Wolverine World Wide said that the Merrell business “had another phenomenal year” with sales for 2003 growing 20%, exceeding the companys 15% growth plan for the brand for the year. Fourth quarter sales for the brand were described as growing at a “slightly faster pace” than the rest of the year.
The brand reported double-digit sales increases across all global regions for the year, with the largest increases coming from continental Europe, where business “more than doubled” off a relatively small base. The company said Merrell had a very strong fourth quarter in the U.S. as well, describing sell-throughs as “unusually good”, resulting in “aggressive levels” of fill-in orders. WWW also pointed to the colder weather in the I-95 corridor as drivers for Q4 gains.
The company said the brands shop-in-shop program is paying big dividends for retailers, showing “excellent results” with growth in the 50% to 400% range. They are targeting another 70 shops for 2004 in addition to the current 60 shops in place.
Hush Puppies global sales were “up mid-single digits for the quarter and for the year” and profits were said to be “up strongly” for both periods due to improved gross margins as the brand sold higher-priced, higher-quality products to upper-tier retailers. U.S. wholesale sales declined 1.6% in the quarter and 2.3% for the full year.
Profits in the U.S. business were up on a 190 basis points gross margin increase from “a change in mix to more contemporary market-right product and reduced inventory markdowns”. The Canada and U.K. operations reportedly had “very strong results”, as did the international licensing business.
The Wolverine Footwear Group, which includes Wolverine boots and shoes, Harley-Davidson, Bates Uniform and Stanley businesses, reportedly had a strong fourth quarter and a record year in both sales and profits. Bates and Harley-Davidson drove double-digit sales gains while the Wolverine boots and shoes sales were off 2% in the quarter and 4% for the year. The decline was due entirely to “a change in mix as the brand executed a strategy to expand product in the $80 to $100 retail price point” range. Unit sales of Wolverine boots and shoes increased during the year.
The Consumer Direct business grew at a “double-digit pace” during the quarter and increased 4.9% for the year, due primarily from two new Track n Trail stores in Q4 and “strong gains” in the e-commerce business. WWW plans to open six to eight stores in 2004 on top of the four stores open at year-end.
In 2004, foreign currency gains provided 1.5% of the sales increase for Q4 and 1.9% for the year.
International revenues accounted for 24% of the revenue mix, and European revenues provided 16.2% of overall revenues.
The Sebago business, which is now part of the Outdoor Group with Merrell, has been re-located to the corporate HQ in Michigan and production is being transferred to the Dominican Republic in second quarter 2004.
WWW said Sebagos major re-introduction will be in mid to late 2004, but some new product will be at retail in Fall 2004. Business for the year is expected to be approximately $30 million, generating “a small profit”.
Excluding the Sebago business, inventories were down about 7.5% on a “business-to-business basis”. WWW reduced its SKU levels by 13% during the year.
WWW ended the year with a 20% increase in the futures backlog.
The company is increasing earnings estimates for 2004 by three cents a share to a range of $1.37 to $1.43 per share on sales between $945 million and $965 million. WWW sees a growth rate “in excess of 7.5%” in the first half of the year while anticipating “a more moderate growth rate” in the back half. Gross margin is expected to improve by 20 to 30 basis points.
