Back to top

Image: Bigstock

Here's Why Steven Madden (SHOO) is a Solid Investment Choice

Read MoreHide Full Article

As online shopping is picking up fast amid social distancing in wake of the pandemic, fashion-footwear dealer Steven Madden, Ltd. (SHOO - Free Report) has been stepping up its digital efforts. Strength in the company’s brands, a pristine balance sheet and a robust business model are added strengths of the company.

The Long Island City, NY-based company’s shares have skyrocketed 79.5% over the past three months versus the industry’s 14.3% growth. The Zacks Rank #1 (Strong Buy) stock has also surpassed the broader Consumer Discretionary sector and the S&P 500 index’s rally of 18.3% and 11.4%, respectively.

Meanwhile, the Zacks Consensus Estimate for the company’s 2021 sales and earnings presently stand at $1.59 billion and $1.60, which suggest year-over-year growth of more than 33% and 176%.

Let’s Dig Deeper

E-commerce has been a bright spot for Steven Madden. Robust gains from increased investment in digital marketing and solid consumer reception to capabilities such as “try before you buy” have been contributing to the company’s performance. Encouragingly, it saw the second straight quarter of more than an 80% year-over-year increase in e-commerce during the third quarter of 2020. In the same quarter, revenues on surged 82%, up from a 72% increase seen in the same quarter a year ago. Further, digital sales grew 63.3% in the last reported quarter.

Robust growth in the e-commerce channel has helped Steven Madden deliver better-than-expected results in the third quarter of 2020 despite the coronavirus pandemic. Management has been accelerating investments in talent, digital marketing, and new e-commerce and omni-channel strategies.

The company’s actions, including adjusting merchandise mix, enhancing digital initiatives and managing expense structure, have been helping it maneuver through the pandemic-induced challenges. Apparently, cost of sales decreased 32.4%, while operating expenses dropped 14% in the last reported quarter. Management had earlier projected operating expenses decline of nearly 10% year over year in the fourth quarter.

Although sluggishness in the wholesale business due to a decline in the wholesale footwear and accessories/apparel revenues remains a concern, Steven Madden is making every effort to bring the company back on growth trajectory. Encouragingly, the division is expected to witness a sequential improvement in the fourth quarter on continued recovery in its flagship footwear and handbag brands. Markedly, the company is witnessing strength in the handbag category, including branded and private label handbags.

Other Hot Stocks

Deckers (DECK - Free Report) has an expected long-term earnings growth rate of 18.6% and sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Tapestry (TPR - Free Report) has a long-term earnings-growth rate of 11.7% and currently sports a Zacks Rank #1.

Capri Holdings (CPRI - Free Report) has an earnings surprise of 282.7% for the last four quarters, on average. The company currently has a Zacks Rank of 1.

Just Released: Zacks’ 7 Best Stocks for Today

Experts extracted 7 stocks from the list of 220 Zacks Rank #1 Strong Buys that has beaten the market more than 2X over with a stunning average gain of +24.4% per year.

These 7 were selected because of their superior potential for immediate breakout.

See these time-sensitive tickers now >>