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Here's Why Steven Madden Stock is Losing Investors' Favor
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Steven Madden, Ltd. (SHOO - Free Report) is going through a rough patch thanks to persistent softness in its wholesale business and rising operating expense concerns. An unimpressive first-quarter 2020 performance has dealt a further blow. Incidentally, shares of the fashion-forward footwear company have tumbled 47.9% year to date, wider than its industry that has lost 7.8%.
Analysts are pessimistic on this Zacks Rank #4 (Sell) stock. The Zacks Consensus Estimate for the second quarter of 2020 is currently pegged at a loss of 24 cents although it was earnings of 25 cents 30 days ago. Moreover, the consensus estimate for the current year’s earnings is pinned at 66 cents, mirroring a decline of 50.7% over the past 30 days. Steven Madden had delivered earnings of 47 cents in second-quarter 2019 and $1.95 in 2019. A VGM Score of D further adds to the stock’s gloomy side. Let’s dive deep.
Hurdles on the Way
As stated above, Steven Madden is seeing sluggishness across its wholesale business owing to lower wholesale footwear and accessories/apparel revenues. This continued in first-quarter 2020, wherein the segment’s revenues dropped 13% year over year. Apart from softness in its footwear and accessories/apparel categories, major order cancellations in the back half of March due to COVID-19 hurt results. Moreover, gross margin in the wholesale business shrunk 200 basis points (bps) to 32.5%, thanks to inventory reserves with respect to the pandemic. At its first-quarter earnings, management stated that wholesale revenues have been trending down roughly 75% for April and May. This is going to weigh on second-quarter results.
In view of COVID-19 perils, revenues at Steven Madden’s retail business also plunged 15.8% in the first quarter on account of store closures in the second half of March. Nonetheless, gross margin at this segment expanded 130 bps to 59.8% owing to gains from the modification of the company's loyalty program, somewhat offset by the pandemic inventory reserves. Going forward, the company might continue witnessing softness across its retail segment on evolving online shopping patterns and a dynamic retail landscape.
Higher operating expense has already been a major concern for the company. To top it off, higher cost of investments toward digital capabilities has been adding up to increased costs, further putting pressure on the company’s overall margins.
Is There Any Silver Lining?
Certainly, the above-discussed factors cannot be overlooked. Steven Madden’s e-commerce initiatives seem encouraging amid pandemic. Management is now accelerating e-commerce growth initiatives, including higher investments in digital marketing and testing of latest features like try-before-you-buy and delivery capabilities. During first-quarter 2020, its e-commerce revenues grew mid-teens. Management at its earnings call on Jun 11 highlighted that second-quarter to date e-commerce revenues grew nearly 75%. Also, management has been gradually reopening stores. The company’s flagship brand is standing out. It is also poised to gain from the GREATS and BB Dakota acquisitions.
BJ's Wholesale Club (BJ - Free Report) , also a Zacks Rank #1 stock, which has a long-term earnings growth rate of 13.5%.
lululemon athletica (LULU - Free Report) has a long-term earnings growth rate of 18.3% and a Zacks Rank #2 (Buy).
Zacks Top 10 Stocks for 2020
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2020?
Last year's 2019 Zacks Top 10 Stocks portfolio returned gains as high as +102.7%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
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Here's Why Steven Madden Stock is Losing Investors' Favor
Steven Madden, Ltd. (SHOO - Free Report) is going through a rough patch thanks to persistent softness in its wholesale business and rising operating expense concerns. An unimpressive first-quarter 2020 performance has dealt a further blow. Incidentally, shares of the fashion-forward footwear company have tumbled 47.9% year to date, wider than its industry that has lost 7.8%.
Analysts are pessimistic on this Zacks Rank #4 (Sell) stock. The Zacks Consensus Estimate for the second quarter of 2020 is currently pegged at a loss of 24 cents although it was earnings of 25 cents 30 days ago. Moreover, the consensus estimate for the current year’s earnings is pinned at 66 cents, mirroring a decline of 50.7% over the past 30 days. Steven Madden had delivered earnings of 47 cents in second-quarter 2019 and $1.95 in 2019. A VGM Score of D further adds to the stock’s gloomy side. Let’s dive deep.
Hurdles on the Way
As stated above, Steven Madden is seeing sluggishness across its wholesale business owing to lower wholesale footwear and accessories/apparel revenues. This continued in first-quarter 2020, wherein the segment’s revenues dropped 13% year over year. Apart from softness in its footwear and accessories/apparel categories, major order cancellations in the back half of March due to COVID-19 hurt results. Moreover, gross margin in the wholesale business shrunk 200 basis points (bps) to 32.5%, thanks to inventory reserves with respect to the pandemic. At its first-quarter earnings, management stated that wholesale revenues have been trending down roughly 75% for April and May. This is going to weigh on second-quarter results.
In view of COVID-19 perils, revenues at Steven Madden’s retail business also plunged 15.8% in the first quarter on account of store closures in the second half of March. Nonetheless, gross margin at this segment expanded 130 bps to 59.8% owing to gains from the modification of the company's loyalty program, somewhat offset by the pandemic inventory reserves. Going forward, the company might continue witnessing softness across its retail segment on evolving online shopping patterns and a dynamic retail landscape.
Higher operating expense has already been a major concern for the company. To top it off, higher cost of investments toward digital capabilities has been adding up to increased costs, further putting pressure on the company’s overall margins.
Is There Any Silver Lining?
Certainly, the above-discussed factors cannot be overlooked. Steven Madden’s e-commerce initiatives seem encouraging amid pandemic. Management is now accelerating e-commerce growth initiatives, including higher investments in digital marketing and testing of latest features like try-before-you-buy and delivery capabilities. During first-quarter 2020, its e-commerce revenues grew mid-teens. Management at its earnings call on Jun 11 highlighted that second-quarter to date e-commerce revenues grew nearly 75%. Also, management has been gradually reopening stores. The company’s flagship brand is standing out. It is also poised to gain from the GREATS and BB Dakota acquisitions.
Forget SHOO, Eye These High-Performance Stocks
Activision Blizzard has an expected long-term earnings growth rate of 18.8% and currently has a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
BJ's Wholesale Club (BJ - Free Report) , also a Zacks Rank #1 stock, which has a long-term earnings growth rate of 13.5%.
lululemon athletica (LULU - Free Report) has a long-term earnings growth rate of 18.3% and a Zacks Rank #2 (Buy).
Zacks Top 10 Stocks for 2020
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2020?
Last year's 2019 Zacks Top 10 Stocks portfolio returned gains as high as +102.7%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
Access Zacks Top 10 Stocks for 2020 today >>