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Susquehanna Initiates Steve Madden With Positive Rating, $42 Target

Steven Madden, Ltd. SHOO 2.64% is managing well in a challenging retail environment, and the move to a JV model for International could bear fruit in 2017, Susquehanna’s Sam Poser said in a report. He initiated coverage of the company with a Positive rating and a price target of $42.

Strong Brands

The Steve Madden and Dolce Vita brands are strong and “key to the story,” Poser mentioned. The company is performing well, despite the tough retail environment. Wholesale trends are expected to “catch up with the solid sell-through rates” achieved by the Steve Madden and Dolce Vita brands in the first half of the year.

The resiliency of the Steve Madden brand is highlighted by the strong SSS trends in the company’s own retail stores. Moreover, continued growth in end-market demand in Steve Madden women's footwear, the Dolce Vita brand, and Blondo would likely have retailers increasing order flow by 4Q, Poser commented.

The Macy’s Impact

Macy's Inc M 0.03% has announced its plan to close 100 stores in 2017. The analyst expects this to have only a marginal impact on Steve Madden’s top line, but be margin accretive in 2017.

JV Model
“Importantly, while International headwinds have dampened the FY16 sales outlook, the decision to move towards a JV/sub heavy model is the right call for the long term health of the business and should start to pay dividends in 2017,” Poser stated.

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DateFirmActionFromTo
Aug 2016SusquehannaInitiates Coverage onPositive
Aug 2016B. Riley & Co.DowngradesBuyNeutral
Jul 2016Buckingham ResearchDowngradesBuyNeutral

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