Steven Madden's (SHOO) Loss Narrower, Revenues Miss in Q2

Steven Madden, Ltd. SHOO reported narrower-than-expected loss in second-quarter 2020. However, revenues lagged the Zacks Consensus Estimate after a beat in the previous quarter. Also, both top and bottom lines compared unfavorably with the year-ago quarter’s respective figures.

Steven Madden delivered adjusted loss of 19 cents a share, narrower than the Zacks Consensus Estimate of a loss of 26 cents. However, the bottom line compared unfavorably with adjusted earnings of 47 cents reported in the year-ago quarter. We note that operating expenses dropped 36.4% to $76.9 million and cost of sales decreased significantly to $86.9 million in the reported quarter.

Total revenues plunged 68.2% year over year to $142.8 million. This takes into account a 68.2% decline in net sales of $141.4 million and decrease of 70.2% in commission and licensing fee income of $1.4 million. The Zacks Consensus Estimate for total revenues was $183 million.

Steven Madden, Ltd. Price, Consensus and EPS Surprise Steven Madden, Ltd. Price, Consensus and EPS Surprise

Steven Madden, Ltd. price-consensus-eps-surprise-chart | Steven Madden, Ltd. Quote

Detailed Discussion

Revenues for the Wholesale business fell 72.5% to $100 million, reflecting a drop in wholesale footwear and accessories/apparel revenues. Also, the metric was hurt by significant order cancellations due to COVID-19. We note that wholesale footwear revenues declined 72.8% and accessories/apparel revenues tumbled 71.5%.

Retail revenues plunged 49.2% to $41.4 million, owing to the closure of most of its retail outlets with respect to the pandemic. This was partly compensated with the robust performance across its e-commerce business. Management remains encouraged by solid digital commerce channels, with 88% revenue growth on in the reported quarter. This has been gaining from strength in the company’s brands coupled with continued consumer demand for its products. 

Consolidated gross profit tumbled 67.1% year over year to $55.9 million, while gross margin expanded 130 basis points (bps) to 39.1%. We note that gross margin in the wholesale business shrunk 550 bps to 26.6%, mainly due to the shift in sales mix to the lower-margin private label business. However, retail gross margin expanded 770 bps to 67.4%, mainly buoyed by a shift in sales mix to the higher-margin e-commerce business.

Further, the company reported adjusted operating loss of $21 million compared with adjusted operating profit of $49.1 million in the same quarter a year ago.

Steven Madden ended the second quarter with 225 company-operated retail outlets including eight Internet stores, along with 17 company-operated concessions in international markets.

Other Financial Aspects

Steven Madden, which carries a Zacks Rank #4 (Sell), ended the reported quarter with cash and cash equivalents of $318.1 million, marketable securities of $38.8 million, and shareholders’ equity of $755.1 million, excluding non-controlling interests of roughly $12 million. Moreover, advances from factor were $42.7 million as of Jun 30, 2020.

On July 22, 2020, Steven Madden entered into a five-year asset-based revolving credit facility worth $150 million. This replaced the company’s earlier credit facility with its factor.

As of Jun 30, net cash provided by operating activities were $57.9 million. Management incurred capital expenditures of approximately $4.3 million during the first six months of 2020. The company also paid cash dividends of $12.5 million in the aforementioned period.

Price Performance

A glimpse of the Long Island City, NY-based company’s price performance shows that its shares have plunged 11.9% in the past three months. Meanwhile, the industry rallied 11%.

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Carter's CRI has delivered a significant earnings surprise in the last reported quarter and currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Deckers’ DECK long-term expected earnings growth rate of 16.6% is impressive, and the company presently displays a Zacks Rank #2 (Buy).

Crocs CROX, also a Zacks Rank #2 stock, has an expected long-term earnings growth rate of 15%.

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