Back to top

Image: Bigstock

Steven Madden (SHOO) Marches Ahead of Industry: Here's Why

Read MoreHide Full Article

Steven Madden, Ltd. (SHOO - Free Report) has exhibited a decent run on the bourses in the past year. Thanks to its focus on the direct-to-consumer business, expanding categories outside of footwear, enhancing its presence in the international markets and reinforcing its core U.S. wholesale footwear business.

The stock has outpaced the Zacks Shoes and Retail Apparel industry. In the said period, shares of this Zacks Rank #3 (Hold) company have gained about 28% against the industry’s decline of 19%.

Analysts seem quite optimistic about the company, which is one of the recognized names in the retail space. The Zacks Consensus Estimate for its 2024 sales and earnings per share (EPS) is pegged at $2.11 billion and $2.71, respectively, indicating year-over-year growth of 7.1% and 12.7%.


Zacks Investment Research
Image Source: Zacks Investment Research


Let’s Delve Deeper

The company's progress in innovation and global expansion highlights its resilience and strategic foresight. Its adaptability to evolving market conditions solidifies its position as a strong competitor. Despite short-term cautiousness, SHOO's dedication to operational efficiency and its varied strategy build confidence in its potential.

In third-quarter 2023, international revenues grew 5% year over year, accounting for about 20% of consolidated revenues. The EMEA region particularly excelled, with Europe witnessing an 18% revenue increase. Additionally, the South Africa joint venture experienced a remarkable 87% revenue surge, largely driven by strong sales in the sneaker category.

Notable growth in the international markets highlights Steven Madden's effective global expansion strategies. This improvement signifies the brand's wide appeal and success in diversifying its market base, reducing reliance on any single market.

The third quarter of 2023 witnessed a 27% year-over-year increase in overall accessories and apparel revenues, with the Steve Madden handbag business leading the way with staggering 52% revenue growth. The company's substantial increase in revenues from accessories and apparel, primarily driven by its handbag business, illustrates successful product line diversification.

By acquiring Almost Famous, Steven Madden aims to enhance its apparel offerings, signaling strategic business expansion and diversification. This acquisition is expected to bring new design dynamics into the company’s portfolio and tap into different consumer segments.

Additionally, the acquisition is seen as a significant opportunity for growth, both in terms of sales and margins. The company anticipates leveraging its capabilities to enhance the performance of Almost Famous over time. With an expected revenue contribution of $30-$35 million and an EPS impact of 1-2 cents for the current financial year, this acquisition aligns seamlessly with Steven Madden's forward-looking growth strategy.

Despite a slight decline, the company's direct-to-consumer business remains significantly better than pre-COVID levels. The gross margin in the DTC segment improved 250 basis points to 63.7%, contributing to an expansion in the operating margin and higher EBIT from those reported in 2022. The improvement in the DTC gross margin was driven by lower freight expenses and a reduction in promotional activity.

Challenges to Overcome

Despite the positive strides, SHOO acknowledges the softening of the industry trends starting in September 23. This, coupled with the impacts of the Middle East crisis on its joint ventures in Israel and the Middle East, led to a more cautious stance.

Steven Madden revised its guidance for 2023. It expects revenues to decline 7% year over year versus the earlier mentioned decrease of 6.5-8%. SHOO envisions EPS of $2.40 for the year compared with the previously stated $2.38-$2.48. In 2022, Steven Madden reported revenues of $2.1 billion and an adjusted EPS of $2.80.

Nonetheless, the company's effective management of gross margins, inventory and operating expenses exemplifies its strong operational discipline. This discipline is a critical factor in maintaining profitability and operational efficiency, reflecting strategic foresight in business operations.

3 Promising Stocks

A few better-ranked stocks are The Gap, Inc. (GPS - Free Report) , Abercrombie & Fitch Co. (ANF - Free Report) and Deckers Outdoor Corporation (DECK - Free Report) .

The Gap is a premier international specialty retailer offering a diverse range of clothing, accessories and personal care products. The company currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Gap’s current fiscal-year sales indicates growth of 387.5% from the previous year’s reported figures. GPS has a trailing four-quarter average earnings surprise of 138%.

Abercrombie & Fitch is a specialty retailer of premium, high-quality casual apparel. The company currently flaunts a Zacks Rank #1. ANF delivered a 60.5% earnings surprise in the last reported quarter.

The Zacks Consensus Estimate for Abercrombie & Fitch’s current fiscal-year sales implies growth of 15.1% from the previous year’s reported number. ANF has a trailing four-quarter average earnings surprise of 713%.

Deckers is a leading designer, producer and brand manager of innovative, niche footwear and accessories. It currently carries a Zacks Rank #2 (Buy).

The Zacks Consensus Estimate for Deckers’ current fiscal-year earnings and sales indicates growth of 21.9% and 11.7%, respectively, from the previous year’s reported figures. DECK has a trailing four-quarter average earnings surprise of 26.3%.

Published in