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Investing.com -- Citi upgraded Steven Madden (NASDAQ:SHOO) to Buy from Neutral and raised its price target to $32, saying the footwear maker is nearing a bottom in margins as tariff pressures ease and fashion trends shift in its favor.
The bank expects second-quarter earnings, due July 30, to mark the low point for margins after the company absorbed steep tariffs, some as high as 145%, on China-sourced goods.
But as the firm scales up manufacturing outside China and benefits from the integration of the KG brand, Citi sees gross margins rebounding above 40% in fiscal 2026.
Earnings for 2026 could reach at least $2.15 per share, well ahead of the Street’s $1.84 consensus, driven by stronger sales and improving mix.
Citi raised its 2025 and 2026 EPS estimates and now expects revenue to grow 12% next year, helped by the full-year contribution from the KG acquisition and rising demand for dress styles over sneakers.
At around 11.5 times Citi’s 2026 earnings estimate, Steven Madden shares trade at a discount to their five-year average of 15 times.
Citi’s $32 price target assumes a return to that historical multiple, citing reduced sourcing risk and a more diversified supply chain.
The firm also sees potential for upside if management offers third-quarter guidance, especially with less tariff uncertainty compared to earlier in the year.
While SHOO has suspended annual forecasts, Citi believes a Q3 outlook, if provided, could beat current consensus.