Fashion footwear dealer Steven Madden, Ltd. SHOO has been in good shape on the back of its growth initiatives and strength in e-commerce. Amid the pandemic, the e-commerce business has been a bright spot for the company. Gains from increased investment in digital marketing and robust consumer reception of capabilities such as try-before-you-buy have been contributing to its performance.
The company has also been significantly accelerating its digital commerce initiatives with respect to distribution. It has added a high-level talent to the organization, ramped up digital marketing spend, improved data science capabilities, launched try-before-you-buy payment facility, rolled out buy online, pick-up in store across its entire U.S. full-price retail outlets, and introduced advanced delivery and return options.
Encouragingly, momentum in the e-commerce unit continued in fourth-quarter 2020 with revenues surging 36%, including a 51% increase in Steve Madden e-commerce business. In 2020, the company-operated e-commerce revenues rose about 50% versus 58% increase last year. This included 55% growth in Steve Madden’s e-commerce business, up from a 51% increase in the previous year. We note that the company-operated e-commerce profit margins increased meaningfully for the third consecutive year. Going forward, strength in e-commerce is likely to stay and boost the company’s overall results, given such robust digital endeavors.
Although the coronavirus pandemic continued to hurt business, the company’s fourth-quarter 2020 results surpassed management’s expectations and improved sequentially. The company’s actions, like quick adjustments to merchandise assortments to cater to changed consumer preferences, enhanced digital initiatives, and managing of expense structure have aided it to maneuver the pandemic-induced challenges. Meanwhile, strength in brands, a strong balance sheet and a robust business model appear encouraging.
However, sluggishness across the company’s wholesale business continued in the fourth quarter of 2020 on lower wholesale footwear and accessories/apparel revenues. We note that the pandemic has been hurting this business. Incidentally, management projects wholesale revenue decline of high-single digits, on a percentage basis, year over year for the first quarter of 2021.
On a positive note, Steven Madden is focused on creating trendy products, deepening relations with customers via marketing, enhancing digital commerce agenda, expanding international markets including Europe, and efficiently controlling inventory and expenses. For the first quarter of 2021, retail revenues are anticipated to rise mid-single digits on a percentage basis, year over year.
Furthermore, Steven Madden remains encouraged about the buyout of BB Dakota, a California-based women's apparel company. With this acquisition, the company looks to expand its apparel category. It remains on track to launch the BB Dakota Steven Madden product. Meanwhile, management is focusing on expanding the business globally, with a greater emphasis on Europe. These initiatives are likely to contribute to the company’s top line.
Buoyed by the aforesaid strengths, shares of this Zacks Rank #3 (Hold) stock have surged 83.3% and outperformed the industry’s mere 7.9% gain in a six-month time frame. An expected long-term earnings growth rate of 15% and a VGM Score of B further demonstrate strength.
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