It has been about a month since the last earnings report for Steven Madden (SHOO - Free Report) . Shares have added about 4% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Steven Madden due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Steve Madden Earnings & Sales Top Estimates in Q2
Steven Madden, Ltd. delivered better-than-expected second-quarter 2018 results, wherein both the top and bottom lines grew year over year. Management highlighted that its flagship Steve Madden brand stole the quarterly show. The brand not only witnessed robust growth in the wholesale channel in both domestic and international markets but also registered comparable store sales (comps) growth in the retail channel.
Notably, this marked the third straight quarter of an earnings and revenue beat. The company also reiterated its full year sales and earnings projection.
Let’s Delve Deep
This designer and marketer of fashion footwear and accessories delivered adjusted quarterly earnings of 61 cents a share that surpassed the Zacks Consensus Estimate of 59 cents and increased 19.6% from 51 cents reported in the year-ago period. The bottom line improved in spite of increase in adjusted operating expenses (up 7.2%). This can be attributed to higher net sales.
The top line increased 5.8% year over year to $395.8 million and also came ahead of the Zacks Consensus Estimate of $390.4 million.
Management hinted that Steve Madden brand experienced high-single digit percentage increase in the United States and more than 30% growth in international markets during the quarter under review. Dolce Vita and Blondo brands also performed well. Blondo brand is likely to gain from the expansion of core boot business.
The company’s directly-owned subsidiaries in Canada and Mexico, SM Europe JV as well as the distributor business in Italy, India, and the Middle East posted strong results.
Net sales for the wholesale business rose 5.2% to $321.4 million, reflecting gains in both the wholesale footwear and wholesale accessories businesses. Wholesale footwear net sales jumped 5.9% to $252.1 million, while wholesale accessories net sales increased 2.6% to $69.3 million.
We note that net sales in wholesale accessories business climbed on the back of private label handbag division. The company’s Steve Madden handbag and special make up businesses also continue to gain traction. Management now envisions accessories' net sales to improve in the back half of the year buoyed by robust momentum witnessed in Steve Madden and private label handbag businesses coupled with the addition of Anne Klein handbags.
Retail net sales jumped 8.5% to $74.3 million, while comps increased 1.6% in spite of an adverse impact of roughly 200 basis points on account of the Easter shift.
Meanwhile, adjusted gross profit climbed 5.7% to $147.8 million, while adjusted gross margin contracted 10 basis points to 37.3%. We note that adjusted gross margin in the wholesale business declined 30 basis points to 31.4% on account of customer mix shift in the private label footwear business. Meanwhile, retail gross margin increased 30 basis points to 62.9%.
Adjusted operating income increased 2% to $44 million, however, adjusted operating margin shrunk 40 basis points to 11.1%.
Steven Madden ended the quarter with 208 company-operated retail outlets, comprising six Internet stores, as well as 45 company-operated concessions in international markets.
Other Financial Aspects
The company ended the quarter with cash and cash equivalents of $191 million, marketable securities of $66.4 million, and shareholders’ equity of $823.6 million, excluding non-controlling interest of $6.7 million. Management incurred capital expenditures of $2.3 million during the quarter.
During the quarter, the company bought back about 193,000 shares for $9.4 million and there was still $148.1 million remaining under its share buyback program.
Management continues to expect net sales growth of 5-7% for 2018. The company envisions full year adjusted earnings in the range of $2.60-$2.67, indicating an improvement from $2.24 in 2017. The company expects third-quarter earnings per share growth to be approximately in line with the first two quarters. For the final quarter, management expects earnings to improve considerably gaining from tax rate and easier comparisons.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
Currently, Steven Madden has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% 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.
Based on our scores, the stock is more suitable for growth investors than those looking for value and momentum.
Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Steven Madden has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.