pointing to its keen sense for fashion that sells even during a recession.

A bleak spending environment has hit profits at many retailers and forced them to slash prices, but the appeal of Steven Madden's trendy 'Bonanza' boots is expected to help the company walk over market estimates for the fourth quarter.

The company's product offering in the quarter was superior to last year's collection, and sales of products not on discount were better despite poor economic conditions, Sterne Agee analyst Sam Poser said.

The company's 'Bonanza' boots, sold at Nordstrom Inc (JWN.N), and similarly styled boots sold at Macy's Inc (M.N) flew off shoe racks, analysts said.

Steven Madden, which is popular among girls aged 12 to 25, also benefited as spending among younger consumers held up better than among older women, Sterne Agee's Poser said.

The shoe maker, which keeps lean inventories, stays on top of fashion trends by bringing new designs to stores faster than its peers, the analyst said.

This has helped the company, whose lines include flagship brand Steve Madden, Stevies, and Candies, perform better than other footwear makers, who have been stung by fewer orders from retailers and by deep discounts that have withered margins.

Athletic shoe maker Skechers USA Inc (SKX.N) recently posted a fourth-quarter loss, while Kenneth Cole Productions Inc (KCP.N) has forecast an operating loss, before items, for the quarter.

The Wall Street consensus is for Steven Madden to earn 40 cents a share on revenue of $114.1 million in the fourth quarter, according to Reuters Estimates.

The company, which also sells accessories and apparel, has a history of coming in ahead of analysts' average estimate.


Some analysts believe the company, whose shoes also sell at department stores such as Dillard's Inc (DDS.N) and Kohl's Corp (KSS.N), will be able to continue its good run in the early part of 2009 even though consumer spending is expected to slow further.

"We believe the company's spring product is also outshining its competitors, which should enable it to continue its relatively strong performance through at least the first half of 2009," Wedbush Morgan Securities analyst Jeff Mintz said in a note to clients.

However, the company will be hurt as retailers cut back on inventory in the spring, C.L. King analyst Scott Krasik said.

Also, a lack of visibility into the second half of 2009 will make it difficult for the shoe maker to top its strong performance during the latter part of 2008, said Krasik, who has a "neutral" rating on the company's stock.

Still, "if you have the right product in this junior business and it's performing well, you get to grow, even in this horrible environment," Sterne Agee's Poser said. He and Wedbush's Mintz recommend investors buy the stock.

The company's strong balance sheet will also help it "weather the recession better than many of its competitors and emerge in a strong position when the eventual recovery does occur," Mintz said.

Long Island City, New York-based Steven Madden's stock has shed only 8 percent of its value over the last 52 weeks. It has outperformed shoe makers such as Skechers and Kenneth Cole, which have lost more than half their market value over the same period. (Editing by Pratish Narayanan)

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