Steve Madden’s Stock Jumps On Better-Than-Expected Q1

Steve Madden Ltd.’s shares were up more than 8 percent today after the Long Island City, New York-based company posted better-than-expected Q1 performance. The company said improving footwear trends proved to be an important driver, contributing double-digit comparable-store sales growth in its retail business during the quarter.

Net Income: Net income for Q1 was $19.8 million, down from the prior year’s $23.6 million.

EPS: Earnings per diluted share were 32 cents, compared with the year-ago quarter’s 36 cents per diluted share.

Adjustments: Profits in the first quarter of 2015 included a net benefit of $3 million related to early-lease termination of the company’s Fifth Avenue (New York) store location and a $3 million loss related to the partial impairment of its Wild Pair trademark. Since the items offset, net income excluding these items remained at $19.8 million, or 32 cents per diluted share.

Net Revenue: Net sales rose 6.3 percent, to $323.9 million, compared with $304.6 million in the same period of 2014.

Hit, Miss or Beat: While it was better than anticipated—it beat analysts’ revenue and EPS forecasts. Analysts polled by Yahoo Finance had predicted revenue of $316.4 million and EPS of 31 cents.

Executive Insights: “In our wholesale footwear business, while sales excluding acquisitions declined as expected, our sell-through at our retail partners improved significantly compared to the prior year — an encouraging sign as we move forward.”

“With respect to our footwear business overall, we were pleased to see stronger fashion footwear trends emerge, as we anticipated. Customers responded favorably to our new products across a number of categories, including dress shoes, casuals and sneakers. These newer trends had a strong positive impact on our retail stores, and we expect they will begin to drive improved results in our wholesale business — where first quarter sell-in was weak but sell-through was strong — as we move throughout the year.” — CEO Edward Rosenfeld in a Q1 conference call.

Looking Ahead: For fiscal year 2015, the company continues to expect that net sales will rise 7 percent to 9 percent over net sales in 2014. Diluted EPS for fiscal year 2015 is expected to be in the range of $1.85 to $1.95.

Analysts Insights:

“[Steve Madden] reported in-line results but provided more confidence in terms of emerging trends and the West Coast port situation; and therefore, we are more bullish regarding performance in [the second half of 2015]. In addition, recent additions to the portfolio are on track to drive potential upside in [the second half] and become more meaningful in 2016, men’s remains strong, handbags is rebounding, and international is picking up speed. We continue to view [Steve Madden] as our top pick and reiterate our ‘Buy’ rating.” –Danielle McCoy, Wunderlich Securities Inc. analyst.

“Risk factors that could impede Steve Madden shares from reaching our target price [$37] include decreasing popularity of the brand, product design, a slowing footwear cycle, M&A integration problems, a potential inability to respond to changing fashion trends and/or consumer demand, sourcing problems and a slowdown in comparable-store sales.” — Kate McShane, Citi Research analyst.

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