It has been about a month since the last earnings report for Steven Madden (
SHOO Quick Quote SHOO - Free Report) . Shares have lost about 4.7% 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 Q2 Earnings Miss, Revenues Down Y/Y
Steven Madden reported lower-than-expected results in second-quarter 2023, wherein the top and bottom lines missed the Zacks Consensus Estimate. Revenues and earnings also declined year over year.
In the reported quarter, the company witnessed a tough operating environment, conservative order patterns from wholesale customers and tough year-over-year comparisons. However, Steven Madden has reduced its inventory levels and saw a strong gross margin performance in spite of the promotional retail backdrop. Also, it has been managing expenses. Q2 Highlights
Steven Madden posted adjusted quarterly earnings of 47 cents a share, which missed the Zacks Consensus Estimate by a penny. The same decreased 25.4% from earnings of 63 cents per share reported in the prior-year period.
Total revenues fell 16.8% year over year to $445.3 million. While net sales of $442.8 million decreased 16.9%, commission and licensing fee income of $2.5 million increased 8.7% from the year-ago period’s level. The top line came below the consensus estimate of $454 million. Gross profit tumbled 12.8% year over year to $189.9 million. Nonetheless, the gross margin expanded 190 basis points (bps) to 42.6%. Gross profit, as a percentage of wholesale revenues, increased 200 bps to 33.6%, driven by higher margin in the Wholesale accessories/apparel business. However, gross profit, as a percentage of direct-to-consumer revenues, decreased 270 bps to 63.7% owing to higher promotional activity. Adjusted operating expenses dipped 4.4% year over year to $145.8 million. However, as a percentage of revenues, adjusted operating expenses expanded 440 bps to 32.6%. Steven Madden reported an adjusted operating income of $44.5 million, down from $67 million registered in the same quarter a year ago. The adjusted operating margin contracted 250 bps to 10%. Segmental Performance
Revenues for the Wholesale business decreased 20.8% year over year to $314.6 million. We note that Wholesale footwear revenues fell 19.4% year over year, while Wholesale accessories/apparel revenues were down 24.6%.
Direct-to-consumer revenues dipped 5.4% to $128.2 million, driven by a decrease in the brick-and-mortar business and e-commerce unit. Other Financial Aspects
Steven Madden ended the reported quarter with cash and cash equivalents of $258.1 million, short-term investments of $16.4 million and stockholders’ equity of $824.5 million, excluding non-controlling interest of $17.2 million. Management incurred capital expenditures of $7.8 million in the first half of 2023.
In the reported quarter, SHOO repurchased $25.8 million of its common stock, including shares acquired via the net settlement of employees’ stock awards. Outlook
Moving ahead, although wholesale customers remain cautious, the company expects to experience significant improvement for the rest of the year in comparison to the first half. Management anticipates returning to year-over-year growth in direct-to-consumer in the back half.
Steven Madden continues to project revenues to decline 6.5-8% from the last year’s level. SHOO envisions earnings per share (EPS) of $2.38-$2.48 and adjusted EPS of $2.40-$2.50 for the year. In 2022, Steven Madden reported revenues of $2.1 billion and adjusted EPS of $2.80. How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month.
The consensus estimate has shifted 5.14% due to these changes.
Currently, Steven Madden has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile 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.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Steven Madden has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.