Merrell Barefoot Sell-in Wider than Expected; Parent Battles Higher Input Costs

Don Grimes, Wolverine World Wide’s SVP and CFO, said last week his company’s gross margins were up 30 basis points in the third quarter and the company continues to guide to flat gross margins.

 

If accomplished, Grimes said Wolverine will stand out as “the heroes and real outliers in our industry” given that the company is seeing mid-single-digit product cost increased in the first half of the year and high-single digits in the second half.  Grimes comments came during the Robert W. Baird & Co., Inc. Growth Stock Conference last week.


“We are not being bashful about raising prices ourselves, said Grimes. We expect to cover two-thirds to three-quarters of the cost increases with the selling price increases.  He said the balance will be covered by a positive mix shift, selling more higher gross margin brands or through higher gross margin or geographies.


He said WWW has a very experienced supply chain and sourcing group and has partnerships with factories in Bangladesh and Indonesia with more free capacity and “somewhat cheaper” labor costs.  But he said the higher raw material, labor and freight costs is “a reality that were all facing.  Grimes continued, I think other brands are raising prices with different degrees of confidence. We have been fairly aggressive. We also looked very closely at our gross margin and our operating margin and tried to achieve leverage across every brand across every geography. But we have received very little pushback from the price increases we have taken. That doesnt mean there hasnt been some hard discussion but were combating it every way that we can.”
Grimes also provided an update on the rollout of the Merrell Barefoot collection, the partnership with Vibram that’s being touted as possibly the most successful launch in Wolverine’s history, with 400,000 pairs of Merrell Barefoot sold in.


Running specialty was expected to drive the launch, but the channel only accounts for 6 percent of the initial sell-in. Outdoor specialty is 26 percent; sporting goods, 15 percent; department stores, 11 percent; footwear specialty, 24 percent; and Internet/catalog, 16 percent.


Said Grimes, “It’s been a very-balanced sell in, which is a very positive thing to see and it bodes well for the ongoing success of Merrell Barefoot.” Grimes said the sell-through has been quite good.” He added that Merrell Barefoot helped drive the overall Outdoor group’s 22 percent growth in Q1, although revenues would have been up strong double-digits without the launch. The line will expand in the Fall to soft shell uppers, windproof and Gore-tex styles.

Merrell Barefoot Sell-in Wider than Expected; Parent Battles Higher Input Costs

Don Grimes, Wolverine World Wide’s SVP and CFO, said last week his company’s gross margins were up 30 basis points in the third quarter and the company continues to guide to flat gross margins.


If accomplished, Grimes said Wolverine will stand out as “the heroes and real outliers in our industry” given that the company is seeing mid-single-digit product cost increased in the first half of the year and high-single digits in the second half.  Grimes comments came during the Robert W. Baird & Co., Inc. Growth Stock Conference last week.

 

“We are not being bashful about raising prices ourselves, said Grimes. We expect to cover two-thirds to three-quarters of the cost increases with the selling price increases.  He said the balance will be covered by a positive mix shift, selling more higher gross margin brands or through higher gross margin or geographies.


He said WWW has a very experienced supply chain and sourcing group and has partnerships with factories in Bangladesh and Indonesia with more free capacity and “somewhat cheaper” labor costs.  But he said the higher raw material, labor and freight costs is “a reality that were all facing.  Grimes continued, I think other brands are raising prices with different degrees of confidence. We have been fairly aggressive. We also looked very closely at our gross margin and our operating margin and tried to achieve leverage across every brand across every geography. But we have received very little pushback from the price increases we have taken. That doesnt mean there hasnt been some hard discussion but were combating it every way that we can.”
Grimes also provided an update on the rollout of the Merrell Barefoot collection, the partnership with Vibram that’s being touted as possibly the most successful launch in Wolverine’s history, with 400,000 pairs of Merrell Barefoot sold in.


Running specialty was expected to drive the launch, but the channel only accounts for 6 percent of the initial sell-in. Outdoor specialty is 26 percent; sporting goods, 15 percent; department stores, 11 percent; footwear specialty, 24 percent; and Internet/catalog, 16 percent.

 

Said Grimes, “It’s been a very-balanced sell in, which is a very positive thing to see and it bodes well for the ongoing success of Merrell Barefoot.” Grimes said the sell-through has been quite good.” He added that Merrell Barefoot helped drive the overall Outdoor group’s 22 percent growth in Q1, although revenues would have been up strong double-digits without the launch. The line will expand in the Fall to soft shell uppers, windproof and Gore-tex styles.

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