On Wednesday, Williams Trading revised its stance on Steven Madden , Ltd. (NASDAQ: NASDAQ:SHOO), downgrading the stock from Buy to Hold. The firm also set a price target of $44.00, citing several reasons for the adjustment. The downgrade is attributed to anticipated gross margin pressures, an underdeveloped direct-to-consumer (DTC) business, and overall lack of visibility into future performance.
Williams Trading expressed concerns about the scale of Steven Madden's DTC operations, suggesting that it may not be sufficient to propel the stock price further. Despite acknowledging the company's effective management and the development of compelling products within its women's and men's lines, as well as Dolce Vita, the firm anticipates these factors may not be enough to counterbalance the challenges faced.
The new price target of $44.00 is based on a price-to-earnings (P/E) ratio of 14.7 times Williams Trading's fiscal year 2025 earnings per share estimate. This reflects a slight decrease from the five-year average P/E ratio of 15.1 times for Steven Madden. The firm has also adjusted its earnings per share (EPS) estimates, trimming the figures in light of the concerns raised.
Steven Madden is scheduled to report its fourth-quarter earnings for 2023 before the market opens on February 28, 2024. Williams Trading forecasts an EPS of $0.56 on revenue of $510.7 million, which represents an 8.5% increase. This forecast is slightly below the consensus EPS estimate of $0.57 on revenue of $512 million.
The downgrade comes ahead of the earnings report, with Williams Trading not expecting any significant surprises from the upcoming financial results. The firm's forecast is closely aligned with broader market expectations, suggesting a cautious outlook for the company's near-term financial performance.
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