Steve Madden (NASDAQ: SHOO) is a Long Island City, New York based designer of fashion-forward footwear and accessories for men, women, and children. Its products are marketed through its own retail stores and e-commerce websites, as well as a variety of department stores and retailers throughout the United States and Canada. Steve Madden also has special distribution channels for marketing its products in Asia, Europe, Mexico, Australia, South Africa, South America and India.
Steve Madden in the News
On September 30th, Steve Madden announced that it has signed a conclusive agreement to acquire the SM Mexico brands Trendy Imports, Comercial Diecisiette, and Maximus Designer Shoes, for a cash transaction of approximately $15 million. As an official Steven Madden licensee, SM Mexico will now market Steve Madden products in Steve Madden branded stores and wholesale channels in Mexico.
Edward Rosenfeld, Chairman and Chief Executive Officer, commented, “Mexico is a strong and growing market for the Steve Madden brand. Upon the completion of this transaction, we plan to enhance our presence in leading department stores, expand into new wholesale accounts, grow our portfolio of Steve Madden retail stores and introduce certain of our other brands into the Mexican market. Diego Candano and his team have done a tremendous job in building our Steve Madden brand in Mexico, and we look forward to working with them to capitalize on the significant long term growth opportunity in this region.”
A Financial Experts Opinion
On September 30th, Sterne Agee analyst Sam Poser maintained a Buy rating on Steve Madden with no price target. He noted, ““SHOO’s acquisition of its Mexican business for $15M (1x sales) is another wise move in using its strong balance sheet to drive growth. The acquisition represents the next step in SHOO’s international expansion. Mexico is first real test for the SHOO to run an international business. Mexico is familiar territory for SHOO, where a significant amount of its manufacturing takes place. The deal will close in January 2015, and is expected to be $0.02-$0.03 accretive to 2015E EPS.”
Sam Poser’s Past Recommendations
Poser has a history of rating stocks in the retail industry, such as Under Armour (UA) and Lululemon (LULU), helping him earn an overall success rate of 71% recommending stocks and a +18.2% average return per recommendation.
On July 7th of this year, Poser reiterated a Buy rating for Under Armour and boosted his price target from $63 to $68. He reasoned, “Under Armour will be the primary beneficiary of Adidas’ decision to allow its products to be sold on mass on-line retailers such as eBay and Amazon… Premium sporting goods and athletic specialty retailers will punish Adidas for its decision. Those retailers will increase funding to UA at the expense of Adidas. Nike may benefit a bit but retailers do not want to increase its market share.” Poster has rated Under Armour 17 times earning an 87% average return on the stock.
Separately on September 12th, Poser maintained a Neutral rating on Lululemon with no price target. He explained, “We are raising our FY14/15 EPS estimates from $1.72/$1.92 to $1.74/$1.99, reflecting modestly higher revenues and lower share count. We are maintaining our Neutral rating as we do not believe there is upside to estimates or valuation. Trading at ~22.5X our FY15 EPS estimates and over 1X PEG, we believe LULU is expensive. Historic growth rates are just that, as we expect EPS CAGR of ~9% from 2013-2016, below EPS growth rates of over 30% in 2010-2013 time period. We see no reason to step in at this point as SSS will likely remain, at best, in the positive LSD range.” Poser has rated Lululemon 16 times, earning a 60% success rate recommending the stock.
However, Poser has not always been accurate with his recommendations. On August 25th, Poser maintained a Buy rating on Genesco Inc. (GCO) with a price target of $90.00. He reasoned, “We remain bullish on GCO ahead of 2Q results. Key casual brands will be a catalyst for 2H SSS acceleration. Management is doing a good job in managing store and ecommerce business in a tough mall/teen environment. In an over-stored world, Journeys and Lids are differentiated concepts. FY16 (CY15) consensus EPS estimates will need to increase, as the rolling off of the accrual for the contingent bonus payment related to the Schuh acquisition is embedded.” Poser has rated Genesco Inc. 4 times, culminating in a 0% success rate recommending the stock.
Conclusion
Poser is fashion forward when recommending stocks in retail, but can you trust his latest recommendation based on his financial advice history?
