UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-Q/A
                                (Amendment No. 1)


[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the quarterly period ended              September 30, 2005
--------------------------------------------------------------------------------

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the transition period from  __________________    to     ___________________

                         Commission File Number 0-23702
                                                -------

                               STEVEN MADDEN, LTD.
--------------------------------------------------------------------------------
             (Exact name of Registrant as specified in its charter)


          Delaware                                       13-3588231
-------------------------------             ------------------------------------
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
incorporation or organization)

52-16 Barnett Avenue, Long Island City, New York                11104
--------------------------------------------------------------------------------
 (Address of principal executive offices)                     (Zip Code)

Registrant's telephone number, including area code          (718) 446-1800
--------------------------------------------------------------------------------

Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X]  No [ ]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [X] No [ ]

Indicate by check mark whether the registrant is a shell company (as defined
by Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

As of November 4, 2005, the latest practicable date, there were 13,700,567
shares of common stock, $.0001 par value, outstanding.


                                Explanatory Note

Steven Madden, Ltd. (the "Company") is filing this Amendment No. 1 to its
Quarterly Report on Form 10-Q for the quarter ended September 30, 2005, as filed
with the Securities and Exchange Commission on November 9, 2005 to (1) restate
the full text of the Quarterly Report as originally filed, (2) to indicate on
the cover that the Company is not (and at the time of the filing was not) a
shell company as defined in Rule 12(b)-2 of the Securities and Exchange Act of
1934, as amended, and (3) correct errors in and refile Exhibits 31.1, 31.2, 32.1
and 32.2.


                               STEVEN MADDEN, LTD.
                                   FORM 10-Q/A
                                QUARTERLY REPORT
                               September 30, 2005


                                TABLE OF CONTENTS



PART I- FINANCIAL INFORMATION
ITEM 1.    Condensed Consolidated Financial Statements (Unaudited):

           Consolidated Balance Sheets......................................   3

           Consolidated Statements of Operations............................   4

           Consolidated Statements of Cash Flows............................   5

           Notes to Unaudited Condensed Consolidated Financial Statements...   6


ITEM 2.    Management's Discussion and Analysis
           of Financial Condition and Results of Operations.................  12

ITEM 3.    Quantitative and Qualitative Disclosures About Market Risk.......  26

ITEM 4.    Controls and Procedures..........................................  27


PART II - OTHER INFORMATION
ITEM 1.    Legal Proceedings................................................  27

ITEM 2.    Unregistered Sales of Equity Securities and Use of Proceeds......  28

ITEM 6.    Exhibits.........................................................  28

Signature...................................................................  29

                                                                               2


PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements

STEVEN MADDEN, LTD. AND SUBSIDIARIES

Consolidated Balance Sheets
(in thousands)



                                                                     September 30,   December 31,    September 30,
                                                                         2005            2004            2004
                                                                     ------------    ------------    ------------
                                                                      (unaudited)                     (unaudited)
                                                                                                     
ASSETS
Current assets:
   Cash and cash equivalents                                         $     55,708    $     30,853    $     18,128
   Accounts receivable, net of allowances of $703, $536 and $688            2,986           3,322           3,223
   Due from factor, net of allowances of $4,298, $2,379 and $1,973         45,508          33,711          45,370
   Inventories                                                             22,663          34,384          30,441
   Marketable securities - available for sale                              15,449          12,784          10,183
   Prepaid expenses and other current assets                                1,329           1,287           2,403
   Prepaid taxes                                                              349           2,255             405
   Deferred taxes                                                           2,566           2,498           2,292
                                                                     ------------    ------------    ------------

        Total current assets                                              146,558         121,094         112,445

Property and equipment, net                                                20,855          20,715          20,372
Deferred taxes                                                              5,943           5,780           5,618
Deposits and other                                                            495             435             428
Marketable securities - available for sale                                 28,470          36,340          40,225
Cost in excess of fair value of net assets acquired                         1,547           2,066           2,066
                                                                     ------------    ------------    ------------

                                                                     $    203,868    $    186,430    $    181,154
                                                                     ============    ============    ============

LIABILITIES
Current liabilities:
   Accounts payable                                                  $     10,973    $     13,450    $      7,571
   Accrued expenses                                                         8,293           5,807           4,401
   Accrued incentive compensation                                           1,938             420             292
                                                                     ------------    ------------    ------------
        Total current liabilities                                          21,204          19,677          12,264

Deferred rent                                                               2,373           2,088           2,141
                                                                     ------------    ------------    ------------

                                                                           23,577          21,765          14,405
                                                                     ------------    ------------    ------------

Commitments, contingencies and other

STOCKHOLDERS' EQUITY
Preferred stock - $.0001 par value, 5,000 shares authorized;
   none issued; Series A Junior Participating preferred stock -
   $.0001 par value, 60 shares authorized; none issued
Common stock - $.0001 par value, 60,000 shares authorized, 15,934,
   14,608 and 14,582 shares issued, 13,700, 12,818 and
   13,054 outstanding                                                           2               1               1
Additional paid-in capital                                                 91,872          80,631          79,395
Retained earnings                                                         115,212         103,451         103,078
Unearned compensation                                                         (26)           (703)         (1,663)
Other comprehensive gain:
   Unrealized gain (loss) on marketable securities                         (1,343)         (1,024)           (829)
Treasury stock - 2,234, 1,790 and 1,528 shares at cost                    (25,426)        (17,691)        (13,233)
                                                                     ------------    ------------    ------------

                                                                          180,291         164,665         166,749
                                                                     ------------    ------------    ------------

                                                                     $    203,868    $    186,430    $    181,154
                                                                     ============    ============    ============


See accompanying notes to consolidated financial statements - unaudited        3

STEVEN MADDEN, LTD. AND SUBSIDIARIES

Consolidated Statements of Operations
(unaudited)
(in thousands, except per share data)



                                                                        Three Months Ended               Nine Months Ended
                                                                           September 30,                   September 30,
                                                                    ----------------------------    ----------------------------
                                                                        2005            2004            2005            2004
                                                                    ------------    ------------    ------------    ------------
                                                                                                                 
Net sales:
   Wholesale                                                        $     71,018    $     64,851    $    196,210    $    179,722
   Retail                                                                 29,049          23,759          88,151          73,890
                                                                    ------------    ------------    ------------    ------------

                                                                         100,067          88,610         284,361         253,612
                                                                    ------------    ------------    ------------    ------------

Cost of sales:
   Wholesale                                                              48,761          45,629         135,314         122,472
   Retail                                                                 15,075          11,531          45,988          35,706
                                                                    ------------    ------------    ------------    ------------

                                                                          63,836          57,160         181,302         158,178
                                                                    ------------    ------------    ------------    ------------

Gross profit:
   Wholesale                                                              22,257          19,222          60,896          57,250
   Retail                                                                 13,974          12,228          42,163          38,184
                                                                    ------------    ------------    ------------    ------------

                                                                          36,231          31,450         103,059          95,434

Commission and licensing fee income - net                                  2,217           1,175           5,241           3,224
Operating expenses                                                       (29,447)        (26,758)        (88,902)        (79,635)
Impairment of cost in excess of fair value of net assets acquired             --              --            (519)             --
                                                                    ------------    ------------    ------------    ------------

Income from operations                                                     9,001           5,867          18,879          19,023
Interest and other income, net                                               504             488           1,398           1,497
                                                                    ------------    ------------    ------------    ------------

Income before provision for income taxes                                   9,505           6,355          20,277          20,520
Provision for income taxes                                                 3,992           2,669           8,516           8,618
                                                                    ------------    ------------    ------------    ------------

Net income                                                          $      5,513    $      3,686    $     11,761    $     11,902
                                                                    ============    ============    ============    ============

Basic income per share                                              $       0.41    $       0.28    $       0.89    $       0.90
                                                                    ============    ============    ============    ============

Diluted income per share                                            $       0.39    $       0.26    $       0.85    $       0.83
                                                                    ============    ============    ============    ============

Basic weighted average common shares outstanding                          13,503          13,177          13,272          13,243
Effect of dilutive securities - options/warrants/restricted stock            542           1,043             504           1,085
                                                                    ------------    ------------    ------------    ------------

Diluted weighted average common shares outstanding                        14,045          14,220          13,776          14,328
                                                                    ============    ============    ============    ============


See accompanying notes to consolidated financial statements - unaudited        4

STEVEN MADDEN, LTD. AND SUBSIDIARIES

Consolidated Statements of Cash Flows
(unaudited)
(in thousands)



                                                                                                     Nine Months Ended
                                                                                                       September 30,
                                                                                                 ------------------------
                                                                                                    2005          2004
                                                                                                 ----------    ----------
                                                                                                                
Cash flows from operating activities:
   Net income                                                                                    $   11,761    $   11,902
   Adjustments to reconcile net income to net cash provided by (used in) operating activities:
      Depreciation and amortization                                                                   4,037         3,654
      Impairment of cost in excess of fair value of net assets acquired                                 519
      Non-cash compensation                                                                             677         1,479
      Provision for bad debts                                                                         2,086           283
      Deferred rent expense                                                                             285           313
      Realized loss (gain) on marketable securities                                                     182           (70)
      Changes in:
        Accounts receivable                                                                             169           822
        Due from factor                                                                             (13,716)      (16,669)
        Inventories                                                                                  11,721        (6,583)
        Prepaid expenses, prepaid taxes, deposits and other assets                                    1,771         4,248
        Accounts payable and other accrued expenses                                                   1,527        (4,687)
                                                                                                 ----------    ----------

           Net cash provided by (used in) operating activities                                       21,019        (5,308)
                                                                                                 ----------    ----------

Cash flows from investing activities:
   Purchase of property and equipment                                                                (4,144)       (5,635)
   Purchase of marketable securities                                                                 (1,156)      (26,132)
   Sale/redemption of marketable securities                                                           5,629         7,150
                                                                                                 ----------    ----------

           Net cash provided by (used in) investing activities                                          329       (24,617)
                                                                                                 ----------    ----------

Cash flows from financing activities:
   Proceeds from options and warrants exercised                                                      13,009           223
   Cash in lieu of restricted stock                                                                  (1,767)
   Purchase of treasury stock                                                                        (7,735)       (5,242)
   Repayment of lease obligations                                                                        --            (1)
                                                                                                 ----------    ----------

           Net cash provided by (used in) financing activities                                        3,507        (5,020)
                                                                                                 ----------    ----------

Net increase (decrease) in cash and cash equivalents                                                 24,855       (34,945)
Cash and cash equivalents - beginning of period                                                      30,853        53,073
                                                                                                 ----------    ----------

Cash and cash equivalents - end of period                                                        $   55,708    $   18,128
                                                                                                 ==========    ==========


See accompanying notes to consolidated financial statements - unaudited        5


STEVEN MADDEN, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements - Unaudited
September 30, 2005
($ in thousands except per share data)


NOTE A - BASIS OF REPORTING

The accompanying unaudited financial statements have been prepared in accordance
with accounting principles generally accepted in the United States of America
("GAAP") for interim financial information and pursuant to the rules and
regulations of the Securities and Exchange Commission (the "SEC"). Accordingly,
they do not include all of the information and footnotes required by GAAP for
complete financial statements. In the opinion of management, the accompanying
statements include all adjustments (consisting only of normal recurring items)
that are considered necessary for a fair presentation of the financial position
of Steven Madden, Ltd. and subsidiaries (the "Company") and the results of its
operations and cash flows for the periods presented. The results of its
operations for the three- and nine-month periods ended September 30, 2005 are
not necessarily indicative of the operating results for the full year. It is
suggested that these financial statements be read in conjunction with the
financial statements and related disclosures for the year ended December 31,
2004 included in the Annual Report of Steven Madden, Ltd. on Form 10-K filed
with the SEC on March 16, 2005, as amended on April 11, 2005.

Certain reclassifications were made to prior year amounts to conform to the 2005
presentation.

NOTE B - CASH AND CASH EQUIVALENTS

On July 1, 2005, the Company terminated its factoring agreement with Capital
Factors, Inc. ("Capital") and entered into a new factoring agreement with GMAC
Commercial Finance, LLC (See note M[4]). Pursuant to the termination, the
Company deposited $10,114 in an escrow account with Capital as collateral
against payments of outstanding letters of credit facilitated by Capital. The
escrow balance as of September 30, 2005 was $2,339 and was categorized as Cash
and Cash Equivalents on the Balance Sheet. As of November 4, the remaining
balance in the escrow account was reduced to $464.

NOTE C - MARKETABLE SECURITIES

Marketable securities consist primarily of corporate bonds, U.S. treasury notes
and government asset-backed securities with maturities greater than three months
and up to five years at the time of purchase, as well as marketable equity
securities. These securities, which are classified as available-for-sale, are
carried at fair value with unrealized gains and losses, net of any tax effect,
reported in shareholders' equity as accumulated other comprehensive income
(loss). Amortization of premiums and discounts are included in interest income
and are not material. The values of these securities may fluctuate as a result
of changes in market interest rates and credit risk.

NOTE D - INVENTORIES

Inventories, which consist of finished goods on hand and in transit, are stated
at the lower of cost (first-in, first-out method) or market.

NOTE E - REVENUE RECOGNITION

The Company recognizes revenue on wholesale sales when products are shipped
pursuant to our standard terms which are freight on board (FOB) warehouse or
when products are delivered to the consolidators as per the terms of the
customers purchase order. Sales reductions for anticipated discounts, allowances
and other deductions are recognized when sales are recorded. Retail sales are
recognized when the payment is received from customers and are recorded net of
returns. The Company earns commission income as a buying agent through its
Adesso-Madden Division by arranging to produce private label shoes to the
specifications of its customers. Commission revenue is recognized as earned when
title of the product transfers from the manufacturer to the customer and is on a
net basis after deducting operating expenses.

                                                                               6


STEVEN MADDEN, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements - Unaudited
September 30, 2005
($ in thousands except per share data)


NOTE E - REVENUE RECOGNITION (CONTINUED)

The Company licenses its Steve Madden trademark for use in connection with the
manufacturing, marketing and sale of belts, handbags, sunglasses, eyewear and
hosiery products. Each license agreement requires the licensee to pay to the
Company a royalty and advertising fee based on net sales as defined in the
various agreements. A minimum royalty and advertising fee is due the Company in
the event that specified net sales targets are not achieved. Licensing revenue
is recognized on the basis of net sales reported by the licensees or, if
greater, minimum guaranteed royalties when received and earned. In substantially
all of the Company's license agreements, the minimum guaranteed royalty is
earned and payable on a quarterly basis.


NOTE F - SALES DEDUCTIONS

The Company supports retailers' initiatives to maximize sales of the Company's
products on the retail floor by subsidizing the co-op advertising programs of
such retailers, providing them with inventory markdown allowances and
participating in various other marketing initiatives of its major customers.
These expenses are reflected in the financial statements as deductions to sales.
For the three- and nine-month periods ended September 30, 2005, the total
deduction to net sales for these expenses was $9,682 and $27,421, respectively,
as compared to $8,158 and $22,782 for the comparable periods in 2004.


NOTE G - COST OF SALES

All costs incurred to bring finished products to the Company's distribution
center are included in the cost of sales line item on the Consolidated Statement
of Operations. These include purchase commissions, letter of credit fees,
brokerage fees, FOB costs, sample expenses, custom duty, inbound freight, labels
and product packaging. All warehouse and distribution costs are included in the
operating expenses line item of the Company's Consolidated Statement of
Operations. The Company classifies all shipping costs to customers as operating
expenses. The Company's gross margins may not be comparable to other companies
in the industry because some companies may include warehouse distribution, and
royalty expenses as a component of cost of sales, while other companies report
on the same basis as the Company and include them in operating expenses.


NOTE H - IMPAIRMENT OF COST IN EXCESS OF FAIR VALUE OF NET ASSETS ACQUIRED

On May 1, 1998, the Company purchased certain assets from and assumed certain
liabilities of Daniel Scott, Inc. which operated two retail outlet stores under
the name Shoe Biz. The acquisition was recorded at a total cost of approximately
$703, including related expenses, of which $635 was allocated to cost in excess
of fair value of the identifiable net assets acquired ("goodwill"). Prior to the
adoption of Statement of Financial Accounting Standards ("SFAS") No. 142,
"Goodwill and Other Intangible Assets" in 2002, the Company had amortized
approximately $116 of the goodwill, resulting in a net value of $519. During the
year ended December 31, 2004, the Company operated four stores under the Shoe
Biz name. In order to consolidate its resources to the Steve Madden brand, the
Company has decided to discontinue using the Shoe Biz name. As a result, as of
June 30, 2005, one Shoe Biz store has been converted to a Steve Madden store,
while two other Shoe Biz stores have been closed. The remaining store operating
under the Shoe Biz name has generated operating losses during the last two
fiscal years and the net present value of the future cash flows of this store is
negative. As a result, the entire balance of the goodwill of $519 is considered
impaired and was recognized as a reduction of income in the second quarter of
2005.

                                                                               7


STEVEN MADDEN, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements - Unaudited
September 30, 2005
($ in thousands except per share data)


NOTE I - NET INCOME PER SHARE OF COMMON STOCK

Basic income per share is based on the weighted average number of common shares
outstanding during the period. Diluted income per share reflects the potential
dilution assuming common shares were issued upon the exercise of outstanding
options and the proceeds thereof were used to purchase outstanding common
shares. Diluted income per share also reflects the unvested and un-issued shares
promised to employees that have a dilutive effect. For the three- and nine-month
periods ended September 30, 2005, none and approximately 185,000 stock options,
respectively, have been excluded from the calculation because inclusion of such
shares would be antidilutive, as compared to approximately 1,210,000 and 135,000
stock options, excluded respectively, for the three- and nine-months ended
September 30, 2004.

NOTE J - STOCK-BASED COMPENSATION

SFAS No. 123, "Accounting for Stock-Based Compensation", encourages the use of
the fair value based method of accounting for stock-based employee compensation.
Alternatively, SFAS No. 123 allows entities to continue to apply the intrinsic
value method prescribed by Accounting Principles Board ("APB") Opinion 25,
"Accounting for Stock Issued to Employees" ("APB Opinion 25"), and related
interpretations and provide pro forma disclosures of net income and earnings per
share, as if the fair value based method of accounting had been applied to
employee awards. The Company has elected to continue to apply the provisions of
APB Opinion 25 and provide the disclosures required by SFAS No. 123 and SFAS No.
148, "Accounting for Stock-Based Compensation - Transition and Disclosure",
which was released in December 2003 as an amendment of SFAS No. 123. The
following table illustrates the effect on net income and earnings per share if
the fair value based method had been applied to all awards.



                                                         Three Months Ended               Nine Months Ended
                                                            September 30,                   September 30,
                                                     ----------------------------    ----------------------------
                                                         2005            2004            2005            2004
                                                     ------------    ------------    ------------    ------------
                                                                                                  
  Reported net income                                $      5,513    $      3,686    $     11,761    $     11,902
  Stock-based employee compensation included in
     reported net income, net of tax                           --             102             165             299
  Stock-based employee compensation determined
     under the fair value based method, net of tax           (735)           (968)         (1,772)         (2,486)
                                                     ------------    ------------    ------------    ------------

  Pro forma net income                               $      4,778    $      2,820    $     10,154    $      9,715
                                                     ============    ============    ============    ============

  Basic income per share:
     As reported                                     $       0.41    $       0.28    $       0.89    $       0.90
     Pro forma                                       $       0.35    $       0.21    $       0.77    $       0.73

  Diluted income per share:
     As reported                                     $       0.39    $       0.26    $       0.85    $       0.83
     Pro forma                                       $       0.34    $       0.20    $       0.74    $       0.68



NOTE K - COMPREHENSIVE INCOME

Comprehensive income for the three- and nine-month periods ended September 30,
2005, after considering other comprehensive income including unrealized loss on
marketable securities of $152 and $319 was $5,361 and $11,442, respectively. For
the comparable periods ended September 30, 2004, after considering other
comprehensive gain (loss) on marketable securities of $200 and $(702),
comprehensive income was $3,886 and $11,200 respectively.

                                                                               8


STEVEN MADDEN, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements - Unaudited
September 30, 2005
($ in thousands except per share data)


NOTE L - RECENTLY ISSUED ACCOUNTING STANDARDS

In December 2004, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 123R, "Share-Based Payment" ("SFAS 123R"), which replaced SFAS No. 123,
"Accounting for Stock-Based Compensation", and superseded APB Opinion 25,
"Accounting for Stock Issued to Employees". SFAS 123R requires that all
share-based payments to employees be recognized in the financial statements
based on their fair values on the date of grant. The Company currently uses the
intrinsic value method to measure compensation expense for stock-based awards.
Note J above, entitled "Stock-Based Compensation", provides pro forma net income
and earnings per share as if the Company had used a fair-value based method
provided by SFAS 123R to measure stock-based compensation for the periods ending
September 30, 2005 and 2004. On April 14, 2005, the SEC amended the compliance
dates for SFAS 123R, which extended the Company's required adoption date of SFAS
123R to the first quarter of 2006. The Company is evaluating the requirements of
SFAS 123R and expects that its adoption will have a material impact on the
Company's results of operations and earnings per share.


NOTE M - COMMITMENTS, CONTINGENCIES AND OTHER

[1]    Indictment:

       On June 20, 2000, Steven Madden, the Company's former Chairman and Chief
       Executive Officer, was indicted in the United States District Courts for
       the Southern District and Eastern District of New York. The indictments
       alleged that Mr. Madden engaged in securities fraud and money laundering
       activities. In addition, the Securities and Exchange Commission filed a
       complaint in the United States District Court for the Eastern District of
       New York alleging that Mr. Madden violated Section 17(a) of the
       Securities Exchange Act of 1934, as amended. On May 21, 2001, Steven
       Madden entered into a plea agreement with the U.S. Attorney's Office,
       pursuant to which he pled guilty to four of the federal charges filed
       against him. In addition, Mr. Madden reached a separate settlement
       agreement with the Securities and Exchange Commission regarding the
       allegations contained in its complaint. As a result, Mr. Madden resigned
       as the Company's Chief Executive Officer and as a member of the Company's
       Board of Directors effective July 1, 2001. Mr. Madden agreed to serve as
       the Company's Creative and Design Chief, a non-executive position. On
       April 4, 2002, Mr. Madden was sentenced in the United States District
       Court for the Southern District of New York to forty-one (41) months'
       imprisonment in connection with two of the federal charges to which he
       pled guilty.

       On May 3, 2002, Mr. Madden was sentenced in the United States District
       Court for the Eastern District of New York to forty-one (41) months'
       imprisonment in connection with the remaining two charges to which he
       pled guilty. The sentences ran concurrently. Under the settlement
       agreement with the Securities and Exchange Commission, Mr. Madden agreed
       not to serve as an officer or director of a publicly traded company for 7
       years. Neither the indictments nor the Securities and Exchange Commission
       complaint allege any wrongdoing by the Company or its other officers and
       directors. Mr. Madden began serving his sentence in September of 2002. On
       April 14, 2005, Mr. Madden was released from federal prison and has
       returned to work at the Company as its Creative and Design Chief, a
       non-executive position.

       In December 2001, the Company purchased a loss mitigation policy to cover
       costs arising out of lawsuits related to the June 2000 federal indictment
       of Steven Madden described above. The policy covers the Company's
       anticipated damages and legal costs in connection with such lawsuits. The
       Company is obligated to pay for damages and costs in excess of the policy
       limits. The cost of the policy was $6.9 million. On June 1, 2004, the
       aforementioned lawsuits were settled for damages and costs that were
       below the policy limits.

                                                                               9


STEVEN MADDEN, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements - Unaudited
September 30, 2005
($ in thousands except per share data)


NOTE M - COMMITMENTS, CONTINGENCIES AND OTHER (CONTINUED)

[2]    Other Actions:

       (a)  On December 15, 2003, the Company commenced an action against LaRue
            Distributors, Inc. ("LaRue") in the United States District Court for
            the Southern District of New York. The Company sought a declaratory
            judgment that the Company properly terminated a license agreement
            with LaRue and monetary damages for breach of the license agreement
            and trademark infringement by LaRue. On January 20, 2004, LaRue
            served an answer and counterclaim alleging that the license
            agreement was improperly terminated by the Company and seeking
            $9,900,000 in compensatory damages, as well as additional punitive
            damages. The parties served cross-motions for summary judgment which
            were submitted to the court on February 28, 2005. On August 1, 2005,
            the parties agreed to a settlement pursuant to which the Company
            paid LaRue $1,500,000 in full satisfaction of any and all claims
            relating to this action. A Stipulation of Dismissal, with prejudice,
            has been filed with the court and the parties have exchanged general
            releases.

       (b)  On or about July 9, 2004, an action was filed in the United States
            District Court for the Southern District of New York against the
            Company by Robert Marc for trademark infringement, captioned Robert
            Marc v. Steven Madden, Ltd. Case No. 04 CV 5354 (JGK). In the
            action, Robert Marc claimed trademark infringement in connection
            with a "bar and dot" design on the sides of certain eyewear. The
            alleged infringing eyeglasses are manufactured and sold by the
            Company's licensee for eyewear, Colors in Optics, which was also a
            defendant in the action. Colors in Optics assumed responsibility for
            the defense of this action. The matter was settled with no payment
            of money by Steven Madden, Ltd. The case was dismissed on May 10,
            2005.

       (c)  On or about December 20, 2004, an action was filed in the United
            States District Court for the Central District of California against
            the Company by Global Brand Marketing, Inc. (GBMI) for patent
            infringement, captioned Global Brand Marketing, Inc. v. Steven
            Madden, Ltd., Case No. CV 04-10339 (RJK-AJW (RZx)). In the action,
            GBMI claimed infringement of a design patent in connection with a
            shoe sold by Steven Madden, Ltd. referred to as the "Ronan". The
            parties settled the matter on or about April 5, 2005 and a dismissal
            was filed on April 27, 2005. The settlement did not have a material
            effect on the Company's financial position.

       (d)  On July 28, 2005, adidas America, Inc., and adidas-Salomon AG
            (together, "adidas") filed a Demand for Arbitration (the "Demand")
            against Steve Madden, Ltd., and Steve Madden Retail, Inc. before the
            American Arbitration Association. In its Demand, adidas alleged that
            the parties had previously been engaged in a lawsuit over the
            Company's sale of sneakers that allegedly infringed adidas' "three
            stripe" mark. The parties settled that lawsuit by entering into a
            settlement agreement dated August 4, 2003 that prohibited the
            Company from selling shoes that contained adidas' "three-stripe"
            mark either with one additional stripe or with one less stripe.
            adidas alleged in the Demand that the Company was selling three
            shoes (the Finnley, the Troyy, and the Soccet) that adidas contends
            violates the settlement agreement and infringes adidas'
            "three-stripe" mark. The parties have been engaged in settlement
            discussions ever since, and the Company's time to answer the Demand
            has been continually extended. the Company's current deadline to
            answer the Demand is November 18. The Company believes it has
            substantial defenses to the claims asserted in the Demand for
            Arbitration.

       (e)  On August 10, 2005, the U.S. Customs Department issued a report that
            asserts that certain commissions which the Company treated as buying
            agents commissions (which is non-dutiable), should be treated as
            "selling agents commissions" and hence is dutiable. In the report,
            Customs estimates that the Company had underpaid duties during the
            calendar years of 1998 through 2004 in the amount of $1,051. Based
            on management's estimation at this point, a reserve of $1,051 has
            been recorded as of the September 30, 2005 Financial Statements.
            Such reserve may in the future be modified to reflect the status of
            this matter.

                                                                              10


STEVEN MADDEN, LTD. AND SUBSIDIARIES

Notes to Consolidated Financial Statements - Unaudited
September 30, 2005
($ in thousands except per share data)


NOTE M - COMMITMENTS, CONTINGENCIES AND OTHER (CONTINUED)

[2]    Other Actions (continued):

       (f)  The Company has been named as a defendant in certain other lawsuits
            in the normal course of business. In the opinion of management,
            after consulting with legal counsel, the liabilities, if any,
            resulting from these matters should not have a material effect on
            the Company's financial position or results of operations. It is the
            policy of management to disclose the amount or range of reasonably
            possible losses in excess of recorded amounts.

[3]    Employment agreements:

       (a)  Effective as of July 1, 2005, the Company amended its employment
            agreement with Steven Madden, the Company's Creative and Design
            Chief. The agreement provides for an annual salary of $600,000,
            subject to certain specified adjustments, through June 30, 2015. The
            agreement also provides for annual bonuses based on EBITDA and on
            revenue for any new business, an annual option grant at exercise
            prices equal to the market price on the date of grant and a
            non-accountable expense allowance.

       (b)  Effective as of July 1, 2005, the Company entered into an employment
            agreement with Awadhesh Sinha, pursuant to which Mr. Sinha will
            serve as the Company's Chief Operating Officer. The initial term of
            the agreement is three years through June 30, 2008, with successive
            one-year automatic renewal terms. The agreement provides for an
            annual salary of $425,000 with annual increases and performance
            bonuses. The agreement requires the Company to accrue deferred cash
            compensation equal to 25% of the annual salary, payable to Mr. Sinha
            at the end of the term of the agreement.

       (c)  Effective as of May 23, 2005, the Company amended its employment
            agreement with Richard Olicker, the Company's President. The
            agreement provides for an annual salary of $453,747 through December
            31, 2005. The agreement also provides for an annual performance
            bonus. Mr. Olicker will be leaving the Company in conjunction with
            the expiration of his employment agreement on December 31, 2005.

[4]    Due From Factor:

       On July 1, 2005, the Company entered into a factoring agreement with GMAC
       Commercial Finance LLC ("GMAC"). Under the terms of the agreement, the
       Company may request advances from GMAC of up to 80% of the aggregate
       receivables purchased by GMAC at an interest rate of two and one-half
       percent (2.5%) over the 30 day LIBOR. The Company will also pay a fee of
       0.325% of the gross invoice amount of each receivable purchased. The
       Company assigns a substantial portion of its receivables, principally
       without recourse, to its factor. The agreement, which has no specific
       expiration date and can be terminated by either party with 60 days
       written notice after June 30, 2007, provides the Company with a $25
       million credit facility with a $15 million sub-limit on direct
       borrowings. GMAC will maintain a lien on all of the Company's receivables
       and assume the credit risk for all assigned accounts approved by them
       with certain restrictions.

[5]    Common Stock Dividend

       On November 3, 2005, the Board of Directors declared a special dividend
       of $1 per share payable to Steven Madden, Ltd. shareholders of record at
       the close of business on November 14, 2005. The dividend is payable on
       November 23, 2005.

                                                                              11


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
           RESULTS OF OPERATIONS
--------------------------------------------------------------------------------

The following discussion of the Company's financial condition and results of
operations should be read in conjunction with the unaudited Financial Statements
and Notes thereto appearing elsewhere in this document.

Statements in this "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and elsewhere in this document as well as statements
made in press releases and oral statements that may be made by the Company or by
officers, directors or employees of the Company acting on the Company's behalf
that are not statements of historical or current fact constitute
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements involve known and
unknown risks, uncertainties and other unknown factors that could cause the
actual results of the Company to be materially different from the historical
results or from any future results expressed or implied by such forward-looking
statements. In addition to statements which explicitly describe such risks and
uncertainties, readers are urged to consider statements labeled with the terms
"believes", "belief", "expects", "intends", "anticipates" or "plans" to be
uncertain forward-looking statements. The forward-looking statements contained
herein are also subject generally to other risks and uncertainties that are
described from time to time in the Company's reports and registration statements
filed with the Securities and Exchange Commission.

Financial Overview:
-------------------

The Company's earnings per share increased 50% to $0.39 per share for the
quarter ended September 30, 2005 compared to $0.26 per share for the same
quarter of 2004. This follows a 39% increase in earnings per share realized by
the Company during the quarter ended June 30, 2005. This substantial growth rate
could not have been achieved without the hard work and coordinated effort by the
management and employees of the Company. In particular, two employees have had
an important positive impact on the operations of the Company. Steve Madden
returned to the Company on April 14 of this year in the capacity of its Creative
and Design Chief. The Company's impressive sales growth in this quarter is a
testament to Mr. Madden's creative abilities. On July 1 of this year, Mr.
Awadhesh Sinha joined the Company as its Chief Operating Officer. Mr. Sinha's
efforts to improve the inventory management systems resulted in increased
inventory turns and an increase in the gross profit percentage achieved during
the third quarter of this year to 36% compared to 35% last year.

The dedicated resolve of the Company's workforce has resulted in successes in
many areas of the business. These successes include:

        1.  Management has implemented new inventory controls and procedures in
            an attempt to reduce inventory levels. For example, "cut-to-order"
            inventory controls in the l.e.i. Footwear Wholesale Division
            ("l.e.i."), the Candie's Wholesale Division ("Candie's"), and
            Stevies Inc. ("Stevies") have resulted in reduced inventory levels
            in those divisions. Overall, total inventory has been reduced by 26%
            to $22,663 as of September 30, 2005 compared to $30,441 the previous
            year, even though sales increased by 13% for the quarter ended
            September 30, 2005 over the same period of 2004.

        2.  The Company's decision to broaden its product line continued to pay
            dividends this quarter. This is exemplified by the Madden Mens
            Wholesale Division ("Madden Mens") which has evolved into a
            "collection" brand offering a full assortment of dress, casual and
            sport footwear. The expanded product line has helped Madden Mens
            establish open stock programs with several customers and increase
            the number of doors with Dillards and Nordstom, all of which
            contributed to a net sales increase of 106% to $15,062 in the third
            quarter of 2005 compared to $7,329 in the same period of 2004.
            Another example of the Company's success in expanding its product
            line is the Company's entree into the young women and girls market
            via the Candie's division. Propelled by its success at Kohls,
            Candie's net sales increased 25% to $6,712 in the third quarter of
            2005 compared to $5,364 in the same period last year.

In the Retail Division, same store sales (sales in stores that were in operation
throughout all of the third quarters of 2005 and 2004) increased 12%. Store
sales productivity remained high with sales per square foot of $752. The Company
is planning to open two to three new stores during the balance of 2005.

                                                                              12


The Company's annualized inventory turnover increased to 7.9 times in the third
quarter of 2005 compared to 7.6 times in the third quarter of 2004, reflecting
the inventory reductions described above. The Company's accounts receivable
average collection days improved to 62 days in the current quarter compared to
67 days last year.

As of September 30, 2005, the Company had $99,627 in cash, cash equivalents and
marketable securities, no short or long-term debt, and total stockholders equity
of $180,291. Working capital increased to $125,354 as of September 30, 2005
compared to $101,417 on December 31, 2004. During the nine-months ended
September 30, 2005, net cash provided by operating activities increased to
$21,019 as compared to net cash used of $5,308 in the same period last year.



The following tables set forth information on operations for the periods
indicated:

                         Selected Financial Information
                         ------------------------------
                                Nine Months Ended
                                -----------------
                                  September 30
                                  ------------
                                ($ in thousands)


                                                                            2005                   2004
                                                                    -------------------    -------------------
                                                                                                
Consolidated:
-------------
Net Sales                                                           $284,361        100%   $253,612        100%
Cost of Sales                                                        181,302         64     158,178         62
Gross Profit                                                         103,059         36      95,434         38
Other Operating Income                                                 5,241          2       3,224          1
Operating Expenses                                                    88,902         31      79,635         31
Impairment of cost in excess of fair value of net assets acquired        519          0          --         --
Income from Operations                                                18,879          7      19,023          8
Interest and Other Income Net                                          1,398          0       1,497          0
Income Before Income Taxes                                            20,277          7      20,520          8
Net Income                                                            11,761          4      11,902          5

By Segment

WHOLESALE DIVISIONS:
--------------------

Steven Madden, Ltd.
-------------------
Madden Womens:
--------------
Net Sales                                                           $ 92,446        100%   $ 89,005        100%
Cost of Sales                                                         65,837         71      61,008         69
Gross Profit                                                          26,609         29      27,997         31
Other Operating Income                                                 1,744          2       1,748          2
Operating Expenses                                                    23,695         26      21,736         24
Income from Operations                                                 4,658          5       8,009          9

l.e.i. Footwear:
----------------
Net Sales                                                           $ 25,544        100%   $ 31,086        100%
Cost of sales                                                         17,460         68      21,621         70
Gross Profit                                                           8,084         32       9,465         30
Operating Expenses                                                     6,274         25       7,957         25
Income from Operations                                                 1,810          7       1,508          5

Madden Mens:
------------
Net Sales                                                           $ 41,526        100%   $ 20,350        100%
Cost of sales                                                         25,788         62      14,045         69
Gross Profit                                                          15,738         38       6,305         31
Operating Expenses                                                     9,069         22       5,829         29
Income from Operations                                                 6,669         16         476          2


                                                                              13


                         Selected Financial Information
                         ------------------------------
                                Nine Months Ended
                                -----------------
                                  September 30
                                  ------------
                                ($ in thousands)



                                                                             2005                    2004
                                                                    --------------------     --------------------
By Segment (Continued) 

WHOLESALE DIVISIONS:
--------------------
                                                                                                   
Candie's Footwear:
------------------
Net Sales                                                           $ 16,448         100%    $ 12,315         100%
Cost of sales                                                         10,976          67        8,602          70
Gross Profit                                                           5,472          33        3,713          30
Operating Expenses                                                     4,290          26        3,245          26
Income from Operations                                                 1,182           7          468           4

Diva Acquisition Corp. (Steven):
--------------------------------
Net Sales                                                           $ 12,783         100%    $ 17,931         100%
Cost of sales                                                          9,958          78       10,929          61
Gross Profit                                                           2,825          22        7,002          39
Operating Expenses                                                     3,803          30        3,894          22
Income (loss) from Operations                                           (978)         (8)       3,108          17

Stevies Inc.:
-------------
Net Sales                                                           $  6,737         100%    $  8,715         100%
Cost of sales                                                          4,769          71        5,947          68
Gross Profit                                                           1,968          29        2,768          32
Operating Expenses                                                     1,415          21        2,026          23
Income from Operations                                                   553           8          742           9

Unionbay Men's Footwear:
------------------------
Net Sales                                                           $    726         100%    $    320         100%
Cost of Sales                                                            526          72          320         100
Gross Profit                                                             200          28            0           0
Operating Expenses                                                       163          23          497         155
Income (loss) from Operations                                             37           5         (497)       (155)

RETAIL DIVISION:
----------------

Steven Madden Retail Inc.:
--------------------------

Net Sales                                                           $ 88,151         100%    $ 73,890         100%
Cost of Sales                                                         45,988          52       35,706          48
Gross Profit                                                          42,163          48       38,184          52
Operating Expenses                                                    40,193          46       34,452          47
Impairment of cost in excess of fair value of net assets acquired        519          --           --          --
Income from Operations                                                 1,451           2        3,732           5
Number of Stores                                                          98                       90

ADESSO MADDEN INC.:
-------------------
 (FIRST COST)

Other Operating Revenue - Net of expenses                           $  3,497                 $  1,477


                                                                              14


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


                                             2005                   2004
                                     -------------------    -------------------

Consolidated:
-------------

Net Sales                            $100,067        100%   $ 88,610        100%
Cost of Sales                          63,836         64      57,160         65
Gross Profit                           36,231         36      31,450         35
Other Operating Income                  2,217          2       1,175          1
Operating Expenses                     29,447         29      26,758         30
Income from Operations                  9,001          9       5,867          6
Interest and Other Income Net             504          1         488          1
Income Before Income Taxes              9,505         10       6,355          7
Net Income                              5,513          6       3,686          4

By Segment

WHOLESALE DIVISIONS:
--------------------

Steven Madden, Ltd.
-------------------
Madden Womens:
--------------
Net Sales                            $ 33,000        100%   $ 32,507        100%
Cost of Sales                          23,254         71      22,925         71
Gross Profit                            9,746         29       9,582         29
Other Operating Income                    568          2         508          2
Operating Expenses                      7,567         23       7,424         23
Income from Operations                  2,747          8       2,666          8

l.e.i. Footwear:
----------------
Net Sales                            $  9,650        100%   $  9,358        100%
Cost of sales                           6,846         71       7,038         75
Gross Profit                            2,804         29       2,320         25
Operating Expenses                      2,216         23       1,968         21
Income from Operations                    588          6         352          4

Madden Mens:
------------
Net Sales                            $ 15,062        100%   $  7,329        100%
Cost of sales                           9,584         64       4,948         68
Gross Profit                            5,478         36       2,381         32
Operating Expenses                      2,922         19       2,239         30
Income from Operations                  2,556         17         142          2

Candie's Footwear:
------------------
Net Sales                            $  6,712        100%   $  5,364        100%
Cost of sales                           4,102         61       3,885         72
Gross Profit                            2,610         39       1,479         28
Operating Expenses                      1,459         22       1,356         25
Income from Operations                  1,151         17         123          3

                                                                              15


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



                                                    2005                     2004
                                            --------------------     --------------------

By Segment (Continued)
                                                                           
Diva Acquisition Corp. (Steven):
--------------------------------
Net Sales                                   $  3,719         100%    $  6,840         100%
Cost of sales                                  3,058          82        4,468          65
Gross Profit                                     661          18        2,372          35
Operating Expenses                             1,239          33        1,431          21
Income (loss) from Operations                   (578)        (15)         941          14

Stevies Inc.:
-------------
Net Sales                                   $  2,875         100%    $  3,227         100%
Cost of sales                                  1,917          67        2,196          68
Gross Profit                                     958          33        1,031          32
Operating Expenses                               508          17          640          20
Income from Operations                           450          16          391          12

Unionbay Men's Footwear:
------------------------
Net Sales                                   $      0           0%    $    226         100%
Cost of Sales                                      0           0          169          75
Gross Profit                                       0           0           57          25
Operating Expenses                                 0           0          159          70
Loss from Operations                               0           0         (102)        (45)

RETAIL DIVISION:
----------------

Steven Madden Retail Inc.:
--------------------------
Net Sales                                   $ 29,049         100%    $ 23,759         100%
Cost of Sales                                 15,075          52       11,531          49
Gross Profit                                  13,974          48       12,228          51
Operating Expenses                            13,536          47       11,541          48
Income from Operations                           438           1          687           3
Number of Stores                                  98                       90

ADESSO MADDEN INC.:
-------------------
 (FIRST COST)

Other Operating Revenue - Net of expenses   $  1,649                 $    667


                                                                              16


RESULTS OF OPERATIONS
 ($ in thousands)


Nine Months Ended September 30, 2005 vs. Nine Months Ended September 30, 2004

Consolidated:
-------------

Total net sales for the nine-month period ended September 30, 2005 increased by
12% to $284,361 from $253,612 for the comparable period last year. Significant
sales increases from Madden Mens, Candie's and the Retail Division as well as a
modest increase from the Madden Womens Wholesale Division were partially offset
by declines in Diva Acquisition Corp. ("Steven"), l.e.i. and Stevies.

Gross profit as a percentage of sales decreased to 36% in 2005 from 38% in 2004
reflecting gross profit declines in both the Wholesale and Retail Divisions. The
decline in the Wholesale Divisions occurred primarily in the first quarter and
was the result of the Company's decision to closeout slow moving inventory.
Additionally, the weaker than anticipated performance of the Steven and Stevies
Wholesale Divisions at retail necessitated high levels of inventory markdowns
which resulted in lower than expected margins. The decline in the Retail
Division was due to an increase in promotional activity, the liquidation of slow
moving inventory combined with the liquidation of inventory at four outlet
stores (three of which were temporary locations) that were closed during the
third quarter.

Operating expenses increased to $88,902 in 2005 from $79,635 in 2004. The
increase is primarily due to an increase in direct selling expenses reflective
of the 12% growth in sales and the incremental payroll and occupancy costs
associated with the operation of an additional eight retail stores (net). Other
contributing factors were an increase of professional and accounting fees
incurred by the Company in connection with management's assessment and the audit
of internal controls pursuant to Section 404 of the Sarbanes-Oxley Act of 2002,
and the settlement of the LaRue lawsuit in the amount of $1,500.

Income from operations was $18,879 in 2005 compared to $19,023 in 2004. Net
income was $11,761 in 2005 compared to $11,902 in 2004.

Wholesale Divisions:
--------------------

Steven Madden, Ltd. (Madden Womens, l.e.i. Footwear, Madden Mens and Candie's
Footwear):

Sales from the Madden Womens Wholesale Division ("Madden Womens") accounted for
$92,446 or 33%, and $89,005 or 35%, of total sales in 2005 and 2004,
respectively. This increase resulted from higher sales to specialty footwear
retailers. Gross profit as a percentage of sales decreased to 29% in 2005 from
31% in 2004, primarily due to the closeout of slow moving inventory and an
increase in markdowns and allowances caused by higher promotional activities at
retail during the early part of the year. Operating expenses increased to
$23,695 in 2005 from $21,736 in 2004 primarily due to the aforementioned legal
settlement of $1,500 and due to increases in selling and related expenses.
Income from operations for Madden Womens was $4,658 in 2005 compared to $8,009
in 2004.

Sales from the l.e.i. Footwear Wholesale Division ("l.e.i.") accounted for
$25,544 or 9%, and $31,086 or 12%, of total sales in 2005 and 2004,
respectively. This decrease in sales was primarily caused by planned reductions
and the elimination of marginally profitable accounts. Gross profit as a
percentage of sales increased to 32% in 2005 from 30% in 2004 due to a decrease
in the liquidation of inventory. Operating expenses decreased to $6,274 in 2005
from $7,957 in 2004 due to a decrease in payroll expenses reflective of
management's initiative to reduce the workforce in l.e.i. and due to a decrease
in variable selling and related expenses. Income from operations for l.e.i. was
$1,810 in 2005 compared to $1,508 in 2004.

Sales from the Madden Mens accounted for $41,526 or 15%, and $20,350 or 8%, of
total sales in 2005 and 2004, respectively. This 104% increase in sales was
driven by an increase in the number of doors at Dillards and Nordstom, and the
introduction of a replenishment program, enabling retailers to generate weekly
reorders with improved turn and profitability. The division continued its
success with sport casual products while dress offerings were also successful,
giving the division a broader and more balanced collection. Gross profit as a
percentage of sales increased to 38% in 2005 from 31% in 2004 primarily due to a
substantial decrease in markdowns and sales allowances. Operating expenses
increased to $9,069 in 2005 from $5,829 in 2004. This increase is attributed to

                                                                              17


increases in direct selling expenses, advertising and marketing expenses and an
increase in payroll expense required to support the Madden Mens' rapid sales
growth. Operating expenses as a percentage of sales decreased to 22% in 2005
compared to 29% in 2004. Income from operations for Madden Mens increased to
$6,669 in 2005 compared to $476 in 2004.

Sales from Candie's accounted for $16,448 or 6%, and $12,315 or 5%, of total
sales in 2005 and 2004, respectively. This 34% increase in sales is the result
of the growth in the Kohl's business and the success of several products
including sandals with embellished heels and embellished flats. Gross profit as
a percentage of sales increased to 33% in 2005 from 30% in 2004 primarily due to
improved inventory management resulting in lower inventory markdowns. Operating
expenses increased to $4,290 in 2005 from $3,245 in 2004 due to increases in
payroll expenses, licensing fees and selling and selling related expenses in
order to position the Division for top line growth. Income from operations for
Candie's was $1,182 in 2005 compared to $468 in 2004.

Diva Acquisition Corp. ("Steven"):

Sales from Steven accounted for $12,783 or 4%, and $17,931 or 7%, of total sales
in 2005 and 2004, respectively. The decrease in sales was due to disappointing
sales of closed toe dress shoes in the first half of the year, which was last
year's bestseller. Additionally, last Fall's disappointing boot season caused
Steven's customers to push initial boot orders to the end of the third quarter,
eliminating the opportunity for any third quarter reorder business. Gross profit
as a percentage of sales decreased to 22% in 2005 from 39% in 2004 due to a
substantial increase in markdowns and allowances. Operating expenses remained
virtually the same ($3,803 in 2005 as compared to $3,894 in 2004). Loss from
operations for Steven was $978 in 2005 compared to income from operations of
$3,108 in 2004.

Stevies Inc. ("Stevies"):

Sales from Stevies accounted for $6,737 or 2%, and $8,715 or 3%, of total sales
in 2005 and 2004, respectively. The decrease was due to the poor performance of
Stevies products at retail. Gross profit as a percentage of sales decreased to
29% in 2005 from 32% in 2004, primarily due to an increase of markdowns and
allowances. Operating expenses decreased to $1,415 in 2005 from $2,026 in 2004
due to a 33% reduction in payroll expenses and a decrease in direct selling
expenses. Income from operations for Stevies was $553 in 2005 compared to $742
in 2004.

Unionbay Men's Footwear ("Unionbay"):

Unionbay, the Company's license for young men's footwear, generated net sales of
$726 in 2005 compared to $320 in 2004. During the third quarter of this year,
Unionbay migrated to a commission-based "first-cost" business and thus its
revenues are now included in the Adesso-Madden Division. Income from operations
for Unionbay was $37 in 2005 compared to a loss from operations of $497 in 2004.


Retail Division:
----------------

Sales from the Retail Division accounted for $88,151 or 31% and $73,890 or 29%
of total sales in 2005 and 2004, respectively. As of September 30, 2005, there
were 98 retail stores compared to 90 retail stores as of September 30, 2004.
Comparable store sales (sales of those stores that were open for all of 2005 and
2004) for the nine-month period ended September 30, 2005 increased 10% over the
same period of 2004. This increase was achieved through the early release and
success of opened up sandals in spring, strong boot sales in the fall, and a
substantial growth in Men's volume at the stores. Gross profit as a percentage
of sales decreased to 48% in 2005 from 52% in 2004, primarily due to an increase
in promotional activity and the liquidation of slow moving inventory combined
with the liquidation of inventory at three outlet stores that were closed during
the third quarter. Operating expenses for the Retail Division were $40,193 in
2005 and $34,452 in 2004. This increase was primarily due to increased payroll
and payroll related expenses and higher occupancy expenses associated with the
operation of eight additional stores in the current period and an increase in
direct selling expenses. Income from operations for the Retail Division
decreased to $1,451 in 2005 compared to $3,732 in 2004.

                                                                              18


Adesso-Madden Division:
-----------------------

Adesso-Madden, Inc. generated net commission revenues of $3,496 in 2005,
compared to $1,477 in 2004. The increase was the result of the growth in first
cost business with existing, as well as new customers, the expansion of the
Company's private label business in men's footwear, the transition of Unionbay
to a first cost commission based model and the cumulative contribution of
commissions on international sales made on a direct-from-factory basis.


Three Months Ended September 30, 2005 vs. Three Months Ended September 30, 2004

Consolidated:
-------------

Total net sales for the three-month period ended September 30, 2005 increased by
13% to $100,067 from $88,610 for the comparable period of 2004. Sales increases
from the Retail Division, Madden Mens, Madden Womens, Candie's and l.e.i. were
offset by declines in Steven and Stevies.

Gross profit as a percentage of sales increased to 36% in 2005 from 35% in 2004.
Gross profit in the Wholesale Divisions increased 170 basis points primarily due
to improved efficiencies in inventory management resulting in lower inventory
markdowns. This was partially offset by a 340 basis point decline in the Retail
Division attributed to the liquidation of inventory at four outlet stores closed
during the quarter as well as the clearance of slow-moving inventory.

Operating expenses increased to $29,447 in 2005 from $26,758 in 2004. This
increase resulted from higher payroll and payroll related expenses and higher
occupancy expenses associated with the operation of eight additional retail
stores in the current period and an increase in direct selling costs associated
with the growth in sales. Operating expenses as a percentage of sales decreased
to 29% in 2005 from 30% in 2004.

Income from operations was $9,001 in 2005 compared to $5,867 in 2004. Net income
was $5,513 in 2005 compared to $3,686 in 2004. This increase in income was
primarily due to the higher margins and the decrease in operating expenses as a
percentage of sales.

Wholesale Divisions:
--------------------

Steven Madden, Ltd. (Madden Womens, l.e.i. Footwear, Madden Mens and Candie's
Footwear):

Sales from Madden Womens accounted for $33,000 or 33%, and $32,507 or 37%, of
total sales in 2005 and 2004, respectively. Sales were driven by the success of
Western boots and city sandals, offset by a decrease in sales of dress shoes.
Gross profit as a percentage of sales remained unchanged at 29% for both 2005
and 2004. Operating expenses increased slightly to $7,567 in 2005 from $7,424 in
2004. Income from operations for Madden Womens was $2,747 in 2005 compared to
$2,666 in 2004.

Sales from l.e.i. accounted for $9,650 or 10%, and $9,358 or 11%, of total sales
in 2005 and 2004, respectively. This increase in sales was driven by the success
of Western boots. Gross profit as a percentage of sales increased to 29% in 2005
from 25% in 2004 due to a decrease in close-out sales and a reduction in
markdowns and allowances. Operating expenses increased to $2,216 in 2005 from
$1,968 in 2004. Income from operations for l.e.i. was $588 in 2005 compared to
$352 in 2004.

Sales from Madden Mens accounted for $15,062 or 15%, and $7,329 or 8%, of total
sales in 2005 and 2004, respectively. This 106% growth in sales is the result of
an increase in volume at Journeys as well as an increase in the number of doors
at Dillard's and Nordstrom. Additionally, the introduction of a replenishment
program increased sales by enabling retailers to generate weekly reorders with
improved turn and profitability. Gross profit as a percentage of sales increased
to 36% in 2005 from 32% in 2004, primarily due to a substantial decrease in
markdowns and allowances. Operating expenses increased to $2,922 in 2005 from
$2,239 in 2004. As a percentage of sales, operating expenses decreased to 19% in
2005 from 30% in 2004. The increase in the dollar amount is due to an increase
in payroll and related expenses required to support the rapid growth in the
division. Income from operations for Madden Mens was $2,556 in 2005 compared to
$142 in 2004.

                                                                              19


Sales from Candie's accounted for $6,712 or 7%, and $5,364 or 6%, of total sales
in 2005 and 2004, respectively. This 25% increase in sales is the result of
growth in the Kohl's business and the success of several products including
sandals, embellished heels and embellished flats. Gross profit as a percentage
of sales increased to 39% in 2005 from 28% in 2004 due to a substantial
reduction in markdowns and allowances and improved inventory management that
resulted in lower inventory markdowns. Operating expenses increased to $1,459 in
2005 from $1,356 in 2004, due to increases in payroll expenses required to
support the increase in sales. As a percentage of sales, operating expenses
decreased to 22% in 2005 from 25% in 2004. Income from operations for Candie's
was $1,151 in 2005 compared to $123 in 2004.

Diva Acquisition Corp. ("Steven"):

Sales from Steven accounted for $3,719 or 4%, and $6,840 or 8%, of total sales
in 2005 and 2004, respectively. The sales decrease was the result of last Fall's
disappointing boot season, which caused Steven's customers to trim initial boot
orders this year. Gross profit as a percentage of sales decreased to 18% in 2005
from 35% in 2004, primarily due to a substantial increase in markdowns and
allowances. Operating expenses decreased to $1,239 in 2005 from $1,431 in 2004
due principally to a decrease in advertising expenditures. Loss from operations
for Steven was $578 in 2005 compared to income from operations of $941 in 2004.

Stevies Inc. ("Stevies"):

Sales from Stevies accounted for $2,875 or 3%, and $3,227 or 4%, of total sales
in 2005 and 2004, respectively. Gross profit as a percentage of sales increased
to 33% in 2005 from 32% in 2004, primarily due to a decrease in markdowns and
allowances. Operating expenses decreased to $508 in 2005 from $640 in 2004.
Income from operations for Stevies was $450 in 2005 compared to $391 in 2004.

Unionbay Men's Footwear ("Unionbay"):

During the third quarter of this year, Unionbay migrated to a commission-based
"first-cost" business and thus its revenues and related costs are now included
in the Adesso-Madden Division.

Retail Division:
----------------

Sales from the Retail Division accounted for $29,049 or 29% and $23,759 or 27%
of total sales in 2005 and 2004, respectively. As of September 30, 2005, there
were 98 retail stores compared to 90 retail stores as of September 30, 2004.
Comparable store sales (sales of those stores that were open for all of the
third quarters of 2005 and 2004) for the three-month period ended September 30,
2005 increased 12% over the same period of 2004. This increase was primarily due
to the strong sales of Western boots as well as sandals and casuals. Gross
profit as a percentage of sales decreased to 48% in 2005 from 51% in 2004
primarily due to the liquidation of inventory at four outlet stores (three of
which were temporary locations) that closed during the quarter as well as the
clearance of slow-moving inventory. Operating expenses for the Retail Division
were $13,536 in 2005 and $11,541 in 2004. This increase was primarily due to
increased payroll and payroll related expenses and higher occupancy expenses
associated with the operation of eight additional retail stores in the current
period. Income from operations for the Retail Division was $438 in 2005 compared
to $687 in 2004.

Adesso-Madden Division:
-----------------------

Adesso-Madden, Inc. generated net commission revenues of $1,649 in 2005,
compared to $667 in 2004. The increase was the result of the growth in first
cost business with existing as well as new customers, the expansion of the
Company's private label business in Madden Mens and Unionbay and the cumulative
contribution of commissions on international sales made on a direct-from-factory
basis.

LICENSE AGREEMENTS

Revenue generated from licensing remained at $1,743 for both the nine months
ended September 30, 2005 and 2004. As of September 30, 2005, the Company had
four license partners covering five product categories of the Steve Madden
brand. The product categories include hosiery, sunglasses, eyewear, handbags and
belts.

                                                                              20


LIQUIDITY AND CAPITAL RESOURCES

The Company had working capital of $125,354 at September 30, 2005 compared to
$101,417 at December 31, 2004. The Company's net income for the nine months
ended September 30, 2005 contributed to the increase in working capital as well
as the Company's decision to replace a portion of its non-current marketable
securities with current marketable securities and cash equivalents.

Under the terms of a factoring agreement with GMAC, the Company is eligible to
draw down 80% of its invoiced receivables at an interest rate of two and
one-half percent (2.5%) over the 30 day LIBOR. The agreement, which has no
specific expiration date and can be terminated by either party with 60 days
written notice after June 30, 2007, provides the Company with a $25 million
credit facility with a $15 million sub-limit on direct borrowings. GMAC
maintains a lien on all of the Company's receivables and assumes the credit risk
for all assigned accounts approved by them. As of September 30, 2005 the Company
had not used any portion of the credit line.

As of September 30, 2005 the Company had invested $43,919 in marketable
securities consisting of corporate bonds, U.S. Treasury notes, government
asset-backed securities and equities.

The Company believes that based upon its current financial position and
available cash and marketable securities, it will meet all of its financial
commitments and operating needs for at least the next twelve months.

OPERATING ACTIVITIES

During the nine-month period ended September 30, 2005, net cash provided by
operating activities was $21,019. Sources of cash were provided primarily by the
following: net income, a decrease in inventories of $11,721, a decrease in
prepaid expenses, prepaid taxes, deposits and other assets of $1,771, and an
increase in accounts payable and other accrued expenses of $1,527. The primary
use of cash was an increase in factored receivables of $13,716 which is the
result of an increase in sales during the months of August and September of
2005.

CONTRACTUAL OBLIGATIONS

The Company's contractual obligations as of September 30, 2005 were as follows:



                                            Payment due by period (in thousands)

                                        Remainder of                               2011 and
Contractual Obligations      Total          2005       2006-2008     2009-2010       after
-----------------------   -----------   -----------   -----------   -----------   -----------
                                                                           
Operating Lease
    Obligations           $    87,355   $     2,982   $    36,713   $    19,194   $    28,466

Purchase Obligations           39,521        28,270        11,251             0             0

Other Long-Term
    Liabilities (future
    minimum royalty
    payments)                   3,271           668         2,603             0             0
                          -----------   -----------   -----------   -----------   -----------

Total                     $   130,147   $    31,920   $    50,567   $    19,194   $    28,466
                          ===========   ===========   ===========   ===========   ===========


At September 30, 2005, the Company had un-negotiated open letters of credit for
the purchase of imported merchandise of approximately $11,957.

The Company has an employment agreement with Steven Madden, its Creative and
Design Chief, which provides for an annual base salary of $600 subject to
certain specified adjustments, through June 30, 2015. The agreement also
provides for annual bonuses based on EBITDA and on revenue of any new business,
an annual option grant at exercise prices equal to the market price on the date
of grant and a non-accountable expense allowance.

                                                                              21


The Company has employment agreements with certain executives, which provide for
the payment of compensation aggregating approximately $1,964 in 2005, $1,391 in
2006 and $1,175 in 2007. In addition, such employment agreements provide for
incentive compensation based on various performance criteria as well as other
benefits. The Chief Operating Officer of the Company is entitled to deferred
compensation calculated as a percentage of his base salary.

Significant portions of the Company's products are produced at overseas
locations, the majority of which are located in Brazil, China, Italy and Spain.
The Company has not entered into any long-term manufacturing or supply contracts
with any of these foreign companies. The Company believes that a sufficient
number of alternative sources exist outside of the United States for the
manufacture of its products. In addition, the Company currently makes
approximately ninety-seven percent (97%) of its purchases in U.S. dollars.


INVESTING ACTIVITIES

During the nine-month period ended September 30, 2005, the Company invested
$1,156 in marketable securities and received $5,629 from the maturities and
sales of securities. The Company incurred capital expenditures of $4,144
principally for leasehold improvements for the ten additional retail stores that
were opened during the period as well as for additional showroom space and
upgrades to the computer systems.


FINANCING ACTIVITIES

During the nine-month period ended September 30, 2005, the Company repurchased
444,000 shares of the Company's common stock at a total cost of $7,735.


INFLATION

The Company does not believe that the relatively low rates of inflation
experienced over the last few years in the United States, where it primarily
competes, have had a significant effect on sales, expenses or profitability.


CRITICAL ACCOUNTING POLICIES AND THE USE OF ESTIMATES

Management's Discussion and Analysis of Financial Condition and Results of
Operations is based upon the Company's unaudited consolidated financial
statements which have been prepared in accordance with accounting principles
generally accepted in the United States for interim financial statements. The
preparation of these financial statements requires management to make estimates
and judgments that affect the reported amounts of assets, liabilities, sales and
expenses, and related disclosure of contingent assets and liabilities. Estimates
by their nature are based on judgments and available information. Estimates are
made based upon historical factors, current circumstances and the experience and
judgment of management. Assumptions and estimates are evaluated on an ongoing
basis and the Company may employ outside experts to assist in evaluations.
Therefore, actual results could materially differ from those estimates under
different assumptions and conditions. Management believes the following critical
accounting estimates are more significantly affected by judgments and estimates
used in the preparation of the Company's consolidated financial statements:
accounts receivable and inventory reserves, valuation of intangible assets, and
litigation reserves.

Allowances for bad debts, returns, and customer chargebacks. The Company
provides reserves against its trade accounts receivables for future customer
chargebacks, co-op advertising allowances, discounts, returns and other
miscellaneous deductions that relate to the current period. The reserve against
the Company's non-factored trade receivables also includes estimated losses that
may result from customers' inability to pay. The amount of the reserve is
determined by analyzing aged receivables, current economic conditions, the
prevailing retail environment and historical dilution levels for customers.
Failure to correctly estimate the amount of the reserve could materially impact
the Company's results of operation and financial position.

Inventory reserves. Inventories are stated at lower of cost or market, on a
first in first out basis. The Company reviews inventory on a regular basis for
excess and slow moving inventory. The review is based on an analysis of
inventory on hand, prior sales, and expected net realizable value through future
sales. The analysis includes a review of inventory quantities on hand at

                                                                              22


period-end in relation to year-to-date sales and projections for sales in the
foreseeable future. The Company considers quantities on hand in excess of
estimated future sales to be at risk for market impairment. The net realizable
value, or market value, is determined based on the estimate of sales prices of
such inventory through off-price or discount store channels. The likelihood of
any material inventory write-down is dependent primarily on the expectation of
future consumer demand for the Company's product. A misinterpretation or
misunderstanding of future consumer demand for the Company's product, the
economy, or other failure to estimate correctly, could result in inventory
valuation changes, either favorably or unfavorably, compared to the valuation
determined to be appropriate as of the balance sheet date.

Valuation of intangible assets. SFAS No. 142, which was adopted by the Company
on January 1, 2002, requires that goodwill and intangible assets with indefinite
lives no longer be amortized, but rather be tested for impairment at least
annually. This pronouncement also requires that intangible assets with finite
lives be amortized over their respective lives to their estimated residual
values, and reviewed for impairment in accordance with SFAS No. 144. In
accordance with SFAS No. 144, long-lived assets, such as property, equipment,
leasehold improvements and goodwill subject to amortization, are reviewed for
impairment annually or whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable. Recoverability of assets
to be held and used is measured by a comparison of the carrying amount of an
asset to the estimated undiscounted future cash flows expected to be generated
by the asset. If the carrying amount of an asset exceeds its estimated future
cash flows, an impairment charge is recognized by the amount by which the
carrying amount of the asset exceeds the fair value of the asset.

Litigation reserves. Estimated amounts for litigation claims that are probable
and can be reasonably estimated are recorded as liabilities in the Company's
consolidated balance sheet. The likelihood of a material change in these
estimated reserves would be dependent on new claims as they may arise and the
favorable or unfavorable events of a particular litigation. As additional
information becomes available, management will assess the potential liability
related to the pending litigation and revise their estimates. Such revisions in
management's estimates of the contingent liability could materially impact the
Company's results of operation and financial position.

All costs incurred to bring finished products to the warehouse are included in
the cost of sales line item of the Company's Consolidated Statement of
Operations. These include purchase commissions, letter of credit fees, FOB
costs, sample expenses, custom duty, inbound freight, labels and product
packaging. All warehouse and distribution costs are included in the operating
expenses line item of the Company's Consolidated Statement of Operations. The
Company classifies all shipping costs to customers as operating expenses. The
Company's gross margins may not be comparable to other companies in the industry
because some companies may include warehouse and distribution costs as a
component of cost of sales, while other companies report on the same basis as
the Company and include them in operating expenses.


OTHER CONSIDERATIONS

Fashion Industry Risks: The success of the Company will depend in a significant
part upon its ability to anticipate and respond to product and fashion trends as
well as to anticipate, gauge and react to changing consumer demands in a timely
manner. There can be no assurance that the Company's products will correspond to
the changes in taste and demand or that the Company will be able to successfully
market products that respond to such trends. If the Company misjudges the market
for its products, it may be faced with significant excess inventories for some
products and missed opportunities for others. In addition, misjudgments in
merchandise selection could adversely affect the Company's image with its
customers resulting in lower sales and increased markdown allowances for
customers which could have a material adverse effect on the Company's business,
financial condition and results of operations.

The industry in which the Company operates is cyclical, with purchases tending
to decline during recessionary periods when disposable income is low. Purchases
of contemporary shoes and accessories tend to decline during recessionary
periods and also may decline at other times. While the Company has fared well in
recent years in a difficult retail environment, there can be no assurance that
the Company will be able to return to its historical rate of growth in revenues
and earnings, or remain profitable in the future. A recession in the national or
regional economies or uncertainties regarding future economic prospects, among
other things, could affect consumer spending habits and have a material adverse
effect on the Company's business, financial condition and results of operations.

                                                                              23


In recent years, the retail industry has experienced consolidation and other
ownership changes. In the future, retailers in the United States and in foreign
markets may consolidate, undergo restructurings or reorganizations, or realign
their affiliations, any of which could decrease the number of stores that carry
the Company's products or increase the ownership concentration within the retail
industry. While such changes in the retail industry to date have not had a
material adverse effect on the Company's business or financial condition, there
can be no assurance as to the future effect of any such changes.

Inventory Management: The fashion-oriented nature of the Company's products and
the rapid changes in customer preferences leave the Company vulnerable to an
increased risk of inventory obsolescence. Thus, the Company's ability to manage
its inventories properly is an important factor in its operations. Inventory
shortages can adversely affect the timing of shipments to customers and diminish
sales and brand loyalty. Conversely, excess inventories can result in lower
gross margins due to the excessive discounts and markdowns that might be
necessary to reduce inventory levels. The inability of the Company to
effectively manage its inventory would have a material adverse effect on the
Company's business, financial condition and results of operations.

Dependence Upon Customers and Risks Related to Extending Credit to Customers:
The Company's customers consist principally of department stores and specialty
stores, including shoe boutiques. Certain of the Company's department store
customers, including some under common ownership, account for significant
portions of the Company's wholesale business.

The Company generally enters into a number of purchase order commitments with
its customers for each of its lines every season and does not enter into
long-term agreements with any of its customers. Therefore, a decision by a
significant customer of the Company, whether motivated by competitive
conditions, financial difficulties or otherwise, to decrease the amount of
merchandise purchased from the Company or to change its manner of doing business
could have a material adverse effect on the Company's business, financial
condition and results of operations. The Company sells its products primarily to
retail stores across the United States and extends credit based on an evaluation
of each customer's financial condition, usually without collateral. While
various retailers, including some of the Company's customers, have experienced
financial difficulties in the past few years which increased the risk of
extending credit to such retailers, the Company's losses due to bad debts have
been limited. Pursuant to the Factoring Agreement between GMAC and the Company,
GMAC currently assumes the credit risk related to approximately 95% of the
Company's accounts receivables. However, financial difficulties of a customer
could cause the Company to curtail business with such customer or require the
Company to assume more credit risk relating to such customer's account
receivable.

Impact of Foreign Manufacturers: Substantial portions of the Company's products
are currently sourced outside the United States through arrangements with a
number of foreign manufacturers in four different countries. During the
nine-month period ended September 30, 2005, approximately 90% of the Company's
products were purchased from sources outside the United States, primarily from
China, Brazil, Italy and Spain.

Risks inherent in foreign operations include work stoppages, transportation
delays and interruptions, and changes in social, political and economic
conditions which could result in the disruption of trade from the countries in
which the Company's manufacturers or suppliers are located, the imposition of
additional regulations relating to imports, the imposition of additional duties,
taxes and other charges on imports, significant fluctuations of the value of the
dollar against foreign currencies, or restrictions on the transfer of funds, any
of which could have a material adverse effect on the Company's business,
financial condition and results of operations. The Company does not believe that
any such economic or political condition will materially affect the Company's
ability to purchase products, since a variety of materials and alternative
sources are available. The Company cannot be certain, however, that it will be
able to identify such alternative sources without delay (if ever) or without
greater cost to the Company. The Company's inability to identify and secure
alternative sources of supply in this situation would have a material adverse
effect on the Company's business, financial condition and results of operations.

The Company's imported products are also subject to United States customs
duties. The United States and the countries in which the Company's products are
produced or sold, from time to time, impose new quotas, duties, tariffs, or
other restrictions, or may adversely adjust prevailing quota, duty or tariff
levels, any of which could have a material adverse effect on the Company's
business, financial condition and results of operations.

                                                                              24


Possible Adverse Impact of Unaffiliated Manufacturers' Inability to Manufacture
in a Timely Manner, Meet Quality Standards or to Use Acceptable Labor Practices:
As is common in the footwear industry, the Company contracts for the manufacture
of a majority of its products to its specifications through foreign
manufacturers. The Company does not own or operate any manufacturing facilities
and is therefore dependent upon independent third parties for the manufacture of
all of its products. The Company's products are manufactured to its
specifications by both domestic and international manufacturers. The inability
of a manufacturer to ship orders of the Company's products in a timely manner or
to meet the Company's quality standards could cause the Company to miss the
delivery date requirements of its customers for those items, which could result
in cancellation of orders, refusal to accept deliveries or a reduction in
purchase prices, any of which could have a material adverse effect on the
Company's business, financial condition and results of operations.

Although the Company enters into a number of purchase order commitments each
season specifying a time frame for delivery, method of payment, design and
quality specifications and other standard industry provisions, the Company does
not have long-term contracts with any manufacturer. As a consequence, any of
these manufacturing relationships may be terminated, by either party, at any
time. Although the Company believes that other facilities are available for the
manufacture of the Company's products, both within and outside of the United
States, there can be no assurance that such facilities would be available to the
Company on an immediate basis, if at all, or that the costs charged to the
Company by such manufacturers will not be greater than those presently paid.

The Company requires its licensing partners and independent manufacturers to
operate in compliance with applicable laws and regulations. While the Company
promotes ethical business practices and the Company's staff periodically visits
and monitors the operations of its independent manufacturers, the Company does
not control such manufacturers or their labor practices. The violation of labor
or other laws by an independent manufacturer of the Company or by one of the
Company's licensing partners, or the divergence of an independent manufacturer's
or licensing partner's labor practices from those generally accepted as ethical
in the United States, could have a material adverse effect on the Company's
business, financial condition and results of operations.

Intense Industry Competition: The fashion footwear industry is highly
competitive and barriers to entry are low. The Company's competitors include
specialty companies as well as companies with diversified product lines. The
recent market growth in the sales of fashionable footwear has encouraged the
entry of many new competitors and increased competition from established
companies. Most of these competitors, including Diesel, Kenneth Cole, Nine West,
DKNY, Skechers, Nike and Guess, may have significantly greater financial and
other resources than the Company and there can be no assurance that the Company
will be able to compete successfully with other fashion footwear companies.
Increased competition could result in pricing pressures, increased marketing
expenditures and loss of market share, and could have a material adverse effect
on the Company's business, financial condition and results of operations. The
Company believes effective advertising and marketing, branding of the Steve
Madden name, fashionable styling, high quality and value are the most important
competitive factors and plans to continually employ these elements as it
develops its products. The Company's inability to effectively advertise and
market its products could have a material adverse effect on the Company's
business, financial condition and results of operations.

Expansion of Retail Business: The Company's continued growth depends to a
significant degree on further developing the Steve Madden(R), Stevies, Steven,
Steve Madden Mens, l.e.i.(R) , Unionbay(R) and Candie's(R) brands, creating new
product categories and businesses and operating Company-owned stores on a
profitable basis. During the first nine months of 2005 the Company opened ten
Steve Madden retail stores and has plans to open approximately two to three
additional stores during the remainder of 2005. The Company's recent and planned
expansion includes the opening of stores in new geographic markets as well as
strengthening existing markets. New markets have in the past presented, and will
continue to present, competitive and merchandising challenges that are different
from those faced by the Company in its existing markets. There can be no
assurance that the Company will be able to open new stores, and if opened, that
such new stores will be able to achieve sales and profitability levels
consistent with management's expectations. The Company's retail expansion is
dependent on a number of factors, including the Company's ability to locate and
obtain favorable store sites, the performance of the Company's wholesale and
retail operations, and the ability of the Company to manage such expansion and
hire and train personnel. Past comparable store sales results may not be
indicative of future results, and there can be no assurance that the Company's
comparable store sales results can be maintained or will increase in the future.
In addition, there can be no assurance that the Company's strategies to increase
other sources of revenue, which may include expansion of its licensing
activities, will be successful or that the Company's overall sales or
profitability will increase or not be adversely affected as a result of the
implementation of such retail strategies.

                                                                              25


The Company's operations have increased and will continue to increase demand on
the Company's managerial, operational and administrative resources. The Company
has recently invested significant resources in, among other things, its
management information systems and hiring and training new personnel. However,
in order to manage currently anticipated levels of future demand, the Company
may be required to, among other things, expand its distribution facilities,
establish relationships with new manufacturers to produce its products, and
continue to expand and improve its financial, management and operating systems.
There can be no assurance that the Company will be able to manage future growth
effectively and a failure to do so could have a material adverse effect on the
Company's business, financial condition and results of operations.

Seasonal and Quarterly Fluctuations: The Company's results may fluctuate quarter
to quarter as a result of the timing of holidays, weather, the timing of larger
shipments of footwear, market acceptance of the Company's products, the mix,
pricing and presentation of the products offered and sold, the hiring and
training of additional personnel, inventory write downs, the cost of materials,
the product mix between wholesale and licensing businesses, the incurrence of
other operating costs and factors beyond the Company's control, such as general
economic conditions and the actions of competitors. In addition, the Company
expects that its sales and operating results may be significantly impacted by
the opening of new retail stores and the introduction of new products.
Accordingly, the results of operations in any quarter will not necessarily be
indicative of the results that may be achieved for a full fiscal year or any
future quarter.

Trademark and Service Mark Protection: The Company believes that its trademarks
and service marks and other proprietary rights are important to its success and
its competitive position. Accordingly, the Company devotes substantial resources
to the establishment and protection of its trademarks on a worldwide basis.
Nevertheless, there can be no assurance that the actions taken by the Company to
establish and protect its trademarks and other proprietary rights will be
adequate to prevent imitation of its products by others or to prevent others
from seeking to block sales of the Company's products on the basis that they
violate the trademarks and proprietary rights of others. Moreover, no assurance
can be given that others will not assert rights in, or ownership of, trademarks
and other proprietary rights of the Company or that the Company will be able to
successfully resolve such conflicts. In addition, the laws of certain foreign
countries may not protect proprietary rights to the same extent as do the laws
of the United States. The failure of the Company to establish and then protect
its proprietary rights from unlawful and improper utilization could have a
material adverse effect on the Company's business, financial condition and
results of operations.

Foreign Currency Fluctuations: The Company generally purchases its products in
U.S. dollars. However, the Company sources substantially all of its products
overseas and, as such, the cost of these products may be affected by changes in
the value of the relevant currencies. Changes in currency exchange rates may
also affect the relative prices at which the Company and foreign competitors
sell their products in the same market. There can be no assurance that foreign
currency fluctuations will not have a material adverse effect on the Company's
business, financial condition and results of operations.

Outstanding Options: As of November 7, 2005 there were outstanding options to
purchase an aggregate of approximately 1,515,603 shares of Common Stock. Holders
of such options are likely to exercise them when, in all likelihood, the market
price of the Company's stock is significantly higher than the exercise price of
the options. Further, while its options are outstanding, they may adversely
affect the terms on which the Company could obtain additional capital, if
required.

Economic and Political Risks: The present economic condition in the United
States and concern about uncertainties could significantly reduce the disposable
income available to the Company's customers for the purchase of the Company's
products. In addition, current unstable political conditions, including the
potential or actual conflicts in Iraq, North Korea or elsewhere, or the
continuation or escalation of terrorism, could have an adverse effect on the
Company's business, financial condition and results of operations.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 

The Company does not engage in the trading of market risk sensitive instruments
in the normal course of business. Financing arrangements for the Company are
subject to variable interest rates primarily based on LIBOR. An analysis of the
Company's factoring agreements with GMAC can be found in the Liquidity and
Capital Resource section under Item 2 of this document. As of September 30, 2005
and September 30, 2004, there were no direct borrowings outstanding under the
credit agreement.

                                                                              26


As of September 30, 2005, the Company had investments in marketable securities
valued at $43,919, which consists primarily of corporate bonds, U.S. treasury
notes and government asset-backed securities that have various maturities
through December 2009, as well as marketable equity securities. These
investments are subject to interest rate risk and will decrease in value if
market interest rates increase. The Company currently has the ability to hold
these investments until maturity. Should there be a significant increase in
interest rates, the value of these investments would be negatively affected
unless they were held to maturity. In addition, any further decline in interest
rates would reduce the Company's interest income.

ITEM 4. CONTROLS AND PROCEDURES

As required by Rule 13a-15(b) of the Securities Exchange Act of 1934 (the
"Exchange Act"), the Company's management, including the Company's Chief
Executive Officer and Chief Financial Officer, has evaluated the effectiveness
of its disclosure controls and procedures as of the end of the fiscal quarter
covered by this quarterly report. Based on that evaluation, the Chief Executive
Officer and Chief Financial Officer have concluded that the Company's disclosure
controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act)
were effective as of the end of the fiscal quarter covered by this quarterly
report. As required by Rule 13a-15(d) under the Exchange Act, the Company's
management, including the Company's Chief Executive Officer and Chief Financial
Officer, has evaluated the Company's internal controls over financial reporting
to determine whether any changes occurred during the quarter covered by this
quarterly report that have materially affected, or are reasonably likely to
materially affect, the Company's internal control over financial reporting.
Based on that evaluation, there has been no such change during the quarter
covered by this quarterly report.


Part II.  OTHER INFORMATION 

ITEM 1.  LEGAL PROCEEDINGS

Certain legal proceedings in which the Company is involved are discussed in Note
M and Part I, Item 3 to the consolidated financial statements included in the
Company's Annual Report on Form 10-K for the year ended December 31, 2004. The
following discussion is limited to recent developments concerning certain of the
Company's legal proceedings and should be read in conjunction with the Company's
earlier SEC reports. Unless otherwise indicated, all proceedings discussed in
those earlier reports remain outstanding.

Indictment:

On June 20, 2000, Steven Madden, the Company's former Chairman and Chief
Executive Officer, was indicted in the United States District Courts for the
Southern District and Eastern District of New York. The indictments alleged that
Mr. Madden engaged in securities fraud and money laundering activities. In
addition, the Securities and Exchange Commission filed a complaint in the United
States District Court for the Eastern District of New York alleging that Mr.
Madden violated Section 17(a) of the Securities Exchange Act of 1934, as
amended. On May 21, 2001, Steven Madden entered into a plea agreement with the
U.S. Attorney's Office, pursuant to which he pled guilty to four of the federal
charges filed against him. In addition, Mr. Madden reached a separate settlement
agreement with the Securities and Exchange Commission regarding the allegations
contained in its complaint. As a result, Mr. Madden resigned as the Company's
Chief Executive Officer and as a member of the Company's Board of Directors
effective July 1, 2001. Mr. Madden agreed to serve as the Company's Creative and
Design Chief, a non-executive position. On April 4, 2002, Mr. Madden was
sentenced in the United States District Court for the Southern District of New
York to forty-one months' imprisonment in connection with two of the federal
charges to which he pled guilty.

On May 3, 2002, Mr. Madden was sentenced in the United States District Court for
the Eastern District of New York to forty-one months' imprisonment in connection
with the remaining two charges to which he pled guilty. The sentences ran
concurrently. Under the settlement agreement with the Securities and Exchange
Commission, Mr. Madden agreed to not serve as an officer or director of a
publicly traded company for 7 years. Neither the indictments nor the Securities
and Exchange Commission complaint allege any wrongdoing by the Company or its
other officers and directors. Mr. Madden began serving his sentence in September
of 2002. On April 14, 2005, Mr. Madden was released from federal prison and has
returned to work at the Company as its Creative and Design Chief, a
non-executive position.

                                                                              27


In December 2001, the Company purchased a loss mitigation policy to cover costs
arising out of lawsuits related to the June 2000 federal indictment of Steven
Madden described above. The policy covers the Company's anticipated damages and
legal costs in connection with such lawsuits. The Company is obligated to pay
for damages and costs in excess of the policy limits. The cost of the policy was
$6.9 million. On June 1, 2004, the aforementioned lawsuits were settled for
damages and costs that were below the policy limits.

Other Actions:

On July 28, 2005, adidas America, Inc., and adidas-Salomon AG (together,
"adidas") filed a Demand for Arbitration against Steve Madden, Ltd., and Steve
Madden Retail, Inc. before the American Arbitration Association. In its Demand,
adidas alleged that the parties had previously been engaged in a lawsuit over
the Company's sale of sneakers that allegedly infringed adidas' "three stripe"
mark. The parties settled that lawsuit by entering into a settlement agreement
dated August 4, 2003 that prohibited the Company from selling shoes that
contained adidas' "three-stripe" mark either with one additional stripe or with
one less stripe. adidas alleged in the Demand that the Company was selling three
shoes (the Finnley, the Troyy, and the Soccet) that adidas contends violates the
settlement agreement and infringes adidas' "three-stripe" mark. The parties have
been engaged in settlement discussions ever since, and the Company's time to
answer the Demand has been continually extended. The Company's current deadline
to answer the Demand is November 18. The Company believes it has substantial
defenses to the claims asserted in the Demand for Arbitration.

The Company has been named as a defendant in certain other lawsuits in the
normal course of business. In the opinion of management, after consulting with
legal counsel, the liabilities, if any, resulting from these matters should not
have a material effect on the Company's financial position or results of
operations. It is the policy of management to disclose the amount or range of
reasonably possible losses in excess of recorded amounts.



ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS:

The Company did not repurchase any of its common stock during the quarter ended
September 30, 2005.



ITEM 6. EXHIBITS

         (31.1) Certification of Chief Executive Officer pursuant to Rule 13a-14
or 15d-14 of the Securities Exchange Act of 1934, as adopted pursuant to section
302 of the Sarbanes-Oxley act of 2002.

         (31.2) Certification of Chief Financial Officer pursuant to Rule 13a-14
or 15d-14 of the Securities Exchange Act of 1934, as adopted pursuant to section
302 of the Sarbanes-Oxley act of 2002.

         (32.1) Certification of Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.

         (32.2) Certification of Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.

                                                                              28


Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report on Form 10-Q/A to be signed on its behalf
by the undersigned thereunto duly authorized.



DATE:  November 10, 2005





                                       STEVEN MADDEN, LTD.

                                       /s/ JAMIESON A. KARSON
                                       ------------------------------------
                                       Jamieson A. Karson
                                       Chairman and Chief Executive Officer


                                       /s/ ARVIND DHARIA
                                       ------------------------------------
                                       Arvind Dharia
                                       Chief Financial Officer

                                                                              29


       Exhibit No           Description
       ----------           -----------

       10.1                 Third Amended and Restated Employment Agreement
                            between the Company and Steven Madden, effective as
                            of July 1, 2005 (incorporated by reference to
                            Exhibit 10.1 to the Company's Current Report on Form
                            8-K filed with the Commission on July 20, 2005).

       10.2                 Employment Agreement between the Company and
                            Awadhesh Sinha, dated as of June 15, 2005
                            (incorporated by reference to Exhibit 10.1 to the
                            Company's Current Report on Form 8-K filed with the
                            Commission on June 21, 2005).

       10.3                 Amendment Number 2 to Employment Agreement between
                            the Company and Richard Olicker, dated as of May 23,
                            2005 (incorporated by reference to Exhibit 10.1 to
                            the Company's Current Report on Form 8-K filed with
                            the Commission on June 16, 2005).

       31.1                 Certification of Chief Executive Officer pursuant to
                            Rule 13a-14(a) or 15d-14(a) of the Securities
                            Exchange Act of 1934, as adopted pursuant to section
                            302 of the Sarbanes-Oxley act of 2002.

       31.2                 Certification of Chief Financial Officer pursuant to
                            Rule 13a-14(a) or 15d-14(a) of the Securities
                            Exchange Act of 1934, as adopted pursuant to section
                            302 of the Sarbanes-Oxley act of 2002.

       32.1                 Certification of Chief Executive Officer pursuant to
                            18 U.S.C. Section 1350, as adopted pursuant to
                            Section 906 of the Sarbanes-Oxley Act of 2002.

       32.2                 Certification of Chief Financial Officer pursuant to
                            18 U.S.C. Section 1350, as adopted pursuant to
                            Section 906 of the Sarbanes-Oxley Act of 2002.

                                                                              30