What To Expect When Steve Madden Reports Q1

Analysts had been overwhelmingly upbeat on Steve Madden Ltd. throughout much of 2016, but ahead of its first-quarter earnings release, the tone seems more mixed.

The fashion-footwear and accessories maker’s share price hit a 52-week low of $27.80 in mid-January, and downgrades from Piper Jaffray Co. and Goldman Sachs Group Inc. followed in March. The latter downgraded from neutral to sell and the former changed its rating from overweight to neutral.

In February, when Steve Madden last reported, the brand hit Wall Street’s forecasts. This time around, market watchers said they expect earnings per share of 33 cents and revenues of $325.4 million.

CL King & Associates analyst Steve Marotta said the most pressure on the brand in Q1 likely came from industrywide challenges — i.e., not company specific issues — weighing on the wholesale channel.

With the wholesale channel comprising 85 percent of the total consolidated sales mix in Q1, combined with the fact channel-wide open-to-buy budgets are running lower than last year, even an outperformer like Steve Madden will be challenged to eke out positive sales growth (excluding company-owned retail units),” Marotta wrote on April 5. “The good news is that inventory in the channel is relatively clean, the women’s fashion footwear category seems to have stabilized, and promotions in the quarter do not appear to be accelerating.”

An upbeat Canaccord Genuity Inc. analyst Camilo Lyon — who reiterated his buy rating on the stock — said he suspects “an initially conservative stance on spring orders by the department stores changed to reorders as demand trends improved in March.”

Sentiment among retail buyers has improved over the past few months as much of the excess winter footwear inventory has been worked down and demand for spring product has increased,” Lyon wrote today. “We believe modest reorders in Q1 are a positive signal for more significant reorders in Q2 (not embedded in guidance).”

Lyon added, “What’s more, Steve Madden is the best positioned in the competitive landscape to meet incremental in-season demand from its retail partners due to its quick turn capabilities. As such, we expect Steve Madden to continue gaining share despite overall volatility in the space.”

Lyon expects Q1 EPS in line with consensus but believes there could be a penny of upside based on reorders.

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