Since reporting its fourth-quarter and full-year earnings back on March 1, shoemaker Steve Madden's (NASDAQ:SHOO) shares have been on the decline. The stock has dropped about 12% from the closing price of $18.68 on Feb. 28 to yesterday's close. Let's take a look to see what may have investors tied up in knots.

The company announced that its founder and namesake will return in the spring of 2005, and investors anticipating a rally following the news were quickly disappointed -- not to mention forgetful. Remember, Steve Madden was sentenced to prison for 41 months for securities fraud. But to suggest that the sell-off was due to Steve Madden's return is both unfair to the company's founder and incorrectly identifies the culprit for a stock that continues its downward slide.

One part of the negative reception can be attributed to more of the same old news -- the company's continuing struggle with its wholesale division. Going forward into 2005, Steve Madden expects further pricing pressure in the wholesale business.

Couple its wholesale challenges with rising freight and sourcing costs, and the result was a severe tumble in its operating margins. Its fiscal 2004 operating margins dropped 45% from a year ago to a low of 5.7%. And looking ahead, the company expects steeper operational expenses to carry forward into fiscal 2005.

Higher expenses aren't the only concern. For the year, net sales limped forward 4.2%, compared with the same period a year ago. And once again, this picture doesn't get any prettier: The company anticipates revenues to be flat in 2005.

Stagnant sales and lower operating margins have led to earnings per share of $0.86 -- well off the $1.45 mark of a year ago. So what do you get when you mix zero sales growth, higher expenses in 2005, and a stock valued at a price-to-earnings ratio of 20? They don't mix. Steve Madden carries a nice balance sheet, with $85.7 million in cash and marketable securities and zero debt, but there isn't enough green in its bank account to get this Fool excited about this overpriced stock.

The shoe business is a tough one. Steve Madden faces stiff competition from Deckers' (NASDAQ:DECK) Simple brand and Skechers (NYSE:SKX), as well as from premium designers Kenneth Cole (NYSE:KCP), Donald J Pliner, and Hugo Boss. And just as shoe shoppers have plenty of options to choose from, investors also have plenty of other ways to use their money. My recommendation is to look elsewhere for a better-fitting investment.

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Fool contributor Jeremy MacNealy does not own shares of any companies mentioned.