Steve Madden Is Back To Pre-Tariff Valuation Despite A Worse And Uncertain Outlook

Steve Madden (SHOO) reported dismal 3Q25 results, with underlying sales down 15% excluding the Kurt Geiger acquisition and adjusted operating income halved, primarily due to significant impacts from tariffs on China leading to wholesale order cancellations. Despite these poor financials, the stock saw a mid-teens percentage gain, likely fueled by rumors of a potential Supreme Court ruling against tariffs, which would greatly benefit SHOO given its high China exposure. However, the analyst maintains a 'Hold' rating, citing unattractive valuation at current levels and persistent uncertainty surrounding tariffs and broader macro challenges, despite potential operational improvements.

Analysis

Steve Madden (SHOO) reported dismal 3Q25 results, with underlying wholesale core revenues (excluding Kurt Geiger) declining 19%, driven by significant order cancellations due to tariffs. Despite the Kurt Geiger acquisition boosting reported revenues by 7% year-over-year, adjusted operating income was halved, primarily due to tariff impacts and increased OpEx. The company expects some revenue loss to be non-recurring as customers eventually restock, with Q4 footwear wholesale projected to grow 2-4.5%.

The stock, however, posted a mid-teens percentage gain on the earnings release day, likely fueled by rumors of a potential Supreme Court ruling against the legality of tariffs. This speculation is critical for SHOO, given its 60-70% product import exposure to China and the substantial benefit a tariff reversal would provide. While aggregate gross margins improved due to Kurt Geiger's higher DTC margins, channel-specific wholesale and DTC margins declined due to tariffs and deleverage.

Despite potential operational improvements in Q4 and the possibility of tariff relief, the analyst maintains a 'Hold' rating, citing unattractive valuation. The stock's market cap has returned to pre-tariff levels of $2.7 billion, yet its fundamental prospects are considered worse, making a mid-teens earnings multiple difficult to justify amidst ongoing uncertainty.

Key Decisions for Investors

• Monitor developments regarding the Supreme Court's potential ruling on tariffs, as a favorable outcome could significantly de-risk SHOO's China exposure and improve its operational outlook.
• Evaluate SHOO's Q4 guidance for wholesale recovery, particularly in footwear, and assess whether the anticipated restocking by customers materializes, indicating a potential stabilization of underlying sales trends.
• Consider the current valuation against the backdrop of persistent tariff uncertainty and macro challenges, as the stock has retraced losses despite a less favorable fundamental outlook, warranting caution on entry points.