Jean Fontana - ICR, Investor Relations Edward Rosenfeld - Chairman and Chief Executive Officer Derek Browe - Director, Finance.

Chad Sutherland - Goldman Sachs Camilo Lyon - Canaccord Genuity Kate McShane - Citi Research Erinn Murphy - Piper Jaffray Scott Krasik - Buckingham Research Corinna Freedman - Wedbush Securities Edward Yruma - KeyBanc Jeff Van Sinderen - B.

Riley Sam Poser - Sterne, Agee Steve Marotta - CL King & Associates Danielle McCoy - Brean Capital Chris Svezia - Susquehanna Financial Mike Richardson - Sidoti.

Good day, and welcome to the Steven Madden Limited first quarter 2014 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..

Thank you. Good morning, everyone. Thank you for joining us today for the discussion of the Steven Madden first quarter 2014 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 and 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 results or any future results expressed or implied by forward-looking statements.

These statements contained herein are also subject generally to other risks and uncertainties as described from time-to-time in the company's report 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 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 Steven Madden..

Thanks, Jean. Good morning, everyone, and thank you for joining us today. With me to discuss the business this morning is Derek Browe, our Director of Finance.

In first quarter 2014, we were once again confronted with a tough environment, including weak mall traffic, difficult weather conditions and few significant fashion footwear trends on which to capitalize. In spite of these challenges, we delivered our 23 consecutive quarter of growth in both sales and EPS.

Consistency of our results over the last several years and our solid performance this quarter in a difficult environment, demonstrate the power of our brands, particularly our flagship Steve Madden brand and the strength of our diversified business model.

Net sales for the quarter were $304.6 million, a 9.2% gain compared to the prior year and diluted EPS was $0.36 per diluted share, a 4.2% increase from last year.

Our wholesale business, which accounts for 85% of our consolidated net sales on an annual basis, had an excellent quarter, with net sales increasing 13.3% and gross margin expanding by 30 basis points compared to the prior year.

The strong performance was driven by a great quarter in our core business, footwear under the Steve Madden brand and related brands. Wholesale Footwear net sales for the Steve Madden family of brands increased more than 20% compared to the prior year.

Importantly, performance was strong across the board, with double-digit percentage growth in each of Steve Madden Women's, Steve Madden Men's and more moderately priced Madden Girl and Madden, higher priced FREEBIRD by Steven and the kids divisions Steve Madden Kids and Stevies.

Overall, we were very pleased with these results from our core business, particularly in light of the challenging environment. On the other hand, our Retail business, which accounts for 15% of our consolidated net sales on an annual basis, performed very poorly in the quarter.

A sharp slowdown in our company-operated stores that began December continued throughout Q1. Comparable store sales declined 17.2% for the quarter and gross margin contracted as moved aggressively to clear slow-moving goods.

Since the end of the quarter, we have seen some improvement in the trend, due in part to these shift and also to an uptick in the underlying trends as the weather had gotten warmer and customers have started buying more spring products, particularly in the dress and sneaker categories.

Before I turn the call over to Derek, to take you through a more detailed review of the financial results for the quarter and update our guidance for 2014, I want to touch briefly on an acquisition we completed in the quarter.

On March 24, we announced that we had acquired majority ownership in the Brian Atwood intellectual property and related assets, including the Brian Atwood designer brands and the B Brian Atwood diffusion label.

Brian Atwood himself is our minority partner in the intellectual property and he has taken a license, under which he will design and market the Brian Atwood designer collection. We at Steve Madden will be producing the B Brian Atwood line, which we intend to re-launch for spring 2015.

This is an exciting transaction for us, as it adds true luxury brand with a global footprint to our brand portfolio. We believe there is enormous untapped potential in both Brian Atwood and B Brian Atwood, and we are thrilled to partner with Brian, who is one of our industries leading talent.

With that, I'd like to turn the call over to Derek, who will walk you through the details of the financial results for the quarter and provide our outlook for the year..

Thanks Ed, and good morning. As Ed mentioned, consolidated net sales for the quarter increased 9.2% to $304.6 million. Strong gains in Wholesale Footwear and modest gains in Wholesale Accessories were partially offset by the decrease in our Retail segment.

Our wholesale net sales in the quarter were $265 million compared to $233.9 million in the prior year first quarter, a 13.3% increase. Wholesale Footwear net sales were $219.7 million, up 16.2% from $189.2 million in Q1 2013. As previously mentioned, the Steve Madden family of brands drove the business.

Most notably, Steve Madden's Women's, Madden Girl and Men's, all of which had double-digit percentage growth. Private label also recorded strong growth driven by continued expansion with target. In Wholesale Accessories, we recorded net sales of $45.3 million in Q1 compared to $44.7 million in the prior-year period, a 1.3% increase.

Continued growth in our handbag business was offset by declines in belts and sunglasses. In our Retail division, net sales were $39.6 million, a 12.1% decrease from the $45.1 million in net sales recorded in last year's first quarter driven by our comparable store sales decline.

During the quarter, we opened one full-price store, three outlet locations and closed two full-price locations. These changes bring us to a 123 company-operated retail stores, including 20 outlets and four e-commerce stores. Also, in the middle of March, we re-launched our Steven Madden website.

The new site offers a much improved experience on mobile and tablets, and innovative social media integration among other feature and functionality enhancements. So far we are pleased with the results as we've seen a nice uptick in both sales trends and brand engagement since the refresh.

Turning to other income, our commission and licensing income net of expenses was $3.2 million in the quarter versus $4.4 million in last year's first quarter, due primarily to decline in the First Cost business with Kohl's and Kmart. Our consolidated gross margin in the quarter was 35.6% as compared to 36.8% in last year's first quarter.

Our wholesale gross margin was 32.6% versus 32.3%. This slight increase was driven primarily by improvement in Wholesale Footwear. Gross margin in the Retail division was 55.7% compared to 60.3% in the first quarter of 2013, as we increased promotional activity due to the soft sales in our stores.

Operating expenses were $75.5 million in the first quarter or 24.8% of net sales compared to $70.5 million or 25.3% of net sales in the same period last year. The 50-basis point improvement reflects operating leverage on increase in sales in our wholesale segment. Operating income in the quarter totaled $36 million or 11.8% of net sales.

In last year's first quarter, operating income was $36.4 million or 13.1% of net sales. Our effective tax rate for the quarter was 35.1%, which we expect to be our rate for the year.

The favorability in this rate versus Q1 of 2013 primarily reflects reinvestment of foreign earnings in foreign locations as well as favorability in our overall state tax rate. Turning to the balance sheet. As of March 31, 2014, we had $275.7 million in cash and marketable securities and no debt.

We ended the quarter with inventory of $58.3 million, which was down slightly from the prior year, reflecting a strong focus on inventory management.

Importantly, despite the below planned sales in our Retail segment in Q1, our proactive and aggressive steps to move through inventory during the quarter, left us in a clean inventory position in retail entering Q2. Inventory per store in Retail at the end of the quarter was down 10% compared to the prior-year period.

Our consolidated inventory for the last 12 months was 10.5x. FX in Q1 was $4.4 million and during the quarter we repurchased approximately 851,000 shares for $29.3 million, bringing our total repurchases since the beginning of 2013 to approximately 3.9 million shares for $131.5 million.

And on Tuesday, our Board of Directors approved a continuation of the company stock repurchase program for up to $150 million of common stock. Now, turning to guidance. For fiscal 2014, we continue to expect net sales to increase 5% to 7% compared to fiscal 2013. We continue to expect diluted EPS to be in the range of $2.05 to $2.15.

Due to a continued drag in earnings from the Retail segment, we expect Q2 year-over-year EPS growth to be modest, similar to Q1. EPS growth is then expected to accelerate in the back half, as the retail business stabilizes and last much easier comparisons. Now, I'd like to turn the call back over to Ed for some closing remarks..

Thanks, Derek. Q1 was a challenging quarter, but we were pleased to be able to overcome disappointing results in our Retail segment with strong performance in our much larger wholesale business, once again demonstrating the benefits of our diversified business model.

While the environment remains difficult, we are optimistic about the emerging fashion trends we are seeing, particularly in the dress and sneaker categories and feel good about the projects that we are flowing into the stores.

We remain confident that we can achieve our sales and earnings targets for the year and that the strength of our brands and our business model will enable us to drive growth for years to come. Now, I'd like to turn it over to the operator for questions..

(Operator Instructions) Our first question, we'll hear from Taposh Bari with Goldman Sachs..

It's Chad on for Taposh. I guess my first question just on Retail business.

I was wondering if you could provide any kind of additional color on the month-to-date performance here in April?.

We have seen some improvement in the trend, as we outlined in the prepared remarks, really some of that is due to the Easter shift. But it's also clear there has been some improvement in the underlying trend. And we're very pleased to be getting into the spring season here.

And yesterday's weather in New York notwithstanding to see some improvement in the weather, as we start to see the spring merchandise really start to do much better. And particularly, we called out the dress and sneakers categories. Those are two important trends.

Obviously, dress being the most important that we've really seen start to pickup in April. That being said, we're still not where we need to be, but we are seeing some improvement..

And then, one follow-up, just on the tax rate. Obviously, you're guiding it lower for the remainder of the year.

I guess is that sustainable out in the future years? And I guess where is that money being reinvested internationally?.

I mean we believe that rate at which we are using our foreign earnings to reinvest in such locations is sustainable. Currently those funds are being used on existing businesses and growth with what we have already owned and operated in our international business.

Just to elaborate that, obviously, Canada is what we own now, and so some of the funds are being reinvested there. There is also earnout provisions associated with that purchase agreement in Canada. And then, but we've also got plans to invest in other foreign countries over the next handful years..

And next we move to Camilo Lyon with Canaccord Genuity..

So just going back to your comments about the improvement in trends, Ed maybe if you could just help us understand the cadence in the first quarter of your comps. I think everyone experienced really a dismal January, but I'm trying to get a sense for the magnitude of this improvement.

You're trending positive right now or is it just less negative as you've seen of weather start to become more normalized? Quantification on that would be very, very helpful, if you could?.

We're not going to provide a number, but it's less negative. We are still trending negative in the retail stores..

And maybe if you could talk about what that looks like in non-New York markets or maybe just straight to the one weather markets where it's more consistent?.

I mean we have seen for the whole year seen a pretty dramatic difference by region. And it's pretty clear that that's related to weather.

If you look at Florida, California, Texas, at that group of stores versus the Northeast, the Mid-Atlantic and the Mid-West, a difference in comp for this year today is about between 1,000 and 1,500 basis points by region. So it's pretty significant, the amount that we're performing better in warmer weather locations..

So almost flattish versus, are those stores positive?.

For the year, no..

But they're like flat-to-negative low single, it seems like great, nothing aligned in those Florida, California stores?.

No. I mean that group of stores is probably, the warmer whether ones I am pulling out is by 55% of the sales higher. The colder stores is let's say 45%. So you could do the math, I think it's 17.2% lower..

And in those warmer weather markets what's working there? In your fashion trends you've brought to market the sneakers and the dress shoes and the chunkier heels shoes?.

Yes, absolutely..

And then, a question I get all the time is, if your retail businesses are leading indicator, then why wouldn't this poor retail traffic trend be an indicator of future weakness in your wholesale business? Can you just talk about why there's such a dichotomy between your wholesale and your retail business?.

There was a why that why the difference. I think a lot of it has to do with the traffic and how challenging the traffic has been in our own stores. And while traffic trends have clearly been tough and customers were a weak sale in wholesale, it's been a lot better than what we've seen in our retail stores.

And one thing that we've seen over the years is that where you are in the fashion cycle and the strength of fashion trends. It's such an important driver of traffic in our own stores. And it's really newness and excitement about in the category that drives people into Steven Madden stores.

And if you have a moment like we did in Q1, where you're in a bit below in the fashion cycle that really hurts us in terms of traffic. And of course, you are coupling that with an existing sort of an overall soft retail traffic environment, and that was very challenging.

As I said, Macy's or Nordstrom or DSW, I don't think they are probably jumping up and down about the traffic in Q1, it was considerably better than what we saw on our retail stores.

And just going forward, we, right now, we're seeing the wholesale business is continuing to have a nice momentum, particularly in the branded side of this, we do expect the private label to slowdown a little bit.

But I think that when you have a tough moment like this, the retailers really turn to the brands that are most important for them, that hast the most brand power and that have the history of strong sales growth. And so we're actually seeing them rely on us and the Steve Madden brand in particular more in this environment than they have previously..

And then just finally on, I have one question on Brian Atwood acquisition, clearly at the higher ASP category for you even in the B Brian line, if you look at your portfolio of brands, you only have a couple of brands that has that higher ASP dynamic, FREEBIRD and maybe even Elizabeth and James, so we can take by this acquisition that that's the direction that you're starting to had a little bit more upstream from a pricing perspective as you look at on future acquisition candidates?.

Well, I think that we're not going to limit ourselves with that, but that's certainly a place in the portfolio where we have some room to do more. And that was one of the reasons that we thought the Brian Atwood deal was complimentary to what we have in the existing portfolio..

And next, we'll move on to Kate McShane with Citi Research..

Just to get your thoughts a little bit more on the wholesale channel, how much of what you saw during the quarter is from the incremental growth from white space and market share and how much was a true comp year-over-year?.

Well, I think most of its true comp, there's not a lot of new retailers that we were selling or new doors, I mean certainly within certain brands we added some doors here and there, but for the most part this is growth with existing accounts and existing doors..

And just back to your commentary, before it does sound like you're taking some market share as a result of the environment..

Yes. We feel that is the case for sure..

And then just on the inflationary environment, I just wondered if anything has changed with your outlook for inflation for the year and how are you approaching price increases for the rest of the year?.

And when you say inflationary, are you talking about inflation in our cost or in our pricing?.

In your cost, and then what your plan is to address that, if any, from your pricing?.

We're really seeing that our prices from the factories are really fairly stable.

There has been some increase in materials, labor cost in China are of course up, but on the other hand, from a sort of supply and demand dynamics, the factory seemed hungry for business and we've been able to negotiate prices that are essentially in line with where they were a year ago.

The other interesting thing that's happening, of course is that the dollar has strengthened a little bit against the RMB, which is obviously not the direction that that's been moving for last several years. But that's also helping us to maintain similar prices to the prior year in terms what we're paying.

And similarly, I think now is not the time to try to push through a lot of price increases to the consumer. So we're leaving our prices basically in line where they were a year ago..

And we'll move on to Erinn Murphy with Piper Jaffray..

Just wanted to rebut a little bit more on the promotional environment.

Ed, if you could just speak a little bit about, who's leading the charger there? And then just given how it's been so intensive for the last several quarters, can you just reflect about how your own promotional calendar and the strategies that you guys have employed have evolved?.

Without calling anybody out by name, I think as you pointed out accurately, it has been a very promotional environment.

It was very promotional in Q4 that continued into Q1 and when we continue to see that going forward, particularly as most folks had a relatively challenging Q1 at retail, we're continuing to see that fairly high level of promotional activity.

From our perspective, while we did have to be pretty aggressive as we mentioned earlier to move through goods in retail in first quarter and really had to go a little -- we were pretty aggressive with our clearance. In terms of planned promotions, we're actually pulling back on that a little bit.

I think that we feel that we were running promotions a little bit too frequently, in some cases really training the customer to wait for promotion in our own retail stores. And so we're trying to get off that drug as it were and pull back a little bit there. And we're also experimenting with some new promotions.

Some of the promotion that we've been using, we've been running for a number of years. And I think the customers had in some cases gotten tired of them, they've gotten a little stale, wasn't creating the same level of excitement, so we tried a new promotion, for instance, around Easter holiday and got a very good response from the consumer..

Can you elaborate a little bit more about what you did around the Easter holiday specifically that was so well received?.

Lot of these holiday weekends, we have been running the scratch promotion that you've seen or the spin-to-win promotion over the last several years. We did not do that this time. We did something that's essentially a buy more save more type promotion..

And then sorry if I missed this, but could you just clarify in the first quarter comp, how did conversion tracked during the quarter?.

Well, the traffic was very poor, if you can believe it, conversion was actually up in the quarter..

And then in terms of just the e-commerce re-launch, I'd love to hear just a little bit more about some of the functionality that's been added, some of the digital and kind of mobile enhancements that you've been able to affect in.

I know Derek commented on kind of a slight improvement in trends there, but any quantification or even qualification would be really helpful..

I think the most important thing for me about the new e-commerce platform is that it's a really dramatically improved experience on mobile and tablet. We are getting approximately 50% of our visits now on those devices. And it accounts for about a third of our sales and the experience before the re-launch was pretty rudimentary.

So we feel much better about that. There is a lot of other things that we can do. We have expedited shipping, which we didn't have before. We have much better product inventory. We have some gift certificate functionality. But I think the second thing I'm really excited about is the social media integration.

You can log in via Facebook, you can upload Instragram photos. You can shop other people's Instragram photos. There is lots of ways to share what you're doing with your friends and to see what others are doing and how they're engaging with the brand. And so far the reaction to that has been great.

In terms of the sales trends, well, we're not going to provide a specific number, because it's so early. Essentially the e-commerce was running in line with the stores prior to the refresh, and since the re-launch it's running significantly better than the stores..

And we'll move on to Scott Krasik with Buckingham Research..

The couple of questions, I'll try and keep it short here.

In terms of Wholesale Footwear now, nice to see the branded business really growing sort of on an annual basis, what's the split now between private label and branded?.

Private label overall is about 25 percentage sales..

It's been higher in footwear than accessories?.

Yes..

And then in terms of specifically within the brand that, you called out dress and some sneakers, I'm assuming that's open toed dress, how do you view dress evolving? And is this really something that that you see building?.

I mean interestingly there's a lot of different things working in dress. I think you're right, that the best performing sort of sub-category within dresses opened up. Footwear, sort of anything that's really stripy and sexy is doing very well. Colors doing well in dress, floral prints are doing well.

But we're also seeing single sole pointy toed dress shoes perform. We're still seeing some really aggressive platform pumps doing well. So there's just a lot of different things happening in that category. And it's a category, as you know that that was weak for a couple of years. So we're really excited about what we're seeing there.

And we think that that's going to be pretty significant for us in the coming quarters..

So that's something that can continue in the fall, accelerate in the fall, you think?.

Yes. I think so..

And then just now you've got some visibility into the Nordstrom Anniversary Sale in early fall, do you feel better or worse about tall shafted boots breaking out than you did last quarter?.

I think we feel, neither better nor worse, I think we feel the same. I think we are optimistic that we're going to see more, more tall shaft boots this year relative to the booties, which have really been driving the business. We also think that we'll probably see some dressier boots. It's been all about the casual boots the last couple of years.

And we think that the dressier goods will start to perform better this year..

And do you think you're going to see any impact from a lot of this cold weather brands did pretty well and they seem to be being planned up for fall '14.

Do you think that's going to have some impact on your business?.

I don't think we compete super directly with those guys for open-to-buy for the most part, but it's certainly something that we'll have to be content with..

And then just lastly, I think you had counted on about $60 million to $70 million of share buybacks in your original guidance.

You've done $29 million so far, how do you view that going forward?.

The current guidance, we have not updated the projection for share repurchase, so we're still looking at about $70 million in this forecast. Clearly, there is upside to that, if we continue at our current pace. And so could there be another $0.01 or $0.02 of accretion, if we continue to share repurchase at our current pace..

And we'll move on to Corinna Freedman with Wedbush Securities..

You've just seen great collaborations during the quarter, is there anything that you're working on for back-to-school that you can share?.

Yes, the collaborations have been really successful for us. So as you know we did very well with this collaboration with the blogger, the Blond Salad with Steve Madden and we're following that up with a new blogger collaboration, which launches for fall, which is with a blogger called Peace Love Shea.

And Blond Salad is at Italy and Peace Love Shea is from the U.S. and has got a real nice following. So that's something we're excited about. We're also coming back with another collaboration with the Man Repeller for Superga. And we're continuing Kendall and Kylie for Madden Girl.

That's doing very well at Nordstrom and is going to be expanded at Nordstrom for fall..

Is there any details you can give us on the expansion?.

We do have at least one item that's going to be going all door. We're in about 50 right now..

And then what are your initial thoughts on how big you think that Brian Atwood's line could ultimately be? What kind of accretions to the topline do you think it can add?.

We don't even have any shoes yet, so we're not going to put a number on that at the moment, but what I will say is that this is a business where the brand's footprint and the awareness and the affinity from the customer is much, much larger than the sales dollars that it's doing at the moment, so we think there is a big opportunity there..

And we'll move on to Edward Yruma with KeyBanc..

Back to the whole retail versus wholesale question, were there any trends that you saw like the wholesalers bought into better than maybe your own retailer or other execution issues that might explain some of the performance difference?.

Not really, no. I mean look if we had a crystal ball, I do think that we would have done in retail. Sure, I think that we would have liked to -- we did have the dress and sneaker categories represented and we had products that did well in our own retail stores. We would have liked to have had a bigger inventory position there than we did.

We've obviously caught up now. But there was no meaningful change in the trends that wholesale went after versus retail..

And some of your major off-price customers are now moving online.

Can you talk about your philosophy on off-price, online, and whether you expect to participate in those channels?.

It's something that we're evaluating on a case-by-case basis. There is one very big one that we are not going online with, at least for the time being. And there are some others that we likely will participate with. But that's something we'll have to evaluate as we move forward..

And is that baked into this year's plan or is that?.

Everything we know today is baked into this year's forecast..

And we move on to Jeff Van Sinderen with B. Riley..

Ed, I wonder if you could just follow-up a little bit more on how you think your retail partners are approaching managing inventory, how you're approaching managing inventory? As you look forward, I know it's still early, but as you look toward the important second half of the year, do you think that you need to have more on-hand inventory to ship out once, I know you've got short lead times.

But maybe just give us a little more color on how you're thinking about that?.

I mean, in terms of how our retail partners, our wholesale customers are approaching in, I think, sure, they have gotten a little bit more cautious, given the slow start to the year. The only meaningful thing I would call out is we are seeing people tell us that they'd like to take their boot skin a little bit later this year.

So some of the boots and booties that in prior years we would ship June 25, people are now pushing those out to July and August. It will cause some shifting steadily between Q2 and Q3 in our wholesale sales. But in terms of how we're approaching inventory, in these types of environments, we really focus on inventory management.

And I think you saw it in the numbers today that we came out of first quarter, actually, touchdown versus the prior year. And we're going to continue to really focus on that in this kind of uncertain time..

And then, maybe you can just give us a quick update on performance in your outlet stores.

Just wondering if there's a difference there versus your full-price stores? And then maybe just touch on how your newest outlet stores are performing versus kind of how you're planning them?.

The outlets are performing considerably better than the full-price stores and we continue to feel good about the performance in the outlets that we've been opening and we're continuing to be very optimistic about that business.

We hired a new President of outlet earlier this year, very experienced guy who has outlets run for Ralph Lauren, Calvin Klein, Kenneth Cole, Tommy Hilfiger and he has made some important changes to the way we do things and we feel very good about how that business is trending, certainly considerably better than the full-priced stores right now..

And then finally, anymore color that you could give us on international? And maybe which regions do you expect to drive growth in international as we look towards the second half?.

The biggest one is Asia. Our partner in China is called GRI and they continue to do very well. We're up to about 50 stores there and something like 90-concessions or shop-in-shops. We're opening another 10 freestanding stores in China this year and the comp performance is also very strong there.

So that's probably the one that we're the most excited about, but also excited about the UAE, obviously, specifically Dubai, 23 stores there. We're opening another five this year and they've recently started a big marketing push in Dubai, a lot of outdoor advertising and other advertising. So that's exciting.

And then the next one I would call out is probably Mexico, continues to perform very well..

And Sam Poser with Sterne, Agee, we'll have our next question..

Couple of things, your original guidance called for tax rate in the mid-37s, correct?.

That's right, yes..

And you're going to get about a $0.05 from the reduction of this tax rate for the full year, is what it just looks like the quick fact?.

Yes, I think it's about $0.04, but it's in and around there..

Your inventory is very clean.

Can you talk about that inventory position at wholesale versus retail?.

Sure. It was about flat in both. We were down 1% in wholesale and up 1% in Retail. Again, in Retail, remember though we have 123 stores at the end of first quarter versus 110 a year ago. So on a per store basis it's down about 10%..

So arguably your Retail part of the guidance or the direction you gave for the second quarter is predicated on continuing need for promotional activity at Retail to get the inventories to sort of line in with the same-store sales, and so what I mean arguably you would like to see it a little bit cleaner just based on the trend, is that a fair way of looking at it?.

No, I think we came into the quarter where we wanted to be..

And then just to understand the business, the trends at retail.

Basically the wholesale partners can buy less items in bigger ways, and you have to show us a larger spread at retail, and arguably, there is less of a spread of new compelling product this year than there was a year ago, despite the strength of the athletic and the dress better?.

It's a fair statement, yes..

And then lastly, part of the conversation you had about your growth and you margins were expectations in the bag and accessory business, which was basically flat.

How do you see that going for the balance of the year, because that's generally been a higher margin business?.

You should see that topline growth accelerate in accessories. The handbags continue to do well. We were around 10% growth in handbags, but there was a drag in first from some of the other categories. We've mentioned, I believe earlier belts and sunglasses. And that drag should go away as we go forward.

And so you should see accessories improve from starting in Q2..

And then lastly, Elizabeth and James, is that an ongoing situation or is that something, now that you have Brian Atwood, that one is going to sub-out the other?.

It's the latter. We have discontinued Elizabeth and James and are focusing on Atwood in the higher tier market..

And we'll move on to Steve Marotta with CL King & Associates..

How about another question on the disparity between retail and wholesale in the first quarter? As it pertains to your inventory turns, maybe this renders the question moot, but is it fair to say that there is more selling activity at wholesale in the first quarter and more reorder activity at wholesale in the second quarter?.

Yes. That's fair..

So that could also be part of the disparity, could it not?.

It could. We do expect the wholesale rate to slow a little bit in second quarter for that reason. Although, again, we still feel pretty good about what we're seeing in trends, especially in our branded Wholesale Footwear business. We do think the private label will slow a little bit, but the branded continues to travel on..

And actually that leads to my follow-up question, in previous calls, Ed you've spoken about Steve Madden footwear more or less growing at well above trends, taking market share.

And Ed, putting words in your mouth on previous calls, trees can't grow to the sky, but with the double-digit growth that is still being experienced in Steven Madden branded footwear, I assume your market shares well certainly would be at peak.

And can you talk a little bit about where it could go from here and when you expect the trend to normalize?.

I mean we've been very pleased with the continued growth that we've seen in Steve Madden Women's. And as I said, I think part of that is, the retailers really relaying on the guys who perform for them and strongest brands. We're seeing, I'd say, at this moment relatively fewer sort of new entrance into the departments in our key stores.

Going forward, of course, we always play into that business to go to a more modest growth rate, but right now the trends remain strong..

And next we'll go to Danielle McCoy with Brean Capital..

I guess just a little bit on the Men's, up double-digits this quarter.

What was some of the changes that you feel really pushed this turn in the Men's business? And what are some of the stronger products that you guys are seeing and any growth from here on?.

Thanks. I'm glad you brought that up, because Men's is really a bright spot. We made some changes to the leadership team last year, and I believe we've talked about this in prior calls, so forgive me if I'm repeating myself.

But we really worked to better define the brand architecture here and really define what Steven Madden stands for and what Madden, our more moderately price line stands for. We elevated Steven Madden in terms of the details, the styling, the quality.

And Madden, which before some times just looked like cheaper Steven Madden, we've really focused that on the younger consumer and more casual products. And the response from the retailers and the consumers has been great. Of course, Men's is also really trending better than Women's overall right now.

There is more fashion excitement in Men's than in Women's. These chuckle boots have been a real great driver for us and for some others a very strong category and we continue to do very well with our fashion dress shoes as well. So we're excited about what we're seeing in Men's and we expect that trend to continue.

And I think that's a business that could be up for us high-teens this year..

Next we move on to Chris Svezia with Susquehanna Financial..

Two questions for you. I guess, one, any differences among your wholesale channels in terms of how they performed or what they're seeing? And secondarily, just sandal, I mean much in dress and some open toed, and pertaining to address, but any color as it pertains to the sandalized business is a flat business, as we've come through here.

And is it part because retailers want to take boots a little bit later than anticipating the sandal business to carry a little bit later through the season, just any thoughts about that?.

The first part of the question was about differences and who we sell to, and there are always going to be pockets of strength and pockets of weakness among our wholesale customers. But I don't think there is anything meaningful to call out, in terms of differences by channel.

And then in terms of sandals, for obvious reasons, but this weather, the sandals started off slow this year, but we've really seen sandal start to pickup of late. And it's really anything with jewels on it, anything with bling, is any kind of ornamentation is really performing quite well.

So we feel much better about what we're seeing from sandals right now.

In terms of bringing boots in later, yes, I think if you recall last year, there was a late start to spring and it was also a late start to the boot season, because I think people had just started buying sandals and other spring products relatively late and they weren't ready to start buying boots in July.

And I think folks are looking for a similar pattern this year, and that's why they are taking the boots in a little bit later..

And next we'll move to Mike Richardson with Sidoti..

I just have really just one follow-up from before. Obviously, traffic in general has been pretty soft at retail.

Just wondering what your sense is in general on sort of inventory levels at the department stores?.

I think in some cases they are a little heavy. I think that most people have tried to be, most folks are trying to be pretty proactive, about moving through inventory. So I wouldn't say there is a ton of excess inventory in the channel, but in fact the matter is that it was a tough start to the year.

And I think a lot of people were, a lot of retailers missed their sales plan. Anytime that happens, inventory is going to backup a little bit..

And there are no further questions at this time. I would like to turn the call back over to Mr. Ed Rosenfeld for any additional or closing remarks..

Well, thanks so much for joining us today. And we look forward to speaking to you on the second quarter call..

And that does conclude today's call. We thank you for your participation..