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Shoe and apparel company Steven Madden (NASDAQ:SHOO) reported Q2 CY2024 results exceeding Wall Street analysts' expectations, with revenue up 17.6% year on year to $523.6 million. It made a non-GAAP profit of $0.57 per share, improving from its profit of $0.47 per share in the same quarter last year.
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Steven Madden (SHOO) Q2 CY2024 Highlights:
- Revenue: $523.6 million vs analyst estimates of $518.9 million (small beat)
- EPS (non-GAAP): $0.57 vs analyst estimates of $0.51 (11.3% beat)
- EPS (non-GAAP) Guidance for the full year is $2.60 at the midpoint, missing analysts' estimates by 1.2%
- Gross Margin (GAAP): 41.5%, down from 42.6% in the same quarter last year
- Free Cash Flow of $104.2 million is up from -$19.68 million in the previous quarter
- Market Capitalization: $3.26 billion
As seen in the infamous Wolf of Wall Street movie, Steven Madden (NASDAQ:SHOO) is a fashion brand famous for its trendy and innovative footwear, appealing to a young and style-conscious audience.
FootwearBefore the advent of the internet, styles changed, but consumers mainly bought shoes by visiting local brick-and-mortar shoe, department, and specialty stores. Today, not only do styles change more frequently as fads travel through social media and the internet but consumers are also shifting the way they buy their goods, favoring omnichannel and e-commerce experiences. Some footwear companies have made concerted efforts to adapt while those who are slower to move may fall behind.
Sales GrowthA company’s long-term performance can indicate its business quality. Any business can put up a good quarter or two, but many enduring ones tend to grow for years. Regrettably, Steven Madden's sales grew at a weak 4.2% compounded annual growth rate over the last five years. This shows it failed to expand in any major way and is a rough starting point for our analysis.
Long-term growth is the most important, but within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends and consumer preferences. Steven Madden's history shows it grew in the past but relinquished its gains over the last two years, as its revenue fell by 1.2% annually.
We can dig further into the company's revenue dynamics by analyzing its most important segments, Wholesale and Retail, which are 73.6% and 26.1% of revenue. Over the last two years, Steven Madden's Wholesale (sales to retailers) and Retail (direct sales to consumers) revenues were flat.
This quarter, Steven Madden reported robust year-on-year revenue growth of 17.6%, and its $523.6 million of revenue exceeded Wall Street's estimates by 0.9%. Looking ahead, Wall Street expects sales to grow 7.2% over the next 12 months, a deceleration from this quarter.
Cash Is KingAlthough earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can't use accounting profits to pay the bills.
Steven Madden has shown decent cash profitability, giving it some flexibility to reinvest or return capital to investors. The company's free cash flow margin averaged 12.5% over the last two years, slightly better than the broader consumer discretionary sector.
Steven Madden's free cash flow clocked in at $104.2 million in Q2, equivalent to a 19.9% margin. This quarter's cash profitability was in line with the comparable period last year and above its two-year average.
Over the next year, analysts predict Steven Madden's cash conversion will slightly fall. Their consensus estimates imply its free cash flow margin of 10.2% for the last 12 months will decrease to 8.5%.
Key Takeaways from Steven Madden's Q2 ResultsIt was good to see Steven Madden beat analysts' EPS expectations this quarter. We were also happy its revenue narrowly outperformed Wall Street's estimates. On the other hand, its Wholesale revenue unfortunately missed and its full-year earnings guidance fell short of Wall Street's estimates. Zooming out, we think this was still a decent, albeit mixed, quarter, showing the company is staying on track. The stock remained flat at $44.46 immediately after reporting.
