Wolverine Worldwide Inc. said fourth quarter sales and earnings would reach the high end of its guidance, but expects diluted earnings per share to come in flat in 2015 due to a strong dollar, the phasing out of Patagonia footwear and rising pension expense and incremental spending to boost demand for its 15-brand portfolio, which is led by Merrell and a resurgent Sperry Top-Sider.
WWW now expects revenues for the fourth quarter of approximately $808 million, up $67 million, or 9.1 percent from the year ago quarter. Adjusted diluted earnings per share for the full-year 2014 are expected to come in at the high end of earnings guidance of $1.57 to $1.63 per share. On a reported basis, diluted earnings per share are expect to be consistent with the previous guidance of $1.32 to $1.38.
For the full year, WWW adjusted its guidance to approximately $2.76 billion, representing growth of 2.6 percent compared to prior-year revenue of $2.69 billion. The Michigan company had lowered its full-year revenue guidance from 3 to 2 percent in mid-October due to an increasingly promotional retail environment. The company also said it anticipates record operating cash flow will enable it to reduce interest-bearing debt by approximately $250 million during fiscal 2014, including $175 million of accelerated, voluntary principal payments during the fourth fiscal quarter.
“We are very pleased with the expected excellent close to the fiscal year – especially the acceleration of some of our key brands in the quarter,” said CFO Don Grimes. “Nine of our 16 brands are expected to deliver double-digit revenue growth in the quarter, and Sperry is expected to have finished the year strongly, generating high-single digit revenue growth in the quarter. Additionally, the expected outstanding cash flow performance enabled us to reduce our estimated net debt to below $700 million at year end.”
WWW ended fiscal 2014 with 12,500 points of sale, up 2,000 from a year earlier. Chaco, which is moving into closed-toe footwear, is the company's fastest growing brand, said Chairman, President and CEO Blake Krueger.
In fiscal 2015, WWW plans to increase spending on brand boosting initiatives by $30 million to kick off a three-year, $100 million initiative aimed at accelerating growth around the world. The investments will be focused primarily on demand creation, but also be used to enhance omnichannel initiatives. The company issued preliminary guidance that calls for revenue growth in the mid-single digits.
The outlook reflects a 300-basis-point drag on the sales growth rate from a significantly stronger U.S. dollar, the exit of the Patagonia Footwear license and the net impact of closing 140 retail stores as part of a strategic realignment. The strategic brand-building investments and headwinds from foreign currency and pension expense will drag down diluted earnings per share by 20 cents each, resulting in flat adjusted diluted earnings per share in fiscal 2015.
