What Happened?
Shares of shoe and apparel company Steven Madden (NASDAQ: SHOO) jumped 6.7% in the morning session after the company issued a strong fourth-quarter financial outlook that overshadowed a slight miss on its third-quarter results. While the company's third-quarter revenue grew 6.9% year-over-year to $667.9 million, both sales and adjusted earnings per share of $0.43 slightly missed analysts' expectations. However, investors focused on the upbeat forecast for the upcoming fourth quarter. The company guided for revenue of approximately $748.3 million, which was well ahead of the $688.7 million analysts had projected. Similarly, its adjusted earnings per share guidance of $0.44 was significantly above the consensus estimate of $0.30, signaling strong momentum heading into the year's end.
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What Is The Market Telling Us
Steven Madden’s shares are very volatile and have had 23 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 26 days ago when the stock dropped 4.1% on the news that worries over worsening trade relations with China were triggered by critical comments from President Donald Trump.
The President's comments, stating on social media that China has 'become very hostile,' have injected significant volatility into the broader markets. This has particularly affected the leisure industry, which is highly sensitive to economic sentiment and discretionary spending. Leisure stocks, which include companies in travel, entertainment, and hospitality, rely on consumers feeling confident enough to spend on non-essential goods and services. Trump targeted China's tightening controls on rare earth metals, which are vital components in many technology products from electric vehicles to defense systems. The president's tone and the suggestion of canceling a meeting with President Xi caused a rapid sell-off in the market.
Earlier in the week, China announced new export controls on the critical minerals. Beijing's Commerce Ministry stated that foreign suppliers now need government approval to export products containing certain rare-earth materials. These materials are essential for producing high-tech goods, including computer chips, electric vehicles, and defense technology. Analysts viewed the move as a strategic assertion of China's dominance in the global rare earth supply chain, particularly amid ongoing trade tensions. The prospect of escalating tariffs raises concerns about economic headwinds, which could lead to a slowdown in consumer spending. If consumers tighten their budgets in response to economic uncertainty, discretionary purchases are often the first to be cut, directly impacting the revenues of companies in this sector.
Steven Madden is down 12.2% since the beginning of the year, and at $36.84 per share, it is trading 20.2% below its 52-week high of $46.18 from December 2024. Investors who bought $1,000 worth of Steven Madden’s shares 5 years ago would now be looking at an investment worth $1,425.
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