On Tuesday, February 21st, 2012 Steven Madden LTD (SHOO) reported earnings of $0.55 a share on revenue of $279.8 million. Both numbers topped analysts but 2012 earnings guidance was lower than expected in the range of $2.60 to $2.70 a share. This sent the stock lower and the final bell saw the closing price for SHOO down just over 2.35% from the previous close.
Analysts were expecting earnings of $0.54 a share on revenue of $266.2 million. The $0.01 earnings beat did not impress investors as the stock opened to the downside and stayed that way throughout the trading day. In the past year Steven Madden LTD is up over 42% with over half of that gain coming since the beginning of 2012. A year to date gain of 22% is quite impressive as the S&P 500 is up 8.73%.
A very important metric for investors is revenue at stores open more than one year. This number was very positive as Steven Madden stores opened longer than 365 days increased revenue by 15.9%. Some retailers look at same store sales for stores open more than three years as this tends to be the time when stores become “established.” Looking at metrics during a shorter period of time often inflate numbers as the first six to nine months tend to show extreme growth. Customers begin to recognize that the location is available and return shoppers build a strong relationship with a specific store. After the first year or first three years retail companies can determine just how much they are growing with new customers.
Since the March 2009 stock market bottom Steven Madden LTD is up over 550%. This is a solid gain but there are some niche retailers that have grown well over 1900%. Both Lululemon Athletica and Ulta Salon have increased three times as much as Steven Madden LTD. Even though other retailers have performed better it is still good to see that the SHOO stock price remained above its 50 day moving average after the earnings report.
As of the stock market close on February 21nd, 2012 the 50 day moving average for SHOO is $37.79. The closing price for the stock was $42.20 which is a solid 11.5% above the moving average support level. Over the next several weeks investors will have to note that there is downside risk to this stock. Even though that is the case, both the 50 day and 200 day moving averages are moving higher so investors may see a move sideways until these moving averages catch up to the current price.
When looking at fundamentals it is hard to find many negatives on the balance sheet. In the last year Steven Madden LTD purchased Cejon Group for $30 million and Topline shoe company for $55 million. When making any acquisition companies have to be cautious not to move too fast. When adding new employees to the workforce there is always an adjustment period. Sears Holdings is still trying to get through this adjustment period with KMart and it has been many years. Some feel as if the KMart acquisition was one of the main reasons that Sears stock price has struggled over the last half decade. That is an argument for another time.
Steve Madden has done a great job of appealing to women as they continue to expand both their shoe and handbag lines. After acquiring Cejon it makes sense that Steve Madden will expand into scarves, wraps, and winter accessories as well. Look for these products to be available starting in the fall of 2012. Steve Madden will start to see sales increase in early August as school starts. College students and young adults tend to add to their wardrobe during the months leading up to Christmas shopping.
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