On Thursday, Telsey Advisory Group adjusted its outlook on Steven Madden (NASDAQ: NASDAQ:SHOO), raising the price target to $50 from $44, while retaining a Market Perform rating on the stock.
The firm's decision followed Steven Madden's solid performance in the first half of FY24, which saw the company surpass market expectations on several financial metrics.
Steven Madden demonstrated robust growth in the second quarter, marking a continuation of the positive trend from the first quarter. The company reported high-teens top-line growth for the second consecutive period, an achievement attributed to an 86% increase in accessories and apparel sales, which includes a 30% rise from the Almost Famous acquisition. This growth was further bolstered by international expansion and a stronger direct-to-consumer (DTC) channel.
According to the firm, Steven Madden's success in these strategic areas indicates progress in diversifying the business, with notable gains in international markets, non-footwear categories, and the DTC channel. Additionally, a positive trend in the wholesale footwear category suggests a recovery from the previous fiscal year's challenges.
Despite the upbeat results, Steven Madden has opted to maintain its annual sales and earnings per share (EPS) forecasts, reflecting caution due to an uncertain macroeconomic environment and higher freight costs anticipated in the latter half of the year.
Telsey highlighted Steven Madden's agility in responding to fashion trends and the potential for improved performance throughout FY24, supported by favorable year-over-year comparisons in the wholesale segment.
The firm's increased price target is based on a 15.7x multiple applied to its two-year forward EPS estimate for Steven Madden, aligning with recent near-term multiples. The maintained Market Perform rating, however, indicates ongoing challenges in the wholesale channel and a broader, unsettled operating climate.
In other recent news, Steven Madden Limited continues to display strong financial performance, with its second quarter of 2024 results showing an 18% rise in revenue and a 23% increase in adjusted diluted earnings per share (EPS) year-over-year.
This growth is attributed to the company's strategic expansion into international markets, diversification beyond footwear, and the bolstering of its U.S. wholesale footwear business.
Despite the robust growth, Steven Madden maintains a cautious outlook, keeping its annual guidance steady with an expected 11% to 13% revenue increase for 2024.
Furthermore, the company's financial stability is notable, ending the quarter with no debt and a substantial $192.2 million in cash and investments.
The firm's capital expenditures were $5.3 million, with an additional $38.2 million spent on stock repurchases. Steven Madden has approved a quarterly cash dividend of $0.21 per share, payable later this year.
According to analysts at Telsey Advisory Group, the company's success in these strategic areas indicates progress in diversifying the business, with notable gains in international markets, non-footwear categories, and the direct-to-consumer channel.
However, they also note ongoing challenges in the wholesale channel and a broader, unsettled operating climate, maintaining a Market Perform rating on the stock.
InvestingPro Insights
As Steven Madden continues to navigate the retail landscape with a focus on international expansion and direct-to-consumer sales, InvestingPro data provides further context to Telsey Advisory Group's recent analysis. The company holds a market cap of approximately $3.33 billion, with a P/E ratio of 18.17, reflecting investor confidence in its earnings capacity. Notably, Steven Madden's revenue growth over the last twelve months stands at 10.95%, underscoring the company's solid top-line performance mentioned in Telsey's report.
InvestingPro Tips reveal that Steven Madden is trading at a high P/E ratio relative to near-term earnings growth, which may suggest that the stock is priced optimistically in terms of its earnings outlook. However, the company's strong return over the last three months, with a total return of 15.56%, aligns with the positive sentiment observed by analysts. Additionally, it's worth noting that Steven Madden's liquid assets exceed its short-term obligations, indicating financial stability that could help weather uncertain macroeconomic conditions.
For readers interested in a deeper dive into Steven Madden's financial health and future prospects, there are additional InvestingPro Tips available at https://www.investing.com/pro/SHOO, offering valuable insights for informed investment decisions.
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