Steven Madden, Ltd. (SHOO, $42.87): “The SHOO
still Fits”
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 reported better-than-expected third-quarter 2019 results,
wherein both the top and the bottom lines continued to improve year over year.
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 Q3 2019, their
gross profit climbed 9%-- as this quarter allows a better outlook of 2019
overall. Net sales for 2019 are now envisioned to grow 7-7.5%, up from
management’s prediction of a growth of 5-6.5%.
Steven Madden’s brand development continues to outperform competitors. Specifically, Steven Madden stated that the
acquisitions of GREATS and BB Dakota are likely to be key catalysts. Notably,
impressive performance from this acquisition in August of 2019 is already
occurring. GREATS is a leading
digitally native footwear brand specializing in premium sneakers made in Italy.
This is a significant opportunity to expand the business by combining GREATS’
strengths – which include an outstanding brand and stylish, classic designs
that appeal to today’s more casual consumer – with SHOO’s proven business
model, established infrastructure and global reach.
The company’s international footprint continues to grow exponentially,
along with e-commerce sales. In Q2 2019, e-commerce sales were up 50% yoy. This
is allowing SHOO to earn a higher profit margin, as the expense of the
middle-man is declining. Moreover, their increase sales in e-commerce is
allowing an expansion in their international sales. The increase in
international sales has catapulted the brand to now operate 31 company stores in international markets.
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?
Shares of SHOO have been strong performers lately, as the stock was up
19.9% over the past month. Since January, Steven Madden has gained 43.06%
compared to the consumer discretionary sector up 19.2% on the year. Moreover,
the company has an incredible record of positive earnings surprises—which is
shown in the fact that it has not missed an earnings estimate in the past four
quarters.
Past Year Performance:
SHOO stock price has moved by -0.35% for the past one week and the
stock performed by 20.72% over the past one month. The company has registered
41.56% over the past six months and 43.06% since the start of the year. This
highlights that 2019 has been a great year for Steven Madden. Moreover, both
the top line and the bottom line of the company registered year-over-year
increase in the third quarter of 2019. In combination with that, earnings and
sales surpassed the Zacks Consensus Estimate for the fourth consecutive
quarter. This NY-based company gained from sturdy performance across its Steve
Madden and Blondo brands.
Source: FactSet
My Takeaway
Added to the AIM equity fund at $30.93 in late November, the company
has experienced over 38% upside to date. Steven Madden, Ltd has had another year of
expansion and growth in almost all of their segments. 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.
