Is SHOO Worth Buying as Growth Accelerates but Valuation Stretches?

SHOO’s Earnings Trend Is Moving Higher

SHOO reported second-quarter adjusted earnings of 44 cents per share, topping the Zacks Consensus Estimate of 33 cents. Adjusted income from operations nearly doubled to $44.5 million from $22.6 million, while the adjusted operating margin expanded 270 basis points to 6.7%.

Adjusted gross margin increased 460 basis points to 46.5%. Higher average selling prices, a smaller tariff drag and lower private-label penetration helped offset a 25.3% increase in adjusted operating expenses to $265.1 million.

Steve Madden’s Brand Heat Improves the Outlook

Demand strengthened across women’s footwear, men’s footwear and handbags. Global online searches for Steve Madden rose 71%, while the brand’s global comparable sales increased 9%, including 17% growth in the United States.

Branded wholesale revenues advanced 20%, supported by sell-through, reorders and the ability to chase best sellers. Management raised its 2026 outlook for the Steve Madden brand to high-single-digit revenue growth, reflecting broad gains across wholesale and direct-to-consumer channels.

Crocs, Inc. CROX also reported record second-quarter 2026 results and raised its full-year outlook, showing that differentiated footwear brands can still produce growth. Urban Outfitters, Inc. URBN posted record fiscal first-quarter sales and income, reinforcing the importance of brand relevance and merchandise execution across consumer businesses.

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SHOO’s Mix Shift Supports Margin Quality

Branded and direct-to-consumer growth is reducing SHOO’s dependence on lower-margin private-label revenues. Direct-to-consumer revenues rose 30.6% to $255.4 million, or 11.1% excluding Kurt Geiger, with double-digit gains in stores and e-commerce.

Wholesale adjusted gross margin improved to 35.2% from 30.9%, while direct-to-consumer adjusted gross margin increased to 64% from 61.3%. Pricing, lower promotions and a richer channel mix are strengthening profitability, although management expects the pace of gross-margin expansion to moderate.

SHOO Still Carries Material Execution Risks

Tariff and freight volatility remain meaningful concerns. The prolonged Middle East conflict increased air-freight usage, creating an additional 6 cents per share of second-half earnings pressure, while the company is absorbing higher shipping costs to direct customers.

Supplier costs are also becoming harder to defer. Private-label revenues are expected to decline at a mid- to high-teen rate in 2026, and geopolitical disruption could restrain international demand. These pressures may limit operating leverage if branded sales growth slows.

SHOO’s Premium Valuation Raises the Decision Bar

SHOO trades at 20.0X forward 12-month earnings, compared with 20.1X for its Zacks sub-industry, 16.5X for the Zacks Consumer Discretionary sector and 20.6X for the S&P 500.

The stock’s multiple is also above its five-year median of 14.7X. That premium may be easier to defend if brand momentum and earnings growth persist, but it raises the downside risk from weaker execution or slower margin improvement.

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SHOO’s Scores Favor Growth Over Deep Value

SHOO’s improving operating trends make the stock more attractive than it was before the brand recovery, but the valuation argues for patience. Investors already holding the shares have support from better earnings and estimate trends, while valuation-sensitive buyers may prefer to wait for a more favorable entry point.

The stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Its Growth Score of A, Momentum Score of A and VGM Score of A indicate favorable growth and price-trend characteristics. The Value Score of C is less supportive, consistent with a hold-or-wait stance rather than a clear buy decision at the current multiple.

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

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