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Port Delays Aren’t Over for Steve Madden, but Company Could Still ‘Catapult’ Above 2019 Levels, Analysts Say

Analysts have remained neutral or reiterated their buy ratings for Steven Madden Ltd. — despite macroeconomic headwinds such as pandemic-induced port congestions and store closures that continue to hurt its business.

The New York-based company, which reported today better-than-expected earnings and sales, has seen a “pretty significant impact” on its supply chain, chairman and CEO Ed Rosenfeld said in its first-quarter conference call. It also issued caution for the second quarter, anticipating revenues in the range of $360 million to $365 million, as well as earnings per share between 26 cents and 28 cents.

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“One of the things that’s frustrating for us is just, because we do have such a strong product assortment and consumer is responding so well to so many of our products, we’re not really able to capitalize on that in the way we otherwise would if we didn’t have the supply chain disruption,” said Rosenfeld, who projected a $15 million to $20 million revenue hit in the second quarter as a result of macro uncertainties.

However, market watchers predicted that this top-line performance could prove conservative, given the momentum from fiscal stimulus and pent-up demand. Plus, Rosenfeld forecasted at the end of the chain’s 2020 fiscal year that disruption at the docks could contribute to a $30 million revenue impact in Q1, but he noted today that “it was not as bad as we initially feared … I would say it actually ended up being only about half of that.”

Following the release of the financial report, B. Riley Securities analyst Susan Anderson maintained her buy rating and $44 price target on Steve Madden. She pointed out the performance of retail sales, which were up 7.5% from the same period in 2019, which “indicates a return of consumer appetite for fashionable footwear.” Anderson added, “We believe wholesale performance was impacted by conservative planning by other retailers in addition to port delay and logistical issues seen industrywide.”

According to UBS analyst Jay Sole, the problem at the ports has affected some shoe players more than others: “For companies like Crocs and Skechers, supply chain issues did not seem to negatively impact first-quarter results or second-quarter guidance. However, it was an issue for Nike … Steve Madden’s report is a reminder the supply chain disruption risk isn’t over.”

Still, Sole kept his rating neutral with a price target of $40 and suggested that the economy’s steady reopening could put the spring back in the step of Steve Madden, which saw its dress shoe business overshadowed by the rise of casual, athletic and athleisure styles at the height of the pandemic.

“We think the market will remain confident women’s dress footwear will rebound sharply once the U.S. fully reopens, and SHOO’s earnings will catapult above 2019 fiscal year levels by the end of the 2022 fiscal year,” said Sole.

What’s more, CL King & Associates managing director of research Steven Marotta stuck with his neutral rating, adding that “quarter after quarter of top-tier execution with a first-in-class fashion delivery model is facing the massive headwind caused by the pandemic, and conservative near-term guidance is not terribly surprising.”

Overall, Rosenfeld explained that Steve Madden has seen an improvement in revenue trends throughout the quarter, with March “considerably better” than January and February. “We’ve seen that improve [and] continue into April.”

For the three months ended March 31, the retailer logged adjusted profits of $26.9 million, or earnings of 33 cents per share, compared with the prior year period’s profits of $13 million, or earnings of 16 cents per share. Wall Street had predicted earnings of 17 cents per share. Revenues also increased 0.5% to $361 million, versus analysts’ estimates of $335.3 million.