Friday, December 13, 2019

A Current AIM Small Cap Equity Holding: Steven Madden, Ltd. (SHOO, $42.87): “The SHOO still Fits”

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.


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.