On Tuesday before the market open, Steve Madden (SHOO) reports earnings. The consensus estimate for earnings is 18 cents per share. This earnings announcement will be particularly important as it will give us an indication as to how the retail sector is being affected by the economic slow down. Over the past few weeks, SHOO has traded to the mid-teens after hitting $24 in November. Earnings and the subsequent guidance (including any possible talk of ways to “enhance shareholder value”) should give clues of whether to start scaling into SHOO again.

Check out my Steve Madden (SHOO) analysis for more.

Also of interest, retail giant Wal-Mart (WMT) reports earnings Tuesday. This should be telling on how the massive retailer is handling the economic slowdown. The consensus EPS estimate for Wal-Mart of $1.02 has held steady, and given the uncertainty of the retail markets I am looking forward to seeing whether Wal-Mart is going to be able to meet or beat expectations. If the economy is as bad as many believe, more people may be forced into buying cheaper goods, and nobody provides discount prices on many of the items that people
need everyday than Wal-Mart.

Read Cullen on Wal-Mart (WMT) to find out why he has liked the stock since it bottomed in September.

With both Steve Madden and Wal-Mart reporting earnings, we will start to get a picture of the conditions in retail from both the high and low ends of the market. This week, and earnings coming from several other companies later, could finally answer the much-debated question of whether it’s better to be in high-end or low-end retail when consumer spending slows. Will high-end shoppers prove resilient, or will they too be cutting back and trading down?
I personally think the Steve Madden will be much more affected than Wal-Mart, because I think that more people will be inclined to cut back on purchasing things that are not necessities like extra shoes. I won’t believe the other theory - that the people who do buy the nicer goods will be affected less by a economic slowdown - looks to have been disspelled by Coach (COH), Tiffany (TIF), and others. Look for more indications that the formerly profitable “mass luxury” strategy is taking a beating, but more importantly, listen to what the respective management teams have to say about the rest of the year, because that will likely be what moves the market most.

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