Maxwell Shoe MAXS
March 10, 2003 - 6:15pm EST by
2003 2004
Price: 11.29 EPS
Shares Out. (in M): 0 P/E
Market Cap (in $M): 170 P/FCF
Net Debt (in $M): 0 EBIT 0 0

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Maxwell shoe (MAXS) recently announced Q1 results, where revenues rose 18.2% and net income rose 25% over Q1 of 2002. The company has $128 million of net working capital ($8.49/share; 75% of its market capitalization), including $69.8 million of cash ($4.63/share; 40.6% of market capitalization). The company also recently announced a $25 million shock repurchase program (15% of company at current prices). In their first quarter press release last Friday, the company raised 2003 EPS guidance to $0.94-0.96/share.

Company Description

The Company designs, develops and markets casual and dress footwear for women and children under multiple brand names, each of which is targeted to a distinct segment of the footwear market. The Company offers casual and dress footwear for women in the moderately priced market segment under the Mootsies Tootsies® brand name, in the upper moderately priced market segment under the Sam & Libby® and Dockers® Khakis Footwear For Women brand names and in the better market segment under the AK Anne Klein brand name. The Company also sells moderately priced and upper moderately priced children’s footwear under both the Mootsies Tootsies® and Sam & Libby® brand names. The Company designs and develops private label footwear for selected retailers under the retailers’ own brand names. In 1997, the Company licensed the J. G. Hook® trademark to source and develop private label products for retailers who require brand identification. In October 2000, the Company acquired all the trademarks of joan and david helpern, incorporated and JOAN HELPERN DESIGNS, INC. (Joan & David®) and now sells contemporary footwear for women in the bridge segment under the Joan and David brand name. In 2002, the Company introduced and shipped the Circa Joan & David™ brand. This footwear is sold in the better market segment.

Since 1987, when the Company first focused on its branded footwear strategy and, except for fiscal 1999 as noted below, the Company has increased net sales every year and consistently maintained profitability. In fiscal 1999, the Company’s net sales decreased 9.4% as compared to fiscal 1998 while net income increased 42.1%. This was largely a result of the sale of the Jones New York license to the Jones Apparel Group, Inc. and Jones Investment Co. (hereinafter collectively “Jones”). The Company’s financial success has been largely a result of its ability to design, develop and market footwear with contemporary styles at affordable prices. Retail prices for the Company’s footwear generally range from $20 to $70 for the Mootsies Tootsies®, Dockers® Khakis Footwear For Women and Sam & Libby® brand offerings, from $45 to $95 for the AK Anne Klein product lines, from $90 to $150 for the Circa Joan & David™ and $180 and higher for Joan & David® footwear. The Company began shipping Joan & David® footwear in the fourth quarter of fiscal 2001. In the first fiscal quarter of 2002, the Company opened the Joan & David® Outlet store, an approximately 2,200 square foot store located in Wrentham, Massachusetts in the Wrentham Premium Outlet Mall. Substantially all of the Company’s products are manufactured overseas by independent factories selected by the Company and its overseas agents. The Company sells its footwear primarily to department stores and specialty stores in the United States as well as through national catalog retailers and cable television consumer shopping channels.

Stock Price: $11.29
FD Shares: 15.068 million
Market Cap: $170 million

Net Cash: $70 million ($4.63/share)
Net Working Capital: $128 million ($8.49/share)

2003 P/E = 11.88x
2003 P/E (net of cash) = 7.01x (does not subtract out interest income)
2003 P/E (net of working capital) = 2.95x (does not subtract out interest income)


- Recent guidance of 8.5% revenue growth in 2003
- Recent guidance of $0.95 of EPS
- Authorization to repurchase 15% of outstanding stock
- $8.49 of net working capital/share; primarily cash
- Low valuation
- Low capex business model
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