Steve Madden Beats On Earnings; Skechers Downgraded After Miss

Steve Madden (SHOO) beat on earnings and revenue when it reported Friday morning. Skechers (SKX) plunged after the trendy shoe maker maker reported weak guidance late Thursday.



First-quarter earnings per share rose 25% to 75 cents, meeting estimates according to Zacks Investment Research. Sales grew 16.5% to $1.25 billion, modestly above views for $1.198 billion.

But Skechers sees Q2 EPS of 38-43 cents on sales of $1.12 billion to $1.145 billion. Analysts had expected EPS of 57 cents on sales of $1.157 billion. Some shipments will be shifted from Q2 to the latter half of the year for several key international distributors and domestic accounts, Skechers said.

Skechers crashed 27% to 30.70 on the stock market today, plunging through its 50-day and 200-day moving averages in huge volume. The IBD 50 stock list member had been working on a flat base since early February.

The S&P 400 Component has an excellent IBD Composite Rating of 98, putting it in the top 2% of stocks tracked. It is also the leading stock in its industry group, which currently ranks an impressive fifth among the 197 that IBD tracks.

Wedbush Securities analyst Christopher Svezia downgraded Skechers to neutral from outperform and slashed his price target to 34 from 46.

“While there were some positives in the 1Q print, ($50 million upside to revenues, 160 bps on G/M), it came at a significant cost given the still apparent and growing inefficiencies within its global supply chain,” he said in a research note. “Our issue is growth at any price now seems the narrative, which significantly increases the range of outcomes on margins and earnings and adds a higher level of uncertainty in the stock. “

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Cowen managing director John Kernan said in a post-earnings research note the stock “presents a buying opportunity for patient investors,” even as he cut EPS estimates by 13%. He also said selling, general and administrative expenses investments are clouding “fairly impressive” top-line growth.

Shoe Stocks Tripped Up

The Apparel-Shoes & Related industry group had been strong, with big players such as Nike (NKE), Adidas (ADDYY) and Deckers (DECK) all making gains in recent weeks. But the group was down 1% Thursday and then plunged Friday on Skechers. Nike and Deckers have fallen back below their 50-day lines this week, with Adidas just off a record high.

Steve Madden

Earnings jumped 15% to 54 cents a share as revenue climbed 6% to $389 million. Analysts expected EPS of 50 cents on sales of $380 million.

Same-store sales fell by 1.2%, with gross margin remaining at 36.2%.

“We are off to a good start in 2018, with first quarter results that exceeded our expectations. Our on-trend product assortments and speed-to-market capability continue to set us apart from the competition,” CEO Edward Rosenfeld said in a press release.

Management reiterated its view 2018 net sales will increase 5% to 7% over 2017. It expects yearly EPSwill be in the range of $2.60 to $2.67.

“We are confident that, based on the power of our brands and the strength of our business model, we are well-positioned to drive sales and earnings growth in 2018 and beyond,” Rosenfeld said.

Stock: Steve Madden rose 1.7% to 47.25. The Nasdaq-listed stock has been consolidating for the past 13 weeks and is approaching a 49.37 buy point. It’s holding above its 50-day line. It has a solid IBD Composite Rating of 86.

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Wedbush’s Svezia reiterated his outperform rating for the stock following earnings.

“The company benefited from its strong product and quick turn model, as well as international, which was up +36%. The main Steve Madden brand continues to outperform the market (and should continue to grow in 2018) and sneakers and sandals were notably strong, despite colder weather,” he said in a research note. “In all, the company’s momentum continues with diverse brand and category drivers and opportunity with international.”

Piper Jaffray analyst Erinn Murphy, who rates Steve Madden stock as outperform, noted the company’s line of “dad shoes” could help it to continue to execute, saying the category is gaining “significant interest.”


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