Steve Madden

(Steve MaddenNancy Leyva)

Steve Madden

Brand Inventory

Company

Steven Madden, Ltd. is a globally recognized company in the fashion industry. Their headquarters are located in Long Island City, New York. Steve Madden, named after its’ founder, was founded in 1990. Madden worked at several footwear companies before starting his own. He started the company with $1,100 in 1990 by selling shoes out of the trunk of his scar. Madden created shoe designs and crafted them in his Queens-based factory. Steve Madden has formed one of the top iconic fashion brands in America. His designs are fashion forward, innovative, wild and chic making them desirable to fashion forward men and women.

During the early 2000s the company took a slight hit when founder, Steve Madden, was sued for fraud. In 2002 Madden was convicted of stock manipulation, money, and securities fraud. He was sentenced to three years in prison and was made to resign as CEO from Steven Madden, LTD. Madden was released from prison two years into his sentence. During his time in prison he worked as a creative consultant at his own company, earning him $700,000.

Steve Madden has several subsidiary companies: Madden Girl, Steven, Steve Madden Men’s, and Stevies, as well as its Daisy Fuentes, Betsey Johnson and Olsenboye accessories business through licenses. A majority of the company’s profit comes from the license agreements.

Recently in news revolving Steve Madden, the company announced their first quarter results for 2014. Net sales increased 9.2% compared to the first quarter results in 2013. During the first quarter, the company opened one full-price store and three outlet stores, and closed two full-price stores. Also, brand Steven Madden Ltd. redesigned stevemadden.com for the first time in seven years. The revamped website combines e-commerce and branding. It involves social media sites to appeal the web pages’ younger customers. Singer Keyshia Cole presented her second line of shoes of her ongoing collaboration with Steve Madden.

Key personnel

· Edward R. Rosenfeld- Chairman, Chief Executive Officer and Director

· Arvind Dharia- Chief Financial Officer and Chief Accounting Officer

· Awadhesh K. Sinha- Chief Operating Officer

· Amelia Newton Varela- Executive VP of Wholesale & Retail

· Robert Schmertz- Brand Director

· Directors: John L Madden, Peter Migliorini, Richard P. Randall, Ravi Sachdev, Thomas H. Schwart

INCOME STATEMENT DATA

Year Ended December 31,

(in thousands, except per share data)

 

2013

2012

2011

2010

2009

Net sales

$

1,314,223

$

1,227,072

$

968,549

$

635,418

$

503,550

Cost of sales

831,847

771,370

606,601

359,564

287,361

Gross profit

482,376

455,702

361,948

275,854

216,189

Commissions and licensing fee income - net

15,632

15,395

18,715

22,629

19,928

Operating expenses

(295,223

)

(283,689

)

(226,893

)

(176,859

)

(157,149

)

Impairment charges and provision for litigation

983

(8,432

)

—

—

—

Income from operations

203,768

178,976

153,770

121,624

78,968

Interest income

4,228

3,067

4,885

4,208

2,096

Interest expense

(128

)

(49

)

(51

)

(4

)

(93

)

Other income (expense) - net

1,083

2,193

188

29

(182

)

Income before provision for income taxes

208,951

184,187

158,792

125,857

80,789

Provision for income taxes

75,666

64,623

61,591

50,132

30,682

Net income

133,285

119,564

97,201

75,525

50,107

Net (income) loss attributable to non-controlling interests

(1,278

)

62

118

—

—

Net income attributable to Steven Madden, Ltd.

$

132,007

$

119,626

$

97,319

$

75,725

$

50,107

Basic income per share

$2.04

$1.85

$1.53

$1.22

$0.82

Diluted income per share

$1.98

$1.81

$1.50

$1.19

$0.81

Basic weighted average shares of common stock

64,583

64,529

63,396

62,216

60,903

Effect of dilutive securities - options and restricted stock

2,253

1,726

1,463

1,450

939

Diluted weighted average shares of common stock outstanding

66,836

66,255

64,859

63,665

61,842

 

BALANCE SHEET DATA

At December 31,

 

2013

2012

2011

2010

2009

Total assets

$

880,241

$

804,039

$

639,786

$

447,696

$

326,859

Working capital

342,142

306,776

211,649

138,636

139,007

Noncurrent liabilities

46,898

43,161

29,940

18,697

6,710

Stockholders' equity

$

678,840

$

626,400

$

474,758

$

357,298

$

267,787

Cash Flows (Annual)

Period Ending

Dec 31, 2013

Dec 31, 2012

Dec 31, 2011

Net Income

132,007  

119,626  

97,319  

Operating Activities, Cash Flows Provided By or Used In

Depreciation

12,979  

12,642  

11,060  

Adjustments To Net Income

24,706  

24,691  

10,537  

Changes In Accounts Receivables

(17,722)

(16,001)

(25,879)

Changes In Liabilities

20,702  

2,707  

(6,673)

Changes In Inventories

(10,013)

(1,819)

(9,210)

Changes In Other Operating Activities

(8,484)

1,557  

(2,068)

Total Cash Flow From Operating Activities

155,453  

143,341  

74,968  

Investing Activities, Cash Flows Provided By or Used In

Capital Expenditures

(20,746)

(20,102)

(15,477)

Investments

(19,635)

(18,937)

49,917  

Other Cash flows from Investing Activities

-  

(29,367)

(77,726)

Total Cash Flows From Investing Activities

(40,381)

(68,406)

(43,286)

Financing Activities, Cash Flows Provided By or Used In

Dividends Paid

-  

-  

-  

Sale Purchase of Stock

(96,370)

9,271  

4,994  

Net Borrowings

-  

-  

-  

Other Cash Flows from Financing Activities

(11,481)

(22,867)

(4,151)

Total Cash Flows From Financing Activities

(103,574)

(8,988)

4,997  

Effect Of Exchange Rate Changes

-  

-  

-  

Change In Cash and Cash Equivalents

11,498  

65,947  

36,679  

Category and Competition

Steven Madden, Ltd. is part of the textile fashion footwear industry. It is highly competitive with about 100 manufactures, 1,500 wholesalers, and 30,000 retail outlets. The fashion industry is highly competitive and the barriers to entry are low. The company competes with specialty shoe and accessory companies as well as companies with diversified footwear product lines. Steve Madden’s top competitors are Guess’, Kenneth Cole, Skechers, Jessica Simpson, Aldo and Ugg. Many of the company’s competitors are better financed and have a greater amount of resources. They also have a broader range of products that go beyond footwear and accessories, making it difficult for Steve Madden to compete.

Steve Madden’s methods of distribution vary for each of the product lines. They are sourced separately based on the individual design, style and quality specifications of the products in each product line. The company does not own or operate manufacturing facilities; they instead use agents and their own sourcing offices to source their products from independently owned manufacturers in Mexico, China, Brazil, Italy and India. The company distributes their products from four third-party distribution warehouse centers, two located in California, one located in Texas, and one located in New Jersey, and through two company owned warehouses located in New Jersey and Canada. Steve Madden believes in utilizing distribution facilities that are specialized in distribution fulfillment, their retail store and Internet customer are served more promptly and efficiently.

Their wholesales customers consist principally of better department stores, major department stores, mid-tier department stores, national chains, mass merchants, value priced retailers, specialty stores and catalog retailers. Some examples of where Steve Madden products are located include Macy’s, Dillard’s, J.C. Penney, Nordstrom, and Belks.

Some of Steve Madden’s businesses, including their Retail segment, have experienced holiday retail seasonality. Aside from seasonal fluctuations, the company’s operating results fluctuate from quarter to quarter as a result of the timing of holidays, weather, and timing of larger shipment of footwear, market acceptance of their products, and product mix. Virtually all of Steve Madden’s products are purchased through arrangements with a number of foreign manufacturers. Risks in foreign operation including work stoppages, transportation delays, interruptions and changes in social, political and economic conditions can affect the company. They can result in disruption of trade from the countries in which their manufacturers and suppliers reside. There were no found legal considerations.

Products within Category

Brands within Steven Madden Ltd. include Steve Madden Women’s, Steve Madden Men’s, Madden Girl, Stevies, Steven, and others mentioned further in Consumer Profile. New products that have been introduced into the marketplace are Steve Madden Men’s and Madden which are both men’s clothing and shoes. They both have full collections available and are a new project Steven Madden Ltd. are excited to introduce and evolve. Accessories have also been added to the brand, consisting of hosiery, handbags, and outerwear. Benefits of both the product lines, men’s and accessories, are that they have a larger consumer market to work with and they are offering men and women a larger variety of products which will create brand loyal customers. Innovations within the company are primarily in e-commerce. A social media home page on the website is attracting young socially active consumers.

Brand Analysis

All of Steve Madden Ltd. brands and licenses are valuable to the company but there a few product lines that have been “top dog.” 52% of net sales are from the wholesale segment, 14% from wholesale accessories segment and 25% of net sales are from the retail segment. Wholesale segment can be broken down further into top net sales according to brand.

1. Steve Madden Women’s Division- 29% of net sales.

2. Madden Girl Division- 12% of net sales

3. Steve Madden Men’s Division- 8% of net sales

4. Steven Division- 5% of net sales

5. International Division- 4% of net sales

6. Elizabeth and James Division- 1% of net sales

7. Steve Madden Kids Division- 1% of net sales

Pricing is based on the level of the brand. For example, Elizabeth and James is considered luxury footwear located in high end boutiques, therefore the pricing on the shoes tend to be higher. Madden girl is an opening price point where it is much more affordable than Steven brand. Typically, the prices on the footwear do not fluctuate in price. Information pertaining the growth trends, category shares by country and by region were not available.

Consumer Profile

Steve Madden has a variety of product lines that target different demographics. In the Wholesale Footwear Segment;

· Steve Madden Women’s target women in ages 16-35. They source and market the Steve Brand to department stores, mass merchants and catalog retailers throughout the United States. This product line is a top seller and the most popular. It is a life-style brand in the fashion conscious marketplace. To serve their specific demographic age, Steve Madden creates and markets fashion forward footwear, offering the right look at the right time. It is designed to appeal those customers seeking exciting, new footwear designs at affordable prices. Typically, designs are test marketed at a Steve Madden retail store to determine the appeal of the product to the customers, and then they are sent to various retail locations.

· Madden Girl is geared for young women ages 13-20. This is a product line is an opening price point brand sold at major department stores, mid-tier retailers and specialty stores. Designs are similar to those of Steve Madden Women’s but are lower in cost and have details that are better suited for younger women.

· Steve Madden Men’s targets men ages 18-40. This line provides an assortment of stylish and edgy footwear. Designs are fashion forward athletic shoes, and a full collection of directional men’s shoes. Sold in Major department stores, mid-tier department stores, better specialty stores and independent shoe stores throughout the U.S. as well as in Steve Madden retail stores. Price point for this line begins at $70 and up.

· Steven is for fashion conscious women ages 25 to 45.The line provides an edgy, sexy, cosmopolitan collection. The shoes in this product line are a priced a tier above the Steve Madden brand and are sold at department and better footwear specialty stores throughout the Unites States and in Steve Madden retail stores. It is popular with sophisticated women seeking fashion, quality, and uniqueness.

· l.e.i markets footwear exclusively to Wal-Mart designed for young women and children ages 6 to 20. Steve Madden entered a license agreement with Jones Investment Co. Inc in which they have the right to use the trademark in connection to sales and marketing of the footwear.

· Elizabeth and James is targeted for women ages 25-36. Steve Madden entered a license agreement in which they have the right to use the Elizabeth and James trademark to sell and market the footwear. Elizabeth and James was created by Mary-Kate and Ashley Olsen and is distributed to luxury retailer with a price point starting at $200 for shoes and $300 for boots.

· Olsenboye is another line created by Mary-Kate and Ashley Olsen, in which Steve Madden has entered a license agreement to use the trademark for sale and marketing of footwear to J.C. Penney. This line is at a lower price point and is targeted to young women similar in age to those who purchase Madden Girl.

· Stevies and Steve Madden Kids are made for young girls ages 6-12. Designed, sourced and marketed to appeal to young girls, they are sold at department stores, specialty stores and independent boutiques throughout the U.S.

· Madden is targeted at men of all ages. It includes a full collection of shoes, and has an opening price point making it affordable. They are sold at major department stores, mid-tier retailers and specialty stores.

· Betsey Johnson Shoes are distributed through department stores and online retailers. Betsey Johnson is targeted to the quirky young women. It has a price point at beginning at $30 for accessories, and shoes, depending on where they are purchased. Steve Madden acquired the Betsey Johnson trademark and all other intellectual property of Betsey Johnson LLC, who went bankrupt and were purchased by Steven Madden Ltd. Shoes are sold under Betsey Johnson and Betseyville brands.

· Superga was founded in Italy and is known for their fashion sneakers that come in a vast range of colors, fabrics, and prints.

People who purchase Steve Madden brand shoes and accessories regularly are typically those who are fashion forward and aware of the latest trends. They are usually in the age range of 20-45 years old. Steve Madden gives young women, and men a way to express their individuality and it is a top reason why many purchase their company’s shoes. The attitude that is expressed with Steve Madden footwear is inspired by rock and roll, urban edge, innovative, wild and spot-on-chic. The amount of purchases for Steve Madden footwear made by customers is during each quarter or season, when a new product becomes available. Once you become a Steve Madden buyer you are one for a very long time. There is a strong customer loyalty base and minimal brand switching. Steve Madden footwear and accessories are comfortable for every day wear and there is a vast amount of shoes available for various occasions and products available at high end and affordable prices making them a go-to for preferred footwear brand.

Advertising/ Marketing Communications

(Steve Madden personal appearance in Dallas, Texas)Success of Steven Madden, Ltd. is a result of their focus on its wholesale operation. While the company has been focused mainly on their footwear collections, they are continuing to invest in its accessories business. Their strategy, aside from expanding into accessories includes adding to footwear for men in Steve Madden Men’s and Madden. They will be offering full collections that will help boost their men’s footwear sales. They are also adding more than 30 stores and are looking to enter new markets. There are no identifies specific promises. They are making every effort to make fashion footwear that will suitable for style-conscious young women and men. Principal marketing activities include product placements in lifestyle and fashion magazines, in-store promotions as well as personal appearances by founder Steve Madden. The company continues to promote their e-commerce website where customers can purchase products under brands, Steve Madden, Steven, Steve madden Men’s and select Madden Girl styles. They are also offering exclusive content, and opportunities to participate in contests. Steve Madden is also making every effort to connect with their customers through social media forums.

Media

No information was found regarding brand spending, spending patterns, and spending compared with market share.

Promotions

Though there was not much information found on promotions for Steve Madden, there were a couple examples. The way Steve Madden promotes the company, and products are by using various social media platforms, their e-commerce website, and fashion magazines. Steve Madden uses the platforms to reach out to loyal customers as well as offering special discounts and access to exclusive content as a form of brand loyalty. Success rates of these promotions are fairly high given the benefit many customers see in having them.

Internet and New Media

The Steve Madden website is used as an e-commerce site that concentrates heavily on product listings and information. Customers can shop and order items online. However, the website has been revamped this past March for the first time in seven years. The changes are meant to appeal to the sites young, socially active customers. The new site features user-generated content from social media sites, and allows shoppers to log in with their Facebook. SteveMadden.com pulls and displays photos customers post on various social media sites, with the tag of one of Steve Madden’s various hashtags, directly to the home page. Mark Freidman, president of e-commerce, says “We wanted the site to be a combination of e-commerce and branding.” Customers are also now able to share purchases, reviews, and posts from the website to their Facebook. The website redesign employed a technique that adapts the look of the site to tailor-fit the device the consumer is using.

The Facebook page is updated with outfit suggestions, Steve Madden personal appearances, e-commerce site sale advertisements, customer photos of them wearing the brands footwear. There is also posts made from past events and photos recollecting the occasion. Twitter page is filled with similar posts as from Facebook, and re-tweeted posts from followers. Twitter also gives the customers and followers the opportunity to tweet Steve Madden Help if they have any problems or concerns to voice. Pinterest is loaded with various boards that are each based on a specific theme. The boards also serve as a guide on ideas on how to wear Steve Madden footwear.

Brand Value

Even though this current year has only begun the brand value for Steve Madden has increased. It has improved greatly over the past several years since, founder, Steve Madden returned to his company after serving time in prison for two years due to fraud. The company and brand is growing tremendously. Introducing new products and working with other companies through licenses has increased the brands’ value.

Brand Exploratory

Research methods

The research conducted included qualitative and quantitative methods. Quantitative method included creating a survey and distributing it to a random sample of participants. The purpose of the survey was to determine participant’s awareness of the Steve Madden brand. Various questions included gender, age, income, and what products they associate Steven Madden with were asked. The results determined that men and women between the ages of 21 to 24 earn an annual income of less than $20,000 and are aware of Steve Madden brand and believe it is not affordable. The results could suggest that the participants are not aware of all the brands Steve Madden has that offer various price points. Also, participants were asked, when thinking of Steve Madden brand how descriptive is the word “masculine.” Respondents were answered that the word in not at all descriptive. This is an indication that they do not know about the men’s Steve Madden line.

Qualitative research was conducted using free associations. Participants were asked to describe what came to mind when they were mentioned about Steve Madden brand. The top answer that was same throughout all participants responses was the word “shoes.” It is clear that respondents are aware of what the Steve Madden brand is about. They know Steve Madden creates fashion forward footwear that is in style but also expensive. A few of the male respondents were aware that Steve Madden offers men’s products and have purchased them. Overall, the quantitative research gave a better perspective as to respondents’ awareness of the brand.

Recommendations

Steve Madden brand is valuable asset to the footwear industry. It has been a gateway for young, hip fashionistas to express themselves with their products. In order for Steve Madden to grow more and expand their brand they need to make a few changes. The company needs to strengthen their associations with international markets. They have had acquired licenses from Superga in Italy, and that is a good way to begin expanding into the marketplace, but they need to make more associations. They could even try to create an exclusive line for international consumers in order to begin creating brand loyalty.

Elizabeth and James brand needs to be strengthened in order to make an impact on the wholesale segment, otherwise that license needs to be eliminated and look for other profitable license agreements. Steve Madden should take a look into expanding the women’s product line into full collections that include clothing. This will work well since men’s clothing products are already available and women’s would have a large consumer following because Steve Madden Women’s is a top brand in the wholesale segment.

There are few marketing campaigns for Steve Madden. Focusing on marketing their brand would allow them to reach a larger consumer market. They would also benefit in new marketing campaigns to show consumers how their brand is expanding with new products and collections. Steve Madden should also find a way to change their promotions to involve their consumers. By redesigning their e-commerce site they have already shown they are putting their customers first by involving them in their social media activities. This will spark attention in followers and consumers creating a larger brand loyalty base.

Overall, Steve Madden has been attempting to rebrand themselves by involving current trends that incorporate customer input and ideas. They are continuing to explore what the brand can offer their faithful consumers, as well as hearing the voices of those consumers in order to create something that will come to be a major change in the fashion footwear industry.

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