Jefferies cut shares of Steve Madden (SHOO) and Guess? (GES) to Hold from Buy in a note Thursday. Analysts kept a $40 per share price target on SHOO but lowered the GES price target to 24 from $25 per share.
Analysts said that while specialty apparel and footwear retailers largely performed nicely in 2023, they view upside at companies, including SHOO and GES, as limited in 2024.
According to analysts, the SHOO backdrop remains volatile despite its rise over the last six months.
"We believe the backdrop for wholesale footwear retailers remains challenged, particularly given the potential for softer wholesale demand trends," wrote analysts. "With Wholesale revenue subdued, margins could be pressured, as promos could increase. Therefore, with a strong stock performance in the last 6 months and a volatile outlook, we are downgrading shares to Hold."
While Jefferies believes the GES brand is still strong, they view the current risk/reward as balanced.
"While GES's results have been encouraging over the past two years (strong top-line growth with healthy margin expansion), we believe uncertainty related to the company's America's Retail segment (~28% of F'23 sales), a reversion in margin performance (OM% declined ~220bps in F'23), and any shift in wholesale ordering patterns (HSD% of F'23 sales) could pressure performance over the next 6-12 months.," stated analysts.