Steve Madden warns of slow sales of boots in the fourth quarter, with stock prices plummeting by 10%

Steven Madden Ltd. (NASDAQ:SHOO), the parent company of US footwear and accessories brand Steve Madden, reported third-quarter sales data on Tuesday that fell far short of market expectations, dragging the group's share price down by as much as 10.2% during trading, marking the biggest single-day drop since the beginning of 2009.

Due to weak demand for boots and accessories, same-store sales in the third quarter dropped by 3.8% year-on-year, while the market had expected a 1.8% growth. Even in the fourth quarter, the situation did not improve. Edward Rosenfeld, the chairman and CEO of the group, disclosed in the earnings call that footwear sales had been very slow from the very beginning, and this category should be fully responsible for the overall decline in same-store sales of the group in October.

In the third quarter, Steven Madden Ltd. 's total sales of 441.2 million US dollars still met market forecasts and increased by 8.0% compared with the same period last year. Wholesale business increased by 8.7% year-on-year to 376.9 million US dollars, accounting for more than 85% of the group's sales. During the period, the growth in wholesale of Steve Madden brand footwear was partially offset by the decline in accessories. The retail business achieved sales of 64.3 million US dollars, up 4.0% year-on-year. As of September 30, the group had a total of 202 directly-operated retail stores, among which 4 were located in international markets.

The overall gross profit margin dropped by 20 basis points to 37.6%. Net profit was 44.23 million US dollars, an increase of 1.1% compared with 43.767 million US dollars in the same period last year. EPS rose from 0.74 US dollars in the same period last year to 0.77 US dollars in line with market expectations.

Edward Rosenfeld told analysts that Payless ShoeSource, a wholesale partner and footwear discount retailer that emerged from bankruptcy in August, still had a significant impact on third-quarter performance, but believed it would return to normal in the fourth quarter. Payless ShoeSource's parent company, Payless Holdings LLC, filed for bankruptcy protection in April this year. The group has closed 900 stores in the past year, while Steven Madden Ltd. It is the manufacturer of Payless ShoeSource's own brand.

Steven Madden Ltd. reaffirmed its outlook for full-year net sales to increase by 9% to 11% year-on-year and adjusted EPS to be between $2.18 and $2.24, while the market's expectations for net sales and EPS were $1.55 billion and $2.25 respectively.

Steven Madden Ltd. (NASDAQ:SHOO) closed down 8.88% at $39.0 on Tuesday, October 31, narrowing its cumulative gain for 2017 to 9.1%.

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