Analysts Bullish on Madden

Analysts Bullish on Madden
Steve Madden store

Analysts are upbeat on Steven Madden Ltd., after the firm delivered good results amid a difficult quarter.

Camilo Lyon, analyst at Canaccord Genuity, said the first quarter’s earnings per share number of 52 cents was particularly impressive given poor traffic caused by unseasonable weather.

“The strength in conversion is a direct result of having on-trend styles, namely booties and sneaker wedges,” he said. “We expect booties to continue driving the business in the second quarter as comparisons begin to get difficult in the third quarter.”

Citigroup analyst Kate McShane agreed: “Though traffic remains challenging and management expects heavier promotional activity in the second quarter, we continue to see potential upside in the back half, driven by … share gains for the core Steve Madden business at Macy’s, significant Superga door expansion this spring [and] potential for either an accretive acquisition or increased share buybacks.”

In a conference call with analysts, Edward Rosenfeld, Madden’s chairman and CEO, also expressed confidence about the second half of the year.

“We do have some businesses that seem to be gathering momentum. Madden Girl, in particular, is really picking up steam, and Report should improve in the back half. Betsey Johnson shoes [are] getting better,” he said. “We’ve got a new, smaller brand called Freebird, which is some higher-priced boot product out of Mexico. It’s making some noise and should be additive in the back half.”

Also adding to the top line should be an increased sales volume of the Madden brand’s popular Hilight Sneaker Wedge, as the firm is reducing the selling price to about $100, from $150.

“That $99 or $100 price point has really been a magic price point for us for some big items. A good example is the lace-up bootie that we had so much success with a few years ago. When we took that to $100, it really spiked the volume, and that’s something we’re hoping will repeat itself with this item,” Rosenfeld said.

Another bright spot is the firm’s Adesso-Madden private label wholesale division, which is growing faster than management anticipated.

For the period ended March 31, Steven Madden earned a net income of $23.4 million, or 52 cents a share, a 7 percent increase from $21.9 million, or 50 cents, in the same period a year ago.

Net sales for the Long Island City, N.Y.-based firm increased 4.9 percent to $278.9 million, from $266 million, on the back of a comparable-store sales increase of 3 percent.

Within wholesale footwear, net sales were $189.2 million, down slightly from $191.5 million a year earlier. There was a $14 million sales decline at Topline, partly due to reduced shipments to Payless ShoeSource, the loss of two private-label customers that compete with Steven Madden and weakness in the Report brand, which is being repositioned.

Wholesale accessories net sales grew 19.3 percent to $44.7 million, driven by continued robust growth in both Steve Madden and Betsey Johnson handbags.

In the retail division, net sales increased 21.7 percent to $45.1 million. The firm opened one Steve Madden full-price store in Canada in the quarter, bringing the total number of company-operated stores to 110. The growth of owned retail helped buoy gross margins 70 basis points to 36.8 percent.

At the end of the first quarter, cash and cash equivalents totaled $154.7 million, more than twice its balance of $61.9 million a year ago. 
Madden reiterated that full-year EPS is expected to come in between $2.95 and $3.05, on a revenue increase of between 6 percent and 8 percent.