Canaccord Genuity Morning Coffee on Steven Madden (SHOO): I Make SHOOS!
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Canaccord Genuity Morning Coffee on Steven Madden (Nasdaq: SHOO): I make SHOOS!
Steve Madden announced the acquisition of Steven Madden Canada, its Canadian distributor for $29 million, resulting in $0.05-0.07 accretion expected to 2012 EPS. The Canadian licensee operates seven Steve Madden retail stores as well as a wholesale business, which combined generated $32 million in sales in the 12 months ended July 2011.
Canaccord Genuity Consumer Product Analyst Camilo Lyon estimates the net sales benefit to Steve Madden from this transaction will be $24 million in 2012, which excludes the $8 million Steve Madden was already selling to it. In addition to the sales benefit, he expects gross margins will also benefit as the company will sell directly to its retail partners. Lyon believes the company has the opportunity to expand the Steve Madden Canadian store base by 25-30 stores over the coming years from seven currently. Also, he expects the wholesale business to also grow as Steve Madden takes over control. He believes the company will leverage the Steve Madden brand in Canada to grow the penetration of its other brands (e.g. Betsey Johnson, Big Buddha, and Report). This will most likely be the template going forward as Steve Madden grows its international business. Recall, only the Steve Madden brand is in international markets today, so the growth opportunity of the key portfolio brands is vast, in Lyon’s opinion. Overall, he says this transaction is yet another example of the company doing what it does best: making a smart, accretive transaction that it can leverage to grow both the namesake Steve Madden brand and other portfolio brands.
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Steve Madden announced the acquisition of Steven Madden Canada, its Canadian distributor for $29 million, resulting in $0.05-0.07 accretion expected to 2012 EPS. The Canadian licensee operates seven Steve Madden retail stores as well as a wholesale business, which combined generated $32 million in sales in the 12 months ended July 2011.
Canaccord Genuity Consumer Product Analyst Camilo Lyon estimates the net sales benefit to Steve Madden from this transaction will be $24 million in 2012, which excludes the $8 million Steve Madden was already selling to it. In addition to the sales benefit, he expects gross margins will also benefit as the company will sell directly to its retail partners. Lyon believes the company has the opportunity to expand the Steve Madden Canadian store base by 25-30 stores over the coming years from seven currently. Also, he expects the wholesale business to also grow as Steve Madden takes over control. He believes the company will leverage the Steve Madden brand in Canada to grow the penetration of its other brands (e.g. Betsey Johnson, Big Buddha, and Report). This will most likely be the template going forward as Steve Madden grows its international business. Recall, only the Steve Madden brand is in international markets today, so the growth opportunity of the key portfolio brands is vast, in Lyon’s opinion. Overall, he says this transaction is yet another example of the company doing what it does best: making a smart, accretive transaction that it can leverage to grow both the namesake Steve Madden brand and other portfolio brands.
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