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Steven Madden (SHOO) reported earnings of 66 cents per share Thursday morning, versus the 49 cents expected by Wall Street. Shares closed well off their highs, but still up 11%.

Accounting for 81% of revenue, wholesale sales were up 11%. Retail sales declined slightly, due to the closure of two locations and a drop in same-store-sales of 5.4%.

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SHOO guided earnings for the full year to about $2.07 per share, well above the current consensus of 1.89 and still above the street-high 1.93.

Details from the conference call:

-Average unit retail was down 9%
-The company expects to open 1 new store during the remainder of this year while closing 2.
-Licensing income doubled, thanks to Candies' performance at Kohls (KSS) and l.e.i at Walmart (WMT)
-The improvement in gross margin was due to a 200 basis point (2%) improvement in the wholesale division.
-As for how to deploy the company's $111million in cash and securities, they're "actively" looking at 3 acquisition targets, but nothing is imminent.
-Looking forward they see continued year-over-year improvement in wholesale gross margin, yet continued weakness at retail.
-As for how to improve retail performance, the two main factors are the closure of underporfming locations, and an improving retail environment. The NYC locations, while expected to be terrific performers over the long term, are a huge short-term drag on costs.

I've been familiar with CEO Ed Rosenfeld for 5/6 years -- before he was CEO he was effectively running the finances, while his bosses slept. Maybe his best attribute is picking up acquisitions for fantastic prices, such as paying about $1million for $10million of revenue recently.

I like the company's "test and react" model -- they test styles in their own stores before rolling them out to their big wholesale accounts, which combined with their "Speed to market" strategy is why they're able to be trend-right more quickly than others.

Netting out $6 per share in cash, the stock trades at a P/E multiple of 13 times the new EPS guidance.

Wedbush upped their target to $38 Thursday, and took fiscal 2010 estimates to $2.34, as they see the brand gaining market share.

Taking that $2.34 in 2010 leads to Free Cash Flow (just slightly exceeding net income) of about $43million -- a 9.5% Free Cash Flow Yield (FCFY) on the company's net-of-cash Market Value. Nothing to scoff at, but in this incredibly volatile industry I'd need a much richer (high teens) FCFY to get involved at these levels.

Disclosure - no position

Source: Steven Madden: Big Quarter, Raises Guidance