Good day everyone and welcome to the Steve Madden third quarter 2010 earnings conference call. As a reminder today's call is being recorded. For opening remarks and introductions I would like to turn the call over to Jean Fontana of ICR. Please go ahead, Ms. Fontana.

Thank you. Good morning, everyone. Thank you for joining us for the discussion of Steve Madden's third quarter 2010 earnings results. Before we begin, I would like to remind you that 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 and uncertainties and other unknown facts that could cause actual results to be materially different from historical results or any future results expressed or implied by such forward-looking statements. Statements contained herein are also subject to generally 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 today's earnings release for more information on risk factors; this could cause actual results to differ. Finally, please note that any forward-looking statements in this using this conference call cannot be relied upon as current after this date. I would now like to turn the call over to Ed Rosenfeld, Chairman and CEO of Steve Madden.

Thanks, Jean. Good morning and thank you for joining us today. We are pleased to deliver the highest quarterly sales and earnings in our company's history in third quarter 2010. Consolidated net sales rose 31% to a 184.1 million and operating profit grew 32% to 37.4 million for 20.3% of net sales. Our performance reflects continued momentum in our core businesses as well as significant contributions from our newer business ventures. Our wholesale business continued its strong performance. The net sales increasing 37% to 153.1 million as compared to a $112 million in the third quarter of last year driven by strong gains in both the footwear and accessories businesses. On the footwear side, sales grew 34% to123.3 million versus 92.2 million last year driven by robust increases in the Madden Girl, Steve Madden Men's and international divisions as well as by the contribution from Madden our new men's brand that we introduced in December of 2009. Net sales also benefited from the transition of our footwear business with Wal-Mart from a buying agency model to a selling agency model which means its revenue is now recorded on the top line and not on the other income line on the income statement. Madden Girl recorded the biggest sale increase in dollars in the quarter as continued strong sell-throughs retail resulted in an increased investment in the brand from all of Madden Girl's largest customers. International was our fastest growing division on our percentage basis recoding 99% top line increase in the quarter. In addition to over 100% year-over-year increases in existing territories Asia and Mexico, we also had contributions from four new territories that we launched in the last six months, Saudi Arabia, Australia, Russia and Central America. Our Men's business was another bright spot. In addition to a strong…

(Operator Instructions). And we will go first to Scott Krasik with BB&T Capital Markets. Scott Krasik - BB&T Capital Markets: Maybe talk about was there any change in the cadence of sales or the momentum around boots, obviously a lot of people reported very early strong momentum. Did you see that tail off at all in September and then maybe any color that you could give either out of your own stores or what you are hearing from your retailers in terms of sell through on boots now.

Yes boots and booties continue to be very strong for us. This year as compared to last year, there has been a little bit of a shift from boots into booties which the booties do carry a slightly lower AUR, but the sell-throughs have been very strong. We have got a lace up booty right now that's about as hot an item as we have had here at Steve Madden. So, we still feel very good about that category. Scott Krasik - BB&T Capital Markets: And at least relative to early momentum in this late summer, early fall. It just continues to build, to accelerate or it stayed the same?

Particularly in our retail stores, we had more boot and booties selling earlier in season this year than we did last year, but the momentum has continued to be strong. Scott Krasik - BB&T Capital Markets: And then comment on the gross margin, the wholesale gross margin seems to inflect a little earlier than we thought. What was the reason for the authorized sales or did it just reflect the fact that you had so few last year that it was just such a clean margin last year?

Well I think it was a couple of things. One is we did have a very tough comparison last year it was very, very clean. So that was part of it, but we did have a couple of categories I mentioned that didn't perform up to expectation. When we talked about this on our board meeting the other day, I said to our board that the fashion business has a way of keeping you humble because I think our brand is basically the highest shoe brand in the market and I think our product overall is better than it's ever been, but we did have a couple categories that didn't perform as we expected. One was flat suede boots, that's something that we've had a lot of success with for a couple of years, and it's just slowed up faster than we anticipated. It seems that leather is so much stronger than suede this year and then the second was woods. That's something where we got very strong test in our retail stores and when we got into wholesale it just really just dropped dead and that's going to happen sometimes. We think the rest and react model is great and helps us to mitigate a lot of fashion risk, but it's not going to be perfect and sometimes you're going to have something die like that. Scott Krasik - BB&T Capital Markets: And then any visibility obviously you guys work pretty close to season, but we seem to be at the end of a sandal cycle. Last year you got some good early leads on pumps. Are retailers still excited about pumps for spring or boots can drive early spring sales? What's your outlook in terms of fashion direction?

Yes, I think pumps, people still feel good about pumps and we got some other things that we're pretty excited about. We've just started Rob Schmertz of course and he was very excited yesterday about some early spring tests that we gotten in our Florida stores. Of course I am not going to tell you what those are for competitive reasons but we feel good about our spring product.

Our next question will come from Steve (inaudible) with CL King.

Your sales aggregate was up 31% on year-over-year basis excluding the Big Buddha acquisition and the reclassification of Wal-Mart. What was organic sales up year-over-year for the quarter?

Okay. And can you comment a little bit on inventory levels year-over-year if I heard you correctly was up 50%?

Yes, that's right. I think one of the things that you have to look at there is that the number last year was artificially depressed. Last year our Q3 inventory was down 27% year-over-year despite the fact that we were growing sales in Q4 at the upcoming quarter by 17% and in fact a year ago on this call we talked about how that was unusual and do in large part to a change in the timing of delivery. So I think it's probably (inaudible) look at this on sort of a two year staffed basis and on that basis inventory on the two year on the stack is up 9% while Q4 sales based on our guidance up about 30% and so we do still continue to feel comfortable with inventory levels. At the end of Q3 we had about five weeks of wholesale inventory and about 11-12 weeks of retail which we feel comfortable with.

Okay is any of the slower growing category that you referenced during the third quarter, is any of that inventory building up currently? Do you feel that you are out of that and that everything is as clean as it can be?

Yes we have moved through most of that already.

Okay last question is pricing from China, you mentioned in the 5% area you are seeing it right now. Do you have projections or have you thought about next year and where those costs are going and raw material as well as labor?

Yes I mean I think for the overall cost we are still looking at that sort of 5% to 8% number. Its obviously been trending up a little bit so does that end up more towards the higher end of that range for next year, that's certainly possible.

Okay lastly your ability to price at the lower end to mid-tier and lower like the coals in pennies in Wal-Mart. Do you find that to be different than what you are experiencing at Macy's and above?

You mean to increase price?

Correct. To pass along the cost increases.

Yes, I think generally speaking as you go to the more value priced channel, its going to be more difficult, but the good news for us is that our product is fashion and I think its easier to take price when you have fashion and when you have new fresh looks than if you are doing real basic products, those kind of accounts.

Our next question comes from Camilo Lyon with Wedbush Securities.

I was hoping you could expand a little bit on the Betsey Johnson opportunity particularly as it applies to the wholesale for ware business next year and where you think you can really wrap that up?

If we just take a step, the Betsey Johnson transaction is something we're really, really excited about. We think it was a pretty special opportunity to get a control of an iconic brand like Betsey Johnson at a very attractive valuation. I don't think its too often that you're going to be able to pay 27.5 million and get an authentic designer brand with the kind of following that Betsey Johnson has and takeover day one licensing business that's generating 3.5 million of annual royalty income and save yourself 1.5 million of annual royalty income on the handbags and belts and get to a do a shoe opportunity which you think is very big. I mean we mentioned that we'd be disappointed if we can't do sort of 10 million year one and I think that really that should be a 20 million business over a couple of years for us pretty quickly and we've already signed a couple of new licenses. We are going to have additional licensing income from the apparel and from the cold weather accessories and we think that there is a big opportunity in a lot of these categories to really supercharge the growth here by taking the prices down a little bit without of course cheapening the brand or do anything to hurt the integrity of the brand. So this is something that we're really excited about. We talked about $0.10 of accretion for next year, but we really think that two to three years out, that could be 0.20 or $0.30

Sounds great and what about opportunities to go into different distribution channels, what does that look like?

With Betsey Johnson?

Yes.

Our feeling right now is that we want to keep Betsey Johnson in the existing distribution channel. So it's going to be primarily focused on the better department stores, the Nordstrom's, Dillard's, Macy's of the world. But as I said, we do believe that there is an opportunity within those same distribution channels to bring the prices down a little bit. In shoes for instance if the average prices right now are about 150 to 240, we are going to be doing shoes that the bulk of them will be in the 90 to $150 range.

And I think you already said that you are working on that already for spring deliveries. Is that right? Spring '11 deliveries?

Yes we would be hoping to ship sort of 325.

Got it and then just last one on the gross margin side, as it relates to the international business. With the gross margin pressure there, which are going only by the distributors be in a lower margin business?

That's right; our international business is always going to be meaningfully lower than the wholesale average because we go through these third party distributors.

And any sense as to what delta is roughly between the two? The margin…

We really haven't disclosed that, but it's significantly lower.

Our next question comes from Jeff Van Sinderen with B. Riley.

Just to clarify that on the merchandise that float into the off-price channel, it sounds like you do not expect a similar increase in off-price for Q4. Is that the first statement?

No, you won't have the same kind of impact that you had in Q3.

Okay, good to hear. And then may be you can just talk a little bit about where you are with the full priced retail stores. I know you've closed some and you are getting really strong performance out of your existing comp store base. How many more in the fleet of full price do you think you want to close and then also, are you seeing some better locations to perhaps open if you more a full price and then also if you can just comment on the outlet store opportunity.

Sure, well then, as you said, we are seeing much, much better trends out of our retail stores and we're really pleased with the progress we've made there. In terms of continued closures, we're looking at probably four to six closings next year and beyond that it's probably, its really too early to say. But that is a smaller number of closings than we've had the last few years. We did seven in '08, seven in '09 and eight this year. And then in terms of full priced openings, we've got two leases assigned right now. One for Q4 opening and one for next year and we're going to continue to be opportunistic about opening those retail stores too especially now that we feel a little bit better about our model and the returns we made on the retail stores. And then in terms of outlets, we're opening that first store in Riverhead in a few weeks and we're pretty close in about five other deals for places like Orlando, Vegas, Houston etcetera that would be opening in 2011 and once we get those five to six stores open, I think we'll have a real good test and can really evaluate this outlook business.

Okay great. And then the two openings that you mentioned for full price. Generally as you are looking at new openings and working out deals over land margin you are getting a lot better terms on some of these, are they similar? Any coloring there?

You are certainly getting better deals than some of the ones we signed at the height of the market but they are still tough dealing with these small guys. They were not quite as good as you might think.

Our next question comes from Claire Gallagher with CapStone Investments.

Ed I was wondering if you could give us an update on the Big Buddha footwear and the Material Girl. I realize given the footwear just shipped in the last quarter, but any insights what you learned and really the opportunity to grow the brand. How big do you think they can get growth potential, just channel distribution? Anything you can provide would be helpful.

Sure. So Material Girl we went into about 200 doors, obviously that's exclusive to Macy's and we are doing shoes, handbags and belts. We did a couple of million dollars in Q3. I think we'll do another couple of million in Q4 and then for spring, looks like they are going to expand the doors we are going to go to, I believe its 320 doors, so we are looking for growth there. It's a little too early to say how big that can be next year. We're pleased with the performance of the shoes, the shoes have done quite well and the belts have done very well, although that's a very mall I know that's a very small category, the bags have been a little disappointing. So we need to improve the product there. In terms of Big Buddha shoes that was also about a couple of million of dollars in Q3 and we feel very good about the additional reaps there. We think this a big opportunity. We like it because the product is very different from our other brands, is very different from Steven Madden and Madden Girl and it is going to attract a different customer base and it's gotten a great response so far.

And what channel is Big Buddha doing well in? I mean you are in different distribution channels there right?

Well the biggest customer right now is Bakers. So we are going to do some of the specialty retailers. We are going to sell people like Buckle and we would like to get into the Journeys of course and it is also going to into better department stores. It will be in Dillard's and Belk's, we are going to show to Nordstrom soon and then of course it will in shoe chains like DSW.

And our next question will come from Sam Poser with Sterne Agee.

Can you breakout the sort of the gives and takes on the gross margin in the quarter. You talked about mix, the Walmart, closeouts and international?

Yes, it is about half mix and half closeouts and of the mix, it's about the half the increase in international and half the inclusion of the Walmart business in the top line.

So it is 50-50-50-50 there. And then looking at your guidance or the implied guidance in the fourth quarter, can you gives us some idea of how you are looking at SG&A versus gross margin and so on because you implied?

Yes, we expect to see some sequential improvement in gross margin. So we expect to do better than the [421] that we did this quarter and in the SG&A line we will see some leverage from last year, we are not kind of in the same kind of sales growth, so you are not going to see the same amount of leverage, but in terms of dollar growth year-over-year, we should get that back into the single digits.

So slightly like over mid singles there?

It makes sense, yes something like that

Okay great. And then looking at your retail stores, you talked a little bit about the growth there, what is the key thing that's driving that right now, is it key items driven where you just put more inventory behind the bigger items?

Yes, the overall merchandise assortment is just much stronger and we are doing a better job of planning the business and getting the right shoes in the right stores, the right times and the right quantities. We have made a lot of upgrades to our retail business over the last of couple of years. We brought in very experienced new people. We've obviously put in the new merchandising allocation and planning system that we have talked about. So I think that's paying dividends, but at the end of the day it's because we have got some real great items right now as you pointed out as, we are doing tremendous business with booties, tremendous business with pumps and you are seeing the results.

Could you walk us through the international, how much revenue was done internationally, what is like the five-year plan look like right now?

Sure, we did almost $12 million in the quarter which got us up to about $30 million over the last 12 months, but again it was up 99% in the quarter, that was up after about a 50% gain last year, so that business is really accelerating. The biggest piece of it is our business in Asia with GRI, our partner over there and that's about a third of our international business right now and that business was up 126% in Q3. So it's really flying, obviously the most important territory there is China and we are up to about 110 locations with GRI, that's 16 free standing stores and then about another 94 shop and shops. We've also been launching all these new territories, so just in the last six months we introduced I think I mentioned this earlier but Saudi Arabia, Australia, Russia and Central America and then we have got two new territories that are going to be launching early next year. We signed up with the group called the Landmark Group which is the largest retailer in the Middle East for the UAE and we signed up with the Macintosh which is a proven retailer with 600 shoe stores in Benelux. So really excited about that and just thrilled with the traction that we are seeing internationally, so you really think this should be a $100 million business in the next four years or so.

And how do you structure those distributor agreements or could you give us some idea because overtime I would think you would want to run it, once you get the chance to set up an infrastructure and do so?

Yes, right now we do it all through these partnership agreements, they are partners in the local territory, they (inaudible) their retail stores, they build the stores, they own the stores, they own the inventory and we essentially sell them the goods on a direct from factory basis and then percentage of their purchases and we also get a percentage of their retail sales and right now we think that the right risk reward model down the road, where we want to own this, it's certainly possible, but right now we think this is the right model.

Our next question comes from Steven Martin with Slater Capital Management

Betsey Johnson closed before or after the end of the quarter?

I believe it was the first week of fourth quarter.

So there was no impact on the income statement other than maybe you accrued some interest on the note?

Right and there was actually about a $600,000 expense that we booked in Q3 because there were a couple of agreements that they had with finders for licensees, so essentially they had agreements where they had to pay a certain percentage of their royalty income to the party that had found them the licensee and we bought a couple of those out in the issue of transaction, so that was the only real impact in Q3.

And with your legal fees and transaction costs that flowed into Q3 as well?

No because those have been capitalized because it's an asset purchase that were capitalized

Okay so then on to the balance sheet, what was the Betsey Johnson's impact on the September 30th balance sheet, you would bought the note, so cash was down, where is the note?

There is a line called note receivable on our balance sheet.

Okay, it's not on the abbreviated when that's why I was asking the question.

Yes, okay. I apologize yes. It will be obviously in the 10-Q.

Our next question comes from Scott Krasik with BB&T Capital Markets. Scott Krasik - BB&T Capital Markets: You guys actually do a pretty good job returning value to shareholders. You have done a loss this year. From a strategic perspective, do you have your hands full or share buyback for consideration at this point. Any comment there would be great.

Yes, share buybacks are definitely still a consideration. We did a little bit earlier this year, I believe it was in the second quarter, we did about 5 million and we still have about $45 million in our authorization. I would say that in terms of uses of cash, our first priority would still be to do strategic acquisitions to the extent we could find more things like Betsey Johnson and Big Buddha. We think is our best use of cash, those are going to provide us with really outsized returns on our investment, but absent that we'll certainly continue to look at share repurchases. Scott Krasik - BB&T Capital Markets: Okay and in terms of anything on the horizon strategic wise?

Well we're always looking at things, but there is nothing imminent.

And with that I would like to turn the call back over to our presenters for any final and closing remarks.

Okay great. Well thanks to everybody for joining us on the call and we look forward to speaking to you again on the next call. Thanks.

And once again ladies and gentlemen, this does conclude today's call. Thank you for your participation and have a great day.