Steven Madden, Ltd. (SHOO - Free Report) is gaining momentum on the back of solid wholesale and international businesses. Additionally, its focus on enhancing product portfolio is impressive. The company continued with its positive earnings surprise streak for the fourth straight quarter, when it reported third-quarter 2018 results. Notably, both the top and bottom line grew year over year in the quarter.
Furthermore, the company benefited from solid gains in international markets and impressive performance by its footwear brand Blondo. Also, Steven Madden’s e-commerce business and Women’s wholesale business improved significantly. For 2018, it issued an encouraging sales and earnings projection. (Read: Steve Madden Tops Q3 Earnings Estimates, Updates View)
In a month’s time, this Zacks Rank #3 (Hold) stock has gained 9% against its industry’s 2.9% decline.
Steven Madden’s focus on expanding its business globally is an added positive. In the third quarter, the company witnessed 24% revenue growth internationally. Its directly-owned subsidiaries in Canada and Mexico, SM Europe JV and the distributor business also posted solid results. Backed by strategic investments, the company expects international business to sustain its momentum. The company is optimistic about growth in the Middle East, Italy and India as well. In fact, Steven Madden expects Asia to be a major contributor to net sales.
The company’s wholesale business witnessed sturdy performance during the third quarter, wherein net sales rose 3.1%, reflecting gain from wholesale accessories business. Notably, net sales in wholesale accessories business climbed on the back of Steve Madden handbags and private label accessories business, including contribution from Anne Klein handbags and new license. Also, the company’s Steve Madden handbag and special make up businesses continue to gain traction.
Despite these above-mentioned tailwinds, rising operating expenses, stiff competition and concerns related to trade war remain major concerns. Imposition of tariffs on additional consumer goods such as shoes, handbags and others imported from China are likely to hurt Steven Madden and may have a direct impact on the bottom line. A greater percentage of the company’s handbags are made in China. However, to lower its dependency on China, Steven Madden is contemplating to shift more of its handbag production to Cambodia.
Nevertheless, following the third-quarter performance, the company raised its lower end of expected net sales growth from 5-7% to 6-7% for 2018. The company envisions full-year adjusted earnings in the range of $1.76-$1.78, mirroring an improvement from $1.49 in 2017. Notably, the company’s projection includes a negative impact of 2 cents due to imposition of tariffs on hand bags and other accessories. For 2018, the Zacks Consensus Estimate for adjusted earnings is pegged at $1.79.
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