Steven Madden, Ltd.

SHOO : NASDAQ : US$32.83

BUY 
Target: US$43.00

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 e-commerce
platform and its own retail stores.
Consumer & Retail — Footwear and Apparel
ACCENTUATING THE BRAND’S
STRENGTH VIA EXCLUSIVES
Investment recommendation
We visited the SHOO showroom to preview the late summer/early fall
’14 fashion deliveries. While the latest fashion trends were key topics of
discussion, underlying questions around consumer demand and recent
performance of SHOO’s wholesale customers were also top of mind.
First, traffic (both at retail and wholesale) is the main concern, not the
lack of trends. To combat pervasive discounting of similar products
across competing retailers, SHOO is implementing an “exclusives”
strategy to segment the market, much like Nike does with its marquee
basketball product. The exclusive shoes will be advertised as “in store
only” and should help redirect traffic back to stores while also limiting
unnecessary discounting. As for what is selling well, dress and sneakers
(pony-hair/quilted/perforated etc.) are outperforming sandals, which
have yet to rebound (although the last two weeks have been better). The
sneaker trenConsumer & Retail — Footwear and Apparel
ACCENTUATING THE BRAND’S STRENGTH VIA EXCLUSIVES
Investment recommendation

SHOO showroom  – to preview the late summer/early fall
’14 fashion deliveries. While the latest fashion trends were key topics of
discussion, underlying questions around consumer demand and recent
performance of SHOO’s wholesale customers were also top of mind.
First, traffic (both at retail and wholesale) is the main concern, not the
lack of trends. To combat pervasive discounting of similar products
across competing retailers, SHOO is implementing an “exclusives”
strategy to segment the market, much like Nike does with its marquee
basketball product. The exclusive shoes will be advertised as “in store
only” and should help redirect traffic back to stores while also limiting
unnecessary discounting. As for what is selling well, dress and sneakers
(pony-hair/quilted/perforated etc.) are outperforming sandals, which
have yet to rebound (although the last two weeks have been better).

While SHOO will not cycle the deceleration of booties (i.e., Troopa) until late Q3, we believe the implementation of a
segmentation strategy in the fall will set up 2015 for a resumption of strong double-digit EPS growth. As such, we reiterate our BUY.

Valuation

PT $43 – a blend of 15 x 21-5 earnings, 10x EBITDA and DCF

 

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