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Steven Madden (SHOO) Loses 54% YTD: Is There a Silver Lining?

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Fashion footwear dealer Steven Madden, Ltd. (SHOO - Free Report) has been in troubled waters for quite some time. This is quite evident from the company’s price performance, as the stock has lost 53.9% so far this year on persistent softness in its wholesale business. Decline in the wholesale-footwear and wholesale accessories/apparel revenues have been dampening the unit’s performance. This Zacks Rank #4 (Sell) stock has also lagged the industry’s 10.6% rally in the same time frame.

As said earlier, sluggishness across the company’s wholesale business persisted in the most recent quarter, wherein revenues for the unit tumbled 72.5%. Revenue decline in the second quarter of 2020 got significantly wider than the decreases of 13% and 1.1% registered in the immediately preceding quarters. The coronavirus pandemic has worsened the situation. Disappointingly, significant order cancellations due to COVID-19 have weighed on the segment’s results. We note that wholesale-footwear revenues plunged 72.8% and accessories/apparel revenues tumbled 71.5% in the same quarter. Unfortunately, softness in the wholesale business is likely to continue ahead.

Management, at its second-quarter 2020 earnings call on Jul 29, projected wholesale-footwear revenues to decrease roughly 35% and wholesale-accessories/apparel revenues to be down nearly 40% year over year during the third quarter. Clearly, softness across both categories will most likely mar the segment’s performance.

The pandemic has also hit hard Steven Madden’s Retail segment, as revenues plunged 49.2% in the second quarter owing to the closure of most of the retail outlets. Management expects revenues at Retail business to decline roughly 25% in the third quarter. Bleak third-quarter-revenue forecasts for the segments are likely to take a toll on the company’s overall top line, which also lagged the Zacks Consensus Estimate and plunged 68.2% year over year in the second quarter.

Is There a Silver Lining?

Despite the negative aspects, e-commerce business, which has been working well for the majority of industry players amid the pandemic, appear encouraging for Steven Madden too. Although revenues on were not able to completely offset the company’s overall sales decline, the same surged 88% in the second quarter. This is higher than 58% increase registered in the same quarter a year ago. Increased digital-marketing investments are generating impressive returns, with initiatives like “try before you buy” also boding well. Additionally, performance at Steven Madden’s flagship brand has been standing out. Management also remains optimistic about the company’s BB Dakota buyout.

Certainly, the limitations revolving around Steven Madden cannot be overlooked in the near term. However, the company’s strategic initiatives to bring itself back on the growth trajectory along with a buoyant performance at the e-commerce platform somewhat appear fruitful over the long term.

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