Good day everyone and welcome to Steven Madden Limited First Quarter 2013 Earnings Conference Call. 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, ma'am.

Thank you. Good morning everyone. Thank you for joining us today for the discussion of Steven Madden's first quarter 2013 earnings results. Before we begin, I would like to remind you that statements made in this conference call that are not statements of historical facts constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve risk and uncertainties and other unknown facts that could cause actual results of the Company to differ materially from historical results or any future results expressed or implied by forward-looking statements. The statements contained herein are also subject generally to other risks and uncertainties as 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 information on risk factors that could cause actual results to differ. Finally, please note that any forward-looking statements used in today’s 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 Steven Madden.

Thanks, Jean. Good morning everyone and thank you for joining us today. We are pleased to have reported solid first-quarter results, in line with expectations, despite some significant headwinds, both external and Company-specific. It has been well documented by other brands and retailers that unusually cold weather in Q1 negatively impacted sales of spring items such as sandals, particularly in comparison to last year when first-quarter weather was unseasonably warm. In addition, as discussed on our last call, we lost two private label customers in our Topline division and discontinued our Big Buddha footwear business, making for a difficult comparison with last year's first quarter. Nevertheless, our net sales in the quarter grew 4.9% to $278.9 million and net income increased 7% to $23.4 million or $0.52 per diluted share. We believe this solid performance in the face of some challenging circumstances is a testament to the power of our brands, the durability of our business model, and the strength of our current product assortments. Before going through a more detailed review of the financial results for the quarter and discussing our outlook for 2013, I'd like to touch on some highlights from the quarter. First, our new strategy at Macy's continues to produce excellent results. As you'll recall, in the middle of last year, we transitioned Steve Madden footwear to the Impulse department at Macy's, from its previous position in the Junior department, while continuing to sell our Madden Girl footwear in Juniors. This strategy enabled us to put more elevated Steve Madden product into Macy's and has resulted in significantly higher sell-through rates for both brands. As a result, we saw double-digit percentage increases in shipping to Macy's for both Steve Madden and Madden Girl footwear in the first quarter. Going forward, we remain on track to add…

(Operator Instructions) We'll take our first question from Camilo Lyon with Canaccord Genuity.

Good morning, Ed. Nice job on a tough quarter. I was hoping you could talk a little bit about what you are seeing in the promotional environment here in Q2, and general industry inventory levels, particularly in the sandals category, and how you might think that influences your need or your desire to continue to drive traffic, and if there's any increased promotions that others are engaging in to drive traffic?

Certainly, it's a good question. Certainly there was a very slow start to the sandal season this year and while we did not deliver a lot of sandals early, we really went after the booty category in the first quarter which turned out to be a good move for us. There were certainly others out there who had a lot of sandals on the floor for some time now and are feeling probably a little bit backed up with their sandal inventory. So, we do expect that there is going to be a fairly heavy promotional environment in Q2 and that's something that we've factored into our guidance that we put forth today.

Is one channel that's particularly heavy in the category or is it pretty widespread across retail?

I think that's really sort of industry-wide and goes across channels. Everybody had the same weather issue and the same sandal issue.

And I would assume that in this case for geographies, the warm weather climates were probably cleaner on inventories versus the colder weather climates?

That's right.

Okay. And then can you talk a little bit about just how we should think about the year with respect to the puts and takes around the gross margin? It seems like there was some changes in how the gross margin unfolded in Q1 and if that reflects more of the Adesso business doing much better, how that plays off with direct sourcing the Topline contribution, any color on that would be helpful?

So, in first quarter, we came in really right where we expected to. As you'll recall, in the first quarter we said that we were expecting gross margins to be up 50 to 100 basis points for the year and we came in at about 70 basis point improvement. One of the things that we're seeing though is that as our Adesso Madden private label wholesale business is growing faster than we anticipated this year, that's obviously a lower margin business. So, what that means is that I think that's really pushing us towards the higher end of our sales guidance but towards the lower end of our gross margin guidance, the higher end of the 6% to 8% sales guidance that we have maintained but probably towards the lower end of that 50 to 100 gross margin guidance.

Great, and then on that point, on the Adesso business, can you extract what the contribution was from Mad Love?

Yes, I don't want to get into sales contributions from specific businesses but it was – Mad Love is doing very, very well, the sell-throughs have been great and Target is really excited about it.

And how about ex Mad Love, that also seems to do pretty well?

Yes, even excluding Mad Love, we are growing over 20% in Adesso Madden private label wholesale business.

Okay, great. And then just the last question I have, I think you are reducing the price on the Hilight sneaker wedge here in June or July. What's typically been the response when you have done that kind of a move on a pretty popular shoe?

Yes, we are taking that from approximately $150 to approximately $100 and that's something that that $99 or $100 price point has really been a magic price point for us for some big items. A good example is our lace-up booty that we've had so much success with a few years ago, we took that to $100, that really spiked the volume and that's something that we are hoping will repeat itself with this item.

Great and best of luck in the second quarter. Thanks.

The next question is from Jeff Van Sinderen with B. Riley.

Good morning and let me add my congratulations as well. I guess my first question is, have you seen any change in your business trend in the last couple of weeks in your retail stores, just wondering if we can gauge anything there, wondering if sandals maybe is picking up in some regions with weather starting to break? And then also maybe you can just generally touch on the magnitude of difference in geographical performance in warmer markets versus colder markets, we could start there?

So maybe I'll take the latter part of the question first. Yes, we did see pretty significant differences in geographical regions in the first quarter. We had regions that were down 10 in comp and we had regions that were up 10 in comp, and obviously it was the colder weather regions where we performed poorly and the warmer weather regions really did better. We have seen some nice improvement over the last couple of weeks, we've actually made our sandal plan the last two weeks in our own retail stores really for the first time all year, and we have seen some nice improvement in the traffic as well. And particularly what's exciting for us is you know we're very heavily exposed to New York City in our retail stores. In the last week in particular we saw a real nice improvement in the traffic in New York City. So that's a good sign for us.

Okay, great to hear. And then any other color from your retail partners, given kind of the soft and erratic traffic pattern so far this year, any thoughts I guess on how that is impacting their plans and maybe if that helps you because of your short lead times?

Certainly I think people, it does make them a little bit more cautious and anytime you have a slow start to the spring business the way the industry did in the first quarter, it's going to impact second-quarter reorders on sandals and other spring items to some degree. Fortunately, we are – I think that we have really outperformed the competition, our sell-throughs have been in most cases much better than our peers, and so we don't think we're going to be hurt the same way some others might be. I don't think we can say it's good for us though. I think this is a situation where just as a rising tide lifts all boats and a receding tide brings them all down a little bit.

Got it, okay. Thanks very much and good luck for the rest of the quarter.

And we'll take our next question from Danielle McCoy with Brean Capital.

Congrats on a great quarter. I was wondering if you could give us an update on jewellery and watches for Steve Madden?

Yes, so we're pretty excited about those new categories, our partner Haskell has been showing the new products to retailers, getting good response. The jewellery is going to hit stores in Q3 and we expect the watches to hit stores in Q4, and the distribution will be similar to the normal Steve Madden distribution, better department stores and specialty stores.

Okay, great. And first quarter, the tax rate came in a little bit lower than we had expected. How should we look at that going forward?

Yes, that was related to some earnings that we reinvested definitely in our foreign affiliates. I think that it's going to go up a little bit from the rate that you saw in the first quarter, so I would use 37.5% for the full year.

Okay, great. And just switching to the process of converting to the direct sourcing model, how far along are you and are you still expecting to see the 40 basis point gain from gross margins as you had spoke about in the previous quarters?

Yes, we are right on target there. We are up north of 15% of our legacy footwear business rather going direct and we are still on target to achieve the gross margin benefits.

Alright, great. Thanks guys, good luck.

We'll take our next question from Corinna Freedman with Wedbush Securities.

Also on the jewellery and watches, will that be in the retail stores as well?

We have not yet determined that. We haven't bought any for our retail stores yet. Over time, it will be, but we're just trying to figure out with the appropriate launch date. What was the second part of your question?

Okay. Store opening plans for the rest of the year, what are you targeting for the balance of the year?

Yes, so there is no change, we are still looking at four to six full-price stores for the year, of which we have already done one, and five to seven outlets.

We'll take our next question from Scott Krasik with BB&T Capital Markets. Scott Krasik - BB&T Capital Markets: So if your private label business was up big and your Macy's business was up double digits, what was some of your other big major business, was it down, was it flat, and what was the function of that?

As I mentioned in prepared remarks, the big decline was the Topline business, that was down $14 million in net sales, and of course remember we discontinued Big Buddha as well. Now if you backed out Topline and Big Buddha, admittedly that's cherry-picking, but then we were up actually 10% in wholesale footwear in the quarter. But Topline was really the counterweight to the growth that we had in Adesso Madden and Macy's and International. Scott Krasik - BB&T Capital Markets: Okay, so other big retailers like Nordstrom and DSW, they were still positive, just not – you didn't call it out because it wasn't as strong as Macy's, is that?

That's right, they were just doing fine where they have been, Macy's was a step up. Scott Krasik - BB&T Capital Markets: Okay, alright, good. Then if we could just go through – you did such a good job breaking out the pieces of the wholesale gross margin last quarter, Topline gross margin was up, you had a big lift from Steve Madden Women's in the mix, you got the direct sourcing benefit, Canada benefitted, can you just sort of go through, did these things not recurred in terms of the gross margin lift year-over-year?

As you'll recall, when we talked about it in the last call, a lot of that was a function of what we were anniversarying from the prior year, we are really through all of that starting this year, and it was really much more of an apples-to-apples comparison, and we in fact came in flat on the wholesale gross margin versus the year before. Scott Krasik - BB&T Capital Markets: Right, so what benefit I guess was direct sourcing, what benefit was Canada, can you break any of those out?

Sure. Direct sourcing probably got us 20 to 30 basis points, Canada was a much more modest impact because keep in mind we acquired Canada in the middle of the quarter last year, so you really only had January where it was non-comp. I don't have the number off the top of my head but it was more modest. We did say that the improvement in retail from 60.1% to 60.3% was primarily driven by the inclusion of the SM Canada retail business, which is higher-margin. And then going the other direction, we were slightly lower in Steve Madden Women's wholesale business in first quarter than we were a year ago. Keep in mind the year ago margin was actually our highest quarterly gross margin ever, we were shipping in all those sandals, of course we gave some of that back in Q2 when sandals slowed up. So, we are expecting to be – as we were a little bit lower in Q1, we are expecting to be a little bit higher in Steve Madden Women's wholesale gross margin in Q2. Scott Krasik - BB&T Capital Markets: Okay, alright. Then just you alluded to the Hilight price cut, what contribution are you expecting out of the wedge sneaker in general, is it the most important category for you as you head into the fall and maybe talk about is there anything else that you expect to be really meaningful?

It's an important trend but it's certainly, I would not characterize it as the most important trend. It has been running, it was about 7% of our women's sales in retail Q1 and we think it will be more like 9% in Q2. But I would say that probably some of the most important things that are happening right now, I would point to dress, dress is picking up. That's the category that's been weak for the last year or so but we are seeing some real nice improvement in that category, and one of the things that is interesting there is that we're getting a lot of success with single sole dress shoes. Now as you know, it's really been all about platforms for the last few years in the dress category, and we're still selling some of the overlasted platforms that we've been certainly known for of late but we're also getting some real nice hits on single sole dress shoes. Our flat sandals, now that the weather is finally broken, we also feel very good about that category, particularly the sandals that we have with metallic plating and augmentation. So that's good. Booties of course remain very important. We are still selling a lot of booties even now with the warm weather and we think that will become even more important again as we move into fall, in the back-to-school theory. And then after that, I would say it's the wedge sneakers. Scott Krasik - BB&T Capital Markets: Okay, great color. Thanks and good luck.

We'll take our next question from Taposh Bari with Goldman Sachs.

Question on capital allocation, I think last quarter you had said you'd either do a buyback or a deal this year, it looks like you're now doing a buyback. I guess the question is, are those two events mutually exclusive or is there still an opportunity for you to make a deal this year?

No, we are still evaluating both and they are certainly not mutually exclusive.

Okay. And then just on the amount of the buyback, I mean you clearly have the capacity to be more aggressive, you do have some share or options dilution in your share count, so how do we think about your approach or your philosophy towards buyback in light of what you did in the first quarter?

We did $11 million but we were just sort of getting started there. What we have said though is, I think we're going to be consistent with how we've approached that in the past and we're not going to commit to future buybacks because it's certainly something we are continuing to look at and I think there's a decent likelihood that we'll do some more, but it's always in the context of what our other alternatives for the cash are. And so to the extent that we find a great acquisition, it's going to require a lot of capital that might prevent us from doing a buyback. In the absence of that, I think it's likely that we'll do quite a bit more share purchase.

Okay. I just wanted to clarify your comment around second quarter guidance. What is the EPS base that you are using for 2Q, and I just wanted to make sure, I just wanted to clarify what you had said, I think you had said revenue and EPS growth rates at or slightly better than what you saw in the first quarter, is that correct?

That's correct, and we are looking at $0.61 from a year ago.

Okay. So, if your EPS grew at 3% in the first quarter, you are saying 3% or slightly better than that over $0.61 for 2Q, is that right?

That's right, by calculating EPS a little different from Q1, but that's the right idea.

Okay, and last one I have for you Ed is, Steve Madden Women's wholesale footwear growth in the first quarter, what was that and what are you embedding for the full year guidance for that business?

So, it was down, Steve Madden Women's wholesale footwear in the U.S. was down 2.5% in Q1. What I would like to say though is I don't think that's indicative of the underlying strength of that business. There's a couple of things to remember there. Number one, a year ago, that business was up over 30% in Q1, that was our fastest quarterly growth rate in that business since 2004, so it was a very tough comparison. But more specifically, we did a test program with a new customer in Q1 last year, shipped about $4 million to that customer, very profitable business for us and did well, but we were not pleased with how our products was presented in that retail and we elected not to go forward with that retailer, not to anniversary that program, and Q1 was the only time we shipped them. So if you back that out, we were actually up about 7.5% in Steve Madden Women's in Q1. In terms of the full year, we're not going to provide guidance by individual brands but we continue to feel good about the momentum we have seen there.

Okay, so just so I'm clear, it was down 2.5% in absolute terms, but if you back out that one time test ship in last year's first quarter, it would have been up 7%?

Up 7.5%, that's right.

7.5%, okay. Thank you. Good luck.

We'll take our next question from Steve Marotta with CL King & Associates. Steven Marotta - CL King & Associates: As it relates to the inventory being up 10% versus sales up 5%, can you disassemble that a little bit, offer a little bit more color?

Yes, most of that is driven by the heavier mix of retail this year. Keep in mind that retail turns about once a quarter while wholesale turns about once a month. So, with retail making up a greater percent of the mix, the inventory is going to grow a little faster than sales. Steven Marotta - CL King & Associates: So that was well within the bounds of your expectations?

Yes, and we feel comfortable with the inventory levels. Steven Marotta - CL King & Associates: Great. And lastly, as it relates to the decline at Topline, you gave the specific reasons for it, was it within your original projections to be down $14 million at that business in the first quarter?

We were a couple of million dollars shy, there was a couple of million dollars of shipments that moved out into second quarter from first. Steven Marotta - CL King & Associates: So basically just a timing shift in that differential?

Yes, that's right. Steven Marotta - CL King & Associates: Great, that's perfect. Thank you very much.

We'll take our next question from Jane Leeson with KeyBanc.

This is [Wilkin] (ph) for Jane. As we look at wholesale going forward and kind of a slower growth this year, how do we think about this trajectory of the wholesale segment taken as a whole, and anything in particular given throughout the rest of the year?

You mean the quarterly trajectory?

Yes, sorry. Yes.

Yes, I think you're going to see it improve in the back half. We talked a lot in the last call about how we had some drags in the first half, not only Topline but also the discontinuation of the Big Buddha footwear line, and so you should see that growth rate improve in the back half, get back up into the high single digits.

And anything outside of the lapping the Topline changes and things we have talked about, any other big callouts for the back half?

We do have some businesses that seem to be gathering momentum. I think Madden Girl in particular is really picking up steam and we talked about Report should improve in the back half, Betsey Johnson shoes is getting better, we've got this Bridal package that's performing well and creating some nice buzz for that brand, we've got a new smaller brand called Freebird which is some higher priced boot products out of Mexico that's making some noise and should be out during the back half. So we have got some nice things happening in the back half.

Great. Thanks, Ed.

We'll take our next question from Chris Svezia with Susquehanna Financial Group.

Just a couple of questions. One, just in the dress category, what do you think is driving that in terms of the pickup in momentum, is that just after it's underperformed that suddenly customers are coming back to it, just any thoughts of what's driving that growth improvement?

As I said earlier, we were just selling in our grid of business, it was really all about platforms for a few years, and I think that that trend started to run its course. It was some of the girls had them in their closet and got a little tired of it and so there was a bit of a slowdown for about a year, but now we've got these single sole shoes which are new again and that's creating some nice buzz and momentum in the category.

Okay. And I'm just curious on Macy's, what you've done there in terms of the migration in the Impulse category, is there any other account you guys are looking at that you could do something similar with in terms of that type of rotation or is that just Macy's specific, given their size and given what they are doing in footwear for you guys?

There's not really any other meaningful customer. We have already made that type of change with whatever customer it was available. I think Macy's was the big one.

Okay. And when you guys think about the boot business for the back half of the year, just what are retailers going back to you, what are they saying, what's sort of the response to the product? Macy's has been important, booties you've obviously called out, just how to think about that category for fall and maybe some thoughts about ASPs within that category?

I think that people feel good about the category overall if we consider boots and booties one category, but they tend to be pretty focused on booties. So, you could see ASPs down a touch if booties make up a bigger percentage of the total relative to tall shaft boots.

Okay. And then lastly, just curious on the retail piece, Canada, I mean why to some degree is that more productive and profitable? Is there just something structurally in Canada that makes it that way, I know you have made a lot of progress domestically in the retail piece, just curious why that is in Canada?

Yes, there is a very simple reason, that we get more for the shoes in Canada. We charge 25% to 30% more for the same item in Canada.

Alright, I see, I got it. Okay, that's helpful. Thanks very much and all the best.

We'll take our next question from Sam Poser with Sterne Agee.

It's (indiscernible) in for Sam. Couple of questions, SG&A came in better than our estimates. Are you guys doing anything there in terms of sort of holding the foot on that one?

There is nothing unusual. I mean we continue to do our best to control expenses and obviously our sales growth is a little slower in the first half than where we've been running, so we have been even more focused on controlling expenses, but there are no major cost cuts or anything unusual there.

Got it. And your guidance, last time you talked about your comp guidance, low singles to mid singles and wholesale footwear business being up 4, is that about the same now or has anything changed there?

I think that the wholesale business overall for the year, we're looking at 4 to 6, and no real change in the comp guidance.

Okay, and how are you positioned for the Nordstrom sale this year in terms of SKUs or anything different versus last year?

We're in good shape. We have more in anniversary than we did a year ago. So, we are excited about that.

Got it. Alright, thank you, good luck.

We'll take our last question from Scott Krasik with BB&T Capital Markets.

This is (indiscernible) for Scott. Just a quick follow-up on share repurchases. Is there any share repurchases included in your guidance outlook for the year?

Nothing other than what we have already done.

Okay, great, thanks.

Mr. Rosenfeld, it appears there are no more questions at this time. I'd like to turn it back to you for any closing remarks.

Great. Thanks everybody for joining us and we look forward to speaking to you on the next call.

This concludes today's conference. Thank you for your participation.