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Why Is Steven Madden (SHOO) Up 4.6% Since Last Earnings Report?

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A month has gone by since the last earnings report for Steven Madden (SHOO - Free Report) . Shares have added about 4.6% 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 the most recent earnings report in order to get a better handle on the important catalysts.

Steven Madden Beats on Q3 Earnings, Raises FY19 View

Steven Madden, Ltd. reported better-than-expected third-quarter 2019 results, wherein both the top and the bottom lines continued to improve year over year. This NY-based company gained from sturdy performance across its Steve Madden and Blondo brands. The company witnessed incremental sales at its wholesale and retail businesses.

Moreover, Steven Madden stated that the acquisitions of GREATS and BB Dakota are likely to be key catalysts. Notably, impressive performance prompted management to lift full-year net sales and earnings per share forecast. The company raised view in spite of incremental earnings pressure due to the imposition of the 15% tariff on List 4 products imported from China.

Q3 Details

This designer and marketer of fashion footwear and accessories delivered adjusted quarterly earnings of 67 cents a share that surpassed the Zacks Consensus Estimate of 58 cents, marking the eighth straight quarter of beat.

The quarterly earnings increased 3.1% from 65 cents reported in the year-ago period. Although the company witnessed increase in cost of sales (up 8.1%) and adjusted operating expenses (up 10.3%), the bottom line improved on account of higher net sales and share repurchase activity.

The top line increased 8.5% year over year to $497.3 million and beat the Zacks Consensus Estimate of $490 million. This was the fourth successive quarter of revenue beat.

Net sales for the wholesale business rose 8.5% to $421.6 million, reflecting robust gain in wholesale footwear and accessories/apparel businesses.

We note that wholesale footwear net sales advanced 6.3% to $315.9 million driven by sturdy performance in Blondo, Steve Madden Women's and private label. Wholesale accessories/apparel net sales improved 15.8% to $105.7 million on the back of solid gain in Steve Madden handbags and the addition of the BB Dakota apparel business.

Retail net sales jumped 8.3% to $75.7 million, while same-store sales increased 5.1% on account of sturdy performance in e-commerce business.

Margins

Gross profit climbed 9% to $191 million, while gross margin expanded 20 bps to 38.4%.

We note that gross margin in the wholesale business shrunk 40 bps to 33.9% on account of contraction in the wholesale accessories/apparel gross margin thanks to the imposition of the tariff. This was partly mitigated by an increase in the wholesale footwear gross margin. Meanwhile, retail gross margin expanded 320 bps to 63.3%, mainly due to lower promotional activity.

Adjusted operating income increased 2.3% to $72.3 million, however, adjusted operating margin contracted 90 bps to 14.5%.

Store Update

The company ended the reported quarter with 227 company-operated retail outlets, comprising eight Internet stores and 32 company-operated concessions in international markets.

Other Financial Aspects

Steve Madden ended the reported quarter with cash and cash equivalents of $167.5 million, marketable securities of $27.5 million, and shareholders’ equity of $838.7 million, excluding non-controlling interest of $11.5 million. During the quarter, the company bought back about 784,757 shares for approximately $25.3 million. The company also raised quarterly dividend by 7% to 15 cents a share.

Outlook

Steve Madden now envisions net sales growth of 7-7.5% for 2019. The company expects adjusted earnings in the band of $1.92-$1.95. The company had reported earnings of $1.83 in 2018. Management had earlier projected net sales increase of 5-7% and adjusted earnings of $1.78-$1.86 per share for the current year.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted 13.69% due to these changes.

VGM Scores

At this time, Steven Madden has a great Growth Score of A, a grade with the same score on the momentum front. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision has been net zero. Notably, Steven Madden has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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