Shoe and apparel company Steven Madden (NASDAQ:SHOO) announced better-than-expected revenue in Q4 CY2024, with sales up 12% year on year to $582.3 million. Its GAAP profit of $0.49 per share was 8.7% below analysts’ consensus estimates.
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Steven Madden (SHOO) Q4 CY2024 Highlights:
- Revenue: $582.3 million vs analyst estimates of $550.8 million (12% year-on-year growth, 5.7% beat)
- EPS (GAAP): $0.49 vs analyst expectations of $0.54 (8.7% miss)
- Adjusted EBITDA: $78.56 million vs analyst estimates of $55.09 million (13.5% margin, 42.6% beat)
- EPS (GAAP) guidance for the upcoming financial year 2025 is $2.35 at the midpoint, missing analyst estimates by 11.1%
- Operating Margin: 8%, in line with the same quarter last year
- Free Cash Flow Margin: 16.2%, down from 28.1% in the same quarter last year
- Market Capitalization: $2.74 billion
Edward Rosenfeld, Chairman and Chief Executive Officer, commented, “We are pleased to have delivered earnings results at the high end of our guidance range for the fourth quarter and full year 2024. For the year, revenue grew 15% and Adjusted diluted EPS increased 9% compared to 2023. Our strong performance in 2024 was driven by our team’s disciplined execution of our key strategic initiatives, with robust gains in international markets, non-footwear categories and direct-to-consumer channels, as well as a return to revenue growth in our U.S. wholesale footwear business."
Company Overview
As seen in the infamous Wolf of Wall Street movie, Steven Madden (NASDAQ:SHOO) is a fashion brand famous for its trendy and innovative footwear, appealing to a young and style-conscious audience.
Footwear
Before the advent of the internet, styles changed, but consumers mainly bought shoes by visiting local brick-and-mortar shoe, department, and specialty stores. Today, not only do styles change more frequently as fads travel through social media and the internet but consumers are also shifting the way they buy their goods, favoring omnichannel and e-commerce experiences. Some footwear companies have made concerted efforts to adapt while those who are slower to move may fall behind.
Sales Growth
A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Regrettably, Steven Madden’s sales grew at a sluggish 5% compounded annual growth rate over the last five years. This was below our standard for the consumer discretionary sector and is a tough starting point for our analysis.
We at StockStory place the most emphasis on long-term growth, but within consumer discretionary, a stretched historical view may miss a company riding a successful new product or trend. Steven Madden’s recent history shows its demand slowed as its annualized revenue growth of 3.7% over the last two years is below its five-year trend. 
Steven Madden also breaks out the revenue for its most important segments, Wholesale and Retail, which are 69.2% and 30.2% of revenue. Over the last two years, Steven Madden’s Wholesale revenue (sales to retailers) averaged 5.7% year-on-year growth while its Retail revenue (direct sales to consumers) averaged 2.8% growth.
This quarter, Steven Madden reported year-on-year revenue growth of 12%, and its $582.3 million of revenue exceeded Wall Street’s estimates by 5.7%.
Looking ahead, sell-side analysts expect revenue to grow 2.6% over the next 12 months, similar to its two-year rate. This projection is underwhelming and suggests its products and services will see some demand headwinds.
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Cash Is King
Free cash flow isn't a prominently featured metric in company financials and earnings releases, but we think it's telling because it accounts for all operating and capital expenses, making it tough to manipulate. Cash is king.
Steven Madden has shown mediocre cash profitability over the last two years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 9%, subpar for a consumer discretionary business.
Steven Madden’s free cash flow clocked in at $94.58 million in Q4, equivalent to a 16.2% margin. The company’s cash profitability regressed as it was 11.8 percentage points lower than in the same quarter last year, but it’s still above its two-year average. We wouldn’t read too much into this quarter’s decline because investment needs can be seasonal, leading to short-term swings. Long-term trends trump temporary fluctuations.
Over the next year, analysts predict Steven Madden’s cash conversion will slightly improve. Their consensus estimates imply its free cash flow margin of 7.5% for the last 12 months will increase to 8.8%, it options for capital deployment (investments, share buybacks, etc.).
Key Takeaways from Steven Madden’s Q4 Results
We were impressed by how significantly Steven Madden blew past analysts’ revenue and EBITDA expectations this quarter, which sent shares higher in the pre-market session. On the other hand, its EPS and full-year EPS guidance fell short. Overall, this quarter was mixed. The stock traded up 5.5% to $40 immediately following the results.
Big picture, is Steven Madden a buy here and now? The latest quarter does matter, but not nearly as much as longer-term fundamentals and valuation, when deciding if the stock is a buy. We cover that in our actionable full research report which you can read here, it’s free.
