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Steve Madden Stock Sees Healthy Bounce on Q3 Sales Beat

Steve Madden stock rose 14 percent on Tuesday following the release of its latest sales figures, beating Wall Street sales and earnings expectations.

In a Nutshell: The footwear brand group’s third-quarter was highlighted by two key acquisitions, picking up Brooklyn-native footwear brand, Greats, and BB Dakota, a women’s apparel company. Both are likely to work themselves into the framework of Steve Madden’s wholesale distribution channels, which make up the bulk of its business.

At Sourcing Summit New York, Greats founder Ryan Babenzien said that he agreed to the acquisition after it became apparent that the DTC world had become so fragmented that it may never be possible to reach the level of growth that could sustain the business long-term, opting instead to achieve that growth as a part of a larger brand.

Sales: Revenue for Steve Madden in the third quarter grew by 8.5 percent to $497.3 million compared to just $458.5 million in the same period last year. This eclipsed Wall Street expectations of $487.17 million, driven primarily by gains in its wholesale business, which grew by 8.5 percent to $421.6 million. Wholesale footwear sales grew by 6.3 percent, which the brand attributed to growth from Blondo, Steve Madden Women’s and private labels.

Retail sales also grew for Steve Madden, up 8.3 percent to $75.7 million compared to $69.9 million in the Q3 of last year. Same-store sales were up 5.1 percent thanks to strong e-commerce performance, and retail gross margin was up to 63.3 percent from 60.1 percent in the prior year as a result of reduced promotional activity.

As a result of this performance, Steve Madden raised its annual net sales outlook to a range of 7 percent to 7.5 percent, up from the previous outlook of 5 percent to 7 percent.

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Earnings: Net income for the brand was $52.5 million in the third quarter, compared to $55.6 million in the prior year. This resulted in a diluted EPS of 63 cents, beating the average Wall Street expectation of 58 cents. Steve Madden also chose to raise its earnings guidance for the year, now expecting diluted EPS of $1.83 to $1.86 compared to the previous range of $1.74 to $1.82.

CEO’s Take: Steve Madden chairman and CEO Edward Rosenfeld said the company raised its expectations assuming a negative hit from the implementation of tariffs on Chinese products. Steve Madden brands were more than ready to take the hit, he added.

“We are pleased with our third-quarter results, which included adjusted earnings that significantly exceeded our expectations driven by strong performance in our Steve Madden and Blondo brands.  We also completed two acquisitions during the quarter that provide meaningful growth opportunities going forward: Greats, a pioneering digitally native sneaker brand, and BB Dakota, a contemporary women’s apparel company,” Rosenfeld said.

“Based on the strong performance in third quarter and the continued momentum in our underlying business, we are raising our 2019 EPS guidance despite incremental earnings pressure from the implementation of the 15 percent tariff on List 4 products from China. Looking out further, the power of our brands and the strength of our business model give us confidence that we can continue to drive earnings growth and create value for shareholders over the long term.”