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Why Is Steven Madden (SHOO) Down 7.1% Since Last Earnings Report?

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It has been about a month since the last earnings report for Steven Madden (SHOO - Free Report) . Shares have lost about 7.1% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Steven Madden due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Steven Madden’s Loss Narrower, Revenue Miss in Q2

Steven Madden reported narrower-than-expected loss in second-quarter 2020. However, revenues lagged the Zacks Consensus Estimate after a beat in the previous quarter. Also, both top and bottom lines compared unfavorably with the year-ago quarter’s respective figures.

Steven Madden delivered adjusted loss of 19 cents a share, narrower than the Zacks Consensus Estimate of a loss of 26 cents. However, the bottom line compared unfavorably with adjusted earnings of 47 cents reported in the year-ago quarter. We note that operating expenses dropped 36.4% to $76.9 million and cost of sales decreased significantly to $86.9 million in the reported quarter.

Total revenues plunged 68.2% year over year to $142.8 million. This takes into account a 68.2% decline in net sales of $141.4 million and decrease of 70.2% in commission and licensing fee income of $1.4 million. The Zacks Consensus Estimate for total revenues was $183 million.

Detailed Discussion

Revenues for the Wholesale business fell 72.5% to $100 million, reflecting a drop in wholesale footwear and accessories/apparel revenues. Also, the metric was hurt by significant order cancellations due to COVID-19. We note that wholesale footwear revenues declined 72.8% and accessories/apparel revenues tumbled 71.5%.

Retail revenues plunged 49.2% to $41.4 million, owing to the closure of most of its retail outlets with respect to the pandemic. This was partly compensated with the robust performance across its e-commerce business. Management remains encouraged by solid digital commerce channels, with 88% revenue growth on stevemadden.com in the reported quarter. This has been gaining from strength in the company’s brands coupled with continued consumer demand for its products.  

Consolidated gross profit tumbled 67.1% year over year to $55.9 million, while gross margin expanded 130 basis points (bps) to 39.1%. We note that gross margin in the wholesale business shrunk 550 bps to 26.6%, mainly due to the shift in sales mix to the lower-margin private-label business. However, retail gross margin expanded 770 bps to 67.4%, mainly buoyed by a shift in sales mix to the higher-margin e-commerce business.

Further, the company reported adjusted operating loss of $21 million compared with adjusted operating profit of $49.1 million in the same quarter a year ago.

Steven Madden ended the second quarter with 225 company-operated retail outlets including eight Internet stores, along with 17 company-operated concessions in international markets.

Other Financial Aspects

Steven Madden ended the reported quarter with cash and cash equivalents of $318.1 million, marketable securities of $38.8 million, and shareholders’ equity of $755.1 million, excluding non-controlling interests of roughly $12 million. Moreover, advances from factor were $42.7 million as of Jun 30, 2020.

On July 22, 2020, Steven Madden entered into a five-year asset-based revolving credit facility worth $150 million. This replaced the company’s earlier credit facility with its factor.

As of Jun 30, net cash provided by operating activities was $57.9 million. Management incurred capital expenditures of approximately $4.3 million during the first six months of 2020. The company also paid cash dividends of $12.5 million in the aforementioned period.

How Have Estimates Been Moving Since Then?

Since the earnings release, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -31.08% due to these changes.

VGM Scores

Currently, Steven Madden has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Steven Madden has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.


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