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Steven Madden, Ltd. (NASDAQ:SHOO)

Citi Global Consumer Conference Call

May 29, 2013 10:55 AM ET

Executives

Edward Rosenfeld - Chairman and CEO

Analysts

Kate McShane - Citigroup

Kate McShane - Citigroup

Thank you so much for joining us at our Global Citi Consumer Conference. For those of you who don't know me, I am Kate McShane, Citi's footwear, apparel and retailing hardlines analyst. We are very happy to be conducting a fireside chat today with the CEO of Steve Madden, Ed Rosenfeld. Ed will kick it off with some prepared comments, and then we thought it would be helpful to walk through some of the bigger picture topics with Ed's say, with regards to (inaudible) the consumer, longer term growth trends for the company, their acquisition strategies, and their view on retail versus e-commerce. We have plenty of time for Q&A at the end of today's session.

Thanks again, and here.

Edward Rosenfeld

Great. Well thank you, Kate, and thank you to all of you for joining us for the presentation on Steve Madden. We are going to jump into the fireside chat in a moment, but quickly I am just going to take you briefly through our presentation, that outlines what we see as the key investment highlights for Steve Madden.

And we think about value drivers for Steve Madden, the very first thing that comes to mind, is the strength of our brand portfolio, and in particular, the strength and power of our flagship brand Steve Madden. Steve Madden is currently doing over $1 billion in sales at retail, annually; and we have a tremendous following among our core demographic.

You can see here, that in a recent survey upper income teens, when asked their favorite footwear brand, girls named Steve Madden number two, behind only Nike. So we have a pretty powerful brand at the core of our company in Steve Madden. But in addition to that, what we have done is assemble a diversified portfolio of other brands, that enables us to sell into all tiers of distribution. For luxury, all the way down to value.

I think this chart really illustrates how we use our portfolio brands, both owned and license, to sell everybody from Neiman Marcus to the top, to Walmart to the bottom, and virtually everybody in between.

Now turning briefly to our business model; currently, about 85% of our sales come from our wholesale business, with the balance coming from our company-owned retail stores. We currently have 110 company operated retail stores, including three e-commerce stores. We also have two businesses that are recorded as other income on the income statement, so they don't contribute to the topline, but they do contribute to operating income; those being our first-cost business, where we act as a buying agent in procuring private-label footwear for various retailers and our licensing business where we collect royalty income for the use of our brand names on various products.

What we have done over the last several years, is to work to diversify each of our principal segments. So you can see that back in 2005, our wholesale business was 100% footwear in the U.S. Today, nearly a third of that wholesale business comes from our growing accessories and international businesses.

Similarly, in retail, back in 2005, it was 96% bricks and mortar and only 4% e-commerce, all in the U.S. Today 18% of our retail sales come from our e-commerce properties and 8% come overseas.

Our success in all of these brands, channels and business models is predicated on our unique ability to create trend-right footwear and accessories and get them to market in a timely fashion.

So how we've been able to do that so consistently, season after season? Number one, it is a testament to our design team. We believe we’ve assembled the best design team in our industry, led of course by our founder, Steve Madden. But in addition to that, there are a couple things about our business model that helps to differentiate us from our competitors and help us to mitigate fashion risk.

The first is our test and react model; where we test products in our retail stores and leverage selected winners into the wholesale channel. That has been absolutely critical to our ability to hit the trends over the years, and then we have married that up with an industry leading speed to market capability. We have managed to shorten leadtimes, to short at six to eight weeks, versus the industry standard of three to four months, which has been another primary competitive advantage in the fast moving trend business in which we operate.

So if you need proof that this model works, you need look no further than our performance over the last handful of years. You can see that since 2009, we have grown both net sales and EBITDA to approximately 30% per year on a compounded annual basis, currently have net sales for the trailing 12 months of over $1.2 billion and EBITDA of just over $200 million. Net income and EPS have grown at a similar rate over that period, and our guidance for 2013, which I can reaffirm today, is -- diluted EPS in the range of $2.95 to $3.05.

We also have a very strong financial foundation. As of the end of the most recent quarter, we had nearly $280 million in cash, and no debt, and we turned our inventory an industry leading 10.5 times a year; that’s approximately once a quarter in retail, and approximately once a month in wholesale.

So that all sounds pretty good, but how are we going to keep it up? Now I'd just like to touch briefly on the multiple growth opportunities that we believe will enable us to continue to drive top and bottom line gains in the balance of 2103 and beyond.

First, we see meaningful opportunities to grow our core Steve Madden women's wholesale business. We are particularly excited about the opportunity we have here with Macy's, where we recently transitioned Steve Madden out of the junior department, where it has been historically, and into the department that they call Impulse. Since we have made that transition, our sell-through to that account has improved materially, and that is in turn, leading to expanded -- the doors and SKUs with Macy's.

Number two, we are going to look to continue to grow our direct-to-consumer business. 2012 was our biggest year ever in terms of retail expansion. We opened 15 new full price stores, and five new outlets, and over the next handful of years, we expect to continue to grow the store base. Particularly excited about the opportunity in outlets, where we only have 11 outlets today, and what we have targeted to get to 50 to 60 outlets over the next several years.

Of course, e-commerce is also an important part of what we do here later this year, when we launch in a new e-commerce platform with improved feature and functionality that we believe will enable us to grow, both our stevemadden.com business, as well as our other two e-commerce properties, BetseyJohnson.com and Superga-USA.com.

Third, we will be looking to continue to grow our business outside of footwear. Our in-house accessories business has been the fastest growing segment in the company over the last year or two. You can see that we are up 32% in the trailing 12 month period, and we have particular momentum in the handbag business, our Steve Madden handbag business was up over 100% last year, year-over-year.

That's what we do in-house, and we also have a growing licensing business. It's a relatively small business for us right now, but we are actively introducing new categories. In spring, we launched Betsey Johnson dresses and Steve Madden intimate apparel, and for fall, we will be launching Steve Madden watches and Steve Madden jewelry, under license.

Next is the international opportunity. International is only about 8% of sales currently, but it has been on a very strong upper trajectory. We have grown that business over 50% per year, each of the last three years, and if we look out over the next, let's say, five years, we believe this is a single greatest revenue and profit opportunity for the company.

And last but not least, there are new brands. New brands have been an important part of the growth strategy over the last several years, and we have launched seven new brands since 2010. Most recently, we introduced Superga, a high end fashioned secret brands, which launched in spring 2012, and MadLove, a surf inspired brand that is distributed exclusively at Target, which we launched at Target in spring of 2013. As we move forward, we will be looking to grow these newer brands, and we will also be evaluating additional brands to add to the portfolio, whether we own them or license them.

So when we put that altogether, it's a pretty exciting time at (inaudible). We have strong brands, a proven business model and a whole host of meaningful growth opportunities, which we believe will enable us to continue to grow our business and create value for our shareholders.

Now I'd be happy to go for the fireside chat.

Question-and-Answer Session

Kate McShane - Citigroup

Thank you very much. We can start off by adjusting your view on the health of the consumer currently. Can you help us understand who your core consumer is and what this customer is facing in the current environment?

Edward Rosenfeld

Sure. Well we have -- as you saw, we have a portfolio of brands that enables us to sell customer shopping at various distribution channels. So we reach a bunch of different consumers, in terms of income and financial position, as we pointed out [virtual] equipment. We sell at Payless and Walmart, we sell virtually everybody in between.

We do focus primarily on the younger fashion forward woman customer, that's our primary customer. We believe that there a lot of positive things happening for the consumer. Obviously, we saw some very strong consumer confidence numbers, [have been in] the positive. The challenge has been of course, that the weather has not been so cooperative this spring. But with some of the positive developments that we are seeing from the overall -- the underlying health of the consumer, we feel good going into the fall.

Kate McShane - Citigroup

Okay great. Maybe just on the weather, which has been a big issue for a lot of the retailers and wholesalers that reported, can you talk a little bit about your flexibility to address changes in the environment, and what you did to make it, so that you didn't have as much inventory as the quarter ended, and what you can expect going forward?

Edward Rosenfeld

Sure. Well that's one of the benefits of our model, is that we had this [stack] turn model, where we turn our inventory about once a month in wholesale, and as we pointed out in the prepared remarks, we managed to shorten our lead times to about six to eight weeks, we make a lot of progress out of Mexico, for instance, which enables us to work faster than if we are working out of China, and enable us to be a little bit more nimble; and when we do see changes happening in season, we are able to adjust our inventory levels, and we have been able to do that, and we feel pretty comfortable about where we are, in terms of inventory.

Kate McShane - Citigroup

Okay. And then with regards to your relationship with your wholesale customers, how closely do you work with them in terms of taking back products, and how do you deal with markdowns outside of a typical markdown relationship?

Edward Rosenfeld

It's pretty standard. The one thing we do very rarely is take that product that's really not part of our model. In the very high end, we will do that on occasion, I think that's important to do. You need to be able to swap with people at Neiman Marcus and Sax, but from the department stores in down, we really don't take that product. Of course, we do participate in -- unfortunately, in this season, markdown money negotiations with a number of our customers.

Kate McShane - Citigroup

Okay. Can you talk a little bit then about the competitive market, both from the DTC perspective and your business at wholesale? Who would you say are your biggest competitors in each channel? I know you are very diversified, but who would you view as your biggest competitor and what has the environment been like, from the promotional standpoint, because of what we just went through?

Edward Rosenfeld

Sure. I would say on the direct to consumer side, our biggest competitor is probably Aldo. Within the wholesale channel, they are obviously not as big a player. There are a number of big competitors there, one of them would be the Camuto Group, which is a private company that does brands for people like Jessica Simpson, BCBG, Tory Burch, their Vince Camuto brand, etcetera. But overall, I think it is a fairly promotional environment right now, that's one of the challenges that we are all facing, and that's something that we talked about on our last earnings call, that we were expecting the promotional's second quarter due to the late start to spring selling, because of the challenging weather. And that's something that has essentially gone as we expected.

So, hasn't been more than we had stated, but hasn't been less either.

Kate McShane - Citigroup

With regards to the spring selling season, you do have still a pretty long run rate from where you can grow sandals. At what point does it start to get maybe a little bit more worrisome than not, if sandal sales do not fairly pickup or if weather continues to kind of drag along here?

Edward Rosenfeld

Yeah. Well, you're right that we have some time here, but we want to make sure that we continue to manage the inventory, and that we continue to remain competitive. I think that we actually did a pretty nice job. We have a very strong sandal assortment. I think we had an appropriate amount of sandals, but if everybody else gets aggressive on price, we are going to have to remain competitive, and that's something that we will have to be looking at, in the coming weeks.

Kate McShane - Citigroup

Moving on to pricing. Are ASPs increasing this year, is that incorporated into your guidance, and is it more an element of raising prices or of mix, where do you see ASP growth coming from?

Edward Rosenfeld

ASPs they are up very modestly, low single digits, and that would be driven by mix.

Kate McShane - Citigroup

I know you have had a lot of success in reducing the price down for very popular items. I think the most recent example is the Hilight sneaker wedge. Can you walk us through what gets you to make the decision to reduce the price so meaningful, in this case, from 150 up into 100, and what does it mean for unit sales in your gross margins?

Edward Rosenfeld

Sure. Well typically when we introduce a new fashion product. If it's a real fashion forward item, in that very first few months or first season in some cases, the real fashion forward customer, she will pay virtually whatever the price is, so we can typically 200, 150, in that range for newness. When you then go into the second season, and you are trying to attract a bigger customer base, and there is also more competition etcetera, then typically $99 for an item like that is going to be a magic price point, where you are going to see a real nice increase in the unit sales of course.

In terms of the gross margin, I think it's important to understand that we build the product differently where we are going to price it $150 or even $200, and then we do it for $99. So there is not a big gross margin deterioration, when we take prospects back to $99, we have put it in -- we have made adjustment to the materials, the (inaudible), etcetera such that we can price it out.

Kate McShane - Citigroup

Okay great. Speaking of production. We were looking up to your [factory] -- company headquarters a few weeks ago, which you walked through in your presentation, the test and react product in your stores, it seems to be a very big competitive advantage and I know we've talked about it before, but can you walk us through why this hasn't [necessarily] been replicated by either your competitors or anyone else actually in the industry, and what do you think will continue to keep in that (inaudible)?

Edward Rosenfeld

Well it's a good question. We certainly, there is nothing preventing somebody else from opening up a local factory where they can do samples. It is expensive, and it is considerably more expensive than making samples overseas, which is where most of our competitors make them. So it's an investment that somebody would have to make. I think what the key here is though, that it's not just the sample factory, it's really the whole model put together. So if you build the sample factory, then you also need to have 110 retail stores to test the product in there. Very few of our competitors that have as a considerable investment in both time and money to get there.

Then, of course, there is the flexible sourcing network that we built up over a number of years, that enables us to make shoes all over the world, and so we are very well developed in Mexico, as I pointed out. We are quite far ahead of our competitors, it's not something that can be created overnight. So we are going to keep trying to look for ways to increase our speed and always be on to the next frontier in terms of speed to market.

Kate McShane - Citigroup

Okay. And that leads nicely to our next question. With the speed to market you've highlighted again in the presentation, it takes about six to eight weeks for you guys to get to market. Are there -- are you still looking towards increasing that speed to market? Are there still efficiencies that can be found to increase that and can you talk a little bit too about labor costs, and how that may be impacting you currently?

Edward Rosenfeld

Sure. Yeah, we are always trying to find ways to get back. One of the interesting things that we can do now in terms of testing is to utilize the internet, and we have always utilized our stores for testing, and we can do that pretty quickly, because we can make product locally in Queens and shoot them out overnight to our stores. But now, we can test things on the internet before we even have any products made. Because we can put them up and start to get a read from the consumer, just with the picture. So that's something that's enabling us to speed up that process, the testing process at the beginning, and we are really focusing on this Mexico initiative. We made up about half of the Steve Madden line per fall in Mexico, and that's obviously helping us to drive greater speed.

In terms of labor costs, certainly the labor costs are going up in China, that doesn't seem like something that's going to go in the other direction. However, the overall content of China right now, the inflation is very modest. We are talking about low single digits. The factories, given the global demand environment, the factories are still pretty hungry for business, and that's keeping the prices in line.

Kate McShane - Citigroup

Okay. Great. All of our questions are kind of focused on footwear in the supply chain for footwear. But again in your presentation, you highlighted how accessories is going to be a bigger growth driver. So how much work has to be done in terms of (inaudible) that supply chain?

Edward Rosenfeld

We have a nice -- I think that the sourcing network were pretty far along. What we'd like to get better at is the testing in our retail stores, and we would like to replicate the model that we have in shoes and handbags, and we have put some handbag machinery into our little sample factory that you saw in Queens, which will enable us to make small samples as well as small test runs there. So that's helpful.

One of the challenges that I think you and I may have talked about is that we really need to build a bigger handbag business in our stores, to enable us to get better test results. Because right now, you are only talking about 2.5% of our sales in the stores, so the opportunity or the possibility of sample there is somewhat high, when we are trying to do the test for the stores; because they don't sell enough bags to give us as strong a breeze.

Kate McShane - Citigroup

Okay. Just moving on again, because the company has these great growth drivers. I think international, you highlighted the biggest opportunity. I know you have taken the Canadian licensing house, can you talk a little bit about the decision process to take that in-house and update us on how that integration is faring?

Edward Rosenfeld

Yeah. That's been a homerun for us. I mean, that has been, maybe the best transaction we have done from a financial perspective. We brought that at a very attractive price, and really I think the decision process was -- now at the size and the scale where we think it makes sense. The thing about our partner model it is lower risk, but also lower reward, and in the Canadian business we have been around, we have been in Canada for 15 years now, and the business was of the size, where we thought it made sense, and it has been a home run for us.

We have already been particularly aggressive at expanding the retail footprint there. We were at seven stores, and we acquired it about a year ago. We have almost doubled that to like 13 now, and we have got a list of about another 15 to 20 locations that we are looking at over the next three or four years.

Kate McShane - Citigroup

Are you finding that the market is -- or at least the consumer who is buying your shoe is, I mean, different than who is buying it in the U.S.?

Edward Rosenfeld

It's similar, although it's position -- its [traditionally] just a touch higher in Canada. We charge a little bit more for the product there, that's one of the reasons that the margins are better there, a product that is $99 in the United States, is often $124 or $129 in Canada, and the consumer has not blinked at those prices.

Kate McShane - Citigroup

Are there any markets currently that you have your eye on, that looks similar to Canada or actually has the attributes that would make it attractive to take it in-house sooner, rather than later?

Edward Rosenfeld

We are looking at things. I am not sure that we are quite there yet, but I think that most likely, the next area that we would look at would be in this hemisphere. So South America, Mexico, I could see a strategy down the road, where perhaps we owned in the Americas and licensed out in the rest of the world, at least for a period of time.

Kate McShane - Citigroup

Then retail also was one of your growth drivers for the longer term and, guess it can be approached in a couple of different branches. So first with outlets, which you seem very excited about. Can you talk to us about what the opportunity is there, why you are excited for it and how should we think about the product outlets, that will be more made for?

Edward Rosenfeld

Yes. So it's basically made for outlet strategy. We are going to have very little excess inventory in the outlets and we are very excited about -- the initial response of the customers has been great. The outlet channel I think is also -- there is a little bit of a wind at the back there, because the traffic is moving to that channel. The model seems to work a little better. If you look at many of our footwear competitors, lot of them lose money in their full price stores and do quite well in the outlets, and we think that over time, there is going to be an opportunity to have significantly better profitability or profit margins in the outlets, than in our full price stores.

Right now, of course we do quite well in our full price stores. But right now the four wall contribution margin is quite similar in the outlets and the full price stores, but once we get to scale in the outlet, we believe that it could be as much as 300 to 400 basis points better.

That said, we only have 11 outlets right now, you asked about the opportunity. We have identified that we want to get to, let's say 50 or 60. But even that is far fewer than what I would consider saturation. I mean, there are probably 125, maybe even 150 outlets, as they continue to build, that theoretically support Steve Madden in the United States.

Kate McShane - Citigroup

And how does that dovetail with your retail expansion strategy, with your full price retail expansion strategy?

Edward Rosenfeld

I think we are going to be a little bit more conservative by operating full price stores. We are just under 100 right now, and we really want to focus on A locations, A malls and A street locations. We believe that with so much traffic moving not only to the outlets, but even more impactfully to the internet. That's really the right strategy for us. I mean it's not a 300 door full price opportunity.

Kate McShane - Citigroup

And are there opportunities to expand into other brands, like Superga or something like that, from a retail perspective?

Edward Rosenfeld

Yeah, we will look at that down the road. That's not going to happen the next year. We have on Superga store, which is really a flagship for branding in Soho, but it's something we could look at down the road.

Kate McShane - Citigroup

As your business gets a little bit bigger on the wholesale side, as you gain more share at places like Macy's and DSW, how do you balance the wholesale -- with the products that go into wholesale versus what you are selling at retail?

Edward Rosenfeld

Well there is a lot of product in our retail stores that is not carried into the wholesale. I mean, frankly, that's probably -- our biggest challenge is making sure that we could make the retail store special enough, and so about half of the assortment in retail stores is not carried in the wholesale channel. We have not had a problem with our wholesale customers, as we open retail stores. And I think frankly, in the industry that horse is sort of out of the barn. Some may have -- the big brands have retail stores; and also, I think that the wholesalers have gotten comfortable, that in fact, sometimes it makes their business better, because it builds the brand. We have seen in some cases, that when we open a Steve Madden store in the same mall, where we have a big assortment. Nordstrom there, the Nordstrom business has even gotten better.

Kate McShane - Citigroup

Okay. Then my last question on retail is just about expanding e-commerce. I think you've stated that the long term goal is to get to 18% of sales in like 2017. Can you talk about some of the initiatives to grow that business longer term, and more importantly, will we have to see a step change in the level of CapEx and SG&A in order to get there?

Edward Rosenfeld

Yeah. I am not sure what -- we are at 18% in retail currently. We also have a big wholesale business selling to online retailers, which is probably a little bit less than 10%. It is important to have to continue to grow what we do internally, on our own web properties, and I mentioned briefly in the presentation, that we are implementing a new platform this year, that's in the neighborhood of $2.5 million to $3 million of capital expenditure, and that should -- we think that's really going to help. It's going to allow us to add some features and functionality to things like buy online, pick-up and store, that we can't do now. Also, it will enable us to have a lot better integration with our social media properties. We have a real nice following, and I think we have done a pretty good job on Instagram, Pinterest, Facebook, Twitter, etcetera. But there has not been to-date, a lot of integration with our e-commerce business and so we have got a lot of likes, and we'd like to try to turn those into lot of purchases, and I think the new platform will enable us to do that.

Kate McShane - Citigroup

Okay. Great. Just have two more questions now, and we can open up to the audience. I kind of stayed away from the balance sheet for a lot more strategic questions there. But with regards to the balance sheet, you don't have a lot of debt, have a nice cash position. Can you walk us through the priorities for cash and adjacent acquisitions too over the years, in your acquisition strategy?

Edward Rosenfeld

Yeah, we've made a number of acquisitions. Although we haven't done anything in the last 12 months. I think the last one was completed in February of 2012, and I think the priority in terms of continuing to look for M&A, number one would be additional brands to add to this portfolio. So we are on the hunt for things that we think that fit, and would be complementary to our existing portfolio of brands.

Number two, down the road, I think you will see us look at potentially buying in some of our international businesses, although that may not be a 2013 initiative, but it is something we will continue to look at. Then lower priority, something we would also look at would be additional adjacent categories. So probably categories within accessories, we now have handbags, belts -- we have handbags, belts, cold weather accessories and other fashion accessories like scarves. We could potentially look at, let's say, sunglasses or jewelry or some adjacent category.

In the absence of acquisitions, we do have a share repurchase authorization outstanding right now. We got back into the market and started buying shares for the first time in a couple of years, last quarter, and we have indicated that it's likely that we will continue to repurchase shares, particularly if we don't find acquisitions.

Kate McShane - Citigroup

The last piece has come back to the P&L. There has been a lot of moving pieces with regards to your gross margin, because of just some of the changes that you have made, how should we think about the gross margins over the next three years, and the puts and takes over that time?

Edward Rosenfeld

Yeah. I think there should be a little bit less volatility now that, because we are mostly through these big mix shifts. There are still some puts and takes. We have got a little bit of a tailwind, because we have got this direct sourcing initiative, which we think should enable us to drive about 40 basis points a year in gross margin improvement over the next three years. But there are also mix challenges, because we are growing our business in the sort of max channel, with people like Target, and growing very rapidly, which is a good thing, but is lower gross margin. We are also growing our business through our international distributors, also a good thing, but also a lower margin than the overall.

So when you put it altogether, I think there is opportunity for modest gross margin improvement over the next couple of years.

Kate McShane - Citigroup

Okay. Great. Okay. That's all I really had, we can open it up to the audience for any questions? Okay no questions yet. I will see if we have any more here. I guess more of a near term question, you have seen a lot of success from moving your business from juniors to Impulse at Macy's, which you also highlighted. What is the need to see in the back half of this year to give you increased confidence as you lap that shift going forward?

Edward Rosenfeld

Yeah. So we aren't set up with some expanded, what we call, table doors, which is a full assortment doors at Macy's, going into fall, and we also have an increased number of SKUs in the balance of the doors. So we are going to see some increased sell-in at the beginning of the fall, but of course, the proof is in the pudding, it's all about the sell-through and retail. And if we can get it -- if the product continues to see the nice sell-through that we have seen, since we moved to Impulse, once we ship into those additional doors, and those additional SKUs, that should enable us to continue to drive that business.

Kate McShane - Citigroup

Jumping around a little bit, back to retail. I think you are doing some remodeling and refreshing of your Steve Madden full price stores. Have you talked at all about what kind of conflict you see, once you do a remodel?

Edward Rosenfeld

It varies. We have done as much as 20% and 10% -- at least 10% in almost every case. So that's really the range, somewhere between 10 and 20.

Kate McShane - Citigroup

Okay. Okay. There are some questions.

Unidentified Analyst

[Question Inaudible]. Holidays probably, and what type of retailers you will be seeing?

Edward Rosenfeld

There is going to be a similar distribution as the Steve Madden shoes, so it's the better department stores, Macy's, Dillards, Nordstrom, Belk, etcetera. As well as in the Steve Madden retail stores. Yeah.

Unidentified Analyst

Yes. I know you mentioned that you guys are going to be very conservative on opening full price stores. But when you walk the mall today, you see that there are -- there is a lot of people that say where are the shoe stores. Do you not see that as an opportunity or do you see that adjust to business cycle?

Edward Rosenfeld

Well, you're right, that a lot of peers have been closing stores. Bakers went out of business. Nine West has been closing a lot of stores. Kenneth Cole has been closing a lot of stores. But frankly, I think one of the reasons you have seen that, is that it is a challenging model. That single brand in small footprint shoe store is a challenging model, in the B and C mall. I think it works quite well in the A malls, but I think you also have a lot of customers who like to go to the multi-branded environments for shoes, like in Nordstrom or DSW or Zappos online. So we want to be careful about that. But you're right, that it may create an opportunity at some of the other guys, reduce their footprint.

Kate McShane - Citigroup

I am just going to ask one more question, and then we will wrap it up. In case there are no other questions from the audience. With Superga, very distinct look to the products that I think has been driving the strong growth. What can we see from that brand going forward? I mean, will it still stay very true to its heritage or will there be a little bit more flexibility and style and silhouette of the Superga shoe?

Edward Rosenfeld

I think for the time being, it's still going to be primarily driven by the iconic style. But what we'd like to do over time is to try to broaden out the classification. And we've thought about places where we think that we can play in Superga, we are not going to all of a sudden start doing stilettos in Superga, but we think that rain boots for instance could be an interesting category for that brand, and even within accessories, we have got some canvas backpacks that we may deliver. So we are going to work to gradually broaden out the product categories there, but we also want to make sure that we don't get silly and still look through to what the brand represents.

Kate McShane - Citigroup

So last chance, any other questions? Oh there is one.

Unidentified Analyst

In terms of your commitment with the Nordstrom's anniversary sale, could you add some color to that, is it all going to be shoes, or its going to be shoes and accessories, and could you kind of compare some of the items that may have been (inaudible) this year, than for last year?

Edward Rosenfeld

Yeah. Its shoes and bags, and I would say we have about 15% to 20% more SKUs as a company, than we did a year ago. We have been performing very well with Nordstrom. It has been a real top -- (Inaudible) have been very strong.

Unidentified Analyst

And that would be your business model? I mean, you should be able to -- [Question Inaudible]. I mean, you will be able to put that back in the stage of the source, in September, October, right?

Edward Rosenfeld

Absolutely. In fact, that's perhaps the greatest value for us being in the Nordstrom anniversary sale of course, it's nice to sell some few products to Nordstrom. But it's really about getting those early fall (inaudible) [35:36], and that has been a pretty strong indicator for us in the past, of new products for fall.

Unidentified Analyst

Okay. Thanks a lot.

Kate McShane - Citigroup

Okay. I think that's it. Thanks very much.

Edward Rosenfeld

Great. Well, thanks very much for having me.

Kate McShane - Citigroup

Thank you.

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Source: Steven Madden's CEO Presents at Citi Global Consumer Conference (Transcript)
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