Steve Madden Limited (SHOO) is hot. The company posted record sales in the third quarter and has raised 2009 earnings guidance each of the last 3 quarters. SHOO is attractively valued, trading at 14.2x forward earnings.
Company Description
Steve Madden manufactures footwear and accessories for men, women and children that are sold through 88 company-owned retail stores, department stores, specialty retailers and at the company’s web site, www.stevemadden.com.
It is also the licensee for footwear for Elizabeth and James and l.e.i. which is sold at Wal-Mart, footwear, handbags and belts for Fabulosity and Olsenboye, and for handbags and belts for Betsey Johnson and Daisy Fuentes.
Steve Madden Posted Record Sales in the Third Quarter
Investors knew the news was going to be good from Steve Madden when it reported on Nov 3 because the company pre-announced its earnings and sales results on Oct 20.
As a result of the pre-announcement, analysts raised estimates on the quarter to the 97 cents the company said it was going to earn. Hence, it appears the company only “met” estimates when, in fact, it did much better.
Sales rose 9.4% to $140.1 million from $128.1 million in the year ago period. The wholesale business is what drove the quarter, with sales climbing 15% to $112 million from $97.3 million in the third quarter of 2008.
The strong divisions were Madden Girl, Steven by Steve Madden, Steve Madden Women’s and Steve Madden Men’s wholesale footwear segments. Boots were the driver of footwear sales in the quarter.
The newly acquired Madden Zone, formerly SML Brands, as well as the new Elizabeth and James brand, also boosted the quarter.
Retail was slightly weaker, falling to $28.2 million from $30.7 million in the year ago period. Same store sales also declined 7.6% compared to a 7.8% increase last year.
Gross margin, however, improved to 44.0% from 41.4% in the third quarter of 2008.
2009 Outlook
Steve Madden is bullish about the remainder of the year. It expects net sales to rise to the range of 7% to 8% over 2008. When it pre-announced on Oct 20, the company raised full year guidance to the range of $2.55 to $2.65 per share from the previous range in July of $2.05 to $2.15 per share.
Zacks Consensus Estimates Rise
Analysts are equally as optimistic about the company’s future. The fourth quarter Zacks Consensus Estimate has jumped 11% in just the last 7 days to 61 cents from 55 cents.
For 2009, analysts have raised estimates to the high end of the company’s guidance range to $2.64 from $2.61 per share.
The estimate revisions continue into 2010 with 1 out of 5 covering analysts raising estimates in the last week to $2.83 from $2.68 per share.
Value Fundamentals
Steve Madden is a Zacks #1 Rank (strong buy) stock. It is trading with a price-to-book ratio of 2.67. The company has an outstanding 5-year average return on equity (ROE) of 15%.
