Can Steve Madden Stock Touch Its Pre-Covid Mark?

by Trefis Team
Rate   |   votes   |   Share

Steve Madden’s stock (NASDAQ: SHOO), a company designing and retailing fashion footwear, handbags, and accessories, has become vulnerable due to its high-end and nonessential product assortment. SHOO stock trades at over $33 currently and is, in fact, down 23% so far this year. That said, we believe the company has reached its near-term potential and is unlikely to go back to its pre-Covid level. While news from Pfizer and others regarding a vaccine may bring some much-needed relief for the company and a short-term stock price gain, the timing of a potential comeback still remains doubtful. Our conclusion is based on our detailed comparison of SHOO’s stock performance during the current crisis with that during the 2008 recession in an interactive dashboard analysis.

There is a sense of a downturn in terms of dress wear shoes as most people are homebound. In fact, with fewer workers commuting into the office, consumers will likely continue to seek out comfortable footwear styles. Although the retailer is shifting its focus to more casual styles like flat sandals and sneakers – its bumpy ride is likely to continue for a while. Steve Madden’s revenues declined 38% year-over-year so far. The company saw persistent softness in its wholesale business (which makes more than 60% of revenues) and in its footwear and accessories segments, due to massive order cancellations as a result of the pandemic. The fact of the matter is there has to be a renewed desire in people to dress up again for the footwear sales to pick up similar to pre-Covid levels.

2020 Coronavirus Crisis

Timeline of 2020 Crisis So Far:

  • 12/12/2019:             Coronavirus cases first reported in China
  • 1/31/2020:               WHO declares a global health emergency.
  • 2/19/2020:              Signs of effective containment in China and hopes of monetary easing by major central banks helps S&P 500 reach a record high
  • 3/23/2020:              S&P 500 drops 34% from the peak level seen on Feb 19, as Covid-19 cases accelerate outside China. Doesn’t help that oil prices crash in mid-March amid a Saudi-led price war
  • Since 3/24/2020:  S&P 500 recovers 62% from the lows seen on Mar 23, as the Fed’s multi-billion dollar stimulus package suppresses near-term survival anxiety and infuses liquidity into the system.

Steve Madden’s Performance During 2020 Coronavirus

Steve Madden’s stock declined from levels of around $43 in mid-February (the pre-crisis peak) to roughly around $22 as of March 23 (as the markets bottomed out) – implying that the stock lost as much as 50% of its value from its approximate pre-crisis level. It then rallied to levels of over $33, rising by around 53% since March 23. However, it is still down 23% from levels of $43 seen in early January.

S&P 500 Index Performance During 2020 Coronavirus/Oil Price War Crisis

The S&P 500 index declined from levels of around 3,386 in mid-Feb (pre-crisis peak) to levels of around 2,237 as of Mar 23 (as the markets bottomed out), implying the index lost 34% of its value from its approximate pre-crisis peak. It then rallied to levels of about 3,634 currently, rising by 62% since Mar 23. It is also up 12% from levels of 3,231 seen in early January.

2007-08 Financial Crisis

Timeline of 2007-08 Crisis

  • 10/1/2007: Approximate pre-crisis peak in S&P 500 index
  • 9/1/2008 – 10/1/2008: Accelerated market decline corresponding to Lehman bankruptcy filing (9/15/08)
  • 3/1/2009: Approximate bottoming out of S&P 500 index
  • 1/1/2010: Initial recovery to levels before accelerated decline (around 9/1/2008)

Steve Madden’s Stock Performance Over 2007-08 Financial Crisis

But SHOO’s stock fared better during the 2008 downturn. SHOO’s stock declined from levels of around $4 in October 2007 (the pre-crisis peak) to roughly $3 in March 2009 (as the markets bottomed out) – implying that the stock lost as much as only 15% of its value from its approximate pre-crisis peak. However, Steve Madden’s stock recovered post the 2008 crisis, to levels of over $8 in early 2010, rising by 155% between March 2009 and January 2010.

S&P 500 Performance Over The 2007-08 Financial Crisis

S&P 500 Index fell 51% from levels of 1,540 in September 2007 to 757 in March 2009. It then rallied to levels of 1,124 – rising by about 48% between March 2009 and January 2010.

Fundamentals

How Do SHOO’s Fundamentals Look In Recent Years?

Steve Madden’s revenues grew 28% from $1.4 Bil in 2016 to $1.8 Bil in 2019. In addition, earnings growth, on a per-share basis, was higher by 26% from $1.41 in 2016 to $1.78 in 2019.

Survival Check

Does SHOO’s Have A Sufficient Cash Cushion To Meet Its Obligations Through The Coronavirus Crisis? 

As of Sept. 30 2020, Steve Madden has $257.2 million of cash, cash equivalents, and short-term investments with no debt. This will likely enable the company to continue to navigate through the crisis and thrive once conditions normalize.

Phases of Covid-19 crisis:

  • Early- to mid-March 2020: Fear of the coronavirus outbreak spreading rapidly translates into reality, with the number of cases accelerating globally.
  • Late-March 2020 onward: Social distancing measures + lockdowns.
  • April 2020: Fed stimulus suppresses near-term survival anxiety.
  • May-June 2020: Recovery of demand, with the gradual lifting of lockdowns – no panic anymore despite a steady increase in the number of cases.
  • July-November 2020: Weak Q2 and Q3 results, but continued improvement in demand and progress with vaccine development buoy market sentiment.

What if you’re looking for a more balanced portfolio instead? Here’s a high-quality portfolio to beat the market, with over 100% return since 2016, versus 55% for the S&P 500. Comprised of companies with strong revenue growth, healthy profits, lots of cash, and low risk, it has outperformed the broader market year after year, consistently.

See all Trefis Price Estimates and Download Trefis Data here

What’s behind Trefis? See How It’s Powering New Collaboration and What-Ifs For CFOs and Finance Teams | Product, R&D, and Marketing Teams

Rate   |   votes   |   Share

Comments

Name (Required)
Email (Required, but never displayed)
Be the first to comment!