Analyst: Fashion Footwear Is In An 'Upcycle,' Focus On Steve Madden, Deckers

Investors should have plenty of reasons to be optimistic about the fashion footwear category, Camilo Lyon of Canaccord Genuity argued in a note.

Lyon detailed his findings following his attendance at this year's spring '16 MAGIC/Platform trade show in Las Vegas. The analyst met with management teams from both public and private companies, which supported a bullish thesis that the sector continues to experience an upturn in demand.

Lyon said the "fashion athletic" assortment will remain an important part of the assortment, but more "western" and "festival-inspired" trends are gaining traction. In addition, contacts the analyst spoke with commented the "dress" category is performing well while the "flared jean" look is also being embraced by consumers.

New Brands Helping Steven Madden

Lyon noted the growing trends "ties in very well" with the stacked heel on boots/booties that much of the Steven Madden, Ltd. SHOO assortment is comprised of. In fact, should the "flared leg" look become mainstream in the near-term, Steven Madden will benefit "disproportionately" as customers have a tendency to match their shoe purchases with new fashion trends.

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Meanwhile, Steven Madden's new brands (Dolce Vita and Blondo) are already "performing very well" and positioned to drive incremental sales growth next year. In addition, the company is seeing a benefit from the stronger U.S. dollar as it can produce better-quality products in countries like Brazil and Italy.

Bottom line, Lyon argued that a "positive turn" in the fashion sector began two quarters ago and has a long tail that will carry through 2016.

Shares remain Buy rated with an unchanged $50 price target.

Deckers Outdoor: ‘Modernizing' The ‘Classic' UGG Look

Lyon also met with Deckers Outdoor Corp DECK's product team and showcased the company's spring '16 and the new UGG Slim products.

Lyon noted that the "purposeful evolution" of the Classic UGG boot into the new Slim was impressive. In fact, the Slim has many upgrades that will likely be "well received" by consumers. The Slim line will be more expensive than the Classic ($160 for mini, $200 for short, and $260 for tall) and will launch through UGG DTC (direct to consumer) and with some placements at retailers like Nordstrom.

Lyon also added that distribution of Slim will be "tight" with limited quantities. This may be a good move for the company as it speaks to the strategic changes to segment its distribution with the intention of driving traffic to its stores.

Shares remain Buy rated with an unchanged $86 price target.