Wolverine Posts Balanced 2004 Results; Merrell Backlog Jumps on Continuum Gains…

Wolverine World Wide, Inc. played up the World Wide in its name in both the fourth quarter and the year as the International business increased to 27% of consolidated sales, compared to 25% of sales in the prior year, and pre-tax earnings for the International side increased more than 35% for the year. The company said that FX rate benefits contributed about 1.5% of the 8.7% worldwide sales increase in the quarter and contributed roughly 2.0% of the 11.6% total sales growth for 2004.

Management said they saw “strong results” in the U.S., Canadian, and European wholesale businesses, as well as the international licensing and distribution businesses. They said Europe in particular had an excellent 2004 with strong results for Merrell, Caterpillar, Hush Puppies, and Sebago. WWW pointed out that, while operating margins in Europe are “modestly lower” than North America, the gap “closed significantly.”

Much of the gains are the result of the continued effort to convert distributors to owned wholesale operations, with Merrell converting Sweden and Finland and Sebago converting the French operations in 2004. Sebago will make similar changes in the U.K. and German markets in 2005. In Canada, Wolverine and Caterpillar are converting to subsidiaries, mirroring the shared services structure in place in the U.S. and Europe.

For the fourth quarter, the company reported revenue of $307.4 million, to revenue of $282.8 million in the year-ago quarter. Fourth quarter net income rose 11.3% to $20.7 million, or 52 cents per share, compared to net income of $18.6 million, or 46 cents per share, in the year-ago period. Operating margins for the year rose 110 basis points to 10.1% of sales.

WWW executed a 3-for-2 stock split last week, which adjusted fourth quarter EPS to 34 cents and full year EPS to $1.09 a share.

All Wolverine World Wide operating groups saw double-digit profit improvements during the year with the Merrell again setting the pace with strong double-digit sales gains, while posting the higher earnings than the other divisions. Year-end backlog was up approximately 13% for the company, an increase management said was balanced across brands and geographic regions.

Merrell, which sits under the Outdoor Group umbrella with Sebago, posted an 11% increase in revenues for the quarter and a nearly 17% gain for the year. The U.S. still represents about 80% of the Merrell business, but the brand saw double-digit increase across the regional spectrum. Management called out the shearling-lined Primo Clog as a key item in the fourth quarter, stating that it “sold out to the pair.”

The company continues to grow brand presence at retail, with 136 shop-in-shops in operation in the U.S. at year-end. Merrell plans to add 25 additional U.S. shops in 2005 and 18 more will be opened in Europe.

WWW said that trade reception to the Continuum project resulted in a 20% increase in Merrell’s order backlog at year-end. Management estimates that the Continuum product will represent half the Merrell sales and half the sku’s in 2005. Merrell is expected to have a low double-digit sales increase for 2005.

Bringing the Continuum goods in early pushed inventories higher at year-end, but the company expects those levels to be “significantly lower” by mid-year. Inventory levels for the other operating groups were “slightly down” at year-end.

Sebago revenues doubled in the quarter, but last year’s quarter was only a partial quarter for Sebago as part of Wolverine. The company did say that Sebago’s full year revenues were “very close” to the $30 million sales plan for the year, while earnings exceeded plan and was “modestly accretive.”

Management called out the Sebago backlog, with over a third of the futures business placed with new women’s product versus 10% of the backlog last year. “More than half” the Sebago business is based in Europe, but they see that more of a 50/50 proposition going forward. Sebago, coming off of a smaller base, is expected to grow in stronger double-digits for 2005.

The Heritage Group, which includes Caterpillar and Harley Davidson, posted a sales increase of “about 20%for the quarter and grew nearly 5% for the year. Earnings contribution from the group jumped 65% in 2004.

The Wolverine Group, which contains the Wolverine boot, Bates, and Stanley brands, saw a 1.2% revenue decline in Q4, but rose 5.4% for the year. Earning contribution was up 20% in Q4 and up 15% for the year.

Looking ahead, WWW increased earlier estimates for 2005 revenue by $5.0 million to a range of $1.04 to $1.06 billion. They also increased pre-split EPS estimates two cents per share to a range of $1.79 to $1.86 per share. On a post-split basis, 2005 earnings per share estimates range from $1.19 to $1.24.

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Teresa Hartford

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Wolverine Posts Balanced 2004 Results; Merrell Backlog Jumps on Continuum Gains…

Wolverine World Wide, Inc. played up the World Wide in its name in both the fourth quarter and the year as the International business increased to 27% of consolidated sales, compared to 25% of sales in the prior year, and pre-tax earnings for the International side increased more than 35% for the year. The company said that FX rate benefits contributed about 1.5% of the 8.7% worldwide sales increase in the quarter and contributed roughly 2.0% of the 11.6% total sales growth for 2004.

Management said they saw “strong results” in the U.S., Canadian, and European wholesale businesses, as well as the international licensing and distribution businesses. They said Europe in particular had an excellent 2004 with strong results for Merrell, Caterpillar, Hush Puppies, and Sebago. WWW pointed out that, while operating margins in Europe are “modestly lower” than North America, the gap “closed significantly.”

Much of the gains are the result of the continued effort to convert distributors to owned wholesale operations, with Merrell converting Sweden and Finland and Sebago converting the French operations in 2004. Sebago will make similar changes in the U.K. and German markets in 2005. In Canada, Wolverine and Caterpillar are converting to subsidiaries, mirroring the shared services structure in place in the U.S. and Europe.

For the fourth quarter, the company reported revenue of $307.4 million, to revenue of $282.8 million in the year-ago quarter. Fourth quarter net income rose 11.3% to $20.7 million, or 52 cents per share, compared to net income of $18.6 million, or 46 cents per share, in the year-ago period. Operating margins for the year rose 110 basis points to 10.1% of sales.

WWW executed a 3-for-2 stock split last week, which adjusted fourth quarter EPS to 34 cents and full year EPS to $1.09 a share.

All Wolverine World Wide operating groups saw double-digit profit improvements during the year with the Merrell again setting the pace with strong double-digit sales gains, while posting the higher earnings than the other divisions. Year-end backlog was up approximately 13% for the company, an increase management said was balanced across brands and geographic regions.

Merrell, which sits under the Outdoor Group umbrella with Sebago, posted an 11% increase in revenues for the quarter and a nearly 17% gain for the year. The U.S. still represents about 80% of the Merrell business, but the brand saw double-digit increase across the regional spectrum. Management called out the shearling-lined Primo Clog as a key item in the fourth quarter, stating that it “sold out to the pair.”

The company continues to grow brand presence at retail, with 136 shop-in-shops in operation in the U.S. at year-end. Merrell plans to add 25 additional U.S. shops in 2005 and 18 more will be opened in Europe.

WWW said that trade reception to the Continuum project resulted in a 20% increase in Merrell’s order backlog at year-end. Management estimates that the Continuum product will represent half the Merrell sales and half the sku’s in 2005. Merrell is expected to have a low double-digit sales increase for 2005.

Bringing the Continuum goods in early pushed inventories higher at year-end, but the company expects those levels to be “significantly lower” by mid-year. Inventory levels for the other operating groups were “slightly down” at year-end.

Sebago revenues doubled in the quarter, but last year’s quarter was only a partial quarter for Sebago as part of Wolverine. The company did say that Sebago’s full year revenues were “very close” to the $30 million sales plan for the year, while earnings exceeded plan and was “modestly accretive.”

Management called out the Sebago backlog, with over a third of the futures business placed with new women’s product versus 10% of the backlog last year. “More than half” the Sebago business is based in Europe, but they see that as more of a 50/50 proposition going forward. Sebago, coming off of a smaller base, is expected to grow in stronger double-digits for 2005.

The Heritage Group, which includes Caterpillar and Harley Davidson, posted a sales increase of about 20%for the quarter and grew nearly 5% for the year. Earnings contribution from the group jumped 65% in 2004.

The Wolverine Group, which contains the Wolverine boot, Bates, and Stanley brands, saw a 1.2% revenue decline in Q4, but rose 5.4% for the year. Earning contribution was up 20% in Q4 and up 15% for the year.

Looking ahead, WWW increased earlier estimates for 2005 revenue by $5.0 million to a range of $1.04 to $1.06 billion. They also increased pre-split EPS estimates two cents per share to a range of $1.79 to $1.86 per share. On a post-split basis, 2005 earnings per share estimates range from $1.19 to $1.24.

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