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Steven Madden (SHOO) Loses Over 45% YTD: What Lies Ahead?

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Shares of Steven Madden, Ltd. (SHOO - Free Report) have lost 45.8% year to date, thanks to persistent softness in its wholesale business for a while. Also, the company has been witnessing higher operating expenses for the past few quarters. These limitations have been taking a toll on the fashion-forward footwear and accessories company’s performance. This Zacks Rank #4 (Sell) stock has underperformed the industry’s 5.5% decline in said time period. A Growth Score of D is further adding to the gloomy side.

Steven Madden’s sluggish wholesale business performance can be attributed to the lower wholesale footwear and accessories/apparel revenues. This continued in first-quarter 2020, wherein the segment’s revenues dropped 13% year over year. Also, COVID-19 weighed on the unit’s performance, leading to major order cancellations. We expect the softness in the segment to have continued in the second quarter, since management at its first-quarter earnings call on May 28 stated that wholesale revenues have been trending down roughly 75% for April and May.  The pandemic has also not spared the company’s retail business, which was hurt by the shutdown of all its physical stores in the second half of March.


 

As stated earlier, higher operating expense has already been a major concern for the company. To top it off, management is now accelerating e-commerce-enhancement initiatives amid the pandemic. These initiatives include higher cost of investments toward digital marketing and testing of features like try-before-you-buy and delivery capabilities. This has been adding up to increased costs.

What Awaits

Aforementioned headwinds signal soft second-quarter 2020 results, which are scheduled for released on Jul 29. So, let’s further analyze Steven Madden’s earnings picture. According to our Zacks Model, which says the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chance of an earnings beat to roughly 70%, Steven Madden is unlikely to beat earnings estimates this reporting cycle. This is because the company presently has an Earnings ESP of 0.00% coupled with an unfavorable Zacks Rank.

In fact, the Zacks Consensus Estimate for the impending quarter is currently pegged at a loss of 24 cents although it was earnings of 26 cents 60 days ago. Steven Madden delivered earnings of 47 cents in the same quarter a year ago. Further, analysts polled by Zacks predict revenues of $187.3 million for the second quarter, mirroring a decline of over 57% from the year-ago period.

Surely, above-discussed factors cannot be overlooked. However, we expect that Steven Madden’s e-commerce initiatives and the flagship brand’s robust performance might have cushioned the quarter to some extent. Also, management had earlier informed that it has been gradually reopening stores.

Forget SHOO, Eye These Solid Picks

BJ's Wholesale Club (BJ - Free Report) has an expected long-term earnings growth rate of 13.5% and currently has a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Crocs (CROX - Free Report) has a long-term earnings growth rate of 15% and a Zacks Rank #2.

Rent-A-Center, Inc. (RCII - Free Report) , also a Zacks Rank #2 stock, which has delivered a positive earnings surprise of 13.6% in the last reported quarter.

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