At Citi Global’s Consumer Conference, Blake Krueger, chairman, president and CEO of Wolverine Worldwide, said that although the company was interested in acquiring all the brands that are part of its pending acquisition of Collective Brand’s Performance Lifestyle Group (PLG) segment, Sperry Top-Sider and Saucony stand “a little taller now” as quick contributors.
“We needed an athletic brand, I believe, in our mix of portfolio,” said Krueger last week. “And Sperry is today the number one casual brand in the United States.”
The deal is expected to close in the late third or fourth quarter.
He said all four brands also including Stride Rite and Keds held appeal because they are all “authentic, have a heritage, are real” with collectively over 380 years of brand heritage. All also helped “fill in some white spaces.” While Wolverine had some kids presence, “the Stride Rite brand gives us an opportunity to be meaningful or even dominant in the US kid's business in that particular distribution channel,” said Krueger.
The benefit also includes further penetration in women's, with three of the brands stronger in women's than men's. Being more fashionable than most of Wolverine’s existing brands, both Sperry and Keds hold strong appeal to reach teens, especially girls. He remarked that Keds “frankly, today probably a better brand than a business.”
Internationally, only 10 percent of all PLG’s brands revenues reach overseas with Sperry at only 4 percent. Saucony has a largest presence among the four but is largely limited to Europe and particularly Germany. With 60 percent of its volume international, Wolverine has the capabilities and connections to quickly capitalize on international expansion for the PLG brands.
Said Krueger, “So whether it was from dovetailing all of those brands into our existing portfolio, looking at the upside on the supply chain side, we will now be marketing after close under our 16 brands around the world, 95 million to 100 million pair of primarily non-athletic footwear a year. We will be the largest nonathletic footwear company in our industry. There are a number of synergies and opportunities.”
Regarding the economic problems in Europe, Krueger said Wolverine sells less than 20 percent of the pairs throughout the European region with about half in the U.K. He also believes much of the near-term impact to footwear retailers in the region “has already past” with a number having gone into administration and come out.
Longer term, he expects the volatility will likely continue in the region “until things shake out. And no one really knows when that is going to occur. That is kind of wet blanket on a macroeconomic sense. It is having an impact on the European consumer in general, and somewhat on our industry as well. And, frankly, we expect that to continue.”
Regarding Merrell, Krueger said the $500 million brand “is still very early on its international growth cycle.” Its flattish overall growth in the first quarter was largely do to weather and carryover product. Krueger said a number of the large and small outdoor specialty retailers where Merrell is “very strong” found themselves over inventoried in ski equipment, snowshoes and insulated jackets. Said Krueger, “It was a very, very warm winter. I never tried and let any of our brand presidents use weather as an excuse, but it is what it is. And it was a very warm winter. I have talked to four or five people that came back from ski vacations early because they were skiing on rocks and trees. And it was just an unusual situation.”
That caused a shift to fewer forward future orders to more at-once buys and at-once orders for Merrell trended up significantly during the quarter. Still, gaining future orders remains a challenge. Said Krueger, “It is almost as if the retailers have a little more conservative view now than the actual consumer, at least here in the United States, where the consumer is still out there and shopping fairly well.”
On the positive side, Merrell’s new M-Connect series, an expansion of its successful Barefoot collection, was previewed at two of its largest U.S. customers an unnamed big-box sporting goods retailer and the largest outdoor specialty retailer “and they are beyond enthused with the concept and the product.” The concept also received a “tremendous update” from its international partners in mid-May.
“So we see Merrell continuing to grow,” said Krueger. “We haven't quite closed on the PLG transaction yet, but there is a little internal competition, which is going to be our first $1 billion brand. Is it going to be Merrell? Is it going to be Sperry? So we have got a little bit of that already occurring at the company.”
