The following discussion of our financial condition and results of operations should be read in conjunction with the unaudited Financial Statements and Notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q.

This Quarterly Report contains certain forward-looking statements as that term is defined in the federal securities laws. The events described in forward-looking statements contained in this Quarterly Report may not occur. Generally forward-looking statements relate to business plans or strategies, projected or anticipated benefits or other consequences of our plans or strategies, projected or anticipated benefits from acquisitions to be made by us, or projections involving anticipated revenues, earnings or other aspects of our operating results. The words "may", "will", "expect", "believe", "anticipate", "project", "plan", "intend", "estimate", and "continue", and their opposites and similar expressions are intended to identify forward-looking statements. We caution you that these statements are not guarantees of future performance or events and are subject to a number of uncertainties, risks and other influences, many of which are beyond our control, that may influence the accuracy of the statements and the projections upon which the statements are based. Factors that may affect our results include, but are not limited to, the risks and uncertainties discussed in our Annual Report on Form 10-K for the year ended December 31, 2008. Any one or more of these uncertainties, risks and other influences could materially affect our results of operations and whether forward-looking statements made by us ultimately prove to be accurate. Our actual results, performance and achievements could differ materially from those expressed or implied in these forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statements, whether from new information, future events or otherwise.

Overview:
($ in thousands, except retail sales data per square foot and earnings per share)

Steven Madden, Ltd. and its subsidiaries ("the Company") designs, sources, markets and retails fashion-forward footwear for women, men and children. In addition, we design, source, market and retail name brand and private label fashion accessories, such as handbags and belts, through our Accessories Division. We distribute products through department and specialty stores, our retail stores, our e-commerce website throughout the United States and through special distribution arrangements in Canada, Europe, Central and South America, Australia and Asia. Our product line includes a broad range of updated styles which are designed to establish or capitalize on market trends, complemented by core products. We have established a reputation for our creative designs, popular styles and quality products at accessible price points.

Prior to 2009, our international business operated under the "first cost" model and thus the revenues derived from our international business were included in Commissions and Licensing Fees on the Condensed Consolidated Statements of Income. In order to improve operating efficiencies, and to give our international partners better visibility in the process, as of January of 2009, we have changed the operating model for our international business to the "wholesale" model. Under the "wholesale" model, we will be able to manage inventory levels, improve delivery times, and increase our ability to receive payments on a timely basis. As a result of this change, commencing with the first quarter of 2009, international revenues are now included in the Net Sales line on the Condensed Consolidated Statements of Income. For the quarter ended September 30, 2009, our international business contributed net sales of $5,932, or 4.2% of our net sales.

Net sales for the third quarter of 2009 also reflect shifts related to our Candies businesses, which we distribute exclusively to Kohl's. Pursuant to a mutual agreement with Kohl's, Candies has been transitioned from a wholesale model to a "first cost" model, and therefore revenues for the third quarter of 2009 are included in Commissions and Licensing Fees on the Condensed Consolidated Statements of Income. As a result of this change, net sales for the third quarter of 2009 does not reflect Candies revenue while net sales in the third quarter of 2008 reflected revenue of $4,427 for the Candies business.

We continued the positive sales and earnings growth realized by the Company during the first half of 2009 by achieving record sales and earnings in the third quarter of 2009. Our consolidated net sales increased 9% to $140,138 in the third quarter of 2009 when compared to consolidated net sales of $128,093 achieved in the same period of last year. A decrease in markdowns and allowances resulting from better than expected retail sell-throughs, as well as improvements in other operating efficiencies caused consolidated gross margin to improve in

On July 8, 2009, we acquired certain of the assets constituting the Zone 88 and Shakedown Street lines of SML Brands, LLC (together "Zone 88"), a subsidiary of Aimee Lynn, Inc. SML Brands designs and markets primarily private label accessories, principally handbags, for mass merchants and mid-tier retailers. The acquisition was completed for $1,348 in cash. We believe this acquisition will enable us to expand our accessories business in the private label arena with value priced customers. Zone 88, which is sold under our new Madden Zone Division, contributed net sales of $5,318 in the third quarter of 2009.

On September 2, 2009, the Company expanded its brand portfolio by entering into a license agreement with Dualstar Entertainment Group, LLC, under which the Company has the right to use the "Olsenboye" trademark in connection with the sale and marketing of footwear and accessories exclusively to J.C. Penney. The agreement requires the Company to make royalty and advertising payments equal to a percentage of net sales and a minimum royalty and advertising payment in the event that specified net sales targets are not achieved. The agreement expires on December 31, 2011, but is renewable, at our option, for one three-year term, if certain conditions are met.

On October 20, 2009, the Company made progress on its stated goal to evolve Steve Madden into a global lifestyle brand by signing a license agreement for our Steve Madden brand for the design, manufacture and worldwide distribution of women's fashion apparel. The new fashion apparel line, which will initially ship in spring 2010, joins our existing licenses for cold weather accessories, sunglasses, eyewear, outerwear, bedding and hosiery offerings. Management is pleased to be expanding the Company's presence beyond footwear and accessories and believes the new apparel lines mark a very logical extension of the Company's brands.

In our Retail Segment, same store sales (sales of those stores, including the e-commerce website, that were in operation throughout the third quarters of 2009 and 2008) decreased 7.6%. As of September 30, 2009, we had 88 stores in operation, compared to 99 stores as of September 30, 2008. During the twelve months ended September 30, 2009, sales per square foot was $628 compared to $644 achieved in the same period of 2008.

As of September 30, 2009, our total inventory decreased to $29,678 from $40,740 as of September 30, 2008, and our annualized inventory turnover improved to 9.5 times in the third quarter of 2009 from 8.1 times in the third quarter of 2008. Our accounts receivable average days outstanding improved to 52 days in the third quarter of 2009 compared to 57 days in the third quarter of the previous year. As of September 30, 2009, we had $125,691 in cash, cash equivalents and marketable securities, no short- or long-term debt, and total stockholders' equity of $249,898.

                         Selected Financial Information
                               Three Months Ended
                                  September 30,
                                ($ in thousands)

                                                  2009                2008

CONSOLIDATED:

Net sales                                   $ 140,138   100 %   $ 128,093   100 %
Cost of sales                                  78,462    56        75,114    59
Gross profit                                   61,676    44        52,979    41
Other operating income - net of expenses        5,726     4         4,497     4
Operating expenses                             39,088    28        39,770    31
Income from operations                         28,314    20        17,706    14
Interest and other income, net                    488     1           248     0
Income before income taxes                     28,802    21        17,954    14
Net income                                     17,831    13        11,088     9

By Segment:
WHOLESALE SEGMENT:

Net sales                                   $ 111,957   100 %   $  97,343   100 %
Cost of sales                                  65,837    59        62,006    64
Gross profit                                   46,120    41        35,337    36
Operating expenses                             22,891    20        21,453    22
Income from operations                         23,229    21        13,884    14

RETAIL SEGMENT:

Net sales                                   $  28,181   100 %   $  30,750   100 %
Cost of sales                                  12,625    45        13,108    43
Gross profit                                   15,556    55        17,642    57
Operating expenses                             16,197    57        18,317    59
Loss from operations                             (641 )  (2 )        (675 )  (2 )
Number of stores                                   88                  99

FIRST COST SEGMENT:

Other commission income - net of expenses   $   4,974   100 %   $   4,101   100 %

LICENSING SEGMENT:

Licensing income - net of expenses          $     752   100 %   $     396   100 %