Analysts Favor Steve Madden Ahead Of Q4

Steve Madden x Ja Rule
Venturre, $165. (Maven X Madden collection).
SteveMadden.com.

Insiders have dubbed Steve Madden Ltd. a brand to watch during what has been a turbulent economic time for the industry. As many of its competitors grappled to stay afloat for the past several months, when the fashion footwear maker reported Q3, it showed solid sales and profit growth as well as double-digit comp gains.

In January, however, Steve Madden preannounced its Q4 earnings, which fell below analysts’ expectations for the quarter.

In the announcement, the company said its fourth-quarter net sales totaled $344.2 million, up a modest 0.5 percent year-over-year, and below Wall Street’s expectations for revenues of $360.3 million. The company also addressed its outlook for fiscal year 2015. It now expects diluted earnings per share to be at the low end of its previously provided guidance range of $1.85 to $1.95.

“In light of the challenging retail environment and unfavorable weather in the fourth quarter, we are pleased that earnings results for fiscal 2015 are expected to be within the guidance range, albeit at the low end,” said Steve Madden Chairman and CEO Edward Rosenfeld in a release back in January.

Still, as the firm prepares to release its complete Q4 earnings, on Feb. 24, analysts continue to favor the stock.

On Feb. 3, Canaccord Genuity Inc. analyst Camilo Lyon reiterated a buy rating on the firm’s shares and offered several reasons for his bullish posture.

“After touring [Steve Madden’s] showroom, during which we previewed late spring/early fall deliveries, we are incrementally more positive on the stock due to a strong fashion assortment with over 10 new style categories; footwear buyers appearing incrementally less negative/cautious than they did a month ago; and Steve Madden continuing to gain both wallet share and shelf space in the department store channel,” Lyon wrote.

Citi Research analyst Corinna Van der Ghinst acknowledged the potentially negative impact of macro challenges, but noted that she still expects Madden to stay well-positioned in the near future.

“… Further U.S. retail caution into 2016 could put a damper on [Steve Madden’s] fashion cycle turnaround as retailers manage inventories more tightly and potentially continue to limit reorders (even on stronger selling product), as we saw in 2015,” Van der Ghinst wrote. “Management reiterated challenges in the off-price channel and ongoing headwinds from weaker tourist traffic.”

Van der Ghinst added, “Nevertheless, [the company] should be relatively better positioned versus peers as retailers shift to lower initial open-to-buys and more at-once orders. The company’s proven test-and-react model and faster lead times (four-to-six weeks, versus competitors at several months) should enable the company to pounce on key trends while also limiting markdown risk.”

At press time (11:13 a.m. EST), Madden’s share price had edged up 0.23 percent, or 8 cents, to $34.69. On Jan. 20, 2016, the company’s shares hit a 52-week low of $27.80. The shares had climbed to a 52-week high of $44.73 on July 30, 2015. (Historical data courtesy of Yahoo Finance).