A month has gone by since the last earnings report for Steven Madden (SHOO). Shares have added about 1.9% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Steven Madden due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Steve Madden Tops Q3 Earnings Estimates, Updates View
Steven Madden, Ltd. delivered better-than-expected third-quarter 2018 bottom-line results. Although both the top and bottom lines grew year over year, revenues fell short of the Zacks Consensus Estimate.
Nevertheless, management highlighted that Steve Madden Women's wholesale business witnessed solid growth. Moreover, the company witnessed solid gains in international markets and strong performance at its fashion-oriented footwear brand Blondo. The company's e-commerce business also improved significantly. Notably, the company also provided an encouraging full year sales and earnings projection. Let's Delve Deep
This designer and marketer of fashion footwear and accessories delivered adjusted quarterly earnings of 65 cents a share that surpassed the Zacks Consensus Estimate of 61 cents and increased 27.5% from 51 cents reported in the year-ago period. The bottom line improved in spite of increase in adjusted operating expenses (up 4.7%). This can be attributed to higher net sales.
The top line increased 3.9% year over year to $458.5 million but came below the Zacks Consensus Estimate of $470 million.
Management announced that sales in international markets soared 24% during the quarter under review. Blondo's net sales soared more than 50% in the quarter. The company's directly-owned subsidiaries in Canada and Mexico, SM Europe JV, and the distributor business in Italy, India, and the Middle East posted strong results.
Net sales for the wholesale business rose 3.1% to $388.5 million, reflecting robust gain in wholesale accessories. This was partly offset by a decline in wholesale footwear. We note that wholesale footwear net sales fell 1.1% to $297.3 million, while wholesale accessories net sales increased 19.5% to $91.3 million.
Net sales in wholesale accessories business climbed on the back of Steve Madden handbags and private label accessories business, including contribution from Anne Klein handbags and new license.
Retail net sales jumped 8.8% to $69.9 million, while comparable-store sales increased 5.5%. Margins
Meanwhile, gross profit climbed 5.6% to $175.2 million, while gross margin expanded 60 basis points to 38.2%. We note that gross margin in the wholesale business increased 40 basis points to 34.3% on account of gross margin improvement in both wholesale footwear and wholesale accessories. Meanwhile, retail gross margin increased 80 basis points to 60.1% attributed to higher gross margin in the e-commerce business and full price selling.
Gross margin on stevemadden.com increased more than 500 basis points from the year-ago quarter. However, higher shipping costs on account of implementation of free two-day shipping impacted margin.
Adjusted operating income increased 7.1% to $70.6 million, while adjusted operating margin increased 50 basis points to 15.4%. Store Update
Steven Madden ended the quarter with 210 company-operated retail outlets, comprising seven Internet stores, as well as 46 company-operated concessions in international markets. Other Financial Aspects
The company ended the reported quarter with cash and cash equivalents of $172.5 million, marketable securities of $57.9 million, and shareholders' equity of $859.8 million, excluding non-controlling interest of $7.4 million. Management incurred capital expenditures of $2.9 million during the quarter.
During the quarter, the company bought back about 416,264 shares for $15.8 million and there was still $132.6 million remaining under its share buyback program. The company also hiked quarterly dividend by 5% to 14 cents a share. Outlook
Management expects net sales growth of 6-7% for 2018. The company envisions full year adjusted earnings in the range of $1.76-$1.78, indicating an improvement from $1.49 in 2017. The company's projection includes a negative impact of 2 cents due to imposition of tariffs on hand bags and other accessories. The company had earlier projected net sales growth of 5-7% with adjusted earnings in the band of $1.73-$1.78.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -8.5% due to these changes.
At this time, Steven Madden has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Steven Madden has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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