Wolverine Worldwide reported fourth-quarter revenues reached a record $406.5 million in the fourth quarter but grew at just 5.6 percent, down dramatically from the pace set in the fourth quarter of 2010 despite double digit increases in spending on marketing.

 

For the year, the company, which owns the Merrell, Patagonia, Chaco and Cushe footwear brands, reported revenue rose 12.9 percent to a record $1.41 billion, driven by double-digit growth at the Outdoor Group, Lifestyle Group and Heritage Group. Foreign exchange contributed $17.3 million, or 1.4%, to reported revenue growth. But earnings slid 10.2 percent due to increased spending and slightly lower gross margins.

The company also projected earnings between $2.60 and $2.70 per share and revenues in the range of $1.485 billion to $1.525 billion. Analysts currently sees earnings of $2.72 per share on revenues of $1.52 billion for the new year.

Highlights for the fourth quarter 2011:

  • On top of the prior year's 23.2 percent fourth quarter revenue growth, revenue in this year's fourth quarter rose 5.6 percent to $406.5 million, representing the sixth consecutive quarter of record revenue, driven by growth from all branded operating groups.
  • Gross margin in the quarter decreased 20 basis points to 36.9 percent, with incremental non-cash LIFO expense lowering gross margin by 80 basis points.
  • The company continued to invest behind its most important growth initiatives, with a double-digit increase in marketing investments in the quarter.
  • Diluted earnings per share during the quarter of $0.47 compares to $0.52 in the prior year, a decrease of 9.6 percent. Organic growth across the portfolio of brands was offset by i) $0.06 per diluted share in incremental investments to drive accelerated growth; ii) $0.04 per diluted share in incremental non-cash LIFO expense; iii) $0.02 per diluted share in higher tax expense as a result of a lower effective tax rate in the prior year; and iv) a one-time gain on the sale of a non-core business that added $0.02 per diluted share to fourth quarter fiscal 2010 results.

Don Grimes, the company's senior vice president and chief financial officer, commented, “We are extremely pleased with the company's double-digit increases in both revenue and earnings per share, another record year by both measurements.  This exceptional financial performance in 2011 is indicative of the strength of our business model, the drive and focus of our seasoned management team and the discipline with which we manage the business.  We remain focused on our goal of delivering superior financial results while increasing brand investments to drive future growth.”

Highlights for the year:

  • Foreign exchange contributed $17.3 million, or 1.4 percent, to reported revenue growth.  This year's revenue represents the second consecutive year of double-digit growth, reflecting strong momentum for the company's brand portfolio in almost all major  geographies.
  • Gross margin of 39.5 percent was equal to the prior year's reported gross margin, representing outstanding performance in a challenging sourcing and product cost environment.
  • Operating margin expanded to a record 12.1 percent, compared to prior year reported operating margin of 11.4 percent.
  • Diluted earnings per share increased 14.3 percent, to $2.48, compared to prior year adjusted earnings per share of $2.17.  Reported full-year earnings per share in 2010 were $2.11.
  • The excellent free cash flow generated in 2011 was used to invest for future growth, fund benefit plans for employees and return value to shareholders through the payout of $22.7 million in dividends and the repurchase of 1.8 million shares for $65.3 million.

“Our portfolio of strong, global lifestyle brands combined to deliver another year of record performance,” said Blake W. Krueger, the company's chairman and chief executive officer. “Each of our three branded operating groups and our direct-to-consumer business contributed to the year's outstanding results.  Additionally, all major international regions reported double-digit revenue growth, as our newly created International Group focused on the significant opportunities outside of North America.  Our distributor and licensee business, which markets our brands in nearly 190 countries, also had an exceptional year, with revenue up nearly 40 percent.  We are very proud of the record performance in 2011 and are excited about the global momentum of our brands, our continued geographic expansion and the impressive product innovations we have planned for 2012.”

2012 Outlook

The company's outlook for 2012 reflects the following:

  • The recent strengthening of the U.S. dollar vs. the British pound, the Canadian dollar and the Euro;  
  • Revenue in the range of $1.485 billion to $1.525 billion, representing growth of 5.4 percent to 8.2 percent versus the prior year;
  • Moderate gross margin expansion;
  • Modest SG&A deleverage reflecting i) approximately $11.1 million, or $0.15 per diluted share, of incremental non-cash pension expense; ii) an estimated $2.5 million, or $0.03 per diluted share, of incremental expenses associated with a significant expansion of the company's distribution infrastructure in support of future growth; and iii) incremental investments associated with retail store openings;
  • A full-year effective tax rate of approximately 28 percent;
  • Fully diluted weighted average shares outstanding of approximately 49 million; and
  • Fully diluted earnings per share in the range of $2.60 to $2.70, representing growth of approximately 4.8 percent to 8.9 percent versus the prior year.  Adjusted for the estimated incremental non-cash pension expense, earnings per share are expected to grow in the range of 10.9 percent to 14.9 percent.

Krueger concluded, “We are in a strong position heading into the new year, with several global consumer trends and macro lifestyle trends working in our favor.  The expanding footprint of our lifestyle brands and our ability to target many different consumer groups through a variety of distribution channels enables us to outperform in many different economic environments.  We are certainly excited about the company's prospects for 2012.”     

WOLVERINE WORLD WIDE, INC.

 

 

 

 

 

 

 

 

 

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

 

(Unaudited)

 

($000s, except per share data)












4th Quarter Ended


Fiscal Year Ended



December 31,


January 1,


December 31,


January 1,



2011


2011


2011


2011










Revenue


$ 406,466


$ 385,025


$ 1,409,068


$ 1,248,517

Cost of products sold


256,313


242,291


852,316


754,537

Restructuring and related costs





1,406

Gross Profit


150,153


142,734


556,752


492,574

Gross margin


36.9%


37.1%


39.5%


39.5%










Selling, general and administrative expenses


119,210


111,568


386,534


347,499

Restructuring and related costs





2,828

Operating Expenses


119,210


111,568


386,534


350,327

Operating expenses as a % of revenue


29.3%


29.0%


27.4%


28.1%










Operating Profit


30,943


31,166


170,218


142,247

Operating margin


7.6%


8.1%


12.1%


11.4%










Interest expense, net


378


247


1,025


387

Other (income) expense, net


147


(1,288)


283


(1,366)



525


(1,041)


1,308


(979)

Earnings before income taxes


30,418


32,207


168,910


143,226










Income taxes


7,407


6,560


45,623


38,756

Effective tax rate


24.4%


20.4%


27.0%


27.1%










Net earnings


$ 23,011


$ 25,647


$ 123,287


$ 104,470










Diluted earnings per share


$ 0.47


$ 0.52


About The Author

Thomas J. Ryan

Thomas J. Ryan Senior Business Editor | SGB Media tryan@sgbonline.com | 917.375.4699

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