Steven Madden, Ltd. (SHOO) Q3 2015 Earnings Report, Transcript and Summary

Good day, and welcome to the Steve Madden Third Quarter 2015 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Jean Fontana of ICR. You may begin. Jean Fontana - Managing Director-Retail, Apparel & Footwear, ICR LLC: Thank you, good morning everyone. Thank you for joining us today for the discussion of Steve Madden's third quarter 2015 earnings conference call results. Before we begin, I would like to remind you that statements made on this conference call that are not statements of historical facts constitute forward-looking statements under the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve risks and uncertainties and other unknown factors that could cause actual results of the company to differ materially from historical facts or any future results expressed or implied by forward-looking statements. These statements contained herein are also subject 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 the factors that could cause actual results to differ. Finally, please note that any forward-looking statements used on 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 Steve Madden. Edward R. Rosenfeld - Chairman & Chief Executive Officer: Thanks Jean. Good morning everyone and thank you for joining us to review Steve Madden's third quarter 2015 results. With me to discuss the business is Derek Browe, our company's Director of Finance and Investor Relations. We are pleased with our financial performance in the third quarter as we delivered a 5.5% net sales increase, operating margin expansion in each of wholesale footwear, wholesale accessories and retail and an increase in diluted EPS of 13%. Our retail segment was again a standout. Comparable store sales grew 11.2% with double-digit comp gains in both the full price and outlet channels. Our retail business continued to benefit from trend-right merchandise across a number of categories. Open dress shoes, which have been strong for us all year, led the way. Our sandals also performed well, remaining strong through September as unseasonably warm weather and the customers' buy now, wear now mentality lengthened the season. Finally, our fashion sneakers continued their strong performance, with our Quilted slip-on sneaker becoming one of the must-have items for this year's back-to-school season. On the other hand, boots and booties got off to a slow start as many customers didn't turn to fall fashion until later this year. While there were pockets of strength early in the season, including over-the-knee boots and low-ankle booties, overall the category broke later than in many past years. Fortunately, in recent weeks, as the weather got colder, we have seen a strong uptick in the category, particularly in booties. In wholesale footwear, our net sales, excluding acquisitions, were down as expected. And we did again show sequential improvement in the rate of decline compared to the previous quarter. Continue to see our wholesale footwear business improving faster in what we define as the first-tier, that is the better department stores and independents. Our growth rate excluding acquisitions turned modestly positive in that first-tier channel in Q3, but it was not enough to overcome the declines we experienced in the value-priced channels. In our wholesale accessories business, net sales increased 11.7%, though much of this gain was a result of the timing shift from Q4 to Q3. Betsey Johnson handbag business remains the highlight. The Betsey design team continues to create fun, conversation-inspiring bags that resonate with customers who appreciate novelty and color and the proof is in the results. The Betsey bag business has more than doubled over the last three years. Another bright spot in the quarter was the continued strong growth we're seeing in international markets. Overall international sales increased 32% in the quarter. Sales to our network of distributors were up 21% compared to the year-ago period, with the biggest sales gains coming from Asia, Australia, and Italy. We continue to be pleased with the strong and growing acceptance of the Steve Madden brand in these markets. We are also happy with what we are seeing from our new acquisition, SM Mexico. Despite the headwinds from the weakening of the peso against the dollar, our Mexican business is performing well in both wholesale and retail, and is on target to meet our financial goals for 2015. In addition to the solid earnings contribution for our Mexican acquisition, in third quarter, we started to reap the financial benefits from our other recent acquisitions as well. Q3 was our first major shipping quarter for Blondo, the Canada-based waterproof boot brand we acquired in January. At the time of acquisition, we identified expansion in the United States as the major growth opportunity for the brand, and we have made great progress on that front. In addition to driving a significant increase in the brand's presence at Nordstrom, we leveraged our customer relationships to open up a number of new U.S. accounts, including Zappos and Dillards. Initial sell-through for the season has been strong, and we believe we are positioned for robust growth in this brand in 2016. We also got a meaningful earnings contribution from Dolce Vita in the third quarter. Now been a little over a year since we acquired the company, and we are thrilled with the progress we've made and the direction that Dolce Vita is headed. After completing the acquisition in August 2014, we quickly closed ancillary businesses, including men's brand J.D. Fisk and juniors' brand DV8. And in spring, we pulled diffusion brand DV out of the market. We will re-launch it as an exclusive brand for a large retailer in spring 2016. While these actions reduced sales in the near term, we took them so that the team could focus its efforts on the flagship brand Dolce Vita, which has tremendous brand equity, a unique position in the market, and enormous untapped potential. With DV out of the market, the team has expanded the offering in Dolce Vita to include a wider range of price points while still maintaining the brand's elevated contemporary positioning. And the response to Dolce Vita's current product assortment has been excellent. The brand has been a clear outperformer at retail this fall season with its largest department store customers like Nordstrom and Bloomingdale's, as well as with top independent boutiques, where the brand has a loyal following. There is a palpable buzz surrounding the Dolce Vita brand among both the industry and consumers, giving us confidence that we are well positioned for growth as we look into 2016. Operationally, we've also made great strides with the business. When we acquired the company, we identified an opportunity to significantly expand gross margin through increased IMUs, improved inventory management, and better control of markdown allowances. The team has done a great job of executing on this initiative. We ended third quarter with less than half the inventory we had a year ago in the division, and we expect gross margin for the full year 2015 to end over 600 basis points higher than 2014. We also saw opportunity to rationalize the expense structure, and we've worked diligently to take cost out across the organization, managing to reduce operating expenses as a percentage of sales despite the reduction in sales from the shuttered brands. Overall, operating profit contribution margin for the full year 2015 is expected to be up more than 800 basis points over 2014. With the strong momentum in Dolce Vita, as well as the re-launch of DV in spring 2016, we are excited about the opportunity to drive continued earnings improvement in this division in 2016. Finally, a quick update on our Brian Atwood acquisition. We are reintroducing the B Brian Atwood brand as an exclusive with Lord & Taylor in the U.S. and The Bay in Canada. It will be a soft launch for holiday 2015, followed up by a bigger rollout and marketing push for spring 2016. B Brian Atwood is the contemporary counterpart to the Brian Atwood luxury collection. The offering will include footwear with average retails between $135 and $300, and handbags with average retails between $150 and $400. Summary, we are pleased to have delivered strong third-quarter results that highlight the progress we're making in our legacy business, as well as with our recent acquisitions. Despite the challenging retail environment, we are well positioned as we move forward. We have a powerful business model with a strong and diverse brand portfolio, multiple product categories and distribution channels, and an expanding international presence. Altogether, it's a platform that provides us with significant opportunity for sales and earnings growth over the long term. Now I'll turn it over to Derek to review the financials in more detail.

Thanks Ed, and good morning everyone. Turning to our financial results for the third quarter, consolidated net sales grew 5.5% to $413.5 million, compared to prior year net sales of $392 million. During the quarter, we saw strong double-digit growth in both our wholesale accessories and retail businesses, and low-single-digit growth in our wholesale footwear business. Our wholesale net sales in the quarter increased 4.1% to $357 million. Wholesale footwear net sales increased 2.2% to $278.8 million. Excluding sales from acquisitions, the wholesale footwear segment was down 4.4%. In wholesale accessories, net sales grew 11.7% to $78.2 million in Q3, compared to $70 million in the prior-year period. As Ed mentioned, much of this gain came from sales that had been expected in the fourth quarter, but due to timing of deliveries, shifted into the third quarter. In our retail division, net sales increased 15.1% to $56.4 million. Our comps are once again very strong at 11.2%. During the quarter, we opened two full price stores in Canada, one full price store in Mexico and one outlet location in the U.S. We ended the quarter with 165 company-operated retail stores including 37 outlets and four e-commerce stores. Turning to other income, our commission and licensing income, net of expenses, was $6.6 million in the quarter versus $5.1 million in last year's third quarter, driven by growth in Betsey Johnson licensing income. Our consolidated gross margin in the quarter increased 130 basis points to 36% compared to 34.7% in the prior year, with increases in both wholesale and retail. Wholesale gross margin increased to 32.1% from 31.3% last year due to improvement in the wholesale footwear segment. Gross margin in the retail division increased to 60.4% compared to 58.9% as strong product performance resulted in lower promotional activity as compared to the prior year. Operating expenses for the quarter were $89.1 million or 21.6% of net sales compared to $81.9 million or 20.9% of net sales in the same period last year. The increase in operating expenses as a percentage of net sales is primarily the result of deleverage on the lower organic wholesale sales as well as the impact of our Mexican distributor acquisition. Operating income for the quarter totaled $66.3 million or 16% of net sales compared to last year's third quarter operating income of $59.3 million or 15.1% of net sales. Our effective tax rate for the quarter was 34.1% and net income for the quarter was $42.9 million or $0.70 per share diluted compared to $39.2 million or $0.62 per share diluted in the third quarter 2014. Our balance sheet remained strong. As of September 30, 2015, we had $151.2 million of cash and marketable securities and no debt. Inventory at the end of the quarter was $123.8 million. Excluding inventory associated with the recent acquisitions of Blondo and SM Mexico which were not included in the prior year Q3-ending inventory balance, inventory increased 5% to $108.5 million compared to $103.2 million the prior year. The majority of this increase relates to increased inventory for our retail segment to support the segment's growth from both stronger comparable store sales and the addition of a net nine new stores in the U.S. and Canada versus the prior period. Consolidated inventory turns for the last 12 months ended September 30, including acquired businesses, was 9.8 times and our CapEx for the quarter was $5.1 million. During the quarter, we repurchased approximately 763,000 shares for approximately $29.7 million. Year-to-date, we have repurchased over 2.7 million shares for approximately $103.9 million. Now turning to guidance. As we look at the remainder of the year we now expect net sales will increase 6% to 7% over 2014. This change is based on lower than anticipated sales in our private-label wholesale footwear business. Our higher-margin branded wholesale and retail businesses remain on plan, and therefore we continue to expect diluted EPS for fiscal year 2015 to be in a range of $1.85 to $1.95. Now, I'd like to turn it over to the operator for questions.

Thank you very much. We'll take our first question from Erinn Murphy at Piper Jaffray. Erinn E. Murphy - Piper Jaffray & Co (Broker): Great. Thanks and good morning guys. I was hoping maybe you could speak, Ed, a little more on what you're seeing in the wholesale channel. You mentioned the first-tier department stores were starting to turn positive in Q3, value-priced channels still down. And just given the environment, when do you anticipate that turn in the second-tier? Edward R. Rosenfeld - Chairman & Chief Executive Officer: I think we're looking at spring 2016 as when we're targeting to get that second-tier growing again. We do feel that in Q4 that we'll turn positive year-over-year in our branded wholesale footwear business, excluding acquisitions, but we will be down in private-label in Q4. And so we're looking to get the private-label piece turned around in spring 2016. Erinn E. Murphy - Piper Jaffray & Co (Broker): Okay. And then maybe just flushing out the private-label commentary, can you just talk a little bit more what changed in the last maybe three months to kind of envision a little bit of a softer landing in that segment for the back half of this year? Edward R. Rosenfeld - Chairman & Chief Executive Officer: Sure, I think a couple of things are happening there. The first one is that some of the newer trends that were having success with in our Steven Madden stores or in the better department stores have not yet been adopted by that mass-merchant private-label customer. And in some cases, I think some of the trends that we're doing well with, say, in our Steve Madden stores, an example might be over-the-knee boots, they may never translate in a major way to that customer. So that's the first piece. The second piece is that these customers, many of them make a lot of their decisions about fourth quarter boot orders based on early boot and bootie reads. So, they make that call, let's say, in August or the end of August. And as we know, boots and booties started very slow this year. And I think that that slow selling caused them to pull back on what they normally do in terms of fourth quarter boot orders. So we got fewer boot orders than we got last year in that channel and – than we expected this year. Now fortunately of course, we have seen improvement in the boot and bootie category over the last three weeks, but that's not going to do anything for us in the private-label channel. Erinn E. Murphy - Piper Jaffray & Co (Broker): Okay. That's helpful. And then I guess just bigger picture, from an inventory perspective in the category, I mean one of the – kind of seems in the last week, (0:16:46) inventory for footwear seems to be backing out, particularly in certain classifications, more on the athletic side. I mean, what are you guys seeing in the channel with the partners you work with for footwear, fashion footwear? Is there any concern that you have in your, kind of, 20% increase year-on-year of inventory in terms of cleaning that out throughout the holiday season? Edward R. Rosenfeld - Chairman & Chief Executive Officer: Okay, well, let's take it in two pieces. First, in terms of inventory in the channel, I do think that because of the slow start to boots and booties that there are – that the inventory levels are a little bit elevated out there in the channel, in a number of cases. And again, I'm not talking about Steve Madden, I'm talking about overall footwear inventory. I do think that we've been a relative outperformer and I feel pretty good about where our inventories are in the channel. In terms of our own inventory, we feel very comfortable. Excluding acquisitions, we were only up 5%. And if you break that down further because as you know, because of the different – the fact that our wholesale business turns so much faster than our retail, you really need to look at it by segment. And our retail business is driving most of that 5% increase. Our retail inventory is up 12%. Of course our retail sales were up 15% in the most recent quarter. So, that should be comfortable for folks. And our wholesale inventory was up 2%. That's against a down 1% excluding inventory growth rate in sales in Q3. So it's a little bit higher than where we are in sales, but that's primarily driven by our Steve Madden Women's division where we brought some of the Mexico boot product in a little bit earlier this year. Just given what happened last year with some of the production delays, we thought that was prudent. Erinn E. Murphy - Piper Jaffray & Co (Broker): Got it. Thank you, guys. And best of luck. Edward R. Rosenfeld - Chairman & Chief Executive Officer: Thanks Erinn.

We move next to Jay Sole at Morgan Stanley. Jay Sole - Morgan Stanley & Co. LLC: Hey, good morning. Edward R. Rosenfeld - Chairman & Chief Executive Officer: Good morning, Jay. Jay Sole - Morgan Stanley & Co. LLC: I just want to follow up on the guidance. So the sales guidance changed a little bit, but the EPS guidance stays the same. Can you just talk about where the offset is in terms of margins? Like, what are the drivers that are keeping the EPS the same even though sales look a little bit lower? Edward R. Rosenfeld - Chairman & Chief Executive Officer: Sure. The one thing to remember is that the sales – the reduction in the sales is coming from that private-label footwear business, which is the lowest margin business for us. So, even a $20 million drop in private-label wholesale footwear sales, it's going to have, at the most, $0.03 of impact to EPS. So, I think that's the big headline there. And then we're also running a touch ahead on operating margin in the balance of our business. And that's why we were able to keep the EPS guidance range the same. Jay Sole - Morgan Stanley & Co. LLC: Okay. And then maybe if we can just talk about looking into 4Q a little bit. It sounds like some of the seasonal categories for the summer product did pretty well throughout 3Q. Booties started a little bit slow, but it's picked up, what do you see driving the comp in the retail stores in 4Q? Edward R. Rosenfeld - Chairman & Chief Executive Officer: Boots and booties are obviously going to be important. As I said, the low-ankle booties are performing really well right now and over-the-knee boots are performing very well. Tall shaft boots still have gotten – while have gotten better, still not where we want them to be with the exception of over-the-knee. It's primarily a booties story. But our open dress category continues to be on fire and that's going to be an important driver of comp as well. Jay Sole - Morgan Stanley & Co. LLC: Great, got it. Thanks so much. Edward R. Rosenfeld - Chairman & Chief Executive Officer: Thank you.

We move now to Camilo Lyon at Canaccord Genuity.

Thanks, good morning – good morning guys. Edward R. Rosenfeld - Chairman & Chief Executive Officer: Morning.

Ed, if you could just clarify, first a clarification question on your retail commentary, so great comps in the quarter. Could you just give us the monthly progression and just clarify if that acceleration, I'm assuming there was an acceleration, continued into October? Edward R. Rosenfeld - Chairman & Chief Executive Officer: No, actually the – on a sequential – the comps got weaker sequentially. September was the weakest month for obvious reasons. That's when typically you would see boots and booties kick in. And with the unseasonably warm weather in September, we, like others, got off to a slow start with boots and booties. I don't want to say too much about comps to date. We typically don't – in the quarter, we typically don't do that. We still feel good about our product assortment and what we see in our retail stores. We also, at the same time, want to caution people that given the overall retail environment and the fact that our comparisons get materially tougher, you should expect the comps to slow from where they've been.

Okay, great. And then I guess as it relates to the commentary around Dolce Vita, you've stripped the business from when you first bought it, you've right-sized it. If you think about 2016 and kind of the reacceleration of the growth objectives, could you help us quantify how we should think about that business evolving in 2016? I think you've taken it down to around $75 million or so this year. What kind of growth do we – can we start thinking about – modeling about in 2016? Edward R. Rosenfeld - Chairman & Chief Executive Officer: I'd prefer not to put any numbers around 2016 today. But clearly, this is a business that we think should be north of $100 million pretty quickly, not necessarily in 2016, but not too far thereafter. And frankly, the opportunity is much bigger than that. I mean, we think this could be a very big brand and we've got great momentum there. As I mentioned in the prepared remarks, really, Dolce Vita is having an excellent fall season and retailers are very excited about what they're seeing, the buzz among consumers is great. So, we're really pleased with the trajectory that we're on there.

Okay. And then just the last question I have is – regards your commentary around the private-label ordering patterns, and their more cautious stance around the fourth quarter. From what you said today, just given how some of the other brands have spoken about inventory in the channel, how do you view any risk to your fourth quarter order patterns right now? Is there any risk to cancellations that you're seeing? Edward R. Rosenfeld - Chairman & Chief Executive Officer: At this point, we're not concerned about cancellations, meaningful cancellations.

Okay, great. Best of luck in the holiday season. Edward R. Rosenfeld - Chairman & Chief Executive Officer: Thanks Camilo.

Our next question comes from Jeff Van Sinderen at B. Riley. Jeff Van Sinderen - B. Riley & Co. LLC: Good morning. Ed, maybe you can just confirm, I think you said that wholesale – organic wholesale would be up in Q4 year-over-year? Is that right? Edward R. Rosenfeld - Chairman & Chief Executive Officer: It's going to – if we're talking about the organic wholesale footwear business, which has been the focus... Jeff Van Sinderen - B. Riley & Co. LLC: Yeah. Edward R. Rosenfeld - Chairman & Chief Executive Officer: I think that it's going to be a photo finish. We're trying to get there. We believe that we're going to be up in the branded business. But as we've indicated, we're going to be down in the private-label. And the question is, are we going to be up enough in branded to offset what we're experiencing in private-label? Jeff Van Sinderen - B. Riley & Co. LLC: Okay, that's helpful. And then any order of magnitude you can give us on how we should think about gross margin for Q4 versus last year? Edward R. Rosenfeld - Chairman & Chief Executive Officer: We've got – I'd rather not put a number of around it. But I think that we've got some pretty substantial opportunity. We had a poor gross margin performance in wholesale in Q4 last year, and we're planning on getting a lot of that back this year. I don't think we're going to get all the way back to 2013 levels in wholesale, but we want to put a big dent in that shortfall. And of course our retail business, we've been having gross margin improvement, pretty significant over the last couple of quarters, that the comparison's a little bit tougher in Q4 because, you recall last year, we were actually up a little bit in Q4 versus 2013. But we still think we can see a little bit of improvement in retail as well. Jeff Van Sinderen - B. Riley & Co. LLC: Okay, good. And then just one last one, if I can throw it in. Any more color you can give us on the strong growth you're seeing in international, and should we expect that to continue? Thanks. Edward R. Rosenfeld - Chairman & Chief Executive Officer: Yeah, we're really pleased with the momentum that we have with our international business. It's something that we're putting a lot of management time and resources against right now. In fact, a couple hours after I get off this call, I'm going to go down to Miami for a summit that we're having with all our international partners – or our international distributors. And we're seeing strength in a number of markets. The Middle East continues to be good. Europe is doing surprisingly well for us. One of our biggest sales gains in Q3 came out of Italy. We've got a great distributor there who has got the brand positioned just beautifully. It's in all the best independents, and the brand is really selling through very well there. So, we've got some good momentum. And we're going to – we continue to believe that, over the long term, this is probably the biggest growth opportunity that we have. Jeff Van Sinderen - B. Riley & Co. LLC: Great, thanks, and good luck in Q4. Edward R. Rosenfeld - Chairman & Chief Executive Officer: Thanks, Jeff.

We move now to Corinna Van der Ghinst at Citigroup.

Hi, good morning. Edward R. Rosenfeld - Chairman & Chief Executive Officer: Hi, Cory.

Actually, let me just start off – good morning – with just a follow-up on Dolce Vita. Was Dolce Vita actually accretive in the third quarter, or is that still kind of a fourth quarter story? And has most of the low-hanging fruit that you guys talked about earlier in the year now kind of behind you? Are there any other additional operating cost reductions or inventory clearance still to be completed? Edward R. Rosenfeld - Chairman & Chief Executive Officer: Yeah, Dolce Vita was accretive in the third quarter, to the tune of about $0.03. So that was something that we were pleased to see. And I would say most of it's behind us. But some of the improvements that we made are still layering in, and we certainly didn't get a full-year benefit in 2015 of some of the things – of some of the initiatives. So, you should see continued improvement, both on the gross margin and the operating expense line, in 2016.

Okay, great. And then, I was just wondering if you could give us a little bit more color on the handbag category in general, and just the competitive environment that you guys are seeing into the end of the year and into spring? Edward R. Rosenfeld - Chairman & Chief Executive Officer: Yeah. Well, I think it's been pretty well-documented that the handbag category overall is pretty tough right now. And it's a battle in the department stores. We've talked quite a bit about the key department store customers, for us, shrinking the non-leather category that we play in. The good news is that what we're seeing is that they're shrinking the category, but we're getting a bigger piece of the pie, because they're essentially consolidating the vendor base. And fortunately, Steve Madden and Betsey Johnson are, in some cases, the only two, or the main two brands, that they're going forward with, or least two of the big ones. So, we actually think that, while the pie got a little smaller, we may have some nice opportunity for growth heading into 2016, and also opportunity for better brand presentation in the stores. So, we're looking forward to that. But that being said, it remains a challenging market. We're pleased with the fact we've been able to grow this year in such a difficult category, but we have to expect it's going to be tough for a few quarters here.

Thank you. And I just had one quick follow-up to your previous comments. Do you anticipate getting more promotional this holiday at your own retail stores, just based on what we're kind of hearing and seeing in the broader U.S. retail environment for this Q4? Edward R. Rosenfeld - Chairman & Chief Executive Officer: Our business is a little – not a little – it's definitely healthier in our own retail stores than it was a year ago. And so far this year, we've been able to pull back a little bit on plan promotions and also definitely pulled back on unplanned markdown activity. The goal will be to try to continue to do that in Q4. But I think you correctly point out that it looks like it's going to be a very promotional holiday season. And we will be prepared to do what we have to do to make sure that we remain competitive.

Thanks, Ed. Edward R. Rosenfeld - Chairman & Chief Executive Officer: Thank you.

For our next question we move to Jessica Schmidt at KeyBanc Capital Markets.

Hi, thanks for taking my question. Just given some of the inventory builds that we've seen, I know that there've been a few questions about that just in this space, I guess. What impact are you expecting that to have on your reorder business? Edward R. Rosenfeld - Chairman & Chief Executive Officer: Well, it's definitely – I think it does make it more challenging to get reorders. I think that at this point we have a pretty good sense of that and our views on that are built into the guidance that we've put out today.

Okay, great. And then just a quick follow-up, I know you previously highlighted some weakness related to foreign tourism in some of the markets like New York and Miami. Have you seen any improvement there? Edward R. Rosenfeld - Chairman & Chief Executive Officer: No, we New York continues to be the laggard in terms of our various districts or regions in our own stores and we do think that that's attributable to tourists or lack thereof.

Great, thank you.

We move now to Scott Krasik at Buckingham Research.

Yeah. Hey, good morning. Edward R. Rosenfeld - Chairman & Chief Executive Officer: Good morning.

So just some clarification, so I don't think you specifically answered, Camilo, so Dolce Vita, is that going to be around $75 million this year?

Yes.

Okay. So your comment that it should get to a $100 million in the not-too-distant future, but then growth opportunities beyond, are you suggesting that it has the potential to be bigger than a $100 million in sales?

Yes.

And then when you bought it, I think you had targeted a 10% operating margin, but it seems like you're going to get the high single digits this year, so has your view changed in terms of what type of margin you could achieve at Dolce Vita?

Well, we're really still going to be in the mid-singles this year. Keep in mind the 800 basis points is anniversarying a year where they lost money. But I still think 10% in 2017 is the right target and hopefully we will be able to exceed that.

Okay. When will we find out who the customer is for DV? Edward R. Rosenfeld - Chairman & Chief Executive Officer: Next call we will talk about that.

Next call, okay. And then just a couple more, if you could talk about what type of size the B Brian Atwood launch will be for spring 2016? Edward R. Rosenfeld - Chairman & Chief Executive Officer: It's small. I don't think it requires a change in anybody's model or anything. We are starting if off as this exclusive just to one customer in the U.S. and one customer in Canada. We think it's an exciting initiative and if it is successful, we think that there is a nice opportunity there, but it's not going to be meaningful to the overall results in spring.

Okay. And then just correct me, I may be wrong. But I thought historically New York represented maybe 15% to 20% of your retail sales, am I in the ballpark and then as you lap some of the tourist problems in 4Q, could that be a big driver of business next spring?

Yeah it is. It's between 20% and 25% of the full priced bricks and mortar. Obviously you've got e-comm and outlet also in the retail segment. So I haven't done the calculation what the percentage of the overall retail is. But yes, hopefully that business can get better, that that will be a little bit of a tailwind for us.

Okay. And then just last, are you price sensitive on your buybacks and given the pullback in the stock as you are able to start – the window opens again, how do you view the current price?

Yeah. We are opportunistic. And I think it's likely that we would be in the market and aggressive.

Okay. Awesome. Thanks very much. Good luck.

Thank you.

We go now to Corinna Freedman at BB&T. Corinna Lynn Freedman - BB&T Capital Markets: Hi. Good morning guys. Just a quick question on the retail comp, what is embedded in the guidance for fourth quarter, just wondering if there is a range you could give us?

We really don't provide comp guidance? Corinna Lynn Freedman - BB&T Capital Markets: Okay. And any comments on...

Go ahead. Corinna Lynn Freedman - BB&T Capital Markets: And any comments on e-commerce or the outlet business during the quarter, anything divergent versus the regular full price retail?

No, I mean both full price and outlet were double-digits. E-commerce was a little bit better than the stores, as you might expect, but strong growth there. So it's really – we were clicking on all cylinders there in the third quarter. Corinna Lynn Freedman - BB&T Capital Markets: Okay. And then back to the top-line guidance, you've indicated cancellations aren't an issue and reorders, you've accounted for, how about markdown allowances which is that last piece, are you assuming a higher markdown allowance for fourth quarter versus last year in that guidance or could that be a delta that actually unfolds? Edward R. Rosenfeld - Chairman & Chief Executive Officer: We've not assumed higher than last year although last year they were very high. But we have definitely built in more than I would like in markdown allowances, let's put it that way. Corinna Lynn Freedman - BB&T Capital Markets: Okay, great. Thank you.

We go next to Sam Poser of Sterne Agee CRT.

Good morning. Hi Ed. A couple of things. Number one, can you talk – you said the organic wholesale growth was down 4.4%. Where did that come from? Was that all private-label that drove that decrease or can you give us some color there? Edward R. Rosenfeld - Chairman & Chief Executive Officer: Private label was a big part of it. Private label was down high singles. Branded was down a touch and again if you breakdown branded, we were actually modestly positive in that first tier, the better department stores and the boutiques, but in some of the makeup business that we do for folks like off-pricers or the shoe chains, we were down.

Thank you. And then just a little bit more on the comps in the quarter, you said that – can you give us some – I mean, your comps are not – they are really good comp and given that New York represents so much of that, I mean New York was still up, you still were up in New York, so probably what, mid-singles or something, maybe little better than that? Edward R. Rosenfeld - Chairman & Chief Executive Officer: Low singles.

Low singles. Okay. So there's a very big opportunity given the change in the, like I said, the evolution of trends more than anything else, is that a fair assessment once you lap the down tourism issues? Edward R. Rosenfeld - Chairman & Chief Executive Officer: Yes, I hope you're right.

Thank you. And then you talked about getting more of the pie in the handbag business, can you talk about your share of the pie, let's say, in the junior business and how that's looking and I guess you can add in the women's contemporary business when we add in Dolce, can you give us some color there on how the retailers are looking at you in that regard or planning you in that regard? Edward R. Rosenfeld - Chairman & Chief Executive Officer: I think that Steve Madden continues to have the biggest share in its category, in its department. And I think that we are taking share and we have the ability that we are positioned to continue to take share. And I think Dolce Vita is taking share in its categories. So from a market share perspective we feel good. We obviously wish that the overall category was a little bit more robust right now, but we certainly feel good about how we are performing. We do think as I said earlier that we are relative outperformer.

When you look at the better retailers, the better department stores to call it, are you seeing that is what's holding it down, do you think it's product trend still that's just not – there's just not enough big directional items out there, or do you look more to the macro and how they draw consumers in? I mean, how do you look at that? Edward R. Rosenfeld - Chairman & Chief Executive Officer: I think there is some of both. You read the same earnings announcement I have. The overall retail environment looks pretty choppy out there. Traffic trends are not great. Weather doesn't seem to have done us any favors. And then, in terms of – so that's sort of the overall retail environment. In terms of trends, I think they've gotten better, but I still think that they could be better. Clearly, tall shaft boots has been a little bit of a disappointment for folks this season so far, although we are having a lot of success, again, I'll point out, with the over-the-knee. Booties, we feel pretty darn good about right now. The low ankle booties are really doing well. In a tough environment, we think we are doing better than most, and we feel pretty good. We certainly feel a heck of a lot better about our business than we did this time a year ago.

One more thing. Your license revenue was up, or your – the commission and income line. Where does Madden Girl apparel, because I've noticed Kohl's sort of blasting Madden Girl apparel all over its ads and so on, is that in that line, or is that in – where is that living? Edward R. Rosenfeld - Chairman & Chief Executive Officer: Yeah, that shows up in that line.

And is that, I mean – how big is that? Are you going to be selling Madden Girl footwear there as well? When you look at that business, there may be a change there, so can you tell us anything about that? Edward R. Rosenfeld - Chairman & Chief Executive Officer: Yes, we've done this cold weather collection for Kohl's under the Madden Girl brand, includes cold-weather boots, cold weather accessories and coats, via our outerwear licensee, and the products just shipped in recently, so it's a little too early to talk about how it's working. It's cold weather stuff, so we probably won't know for another month or two, or have a really good read on it, but we are anxious to see how it does.

And would you expand? Edward R. Rosenfeld - Chairman & Chief Executive Officer: We are not – and just to follow-up on that, we are not shipping anything in spring.

Okay. Well, thank you very much, and good luck. Thanks. Edward R. Rosenfeld - Chairman & Chief Executive Officer: Thanks.

Our final question comes from Steve Marotta, C.L. King & Associates. Steven L. Marotta - C.L. King & Associates, Inc.: Good morning, guys. Just a couple of quick points, and I'm sure that this is beating a dead horse a little bit. Given the elevated inventory levels at wholesale currently – not at Steve Madden, but industry-wide, I am assuming – have you increased your markdown allowances associated with potential increases in promotions through the quarter and that's properly – you believe it's properly allocated for in your guidance currently? And I guess the question is, I'm assuming it's changed over the last 30 days to 60 days. Hello? Hello?

And our speakers have disconnected temporarily. As soon as they reconnect, we will let you know, Mr. Marotta. Steven L. Marotta - C.L. King & Associates, Inc.: Thank you.

And it should be just another moment. We thank you for your patience. And our speakers have rejoined us. Steven L. Marotta - C.L. King & Associates, Inc.: Sorry, Ed. Edward R. Rosenfeld - Chairman & Chief Executive Officer: Hi there. Hi, Steve, did you hear my response? Steven L. Marotta - C.L. King & Associates, Inc.: I got nothing. Edward R. Rosenfeld - Chairman & Chief Executive Officer: Oh, okay. I think what you asked about was whether or not we built in a heavy amount of markdown allowances into the guidance for Q4 based on what we're seeing, is that correct? Steven L. Marotta - C.L. King & Associates, Inc.: Yes, and in addition to that if that markdown allowance has increased over the last 30 days to 60 days associated with the fourth quarter in particular? Edward R. Rosenfeld - Chairman & Chief Executive Officer: Yeah. Based on what we're seeing, it is a pretty heavy promotional environment and we expect it to continue to be. We did bump those assumptions up a little bit and that's incorporated in this guidance. Steven L. Marotta - C.L. King & Associates, Inc.: Okay. And you had answered that already and I just wanted to verify that there was an upward drift to that margin allowance allocation over the last 60 days. Edward R. Rosenfeld - Chairman & Chief Executive Officer: Unfortunately, yes. Steven L. Marotta - C.L. King & Associates, Inc.: Yeah, I understand. And I know you are reticent to talk about 2016 and not specific to Steve Madden, but just in general from an industry standpoint, one of the issues in 2015 was that open-to-buy dollars at the wholesale level going into spring were negative on a year-over-year basis. Based on what you are currently seeing, I'm assuming that this year is different and it's positive and I'm wondering if you could amplify that a little? Edward R. Rosenfeld - Chairman & Chief Executive Officer: As we think about spring, I guess I would say that we are cautiously optimistic. We are optimistic because we had very good spring sell-through last year. So, our key customers are coming off a good season with us and that tends to bode well for how they think about spring of the following year. But we are cautious because right now the retail environment is pretty choppy and a lot of folks are not meeting their sales plan. We talked to retailers up and down the value chain and we don't hear virtually anybody jumping up and down about how great business is. So, that means they are probably going to be a little bit more cautious heading into spring than they otherwise would've been. That's sort of where we are. Steven L. Marotta - C.L. King & Associates, Inc.: Okay, helpful. Thank you very much. Edward R. Rosenfeld - Chairman & Chief Executive Officer: Thank you.

And that concludes our question-and-answer session. I'll turn the call back over to our speakers for any additional or closing remarks. Edward R. Rosenfeld - Chairman & Chief Executive Officer: Thanks very much for joining us on today's call and we look forward to reporting back to you after fourth quarter. Have a good day.

Ladies and gentlemen that concludes today's conference. Again, we thank everyone for joining us.