SHOO's Margins Are Under Pressure Amid Tariffs & Supply-Chain Strains

Steven Madden, Ltd. SHOO reported second-quarter fiscal 2025 results that highlighted the ongoing impact of tariffs on profitability. While consumer demand for the brand remained solid, order cancellations and shipment delays, particularly in mass and off-price channels, weighed on performance. These disruptions pushed deliveries into later periods, creating persistent pressure on earnings and highlighting the sensitivity of customers to higher costs.

Gross margin held at 41.9%, up 40 basis points year over year, but tariffs reduced profitability by approximately 230 basis points after supplier discounts. Wholesale gross margin fell to 31% from 33.1%, caused by pressure from tariffs and direct-to-consumer margin declined to 61.3% from 64.3%, impacted by higher landed costs and the lower-margin Kurt Geiger concessions business. Operating income dropped to 4% of revenues compared with more than 10% a year ago, driving adjusted quarterly earnings down 64.9% from 57 cents to 20 cents per share.

To manage supply-chain pressures, SHOO diversified production to countries such as Vietnam and Cambodia while also shifting some orders back to China to ensure timely delivery and maintain quality. Global trade uncertainty continues to inflate inventory costs and lengthen transit times, making sourcing diversification a work in progress.

The company implemented average price increases of about 10% to offset rising costs. Early consumer acceptance has been encouraging in categories like boots and dress shoes, while more price-sensitive items, including sandals and sneakers, remain pressured. Management noted that the full impact of pricing strategies will become clearer in the fall season.

Looking ahead, management expects margin pressure to persist through the fiscal third quarter, with potential easing later in the year if trade conditions stabilize. Until the tariff environment becomes clearer, EBIT margins are unlikely to return to historical double-digit levels. Nonetheless, SHOO remains confident that brand strength, consumer demand for new assortments and the growth potential of Kurt Geiger will provide a foundation for long-term recovery once near-term headwinds subside.

SHOO’s Price Performance, Valuation & Estimates

Shares of the company have gained 13.6% in the past six months compared with the industry’s 5.5% growth. 

From a valuation standpoint, Steven Madden is trading at a forward 12-month price-to-sales ratio of 0.87X, down from the industry average of 1.96X. SHOO has a Value Score of B.

The Zacks Consensus Estimate for Steven Madden’s fiscal 2025 earnings implies a year-over-year decline of 44.9%, whereas the same for fiscal 2026 indicates an uptick of 24.8%. Estimates for fiscal 2025 and 2026 have been unchanged in the past 30 days.

Steven Madden currently has a Zacks Rank #3 (Hold).

Key Picks

Some better-ranked stocks are Genesco Inc. GCO, Urban Outfitters Inc. URBN and Tilly's, Inc. TLYS.

Genesco is a Nashville-based specialty retail and branded company that sells footwear and accessories in retail stores. It currently flaunts a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for GCO’s fiscal 2026 earnings and sales implies growth of 67% and 3%, respectively, from the year-ago actuals. Genesco delivered a trailing four-quarter average earnings surprise of 28.1%.

Urban Outfitters is a lifestyle specialty retailer that offers fashion apparel and accessories, footwear, home decor and gift items. It carries a Zacks Rank #2 (Buy) at present.

The Zacks Consensus Estimate for Urban Outfitters’ current fiscal-year earnings and sales indicates growth of 27.6% and 9.5%, respectively, from the year-ago actuals. URBN delivered a trailing four-quarter average earnings surprise of 24.8%.

Tilly's is a specialty retailer in the action sports industry, selling clothing, shoes and accessories. It has a Zacks Rank of 2 at present. 

The Zacks Consensus Estimate for Tilly's current fiscal-year earnings indicates growth of 8.8% from the year-ago actual. TLYS delivered a trailing four-quarter average earnings surprise of 60.7%.

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This article originally published on Zacks Investment Research (zacks.com).

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