Slowing Merchandise Reorders Likely Impacted Steve Madden In Q2, Analysts Say

While it remains an industry leader for fashion footwear in the moderate price range, Steve Madden will likely feel the impact of retailers’ ongoing desire to manage down inventories into the second half of 2016, according to market watchers.

Consensus estimates predict that the Long Island City, N.Y.-based brand will produce diluted earnings per share two pennies above the comparable period, at 42 cents, while revenues are expected to improve 1.8 percent, to $329.5 million.

Citi Research analyst Corinna Van der Ghinst and CL King & Associates analyst Steve Marotta both give the firm’s stock a neutral rating ahead of Tuesday’s release citing slowing merchandise orders across department stores as well as mass merchants following a tough holiday ’15 season.

We expect the company to generate a positive company-owned retail comp in Q2, against the single most difficult quarterly comparison [up 18.5 percent in 2015],” Marotta wrote on July 22. “However, and as a result of the material headwinds currently plaguing the consumer soft goods industry, merchandise reorders are severely constrained. This further dovetails with constrained wholesale channel open-to-buy dollars in 2H16, limiting any potential upside surprise to current annual expectations.”

Meanwhile, Van der Ghinst noted that Madden’s management indicated, during meetings in June, that both Steve Madden and Dolce Vita were both outperforming this spring. Still, Van der Ghinst said she didn’t believe stronger sell-throughs were resulting in a normalized level of reorders “as retailers continue to manage inventories lower across all tiers of distribution.”

Van der Ghinst predicts EPS in line with consensus and revenue gains of 1.5 percent. Marotta is betting on a Q2 sales gain of 1.3 percent and EPS a penny above consensus, at 43 cents.

Canaccord Genuity Inc. analyst Camilo Lyon reiterated his buy rating on the stock projected EPS in line with consensus but said he believes Steve Madden could “muster a 1 cent beat” in Q2.

While he cited similar concerns as other analysts over the lack of substantial wholesale reorders, Lyon said he believe the company’s expanded partnership with Amazon has resulted in strong e-commerce sales.

By category, we believe sneakers, sandals, and dress were the standout performers,” he added. “Overall, a slightly better Q2 could be mitigated by a softer Q3 guide putting the risk/reward at neutral into the print. That said, we remain positive on the stock as Q2 will highlight the strength of Steve Madden’s fashion assortment and management’s ability to navigate through a challenging environment.”

Steve Madden is expected to report second-quarter earnings Tuesday.

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