On Wednesday, Citi reiterated its Neutral rating on Steven Madden (NASDAQ:SHOO) with a consistent price target of $45.00. The stock currently trades at $46.01, with analyst targets ranging from $42 to $53. Following a meeting with the company's management at their showroom during the FFANY shoe show, the analyst reported a positive outlook on current trends.
The demand for boots and sneakers is solid, and management anticipates that wholesale footwear growth will improve in the fourth quarter compared to the third, aligning with previous guidance. This optimism is supported by the company's strong revenue growth of 14.89% over the last twelve months.
Management at Steven Madden is actively shifting production to mitigate potential tariff risks. By the end of fiscal year 2025 (F25), the company aims to reduce the percentage of units exposed to tariffs from 50% to 25% by moving production outside of China.
The company operates with moderate debt levels and maintains strong liquidity, with a healthy current ratio of 2.09, suggesting it's well-positioned to manage this transition. Despite the uncertainty of the impact this move may have on F25 earnings per share (EPS), the management is proceeding with the strategy, even as they acknowledge the risk of tariffs in other regions, such as Mexico.
Citi has adjusted its financial models to account for gross margin pressure in F25, reflecting the proactive steps taken by Steven Madden's management to relocate production. This move is seen as a way to potentially offset the likelihood of tariff imposition.
The meeting provided further insights into the company's operations and strategies. Although the full implications of the production shift on F25 EPS remain unclear, Steven Madden's management is taking decisive action in the face of global trade uncertainties.
The company's efforts to adapt to the dynamic trade environment are ongoing as they continue to evaluate and respond to tariff risks.
In other recent news, Steven Madden Limited showcased strong growth in the third quarter of 2024, with a 13% increase in revenue to $624.7 million. This growth was driven by robust sales in accessories and apparel, particularly handbags, and contributions from the newly acquired Almost Famous brand.
Despite a minor decline in wholesale footwear, overall wholesale revenue rose, and the company reported a net income of $64.8 million. In light of these results, Steven Madden has raised its 2024 revenue guidance to a 13%-14% increase, expecting diluted EPS between $2.62 and $2.67. The company also announced a quarterly dividend of $0.21 per share.
Needham recently initiated coverage on Steven Madden shares with a Hold rating, citing concerns over potential tariffs and challenging macro conditions. The firm highlighted Steven Madden's significant exposure to China-to-U.S. imports, which could be impacted by tariffs. This factor, combined with the overall challenging macro conditions, is expected to dampen demand, especially among wholesale customers.
In response to these concerns, Steven Madden is actively working to diversify its supply chain, aiming to reduce reliance on Chinese sourcing by 40%-45%. The company also plans to continue its store enhancement investments, with a flagship store opening in Times Square (NYSE:SQ) anticipated.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.