Citi thinks it’s time to buy Steven Madden shares. “Given their unique speed-to-market model, SHOO is one of the only wholesalers able to participate in demand upside this spring,” analyst Paul Lejuez wrote in a Thursday client note. “With inventory very lean at retail and newness in fashion footwear driving demand, we believe SHOO will begin seeing the benefit of stronger wholesale reorders in 2Q.” Lejuez raised his rating on Steven Madden shares to buy from neutral. He also raised his price target to $42, implying that shares could rally more than 20% over the next 12 months. “With guidance conservative and expectations low, we see SHOO as one of the few companies that can beat & raise all year,” Lejuez said. He added that “SHOO’s balance sheet is strong (net cash ~12% of mkt cap) and shares trade at an F23E EV/EBITDA multiple of 9.5x, suggesting a favorable risk/reward.” The analyst praised the company’s “resilient business model” as another reason why he likes the stock. “While SHOO plays in a highly discretionary category, they turn their inventory so fast (~8-9x/year) in a normal supply chain environment (which we are now in after several [years] of disruption) that SHOO is unlikely to get caught in an over-inventoried position if the consumer takes another leg down,” said Lejuez. He added that, because inventory levels for licensed products are so lean at Steven Madden’s key retail products, the downside risk to the brand’s wholesale sales is lower than for many other brands. Citi thinks that the brand will see “several years” of upside as women change their wardrobes in line with changing fashion trends. “We believe the silhouette shift we are seeing in pants to baggier and non-denim away from skinny jeans is driving incremental purchases in footwear. We note that we are still in the early stages of this shift and the fashion is still crystalizing for the consumer, suggesting several years of potential upside as women shift their wardrobe,” Lejuez said. “Recall, coming out of the last recession there was a big shift to skinny denim, which drove several years of very strong growth for SHOO,” he continued. Steven Madden shares were up 2.5% Thursday morning during premarket trading. The stock has gained 6.7% year to date. However, shares have declined almost 17% over the past 12 months. SHOO 1Y mountain Steven Madden stock —CNBC’s Michael Bloom contributed to this report.
