Shares of Steven Madden Ltd. (NASDAQ: SHOO) jumped 5% on Thursday after Citi upgraded the stock from Neutral to Buy and raised its price target to $32.
The investment bank cited signs of a margin bottom, easing tariff headwinds, and shifting fashion trends as key drivers behind the more optimistic outlook.
Citi expects second-quarter earnings, set to be reported on July 30, to mark the low point for margins after the company faced steep tariffs, some as high as 145% on goods sourced from China.
With the company actively diversifying its supply chain and reducing reliance on Chinese manufacturing, the bank believes gross margins are set to rebound above 40% by fiscal 2026.
The upgrade and revised projections fueled Thursday’s rally in the stock, as it extended its surge to 10% in a month.
Citi’s note suggested the company is entering a period of renewed growth and profitability, making the current valuation attractive relative to its historical average.
EPS and revenue set to grow on product shift and acquisitions
Citi also raised its earnings-per-share (EPS) estimates for both 2025 and 2026, projecting 2026 EPS to hit at least $2.15, well above the current consensus of $1.84.
The firm anticipates that a stronger product mix and improved gross margins will drive this earnings acceleration.
Revenue is expected to grow 12% in 2025, supported by the full-year contribution from the KG brand, which Steven Madden acquired as part of its strategic push into premium and dressier footwear categories.
Citi views the acquisition as a meaningful contributor to both sales and profitability, especially as fashion trends shift away from casual sneakers toward dress styles.
These changing preferences post-pandemic are expected to work in the company’s favor, giving Steven Madden an edge in a market that is beginning to favor more formal and semi-formal shoes.
Valuation and guidance potential support higher target
At roughly 11.5 times Citi’s 2026 EPS estimate, Steven Madden stock trades below its five-year average price-to-earnings multiple of 15x.
Citi’s $32 price target reflects a reversion to that average, citing improved gross margins, a more balanced sourcing footprint, and easing tariff risks.
The footwear brand’s strategy to reduce sourcing from China is central to the bullish outlook.
By expanding production to other regions, the company is lowering supply chain concentration risk and positioning itself more competitively in the face of geopolitical and trade-related challenges.
Although Steven Madden has suspended its practice of issuing full-year guidance, Citi believes there is room for upside if the company offers third-quarter guidance during its upcoming earnings call.
With less tariff-related uncertainty and stronger demand trends, management may choose to provide a positive outlook, which could further boost investor confidence.
With Thursday’s 5% rally, the market has responded positively to Citi’s upgraded stance, signaling growing belief in the footwear maker’s recovery and strategic execution.
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