Steven Madden's (NASDAQ:SHOO) Q4 Sales Beat Estimates
Shoe and apparel company Steven Madden (NASDAQ:SHOO) announced better-than-expected results in Q4 FY2023, with revenue up 10.4% year on year to $519.7 million. It made a GAAP profit of $0.49 per share, improving from its profit of $0.44 per share in the same quarter last year.
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Steven Madden (SHOO) Q4 FY2023 Highlights:
Revenue: $519.7 million vs analyst estimates of $513.4 million (1.2% beat)
EPS: $0.49 vs analyst expectations of $0.59 (16.5% miss)
EPS guidance for 2024 of $2.60 at the midpoint is below expectations of $2.71 (4.1% miss)
Free Cash Flow of $145.9 million is up from -$10.61 million in the previous quarter
Gross Margin (GAAP): 41.3%, down from 42.2% in the same quarter last year
Market Capitalization: $3.26 billion
Edward Rosenfeld, Chairman and Chief Executive Officer, commented, “We are pleased to have delivered fourth quarter results that exceeded expectations on both the top and bottom lines. We saw organic revenue growth in both the wholesale and direct-to-consumer channels, supplemented by the contribution from the newly acquired Almost Famous, and also drove strong improvement in Adjusted operating margin compared to the same period in the prior year.
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.
Footwear
Before 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 Growth
A company’s long-term performance can give signals about its business quality. Any business can put up a good quarter or two, but many enduring ones muster years of growth. Steven Madden's annualized revenue growth rate of 3.4% over the last five years was weak for a consumer discretionary business.
Within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends. That's why we also follow short-term performance. Steven Madden's annualized revenue growth of 3% over the last two years aligns with its five-year revenue growth, suggesting the company's demand has been stable.
We can dig even further into the company's revenue dynamics by analyzing its most important segments, Wholesale and Retail, which are 68.3% and 31.2% of revenue. Over the last two years, Steven Madden's Wholesale revenue (sales to retailers) averaged 7.9% year-on-year growth while its Retail revenue (direct sales to consumers) averaged 5.3% growth.
This quarter, Steven Madden reported robust year-on-year revenue growth of 10.4%, and its $519.7 million of revenue exceeded Wall Street's estimates by 1.2%. Looking ahead, Wall Street expects sales to grow 9.5% over the next 12 months, a deceleration from this quarter.
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Cash Is King
If you've followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can't use accounting profits to pay the bills.
Over the last two years, Steven Madden has shown decent cash profitability, giving it some reinvestment opportunities. The company's free cash flow margin has averaged 11.2%, slightly better than the broader consumer discretionary sector.
Steven Madden's free cash flow came in at $145.9 million in Q4, equivalent to a 28.1% margin and down 25.1% year on year. Over the next year, analysts predict Steven Madden's cash profitability will fall. Their consensus estimates imply its LTM free cash flow margin of 10.6% will decrease to 8.7%.
Key Takeaways from Steven Madden's Q4 Results
It was encouraging to see Steven Madden narrowly top analysts' revenue expectations this quarter. On the other hand, its EPS missed and its operating margin fell short of Wall Street's estimates. EPS guidance for the full year also fell short of Wall Street estimates. Overall, the results could have been better. The company is down 1.4% on the results and currently trades at $43 per share.
Steven Madden may have had a tough quarter, but does that actually create an opportunity to invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.
