Steven Madden, Ltd.

SHOO : NASDAQ : US$36.78
BUY 
Target: US$41.00

COMPANY DESCRIPTION:
Steven Madden, Ltd., together with its subsidiaries, designs,
sources, markets and sells fashion-forward footwear for women,
men and children. The company was founded in 1990 and is
headquartered in Long Island City, New York. SHOO has a
portfolio of brands that reaches globally among all economic
tiers. SHOO offers products through wholesale partners, an ecommerce
platform and its own retail stores.

Consumer & Retail — Footwear and Apparel
SPRING ’14 PRODUCT PREVIEW HIGHLIGHTS NEWNESS: REITERATE
BUY, $41 TARGET
Investment recommendation
After spending last week with SHOO in their showroom previewing the
2014 spring product line, we came away positive on the level of newness
in the line that should bolster its competitive position next year. More
importantly, we believe SHOO’s wholesale customers were equally as
enthusiastic with what they saw. In particular, wedges with chunkier
heels, canvas sneakers with pony hair, and the Stingray Oxford booties
were standouts in our opinion. Interestingly, the chunky heel wedge is a
function of an emerging wider pant leg trend. ASP trends are looking to
be consistent with spring ’13; however, if the wide leg pant trend holds,
it could spur a significant increase in units next year. With plenty of new
fashion coming in 2014, we reiterate our BUY rating.
Investment highlights
 The persistent discounting in the mall by most retailers is driving
SHOO to respond with elevated promotions just to maintain its
competitive stance. As such, we have moderated our retail gross
margin estimate down by 30bps to 63.2%. Offsetting the
promotional impact to retail, however, is the market share gain in
wholesale, resulting in our wholesale footwear growth estimate to
increase to 12% from 11.5%. Auto-replenishment of on-point
fashion (e.g. Troopa bootie) is helping further its market position.
Valuation
Our $41 target is based on a blend of 15x 2014E EPS/ 10x EBITDA/DCF.

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