Wolverine Worldwide reported earnings fell 21 percent in the second quarter as sales on an ongoing basis dropped 18 percent due to steep declines at Merrell and Saucony, but the company still raised its sales and earnings guidance for the year as its turnaround program is a sooner-than-expected improvement.

Total sales in the second quarter ended June 29 were $425.2 million, down 27.8 percent on a reported basis and 27.7 percent on a currency-neutral basis. Sales on an ongoing basis, adjusted to exclude the impact of the divestiture of Sperry, Keds and Wolverine Leathers businesses, were $424.8 million, down 18.4 percent on a reported basis and off 18.3 percent on a currency-neutral basis. Results topped analysts’ consensus estimate of $410.8 million.

Earnings on an adjusted basis declined 21.1 percent to 15 cents a share from 19 cents, but exceeded the consensus estimate of $0.11 per share.

“We delivered better-than-expected revenue and earnings in the second quarter while continuing to execute our ambitious turnaround plan,” said Chris Hufnagel, president and chief executive officer of Wolverine Worldwide. “A year ago, we began to take fast and bold actions to build a new and better company—focused squarely on our consumer and our new global brand-building model. Our team has executed with tremendous pace and urgency, driving substantial progress across the business. We’ve significantly lowered our debt and inventory levels while meaningfully expanding our gross margin, and we’re beginning to see proof points of an inflection to growth—driven by stronger product pipelines and improved demand creation. Every day, we’re making progress to position the company for sustained growth in the future and, ultimately, to deliver better performance and greater returns for our shareholders.”

Financial Highlights
Financial results for 2024 and comparable results from 2023, in each case, for its ongoing business exclude the impact of Keds, which was sold in February 2023, the U.S. Wolverine Leathers business, which was sold in August 2023, the non-U.S. Wolverine Leathers business, which was sold in December 2023, and the Sperry business, which was sold in January 2024.

Gross margin improved significantly due to lower supply chain costs, lower sales of end-of-life inventory, fewer promotional eCommerce sales, and a favorable distribution channel mix.

Inventory at the end of the quarter was $297.1 million, down $350.8 million, or approximately 54.1 percent, from the prior year and down $76.5 million from the prior year’s end.

Net debt at the end of the quarter was $666 million, down $271 million compared to the prior year and down $75 million from the prior year end.

Full-Year 2024 Outlook
“We are pleased with how we are performing at this stage in our strategic transformation, and our second quarter results reflect the progress and the actions we’ve taken to improve the financial position of the company,” said Taryn Miller, chief financial officer. “While there is more work to do as we advance Wolverine Worldwide’s strategy, we believe the steps we are taking will position the business for long-term growth and value creation for shareholders.”

For Fiscal year 2024, the company currently expects:

  • Revenue from its ongoing business of approximately $1.71 to $1.73 billion. This range compares to the previous outlook of approximately $1.68 to $1.73 billion and represents a decline of roughly 14.2 percent to 13.2 percent and a constant-currency decline of approximately 14.1 percent to 13.1 percent compared to 2023.
  • Gross margin of approximately 44.5 percent, up 460 basis points compared to 2023, which remains unchanged from the previous outlook.
  • Operating margin of approximately 6.0 percent and adjusted operating margin of approximately 7.4 percent, up 350 basis points compared to 2023. This compares to the previous operating margin outlook of roughly 5.7 percent and adjusted operating margin of approximately 7.0 percent.
  • The effective tax rate of approximately 18.5 percent, as compared to the previous outlook of 18.0 percent.
  • Diluted earnings per share in the range of $0.53 to $0.63 and adjusted diluted earnings per share in the range of $0.75 to $0.85. This compares to the previous outlook for diluted earnings per share in the range of $0.43 to $0.63 and adjusted diluted EPS between $0.65 and $0.85. These full-year EPS expectations continue to include an approximate $0.10 negative impact from foreign currency exchange rate fluctuations.
  • Diluted weighted average shares of approximately 80 million, unchanged from previous guidance.
  • Inventory to decline by at least $75 million at year end compared to the prior year end, unchanged from previous guidance.
  • Net Debt at year-end to be approximately $565 million, a reduction of $175 million from the prior year-end, unchanged from previous guidance.

Image courtesy Merrell