MADDEN’S OFFBEAT STYLE HITS ITS STRIDE
Byline: Melanie Kletter
NEW YORK — Steve Madden doesn’t seem like the type of fashion executive anyone would take seriously.
He wears baseball caps and jeans to analyst meetings, he’s got those bizarre chicken ads, he gets distracted easily, doesn’t sit still for a second and got started by designing clunky sandals and oversize platforms for the sort of downtown girls he would date.
Madden speaks as if he’s stuck in the Sixties, often describing his products as “cool” and “hip.” While his company has expanded into many categories, branding doesn’t seem to have penetrated his vocabulary yet.
But guess again. Madden is among the few fashion firms that Wall Street actually likes. While fashion giants such as Donna Karan, Tommy Hilfiger and Ralph Lauren have seen their stocks tumble in recent months, Madden’s stock has done quite well in the last year, hitting a 52-week high of 22 11/16 on April 25, and has outperformed many other apparel firms.
The company’s growth has been impressive. Sales climbed to $163 million in 1999, from $46 million in 1996, and earnings results have beaten estimates for the last dozen quarters.
Madden is now rapidly opening its own stores in trendy areas such as Manhattan’s 34th Street and delving into new product categories like outerwear and leather sportswear, and a line of shoes and products for girls and tweens under the new Stevies label.
In addition, the company recently formed Madden Direct to oversee its blossoming Internet business and other direct-to-consumer operations such as catalogs and fulfillment.
In an interview with WWD at the company showroom at 1370 Sixth Avenue in New York, Madden reflected on his quick ascension and the future of the company he founded in 1990 with about $1,000 in the bank.
A lively redhead, Madden jumps up as soon as an idea pops into his head, and in the space of an hour he repeatedly leapt up to take phone calls and chat with other employees.
“It was sort of an accident that I tapped into this age group,” said Madden, a Long Island native. “Originally, I started making shoes for the sort of girls I would date.”
Analysts and industry executives praised the company for its quick inventory turn, innovative product and strong management team. Many said the company is well on its way from being a trendy footwear resource to the next megabrand for juniors.
“One key to their success is that they turn their inventory at a rapid rate, about nine or 10 times annually,” said Steve Richter, an analyst at Tucker Anthony. “Their growth has been well managed, and the brand continues to gain strength.”
Joseph Teklits, analyst with Ferris Baker Watts, expects sales to reach $213.5 million this year and $260 million in 2001.
“The Steve Madden brand continues to spread its reach, the Stevies brand has yet to ship, there are significant company-owned retail opportunities and the Internet business remains explosive,” Teklits noted.
Madden, who began working in the industry as a stockboy while in high school, talks about his business with passion and excitement.
“It was like a bug that bit me,” Madden, now 42, said about his early days in the business.
After spending some time on both the retail and the wholesale ends of the shoe world at various companies, he decided to start his namesake firm.
His concept of quirky, fashionable footwear, such as towering platform sandals and chunky loafers, caught on quickly, and the firm soon became a leading shoe vendor in many department stores and specialty boutiques.
“First and foremost we are a product company, and product is what comes first,” he said. “We make a lot of bread-and-butter styles, but we design new shoes practically every day.”
Becoming a public company in 1993 helped Madden to expand into new directions, he noted. While the demands of being public require constant travel and meetings with Wall Street executives, Madden, who lives in the West Village, still has a firm hand in the design of the shoes and often frequents the nearby SoHo store.
Its wholesale business, which includes the core Steve Madden brand, as well as the LEI and David Aaron footwear brands, is the firm’s largest component, accounting for about 70 percent of sales. Distribution covers more than 2,500 doors, 60 percent in department stores and 40 percent, specialty stores, according to Rhonda J. Brown, Madden’s president and chief operating officer.
Madden attributes the company’s rapid growth in large part to the care put into the design elements of the product. In addition, diversified sourcing has enabled the firm to form a quick turnover policy, in which new shoes are developed, tested and in the market in the space of 30 to 90 days. Growth in wholesale is expected to come from widening distribution and building more Steve Madden in-store shops in major department stores. The company’s own stores are another key element of Madden’s growth strategy. Steve Madden stores are sprouting up in trendy destinations, such as Michigan Avenue in Chicago and the Third Street Promenade in Santa Monica.
Madden now operates 57 units, including four outlets and a David Aaron store, which in total produce about 30 percent of overall business. Company executives expect there is room for at least 100 stores, and plans call for about 10 new stores a year going forward.
“We have to be profitable in every location,” Brown said. “And we are very picky about where we want our stores to be.”
The stores are an important venue for testing new designs, and the newest Madden locations, including the 3,000-square-foot 34th Street store, include a larger selection of Madden accessories and sportswear, as well as a more modern design featuring exposed ceilings and wider wall units.
Among the company’s most ambitious projects is the new Stevies line for girls and tweens, which will bow at retail this fall and includes the company-produced line of footwear and licensed products.
“This is a natural step for us,” said Brown. “We get e-mails all the time asking for a younger line, and this age group has such a strong fashion sense.”
Madden has already signed five deals to bring the Stevie’s brand into a wide range of accessories, and analysts expect that the label could generate sales of as much as $10 million in 2001.
Licensing is an area where Madden sees the possibility for tremendous growth. Madden now has nine different licensed product categories, including accessories, handbags, hosiery, leather sportswear and outerwear, eyewear and belts.
The firm has had some problems with licenses, however.
For its first significant push into sportswear, Madden launched a denim and sportswear line in 1998 with Jordache Industries. But the line “wasn’t working,” and the company ended the deal about six months ago, Madden said. The firm also had a licensing agreement for intimate apparel, which has since been terminated.
“You can’t just stick your name on something,” Madden said. “At first, it is flattering because all of these people were coming up and wanting to put my name on something, but we only want to add things that are cool and that make sense for us.”
Elaine Brod, president of accessories firm A. Brod Inc., recently launched Steve Madden hair accessories and cold-weather items.
“There is tremendous interest in the categories and the Steve Madden name,” Brod said. “The name is so recognizable, and as soon as we opened the line, people started buying.”
Madden said he would like to get back into sportswear but is taking his time and searching for the right partner. Other potential categories include pajamas and bathrobes, Madden said.
For now, the firm is concentrating on creating a consolidated design approach among the different licensing categories, and Madden said he has been working closely with the licensees to develop more cohesiveness. Madden recently introduced an accessories concept shop in Macy’s East that for the first time pulls together its licensed products in a single location. If successful, a rollout is planned.
The Internet has emerged as a key marketing and sales vehicle for the company. Madden introduced e-commerce on the site in 1998, and after receiving strong feedback from consumers, the firm decided to upgrade the site and add new features.
In 1999, Web site sales topped $1 million, a whopping 700 percent increase from the previous year, and Madden executives like to say that the site has the potential to be “its biggest store.”
In addition to product, the site includes a plethora of information about Madden himself, including his favorite movies, his astrological sign and e-mail address.
Looking ahead, Madden also wants to take the brand international and is eyeing the United Kingdom as a first step.
He said, “We feel we have so much potential, and we are not yet known in Europe.”