Steven Madden, Ltd. (SHOO) and Allbirds, Inc. (BIRD) are renowned footwear and accessories manufacturers internationally. SHOO designs, sources, markets, and sells fashion-forward branded and private-label footwear, accessories, and apparel for women, men, and children.
On the other hand, BIRD manufactures and sells footwear and apparel products for men and women. It sells its products through its retail stores as well as online.
The growing interest in health, fitness, and fashion has driven the demand for athletic and trendy footwear. Expanding digital presence has also helped footwear companies increase sales over the past year.
Despite the supply chain disruptions and high inflation, growing interest in footwear and resilient consumer spending should allow footwear companies to stay afloat. The global footwear market is expected to grow at a 2.5% CAGR to reach $330.60 billion by 2028. Therefore, both SHOO and BIRD should benefit.
BIRD is a winner with 13% returns over the past week versus SHOO’s 2.6% gains. But which of the stocks is a better buy now? Let’s find out.
Recent Financial Results
For the fiscal 2022 first quarter ended March 31, 2022, SHOO’s net sales increased 55.3% year-over-year to $557.34 million. The company’s gross profit came in at $227.90 million, up 63.8% from the year-ago period. Its adjusted income from operations came in at $94.43 million for the quarter, indicating a 165.2% rise from the prior-year period.
While its adjusted net income increased 172.6% year-over-year to $73.38 million, its non-GAAP EPS grew 178.8% to $0.92. The company had cash and cash equivalents of $170.35 million as of March 31, 2022.
For its fiscal 2022 first quarter ended March 31, 2022, BIRD’s net revenue increased 26.4% year-over-year to $62.76 million. The company’s gross profit came in at $32.60 million, up 26.2% from the year-ago period. Its loss from operations came in at $19.98 million for the quarter, indicating a 91.6% year-over-year improvement.
BIRD’s net loss came in at $21.88 million, representing a 61.8% rise from the prior-year period. Its loss per share came in at $0.15, indicating a 40% year-over-year decline. As of March 31, 2022, the company had $239.72 million in cash and cash equivalents.
Expected Financial Performance
SHOO’s EPS is expected to increase 28.6% year-over-year in fiscal 2022, ending December 31, 2022, and 10.3% in fiscal 2023. Its revenue is expected to grow 15.9% in fiscal 2022 and 5.8% in fiscal 2023. Its EPS is expected to grow at a 10% rate per annum over the next five years.
Analysts expect BIRD’s EPS to remain negative in both fiscal 2022, ending March 31, 2022, and fiscal 2023. Its revenue is expected to grow 22.6% year-over-year in fiscal 2022 and 27.2% in fiscal 2022. Its EPS is expected to decline at a rate of 15.2% per annum over the next five years.
Valuation
In terms of non-GAAP forward P/E for the next fiscal year, SHOO is currently trading at 9.89x, compared to BIRD’s negative at 11.98x. In terms of trailing-12-month EV/Sales, SHOO’s 1.27x compares with BIRD’s 1.43x.
Profitability
SHOO’s trailing-12-month revenue is 7.1 times that of BIRD’s. Also, SHOO is more profitable, with a 15.9% EBITDA margin versus BIRD’s negative value.
Furthermore, SHOO’s net income margin, ROE, and ROTC of 11.8%, 29.8%, and 20.9% compare with BIRD’s respective negative values.
POWR Ratings
While SHOO has an overall B grade, which translates to Buy in our proprietary POWR Ratings system, BIRD has an overall F grade, equating to Strong Sell. The POWR Ratings are calculated by considering 118 distinct factors, each weighted to an optimal degree.
SHOO has been graded a B for Quality, consistent with its higher-than-industry profitability ratios. SHOO’s 30.1% trailing-12-month ROE is 77.5% higher than the 17% industry average. BIRD’s D grade for Quality is in sync with its negative profit margins.
SHOO has an A grade for Sentiment, which reflects its impressive earnings growth expectation. SHOO’s EPS is expected to grow 28.6% year-over-year to $3.01 for fiscal 2022 ending December 31, 2022. BIRD’s C grade for Sentiment is in sync with its negative earnings estimates for fiscal 2022.
Of the 68 stocks in the B-rated Fashion & Luxury industry, SHOO is ranked #8, while BIRD is ranked last.
Beyond what we have stated above, our POWR Ratings system has graded SHOO and BIRD for Stability, Growth, Value, and Momentum. Get all BIRD ratings here. Also, click here to see the additional POWR Ratings for SHOO.
The Winner
The growing demand for trendy and eco-friendly footwear should allow both SHOO and BIRD to benefit in the coming quarters. However, relatively lower valuation and higher profitability make SHOO a better buy here.
Our research shows that the odds of success increase if one invests in stocks with an Overall POWR Rating of Buy or Strong Buy. Click here to access the top-rated stocks in the Fashion & Luxury industry.
SHOO shares were trading at $34.01 per share on Thursday afternoon, up $1.35 (+4.13%). Year-to-date, SHOO has declined -26.01%, versus a -17.49% rise in the benchmark S&P 500 index during the same period.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market.
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