By:
Mary Kate Simon, AIM Student at Marquette University
Disclosure:
The AIM Equity Fund currently holds this position. This article was written by
myself, and it expresses my own opinions. I am not receiving compensation for
it and I have no business relationship with any company whose stock is
mentioned in this article.
Summary
• Steven
Madden, Ltd. (NASDAQ: SHOO) designs, markets
and provides private label and brand name footwear, handbags and accessories
for women, men and children.
• Through retail stores
and e-commerce websites, SHOO sells their products in the United States and
internationally.
• Steve Madden has an
established presence within fashion footwear, as it is coined one of the
industry leaders.
• The company derives
almost all of its revenues domestically: in 2018, the United States accounted
for 88% of total sales.
• SHOO had YOY net sales
growth of 13% and an adjusted diluted EPS increase of 31%.
Key
points:
Steven Madden continues
to grow and increase their market share. What started as a small investment of
$1100, SHOO has developed into one of the most iconic brands in footwear. In the past, Steven Madden has been highly
focused on selling to younger women. However, the company continues to break
barriers in whom they sell to. There continues to be a heavy increase in men’s
sales, children sales and international sales.
Steven Madden’s brand
development continues to outperform competitors. Their acquisition of Schwartz
and Benjamin in 2017 differentiated the brand and created a platform for
accessible luxury footwear. SHOO already licensed with five other companies;
and with the addition of their acquisition of Schwartz and Benjamin is helping
achieve a larger target market. This
brand development can add talk to why their full year ended December 31, 2018,
net sales increased 7.0% to $1.65 billion from $1.55 billion in the prior year.
The company’s international footprint
continues to grow exponentially. Although only about 10% of their total sales
come from outside the US, their international sales increased 22.29% from 2017
to 2018. This international exposure grew 7% more than the increase from 2016
to 2017. Moreover, SHOO has direct control over both their Canadian and Mexican
operations—this gives them full power over these foreign markets. Another major
positive within international affairs, is the fact that the China and Taiwan
retail on online sales are expected to grow over $100 million in mid-term
growth. Overall, Steven Madden’s international footprint proves growth
opportunities in the near future.
Product innovation plays
a major role in SHOO’s growth. Within their constant innovations, there remains
a constant focus: their deepening target of the millennial generation. As
millennials grow older, their incomes do as well. This creates a positive
linear relationship for SHOO in terms of sales from their largest target
market. In addition to their millennial pull, is their generation Z initiatives
on social media platforms, such as Instagram. From offering speed and an
experience to the millennials to offering value on social media platforms,
Steve Madden outperforms their competitors by offering fashion-forward products
in the best way to their largest target markets.
What
has the stock done lately?
Over the last 52-week
period, Steve Madden has seen a 5.30% gain in price. Although their 1 month
performance, shows a price decline of 1.75%, their YTD has seen growth of
7.63%. The company is yielding a dividend of 1.72%.
Past
Year Performance:
Although the apparel and
accessories industry saw overall sluggish performance in 2018, Steve Madden
delivered strong revenue growth and good margins. In Q4 2018, SHOO’s stock saw
volatility despite the fact adjusted net income was $35.7 million, or $0.42 per
diluted share, compared to $27.5 million, or $0.32 per diluted share, in the
prior year's fourth quarter. Moreover, in that quarter, Blondo, one of Steven
Madden’s brands, had net sales increase by over 50%, which proves customers
excitement about this waterproof shoe brand.
Source: FactSet
My
Takeaway:
Added to the AIM equity
fund at $30.93 in late November, the company has experienced over 5% upside to
date. Steven
Madden, Ltd has had another year of expansion and growth in almost all of their
segments. As management continues to move production out of China, the impact
of the tariffs has decreased to solely affect 10% of the products. This
positive, coupled with the international sales frontier, innovation to reach
their largest market segment and brand development proves that SHOO should
remain in the AIM portfolio.
Source: FactSet
