Wolverine Worldwide appears to be having some success in its efforts to cultivate a healthier marketplace as it make progress at retail to ensure inventory levels are declining and rogue seller activity abating. The company is beginning to see sequential improvement in its selling trends and that is said providing a level of confidence that the developed strategies and tactics are beginning to gain traction.
Company President and CEO Chris Hufnagel said on a conference call with analysts that average weekly replenishment orders from wholesale partners “accelerated materially” from the fourth quarter of 2023 to the first quarter of 2024, and the company’s owned e-commerce demand has improved each month this year, most recently inflecting the growth in March and accelerating further in April.
“At the same time, we’ve delivered a much healthier gross margin across the business, achieving an all-time record gross margin in the first quarter as a company,” he added. He said it was a testament to the work they have done on supply chain costs, pricing, inventory, and better managing the marketplace.
“We’ve said consistently that we believe our turnaround will be led by margin improvement, which we’re seeing today, followed by our plan inflection to growth in the second half of the year,” Hufnagel noted, before signaling with a few words of caution.
“While we’re motivated and encouraged by our progress and the proof points we’re seeing, we acknowledge it’s still very early days in our transformation,” he said. “We still have a lot of work to do to hit our stride and realize the full potential of the company, and there’s no doubt challenges beyond our control exist in the marketplace today.”
He pointed out that the company exceeded revenue expectations with a balanced performance across the portfolio led by beats against their internal plan for Merrell and Saucony.
“We exceeded earnings expectations while simultaneously investing more than we initially planned in brand marketing to capitalize momentum we’re seeing in the business today and to help build brand equity for the future,” he emphasized. “And we continue to strengthen the company’s balance sheet, which we remain intently focused on by further reducing our debt and inventory levels more than we anticipated going into the quarter, a good start to an important year for the company.”
He noted that the team has also worked “particularly hard” to rapidly improve their brands’ product pipelines and presentation in the marketplace while also addressing nearly every aspect of the company’s global operations.
Hufnagel said Saucony has moved quickly to advance and accelerate development in its product pipeline.
“The brand started to regain traction with the launch of its new Ride and Guide 17 franchises earlier this year, both of which have performed well at retail,” he said. “These launches were quickly followed by the very successful introduction of new models in the brand’s elite performance franchise, the Endorphin. And just last week, the brand launched the new Triumph 22 driving growth of over 80 percent for the franchise in its first week on saucony.com.”
He noted that Saucony was the second most worn brand at the Boston Marathon last month – and gained share year-over-year. He also said the brand is also gaining momentum on the lifestyle side with its retro tech collections led by the ProGrid Omni, Shadow and Azure.
“It’s been a good few months for the brand resulting in upticks in brand heat and demand,” he expressed.
This summer, the brand plans to launch the Hurricane 24 and Hufnagel said the company is already eager for the next additions of all these key franchises in 2025.
“The brand is supercharging its innovation pipeline and elevating its design, all while taking a more thoughtful and strategic approach than any opportunities the brand has in a very attractive and growing category,” he said.
“In February, I said I was bullish on Saucony’s future prospects driven by a much improved innovation pipeline, and I’m even more excited today on the potential of the brand moving forward,” he shared. “We’re also making important progress cleaning up the marketplace, spearheaded by our newly created brand protection team. To date, we’ve closed or restricted over 30 customers and partners and shuttered approximately 400 retail accounts. This will continue as we work to be great brand managers coupled with a stronger focus on sell through versus sell in and our brands better managing supply and demand in the marketplace.”
Hufnagel said the other brands in the portfolio are close behind Saucony.
“For Merrell, the Moab Speed 2, which is recently recognized as an ISPO Award for the best new product in the hiking category, modernizes the trail by incorporating the beloved fit and comfort of the Moab into a faster, lighter and more athletic silhouette,” Hufnagel boasted. “It is the brand’s biggest story this year and is driving strong sell through today at key wholesale accounts and at merrell.com. This performance is helping generate increased interest in the marketplace and continued market share gains for the category leader.”
On the lifestyle front, he said Merrell’s Wrap collection continues to outpace expectations, selling out with each delivery of new inventory.
“Having proven the concept at merrell.com, we now plan to thoughtfully expand its distribution to our wholesale accounts both in the U.S. and around the world,” he shared. “We’re also fast tracking new styles for Wrap next year, especially for her, including mules and a trend-right Mary Jane.”
Hufnagel also want into the work and rugged zone, commenting that the Wolverine brand’s Trade Wedge, Rancher and Reforce franchise are all performing well today, with both the Trade Wedge and Rancher consistently beating the company’s sell-through forecasts. He said the Reforce is off to a solid start at wolverine.com.
“Going forward, the brand has plans to expand their product franchises, most notably introducing significant new innovation to the western category later this year, as that is an important consumer trend,” he shared.
The CEO said the teams are utilizing consumer insights at the very start of creative development to create more compelling storytelling, and consumer testing is now being leveraged throughout the process, including evaluating creative effectiveness prior to a campaign’s launch.
To lead the execution, he shared that they have hired new consumer-focused marketing leaders for both Merrell and Sweaty Betty over the last six months, with plans to place a new marketing leader for Saucony shortly.
“In addition to leveraging the collective to ensure we share best practices and insights across the portfolio, we’re also evolving towards a better, full funnel approach to marketing investment and campaign objectives that balance functional product stories with brand building messages,” he noted. “It is vital that we build brand equity and deepen emotional connections with our consumers. We need to compete for both ‘share of closet’ and ‘share of mind’ to win in today’s competitive marketplace.”
He then walked the audience through a few examples of how they are telling stories in the market today.
“Sweaty Betty aims to empower women and just last week, the brand launched its second iteration of the Wear the Damn Shorts campaign to encourage its sisterhood community to be confident and comfortable with their bodies,” he outlined. “Last year, the T-shirt featuring the campaign’s tagline was the brand’s most requested T-shirt in its history. This year, the campaign has already driven a 63 percent increase year-over-year in shorts revenue and a 52 percent sell-through of the T-shirt since launch.”
He said the campaign has delivered over 30 million impressions over 1.5 million video views. In total, Hufnagel noted that Sweaty Betty has driven nearly a 40 percent increase in paid impressions globally year-to-date, and the brand continues to resonate with its core consumer.
Hufnagel also talked about Saucony’s successful marathon campaign and how the brand engaged its running community at the London Marathon through a host of events and activations, generating well over 1 million impressions and helping fuel all-time record search interest for the brand in the UK. He said year-to-date global search interest for Saucony is up over 20 percent compared to 2023.
Merrell reportedly just launched its biggest campaign of the year, good things await”, inviting consumers to experience the simple power of being outside (view or download a TikTok video here).
Hufnagel said it’s the most comprehensive marketing campaign in the brand’s history, generating over 7 billion meeting impressions so far and helping drive strength and interest in the brand.
“As the global leader in hike, it’s incumbent upon the brand to drive innovation and heat in the category, and I’m encouraged by the progress we’re making in Merrell,” he said.
Feature image courtesy Saucony
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See below for more SGB Media coverage on first quarter results, including sales trends by brand.
Wolverine Worldwide Business Continues to Shrink in Q1 While Turnaround Progresses
