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Wall Street JournalSHOO Stock Looks Attractive With P/E Multiple of 17.05X: How to Play?
Steven Madden, Ltd. SHOO is trading at a notable low price-to-earnings (P/E) multiple, which is below the Zacks Shoes and Retail Apparel industry and the broader Consumer Discretionary sector’s averages. SHOO's forward 12-month P/E ratio is 17.05, lower than the industry's and the sector’s ratios of 26.97 and 19.05, respectively.
This stock is undervalued than its industry peers, offering compelling value to investors looking for exposure to the sector. SHOO's Value Score of A underscores its appeal as an investment option.
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Shares of the company have seen a decent price increase over the past year, climbing 45.6% and surpassing the industry’s 4.6% decline. This resulted from SHOO’s enhanced operational efficiency and direct-to-consumer (DTC) business, which have also helped it outperform the sector and the S&P 500 index’s respective growth of 21.8% and 34.9% in the same period.
SHOO closed yesterday’s trading session at $48.61, which is 2.8% below its 52-week high of $50.01 attained on Oct. 1, 2024. Steven Madden is currently trading above its 200-day simple moving average (SMA) of $42.81 and 50-day SMA of $45.79. This technical strength, along with sustained momentum, reflects positive market sentiment and investor confidence in SHOO's financial health and growth prospects.
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Steven Madden’s Growth Initiatives Drive Strong Performance
Steven Madden has been strategically focused on driving growth through several key initiatives, which have delivered strong results in the second quarter of 2024. The company's approach includes bolstering its DTC business, expanding beyond footwear into accessories and apparel and growing its international presence, all while maintaining its core U.S. wholesale operations.
The company has leveraged its digital capabilities to enhance the DTC business, which saw a 6.4% year-over-year revenue increase in the second quarter. Its disciplined inventory management and focus on trend-right product assortments reduced the need for promotions, contributing to gross margin expansion in this segment. Comparable DTC sales rose 4.1% in the second quarter.
The company's wholesale business experienced significant growth, with revenues increasing 22.5% year over year to reach $385.3 million. Accessories and apparel were standout categories, with revenues up 86% from the prior year period, driven partly by the acquisition of Almost Famous. Even without this acquisition, wholesale revenues saw an 8.2% year-over-year increase. The core wholesale footwear business also showed signs of recovery, signaling inventory normalization and growth potential in key markets.
Steven Madden is growing its focus beyond footwear, especially in handbags and apparel. The company saw a 74% revenue increase in accessories and apparel, with handbags alone rising 30%, driven by popular styles like structured mini satchels. Apparel grew by nearly 80% and the launch of Madden Girl apparel at major retailers like Macy's and Kohl’s reflects its expanding footprint in this category.
Moreover, Steven Madden’s international markets continue to drive robust growth, with a 13% revenue increase in the second quarter, primarily led by the EMEA region. SHOO expects EMEA revenues to be up more than 20% in 2024, highlighting its successful market strategies. Joint ventures in Southeastern Europe, the Middle East and South Africa have been instrumental in this growth. The company’s increased retail footprint in these regions, particularly with new store openings, positions it well for sustained success.
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SHOO’s Financial Stability and Growth Prospects Ahead
Steve Madden's strong second-quarter financials reflect solid financial health and disciplined capital management. As of June 30, 2024, the company reported $180.5 million in cash and equivalents and $11.8 million in short-term investments, with no outstanding debt.
Looking forward, Steve Madden is well-positioned for continued growth in both domestic and international markets. The U.S. wholesale footwear recovery points to improved inventory management and stronger retail partnerships. The company expects a year-over-year revenue increase in the range of 11-13% in 2024, with adjusted earnings per share forecasted at $2.55-$2.65, up from $2.30 in 2023.
Conclusion
Investors might choose SHOO stock due to its current undervaluation compared with industry peers as reflected in its lower price-to-earnings multiple, indicating compelling value in the shoes and retail apparel sector. The company has demonstrated solid operational efficiency and a robust DTC strategy, leading to significant revenue growth in its wholesale and accessory segments.
Moreover, SHOO’s strong financial health, with substantial cash reserves and no debt, bolsters confidence in its ability to sustain growth both domestically and internationally. With a positive market sentiment fueled by recent price momentum and strong sales performance, SHOO presents an attractive opportunity for investors looking for stability and growth potential in the consumer discretionary market. The company currently carries a Zacks Rank #2 (Buy).
Other Key Picks
Other top-ranked stocks are Abercrombie & Fitch Co. ANF, Wolverine World Wide, Inc. WWW and Build-A-Bear Workshop BBW.
Abercrombie is a specialty retailer of premium, high-quality casual apparel. It sports a Zacks Rank #1 (Strong Buy) at present. ANF delivered a 16.8% earnings surprise in the last reported quarter. You can see the complete list of today’s Zacks #1 Rank stocks here.
The consensus estimate for Abercrombie’s fiscal 2025 earnings and sales indicates growth of 63.4% and 13%, respectively, from the fiscal 2024 reported levels. ANF has a trailing four-quarter average earnings surprise of 28%.
Wolverine is engaged in the designing, manufacturing and distribution of a wide variety of casual as well as active apparel and footwear. It currently carries a Zacks Rank of 2.
The Zacks Consensus Estimate for Wolverine’s 2024 sales indicates a decline of 23% from the 2023 reported figure. WWW has a trailing four-quarter average earnings surprise of 7.5%.
Build-A-Bear Workshop is the only national company providing a make-your-own stuffed animal interactive retail entertainment experience. It currently carries a Zacks Rank of 2.
The Zacks Consensus Estimate for Build-A-Bear Workshop’s fiscal 2024 earnings and sales indicates growth of 8.8% and 1.2%, respectively, from the fiscal 2023 reported figures. BBW has a negative trailing four-quarter average earnings surprise of 3.9%.
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Abercrombie & Fitch Company (ANF): Free Stock Analysis Report
Wolverine World Wide, Inc. (WWW): Free Stock Analysis Report
Build-A-Bear Workshop, Inc. (BBW): Free Stock Analysis Report
Steven Madden, Ltd. (SHOO): Free Stock Analysis Report