Oww, These Uncomfortable Shoes

Steve Madden's (Nasdaq: SHOO  ) toes are in a pinch -- the company said late last week that it's put itself up for sale.

According to Reuters, Steve Madden received takeover offers from unnamed parties, leading it to hire an investment banking firm to help it evaluate the usual strategic options, which could include a sale. The company's stock has fallen 46% over the last year, giving it a market cap of a mere $468 million, and its most recent bad news was cutting its guidance for the year due to weak consumer spending and a limited number of footwear trends to pursue.

A market cap of $400 million certainly is a sobering thought. I'd argue there's been a fad shoe bubble, and Madden's missed it. Consider ultra-trendy shoe purveyor Crocs (Nasdaq: CROX  ) , with its market cap of $5.35 billion and a P/E of 46. Those metrics are outlandish for a company that relies on a shoe that owes most of its success to faddishness (and a strange consumer affinity for rubber). 

Trendy shoe provider Heely's (Nasdaq: HLYS  ) was a highflier until the wheels came off -- its 52-week high is $40, and it's currently trading below $9. (Clap if you thought wheel-heeled shoes might have been a fad, hmm.) Skechers (NYSE: SKX  ) is down 43% in six months.

Deckers (Nasdaq: DECK  ) has been on a run, but I wouldn't be the first to wonder if it can keep the UGGS momentum going. Timberland (NYSE: TBL  ) has also gotten chopped, still trying to turn around, but at least Timberland has practical footwear in its brand portfolio.

Fashion is fickle. Shoe companies that are too faddish are poison for investors, especially in the current climate. As for Steve Madden, it sounds like it's out of step with the trends, and consumers' increasing skittishness makes things worse. Investors may pray for a buyout, but for some, it won't make up for their lost investment.

Consumers might start tightening their belts -- give me a non-faddish shoe stock any day. When it comes to shoes, utilitarian will be more fashionable for 2008. Stranger things have happened. 

Try on these Foolish articles for size:

Read/Post Comments (14) | Recommend This Article (12)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 22, 2007, at 3:16 PM, JimKicker wrote:

    Crocs have been around too long, and have sold too many shoes to be considered a "fad". They are a niche, but not a fad. Not any more than the sneaker was a "fad".

  • Report this Comment On October 22, 2007, at 3:44 PM, jbmorse4 wrote:

    You are guys haven't been right once on this stock, please stop with your ridiculous commentaries.

  • Report this Comment On October 22, 2007, at 3:53 PM, chro9 wrote:

    I once admired the Fool but now you have become what you first criticized: the establishment.

    Could you please look at the numbers?! Are you blind? Sales are not slowing, the number of new styles is not slowing, the number of brands is not slowing! The only thing slowing is your brain it appears.

    Utilitarian?!! There is nothing more utilitarian than Crocs. Comfortable, non-slip, anti-odor, anti-bacterial?

    Please cover your short position and go long.

  • Report this Comment On October 22, 2007, at 3:59 PM, JoeRev wrote:

    You quote market cap and P/E as "outlandish" metrics.

    Anyone who knows anything about investing knows those numbers are meaningless without factoring in GROWTH.

    If you think that TRAILING P/E is expensive for a company growing earnings over 140% then you truly are a "fool" in the traditional sense.

  • Report this Comment On October 22, 2007, at 4:03 PM, bobbleheads wrote:

    What would the day be without a Motley Fool comment against CROCS? I am sure that even if CROCS continues to go up to $100, and then back to $75, Motley Fool will be telling you how they told you it would pull back. This seems to be a story of "foolish" pride which does not allow them to admit when they are wrong.

  • Report this Comment On October 22, 2007, at 4:20 PM, VTHokies2000 wrote:

    This is why I canceled my subscription to advisors, you're hit or miss, just like everyone else...Sell CROX but Buy MTH? Nice calls.

  • Report this Comment On October 23, 2007, at 12:47 AM, badphools wrote:

    Motley Fool is actually taking payments from a consortium of short sellers that are deep under water on their short positions in crox.

    I've never seen a more clear example of payola.

    MF is ignoring facts, distorting or ignoring fundamental facts about crocs, and relentlessly fulfilling their paid mission to bash the stock.

    If the MF isn't taking payments from short sellers, then the MF should DENY any such payments,yet the MF WON'T deny it. C'mon MF, either DENY it or sdmit it. If you don't respond to this accusation, we're only left to conclude you're on the take.

  • Report this Comment On October 23, 2007, at 1:22 AM, DontHateOnCrox wrote:

    You just have a thing against Crox, Motley. I'm so glad I didn't listen to you from the beginning. Fool's Drool. Fad Faddishness Faddarooni. I hope you are just a Fad.

  • Report this Comment On October 24, 2007, at 5:05 PM, TMFLomax wrote:

    No, I'm neither short nor long shares of any of the companies mentioned in this take. Clearly we have a difference of opinion on Crocs, and I do wish you all the best in your investing.

    I hope you noticed that Oct. 23, another Fool, Rick Munarriz, did a Video Take -- he is a Crocs bull. You might want to check that out. It's called, "Missing Out On Crocs?" I don't agree with him on that particular stock but I do, of course, respect his opinion.



  • Report this Comment On October 25, 2007, at 7:12 PM, zman2245 wrote:

    Some of these comments are almost as ridiculous as the article.

    Comments on article: Neither Crox nor SHOO are fads IMO. SHOO was founded in 1990. My girlfriend and her friends have shopped there since they were teens and they love it. They have always tried to be "stylish" which may make the stock more volatile but that hardly makes it a fad. HLYS is a fad. Not SHOO. CROX is most likely not but you could debate either way I think.

    As for the comments. Wow! Don't you guys realize that just because one person at MF has this opinion not MF as a whole has the opinion? I would have been more interested to see comments about MF marketing in about every article... but come on. You can't bash MF for making a bad call or 2 (is this one even a bad call? We don't know yet!!)

  • Report this Comment On October 25, 2007, at 7:26 PM, zman2245 wrote:

    Alyce, I am curious to know more about your research on SHOO. Perhaps this isn't the best place for no one has posted on the SHOO board for months...

    After a quick glance it seems like a good company to me. No debt, people like their shoes, margins have generally improved over last 5 years. There are plans to open new wholesale stores. It seems like many shoe companies have had a bad year, as your article pointed out. I don't see how this justifies a 40% drop in SHOO stock.

  • Report this Comment On October 26, 2007, at 5:30 PM, TMFLomax wrote:

    Hi zman,

    I see your point -- could SHOO be a turnaround possibility. I also notice it has good free cash flow. However... its expecting a decrease in earnings this year and only a 6% increase next year, and it admitted that it's having a hard time finding solid trends it can follow and consumer spending is slowing too. So, I think that explains the 40% decrease, and personally, I'd rather see it cheaper before considering it, given the challenges.

    But, I can see how some might think it might make a good turnaround story. I find it interesting that it's opening new wholesale stores.

    Sometimes the vagaries of fashion can really make or break these companies, the trick is figuring out when growth is sustainable or when lack of growth is temporary or fixable (or was growth a fad to begin with). I kind of think shoe companies might be tougher than retailers in judging some of these elements.

    Thanks for the thoughts,


  • Report this Comment On November 14, 2008, at 2:26 PM, ebrandeis wrote:

    What, no apologies for the unsubstantiated attacks on TMFLomax for what turned out to be a piece of terrific advice?

    Step up and own your failure to value this company properly people. Learn from you mistake and move on.

  • Report this Comment On November 24, 2008, at 1:00 PM, JJandAEO wrote:

    We have all heard it many times--be fearful when others are greedy. Thanks for your viewpoint, and thanks for sticking with it in the face of criticism, Alyce.

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