Welcome to the Steven Madden Limited Conference Call. At this time all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. As a reminder, today's call is being recorded. I would now like to turn the conference over to your host Ms. Jean Fontana of ICR. Please go ahead ma'am.

Thank you, good morning everyone and thank you for joining this discussion of Steven Madden Limiteds' fourth quarter and full year 2008 earnings results. Before we begin I would like to remind you that the statements in this conference call that are not statements of historical or current facts constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other unknown factors that could cause the actual results of the company to be materially different from the historical results or from any future results expressed or implied by such forward-looking statements. The statements contained herein are all subject generally to other risks and uncertainties that are described from time-to-time in the company's reports and registration statements filed with the SEC. Also please refer to the earnings release for more information on risk factors that could cause actual results to differ. Finally, please note that any forward-looking statements used in this call should not be relied upon as current after today. I would now like to turn the call over to Ed Rosenfeld, Chairman and CEO of Steven Madden.

Thanks, Jean. Good morning and thank you for joining us today. On today's call, I will review the company's results for the fourth quarter and full year 2008 and provide our outlook for 2009. We are pleased to have met our expectations for the fourth quarter despite the challenging economic environment. Net sales for the fourth quarter rose 16%, while EPS increased to $0.40 from $0.23 in last year's Q4. We believe that in this environment, consumers increasingly find value in our product, not just based on price, but on the fact that we consistently deliver trend right merchandise at a fair value. Gaining value in purchases is more important to consumers than it has been in years, especially when it comes to fashion. And our core Steve Madden brand is well-positioned to benefit from this trend. Steve and our talented design team continued to create an excellent assortment of footwear capturing the latest trends and enabling us to stay at top of mind with our customers. Furthermore, with our test-and-react strategy, we ensure that we optimize our wholesale assortment by putting in the best selling styles from our retail stores. While we are pleased with our recent performance and very excited about all the developments in our company in 2008, we recognize that we are operating in a challenging environment and will carefully controlled inventory, operating expenses and capital expenditures as we focus on driving the strong cash flow in 2009. Now turning to the performance for the fourth quarter, consolidated net sales increased 16% in the quarter to $119.1 million lead by 24% increase in our wholesale business, where net sales were $79.1 million in the quarter compared to $63.5 million in the prior year. The increase in wholesale sales was primarily driven by strong gains in our…

Thank you, sir. (Operator Instructions). We will take our first question from Mr. Jeff Van Sinderen with B. Riley. Please go ahead sir. Your line is open. Mr. Van Sinderen, your line is open. Due to no response, we will move to our next question. Our next question comes from Mr. Sam Poser with Sterne, Agee. Please go ahead your line is open. Sam Poser - Sterne, Agee & Leach: Good morning, Ed.

Good morning, Sam. Sam Poser - Sterne, Agee & Leach: Just a couple of questions. One, can you give us the inventory by wholesale and retail and if you gave both, if you split it or not?

Sure. Retail was up from $12.5 million a year ago, to $15.4 million this year. And wholesale $14.7 million a year ago, up to $16.2 million this year. If I can just talk about that for a moment. Sam Poser - Sterne, Agee & Leach: 14 from?

14.7, Q4 '07 to 16.2, Q4 '08 in wholesale. Sam Poser - Sterne, Agee & Leach: Correct.

So, you can see that the majority of the increase came from retail about $2.9 million, about $4.3 million overall increase came from retail and that was really driven by conscious decision on our part to change the flow of receipts versus a year ago. We really felt that we missed out on sales in January last year due to not having enough inventory particularly in the boot category. And with boots strong again we decided that this year we were going to bring in more receipts in December and January and fewer receipts in February and March and this is a strategy that we feel has paid off. Our quarter-to-date, through today or through yesterday, our comps in the retail stores are up 8% year-over-year based in large part on brining this inventory particularly the boots in. So, we feel pretty good about that. On the wholesale side there are really two factors, one was a change in order patterns from our customers versus a year ago our orders for January were up year-over-year and orders for February were down and we attribute this again to the strength of boots this year. People wanted to bring in additional boots, but when customers want to bring in boots in first quarter they are going to obviously want to bring them in a January as oppose to February. So, our year-end inventory was higher in order to support that increased January business. That’s the first factor and then the second factor was the decision that we made to carry a little bit of inventory in Madden Girl to support the growth of our business with Macy's there. As you know historically that's been a cut to order business, it remains the cut to order business but in order to grow with Macy's we do need to carry a little bit of inventory and so we have taken some inventory in a couple of key proven styles there in order to grow with that account. Keep in mind that at the end of the year '08 we were in 300 Macy's stores with Madden Girl a year prior to that we were only 80 Macy's stores with Madden Girl. Sam Poser - Sterne, Agee & Leach: Okay, thank you. And then within your guidance when you are looking ,at I mean it sounds like business is pretty decent right now, you said that January is up in both cases both wholesale and retail and then I am not sure where February is, but I guess comp in quarter to-date up 8% is pretty strong. When you are looking in your guidance down I guess three to five ex the Candies move. Is that because of lack of visibility towards the back half of the year, is that the way the order flow look through I guess May or June where you are right now?

Well I think that on a year-over-year basis we are assuming the back half is going to be a little bit worse than the first half. We are shaping up a little bit better than that for first half, but we had seen softening of orders. Obviously I don’t need to tell you what's going on out in the world and you have got most of our big wholesale customers talking about planning their businesses down 10%. Overall, we don't feel that we are going to be down 10% because of our strong recent performance. But we do think it's reasonable to assume that we are going to be down year-over-year. Sam Poser - Sterne, Agee & Leach: And then have you seen any improvement in the reaction to the Men's business at all and to the Men's product for the back half because that went a little further out.

Yes, we are seeing some glimmers hope there, as you know we got back in to Journeys and Underground Stations. We are going to be in, or we are now in about 300 Journeys and 100 Underground Stations, which are important accounts for us and I think that's due to the improvement that we made to the product, and some of the younger looking product that was introduced on the casual side, some of the boots. So, we feel that we are starting to see some encouraging signs in Men's, of course the, of course the other side of that is the men's business itself overall remains very-very challenging right now. Sam Poser - Sterne, Agee & Leach: Okay. And then just last thing. Again back to the guidance. When we are looking at it by category, you are going to get growth, where are you seeing the major slowdowns within the guidance by category, because you do have some new categories as well, or I guess you have the new one with the Fabulosity. So, where are you seeing the weakness within the guidance if we would look at it by division or category?

Well, I think you have to assume that most of our wholesale divisions are going to be down modestly year-over-year with the exception of Madden Girl. The existing wholesale divisions should be down year-over year. Sam Poser - Sterne, Agee & Leach: Okay, thanks Ed.

We will take our next question from Mr. Jeff Mintz with Wedbush. Please go ahead, sir. Your line is open.

Thanks. Good morning, Ed.

Good morning.

Can we talk a little bit about operating expenses for 2009? And in particular you talked about the $1.3 million reserve to close the two stores. Can you talk a little bit about what the cost might be to close the additional stores in 2009?

Yes. For the most part, the remaining store closures, there is not going to be cash expense associated with them. These are stores that we either have a kick-out provision in the lease or we have come to the end of the lease. So, there maybe some with regard to the stores where we are exercising to kick-out there maybe a non-cash charge loss on disposal of the fixed assets, but in terms of the cash charges we don’t anticipate much.

Okay. And then kind of looking at the operating expenses overall. I mean is that something that you can trying to keep inline on a dollar basis with 2008 as you look at slightly lower revenues and kind of belt tightening in general in this environment?

Yes, I think flat operating expenses is a reasonable target.

Okay, great. And then on the inventory, where do you expect that to be as we go through the year here, I mean, you are targeting inventory to be flat to down inline with sales or do you anticipate taking a little bit more aggressive position on that?

Yes, I think when we get through the end of Q1, we are going to be modestly high or low to mid-single digits higher than a year-ago in retail. And we are going to be below a year-ago in wholesale. And I think that’s consistent with our plans to balance the year.

Okay, great. And then finally can you talk a little bit about what are you seeing in terms of pricing your product out there. How much pressure are you getting from your retail accounts to kind of move prices down and then try and be even, obviously you guys do well on pricing but to be perhaps even tighter on pricing in this environment.

It’s not a lot of pressure from our wholesale accounts, we are ourselves very focused on value right now but again value for us doesn’t always mean compete on price. It means having trend right styling with good quality at a reasonable price point. And that’s what we are really focusing on, we think the customer is very focused on value and perceived value right now. That’s one of the reasons that we really drove the under $100 boots in the fall and we had a lot of success with that.

Okay, great. Thanks very much and good luck.

(Operator Instructions). Our next question comes from Mr. Jeff Van Sinderen from B. Riley Please go ahead sir, you line is open. Jeff Van Sinderen - B. Riley & Company: Can you guys hear me?

Hey Jeff. Jeff Van Sinderen - B. Riley & Company: Hi. Okay. So, I guess one question I had, I was just looking into the second half of this year and thinking about the strength you guys have had in boots which has really been seemingly phenomenal. Just wondering, if you are thinking that boots ease on a year-over-year basis and the second half of this year, and if so, is there anything that you are looking at in terms of the category, or what have you, that could replace the strength of boots?

I think its shaping up to be, we believe it's going to be another good boot season, we did some late in season testing of new boots, here that we got some good reads on, but that’s part of the reason that we assumed in our guidance that the back half at least relative to the year ago period will be slightly weaker than the front half, due to the tougher comparisons with the boots. Jeff Van Sinderen - B. Riley & Company: Okay, fair enough. And then, I know you mentioned your focus on cash flow, you are trying to control expenses. Just wondering, how we should think about your approach to expenses this year, are there any specific areas that you are looking at cutting, things of that nature.

Sure. We have implemented a number of cost savings initiatives already. We have let go of approximately 25 people at corporate headquarters, we have negotiated some savings ocean freight, air freight, UPS savings, we have gotten a couple of rent reductions on some of our stores, about three to four stores that were up for renewal. So when you put all that together it could mean about $2 million to $2.5 million of savings in '09, more on an annual basis, we are not going to get catch of the full benefit in '09 and those were the main thing they were working on. Jeff Van Sinderen - B. Riley & Company: Okay, and then anything to update us on in terms of sourcing? Are you guys seeing any price eases anywhere there, or is it pretty much status quo?

Yeah, I guess suppose that's one of the silver linings in all this bad news is that prices are getting a little bit better from the factories. It really varies from product-to-product and factory-to-factory, but in some cases we are seeing price decreases of 5% to 10% out of China. Jeff Van Sinderen - B. Riley & Company: All right good to hear. Thanks very much and good luck.

Thanks.

We will take our next call from Heather Boksen with Sidoti & Company. Please go ahead. Heather Boksen - Sidoti & Company: Good morning. guys. I guess your first question regarding the fourth quarter, the gross margin at wholesale, any brands are particularly stronger gross margin or weaker that you could call out?

The increases were pretty much across the board. And again, the driving factor was the reduction in markdown allowances. Our going in margin was basically flat to the year before, but the give back was so much less. We had price increases in men and women's we had an increase in Steven, Candies etcetera. Heather Boksen - Sidoti & Company: And I guess looking ahead to spring, obviously a lot of the guys you sell to are hurting, but your sell-through still remain pretty strong, what kind of feedback are you guys getting from them with regards to markdown?

Yeah, right now we continue to lead the pack in terms of sell-through, so there is no real change there. Heather Boksen - Sidoti & Company: Okay. And with regards to the inventory position, I guess boots being more expensive, what the inventory look like maybe on pair's basis?

I would have to get back to you on that, I don't know that of the top of my head. Heather Boksen - Sidoti & Company: Okay. And the cash position at the end of the year, I guess what's the plans for all that cash?

Sure. Well, maybe we should just spend a moment on the cash, because there is something a little bit unusual here. We are a factored company. And historically, we have never used our factor as a financing vehicle. So we have never borrowed from the factor against our receivables. And we did do that in Q4 that's one of the reasons that you saw cash balance increase dramatically, and so if we could just spend a moment on why we did that? Our factor is GMAC. And during the fourth quarter there was some uncertainty surrounding GMAC. And at the time they had not yet qualify for bank holding status and there were some speculation that they might file for bankruptcy. Now the way our factoring agreement worked with them at the time we were selling our receivables to GMAC, at that time we invoiced our customers and not collecting women, GMAC would pay us once they have collected the receivable from the customer. So, the concern for us was that in GMAC bankruptcy, we would end up an unsecured creditor to GMAC and would have a potential loss of some, or all of the cash collections on those receivables. So, in the fourth quarter, we began advancing the maximum amount allowable everyday against our receivables from GMAC, and thereby mitigating a potential loss in the bankruptcy. The potential loss is obviously reduced by the amount that we advanced from the factor. And that amount was $30.2 million that we advanced from the factor as of the end of the year. So, that's why our cash was $124.8 million as of the end of the year. On a net basis after accounting for the events, we're talking about $95 million of cash. There are two things have happened since the…

Right. Heather Boksen - Sidoti & Company: Alright, that's helpful.

And there should be no debt. Heather Boksen - Sidoti & Company: Alright, thank you very much.

(Operator Instructions) We will take our next question from Sam Poser with Stern Agee. Please go ahead. Sam Poser - Sterne, Agee & Leach: Hi, just got a quick follow-up. What is the timing of the store closings?

It's really throughout the year, and it's going to be a couple of next quarter. Sam Poser - Sterne, Agee & Leach: When we were looking at the retail business, which seems to be pumping up now? I mean how much did those 8 to 13 stores, I mean how much can we take off the top there? And if you take low singles down on retail and wholesale, and then take off those stores, do we get to that 6% percent range, is that conceptually am I thinking about it right?

On the eight stores that we are closing for the most part are not big dollar volume stores. I would say the average 700,000, may be 600,000 on those stores. So you want to take those off the top as you said, and then the 6% that sounded high, what was that? Sam Poser - Sterne, Agee & Leach: You said it is negative 6 to 8 ex the Candies.

The overall guidance? Sam Poser - Sterne, Agee & Leach: The overall guidance.

The retail guidance will be higher than that. We are talking about let's say 1% to 3% sales growth for retail this year. Sam Poser - Sterne, Agee & Leach: Even with the closures?

Yup. Sam Poser - Sterne, Agee & Leach: All right. Thanks, Ed.

We will take our next question from Susan Sainsbury of Miller Tabak. Please go ahead.

Hi, yes. Ed, can you update us on what's going on with your l.e.i. initiative at Wal-Mart?

Yes, that's something that we are really excited about. The first shipment went out in December. We shipped to about 600 doors and we are now expanding the business to about 24,000 doors, we’lll be in 24,000 doors by the end of next month. Initial sale through have been very good and Wal-Mart is very pleased as is Jones, as are we and so that's something we are excited about. I think we are going to exceed our first year budget there.

Can you refresh me on what that first year budget was?

We've talked about a $1.5 million to $2 million of other income in year one. And I think we can do a little better than that.

And if the initial sell through is good, can you put.

We never give the sell-through percentages; they have told us that it's exceeding the other brands they are selling.

Okay, great. I appreciate it thank you.

At this time, Mr. Rosenfeld, there are no other questions in queue.

Okay, great. Well, thank a lot for joining us and we look forward to speaking with you on the next call.

That does conclude today's Steven Madden Limited Conference call. We appreciate your participation. Have a wonderful day.