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Steven Madden (SHOO) Thrives on Solid E-Commerce Performance

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Fashion-footwear dealer Steven Madden, Ltd. (SHOO - Free Report) has been tracking up the charts of late, thanks to immense strength in its e-commerce business. The e-commerce business, which has been working well for various industry players amid the coronavirus pandemic, has been a bright spot for Steven Madden too. Impressively, the company’s shares have been gaining traction. Over the course of a month, the company has gained 22.6% against the industry’s 1.4% dip.

We note that revenues on surged 82% during the third quarter of 2020. This was up from 72% increase registered in the same quarter a year ago. Gains from increased investment in digital marketing and robust consumer reception of capabilities such as try before you buy have been contributing to performance. Further, digital sales grew 63.3% in the quarter. Notably, this marked the company’s second straight quarter of over 80% year-over-year increase in e-commerce. In the preceding quarter, Steven Madden registered growth of about 88%.

Robust growth in the company’s e-commerce channel has helped post better-than-expected results in third-quarter 2020. Although the coronavirus pandemic continues to hurt the company’s business, the results significantly surpassed management’s expectations. Its actions, including adjusting merchandise mix, enhancing digital initiatives and managing expense structure have aided it to maneuver through the pandemic-induced challenges.

Despite such positives, the company has been grappling with its sluggish wholesale business for a while, which continued in the third quarter of 2020. Decline in the wholesale footwear and accessories/apparel revenues have been marring the unit’s performance. During the third quarter, revenues for the Wholesale business tumbled 32.7%, reflecting decreases in wholesale footwear and accessories/apparel revenues.

Management said that the Wholesale business will  remain under pressure owing to the adverse impacts of the pandemic. Although it anticipates sequential improvement in fourth-quarter 2020 on continued recovery in its flagship brand in both footwear and handbags, wholesale revenues are likely to decline in high-teens percentage year over year. Also, its Retail business sales are expected to decline in high-teens percentage in the fourth quarter. Decline in both the Wholesale and Retail segments might hurt the overall top-line results.

Bottom Line

Although top-line concerns remain mainly due to the adverse impacts of coronavirus, management is making every effort to bring the company back on growth trajectory. Steven Madden also remains encouraged about strength in its brands, pristine balance sheet and a robust business model. Continued momentum in the company’s e-commerce might fix its top-line issue going forward. Encouragingly, Steven Madden currently displays a Zacks Rank #3 (Hold).

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