Wolverine World Wide, Inc. revenues fell 3.2% in the fourth quarter, to $346.1 million from $357.4 million in the prior year. Earnings dipped 0.6% to $24.1 million, or 49 cents a share, from $25.6 million, or 49 cents, a year earlier. The parent of Merrell, Sebago and Patagonia Footwear also said it expects 2009 revenue in the range of $1.160 billion to $1.240 billion on a constant currency basis, down 5.0% to up 1.6% from the prior year.
Foreign exchange had
a negative impact on revenue growth in the quarter of 3.3%.
The company achieved revenue of $1.221 billion for the full fiscal year, a 1.8% increase over prior-year revenue of $1.199 billion. Full-year earnings were $1.90 per fully diluted share, up 11.8% from $1.70 per share for the same period of 2007.
According to Blake W. Krueger, the company's CEO and president, “We are very pleased to report another record year of revenue and earnings per share. Our team's rigorous execution of our multi-brand, multi-country, and multi-distribution channel business model enabled us to post solid results even in these challenging economic times.
“The Outdoor Group, Heritage Brands Group and the Wolverine Footwear Group each posted revenue increases in the fiscal year, with the Outdoor Group and the Heritage Brands Group being the two most significant contributors to the company's profit improvement for the full year. Despite foreign exchange headwinds attributed to a strengthening U.S. dollar, two of our four major branded operating groups delivered revenue gains in the fourth quarter, and two groups also posted profit increases.”
Don Grimes, the company's CFO, commented, “Fourth quarter gross margin of 38.5% was flat, with the prior-year and full-year gross margin improved 40 basis points from the prior year, to 39.8% – strong performance given the pressure from midyear product and transportation cost increases. Operating margin for the full year was essentially flat with the prior year.
“Accounts receivable decreased 6.7% at year-end on a reported 3.2% decrease in fourth quarter revenue, an excellent achievement in an increasingly difficult collections environment. After six consecutive quarters of year-over-year inventory reductions, inventory at year end was up approximately $31 million, or 18.6%, over the prior year. This increase was driven by the strategic decision to make pre-buys of core product in the fourth quarter prior to 2009 cost increases, higher product costs, and the timing of spring inventory receipts, which fell into fiscal 2008 due to the 53rd week in the fiscal year. Much of the incremental inventory represents carry-over product, with most of the increase in the Merrell brand.”
Grimes concluded, “Our solid operating results generated $93.5 million of cash from operating activities for the full year. The company ended 2008 with $89.5 million of cash on hand and interest-bearing debt of $59.5 million, for a net cash position of $30.0 million. We believe that our strong balance sheet represents a competitive advantage to the company as we navigate through these uncertain times.”
The company expects more challenging trading conditions and comparisons in the first half of this year, especially considering the impact of the stronger U.S. dollar. As a result, the company is currently projecting 2009 revenue in the range of $1.160 billion to $1.240 billion on a constant currency basis, down 5.0% to up 1.6% from the prior year. The negative impact of foreign exchange is expected to reduce full-year reported revenue by approximately $90 million compared to 2008.
Earnings are expected to be in the range of $1.50 to $1.70 per fully diluted share, prior to the impact of the Company's previously announced strategic restructuring plan. Included in this range is a 15 cents per share reduction related to a stronger U.S. dollar and 12 cents per share of incremental pension expense. Excluding these items, the Company is projecting earnings in the range of $1.77 to $1.97 per share.
The strategic restructuring plan is projected to result in pretax charges during 2009 in the range of $31 million to $36 million, or 42 cents to 49 cents per share on an aftertax basis.
WOLVERINE WORLD WIDE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
($000's, except per share data)
4th Quarter Ended Fiscal Year Ended
January 3, December 29, January 3, December 29,
2009 2007 2009 2007
(17 weeks) (16 weeks) (53 weeks) (52 weeks)
Revenue $346,116 $357,423 $1,220,568 $1,198,972
Cost of products sold 212,785 219,973 734,547 727,041
Gross profit 133,331 137,450 486,021 471,931
Gross margin 38.5% 38.5% 39.8% 39.4%
Selling and administrative
expenses 100,991 99,306 345,183 333,151
Operating profit 32,340 38,144 140,838 138,780
Operating margin 9.3% 10.7% 11.5% 11.6%
Interest (income) expense,
net 419 309 1,093 (664)
Other (income) expense (838) 449 (839) 873
(419) 758 254 209
Earnings before income
taxes 32,759 37,386 140,584 138,571
Income taxes 8,642 11,790 44,763 45,685
Net earnings $24,117 $25,596 $95,821 $92,886
Diluted earnings per share $0.49 $0.49 $1.90 $1.70