SHOO Q2 Deep Dive: Tariff Disruptions and Sourcing Shifts Challenge Growth Plans

Shoe and apparel company Steven Madden (NASDAQ:SHOO) missed Wall Street’s revenue expectations in Q2 CY2025, but sales rose 6.8% year on year to $559 million. Its non-GAAP profit of $0.20 per share was 17% below analysts’ consensus estimates.

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StockStory’s Take

Steven Madden faced a difficult second quarter as tariff-related disruptions significantly impacted its wholesale business, leading to missed revenue and earnings expectations. Management pointed to widespread order cancellations and shipment delays, particularly in value-priced channels such as mass and off-price retailers, as key reasons for the underperformance. CEO Edward Rosenfeld described the quarter as “extremely challenging” and acknowledged that higher landed costs and organic gross margin declines put substantial pressure on profitability.

Looking ahead, Steven Madden is focusing on mitigating the continued tariff impact by diversifying sourcing away from China and implementing targeted price increases. Management emphasized that consumer acceptance of higher prices has been positive so far, especially for new fashion products, but noted that true demand elasticity will only be clear once the full fall season is underway. The company also aims to leverage the Kurt Geiger acquisition for international growth, while remaining cautious about the near-term outlook given ongoing policy uncertainty.

Key Insights from Management’s Remarks

Management attributed the quarter’s underperformance to tariff-driven disruptions, offset somewhat by progress in direct-to-consumer and new brand initiatives.

• Tariff impact on wholesale: The majority of wholesale revenue declines stemmed from order cancellations and shipment delays in mass and off-price channels, which accounted for approximately 95% of the shortfall versus last year. Tariffs raised landed costs, leading to margin compression and lost sales opportunities.
• Sourcing diversification efforts: Steven Madden accelerated its move away from China, but recent tariff negotiations led the company to shift some fall production back to China for logistical and quality reasons. For fall, about 30% of U.S. imports will be sourced from China, down from 71% in 2024.
• Direct-to-consumer momentum and challenges: While direct-to-consumer revenue rose sharply due to the Kurt Geiger acquisition, organic DTC business (excluding Kurt Geiger) saw declines, impacted by system migrations and tariff-related inventory disruptions. E-commerce outperformed brick-and-mortar stores within the DTC segment.
• Kurt Geiger integration and potential: The newly acquired Kurt Geiger brand is performing ahead of expectations, with strong growth in digital channels and new U.S. retail stores. Management sees significant potential for international expansion and margin enhancement over time.
• Product category trends: Boots and dress shoes outperformed, driven by positive consumer response and targeted marketing. Apparel was one of the few categories to show growth, benefiting from expanded distribution and strong product sell-through, even as overall consumer spending on fashion remained tepid.

Drivers of Future Performance

Steven Madden’s outlook is shaped by ongoing tariff risks, evolving sourcing strategies, and the integration of Kurt Geiger as a new growth engine.

• Persistent tariff uncertainty: Management expects continued headwinds from tariffs, which may affect both revenue and margins in the coming quarters. The company is closely monitoring further trade policy changes and adjusting sourcing strategies accordingly, but visibility remains limited.
• Consumer price acceptance and elasticity: The company is implementing average price increases of about 10%, with early signs of consumer acceptance, especially in dress shoes and boots. However, management cautioned that real demand elasticity will be determined in the fall season as new pricing is fully absorbed and competitors adjust.
• Kurt Geiger expansion and integration: The integration of Kurt Geiger is a strategic priority, with management aiming to increase brand awareness in the U.S. through retail expansion, digital investment, and thoughtful distribution growth in Europe, Latin America, and Asia. The company expects Kurt Geiger to contribute to both top-line growth and, over time, margin improvement.

Catalysts in Upcoming Quarters

In upcoming quarters, the StockStory team will closely watch (1) the pace and effectiveness of Steven Madden’s sourcing diversification and how further tariff changes influence costs, (2) the consumer response to higher prices, especially in the critical fall selling season, and (3) the integration progress and market expansion of the Kurt Geiger brand. Monitoring inventory management and any additional disruptions in the wholesale channel will also be critical signposts of operational resilience.

Steven Madden currently trades at $26.10, in line with $26.31 just before the earnings. At this price, is it a buy or sell? Find out in our full research report (it’s free).

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