Wolverine Sees More Balanced Results, But Outdoor Still Driving Growth…

April 25, 2005
SGB Executive
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Wolverine World Wide, Inc. got fairly balanced performances from each of their divisions in the first quarter ended March 26, with all groups reporting “solid” revenue growth and double-digit earnings gains for the period, but the Outdoor Group, which includes Merrell and Sebago, continued to outpace the pack with a 15% sales increase for the quarter.

Total company revenue increased 9.0% to $245.2 million in Q1, compared to $224.9 million in the year-ago quarter. The U.S. business saw a 7.2% increase in sales, while Europe and Other International markets posted a 14% gain for the period. Total revenues would have grown 7.8% excluding the impact of currency.

Net income increased 23.2% to $16.3 million, or 27 cents per diluted share, compared to $12.3 million, or 20 cents per diluted share, for the same quarter last year. The strong earnings growth was said to be driven by “significant gross margin expansion,” as GM improved 130 basis points to 39.3% of sales for the first quarter. Roughly half the improvement was attributed to the FX rate benefits from the weaker dollar, while the balance of the gain came from “increased sales of higher margin lifestyle products.”

Hush Puppies posted a 14% increase in sales for the first quarter, led by a “very strong performance” in the International business and a 7% gain in the U.S. market, which was driven by a 15% increase in the department store business. The women’s HP business was strengthened by broader distribution at Federated, which expanded the line to 221 doors in Spring from 195 last Fall.

The Heritage Brands group, which includes Caterpillar and Harley Davidson, saw revenues rise 8%, led by a 17% increase for the CAT brand in Europe. Tim O’Donovan, who added the chairman title last week to his president and CEO role, said that the brand is particularly strong in London right now.

The U.S. business showed improving operating results, but sales were off due to fewer closeout sales in the period and a shift in product assortments from two larger industrial accounts. Excluding the impact of the two accounts, CAT sales were up 11% in the U.S. for the period. Harley Davidson posted a double-digit earnings gain on “modestly lower” revenues.

The Wolverine Footwear group, which houses the Wolverine Boot, Bates, and Stanley brands, saw a 3% revenue decline for the period, due entirely to a shift in U.S. DOD shipments for Bates. Wolverine brand sales were up 4% on a “significant increase” in average selling prices from a product mix shift. Bates revenues were down $3.8 million, in-line with expectations for the year.

The Outdoor group got a lift from both brands in the portfolio as Sebago revenues increased 18% for the quarter and Merrell grew 14% for the period. The company pointed to “significant sales increases” for Merrell at Nordstrom, Cabela’s, and Dick’s Sporting Goods, as well as strong sandal sell-in and sell-through, particularly in women’s, as key reasons for the gain. The European business for the Outdoor group was up in the mid-teens. While management pointed to the Continuum program for helping to continue energy in the U.S., it was the multi-sport category within the program that was the highest performing segment of the business.

The Merrell test at The Finish Line was described as “a work in progress” as they try different product in different stores in different geographies. Mr. O’Donovan said it would be “premature” to predict the results at the retailer.

Merrell currently has 135 shop-in-shop destinations and plans to add 25 in the U.S. and another 18 to 20 in Europe this year.

Inventories were up 11.6% at quarter-end to $193.8 million, which came entirely from the Outdoor Group and continued investment in Sebago growth and Merrell’s Continuum program.

Quarter-end order backlog was up over 11%, but the company said that the Fall business was coming in “a little later” than last year. Still, they said they get more than half of their business “in the mail” each week. Excluding the Bates effect, backlog would have been up roughly 14% at quarter-end.

WWW boosted full year earnings estimates by three cents, now forecasting EPS in the $1.22 to $1.27 per share range, while the sales forecast got a $5 million boost for the year to a range of $1.045 billion to $1.065 billion.

Wolverine Sees More Balanced Results, But Outdoor Still Driving Growth…

SGB Executive SGB Update
by

Wolverine World Wide, Inc. got fairly balanced performances from each of their divisions in the first quarter ended March 26, with all groups reporting “solid” revenue growth and double-digit earnings gains for the period, but the Outdoor Group, which includes Merrell and Sebago, continued to outpace the pack with a 15% sales increase for the quarter.

The Outdoor group got a lift from both brands in the portfolio as Sebago revenues increased 18% for the quarter and Merrell grew 14% for the period. The company pointed to “significant sales increases” for Merrell at Nordstrom, Cabela’s, and Dick’s Sporting Goods, as well as strong sandal sell-in and sell-through, particularly in women’s, as key reasons for the gain. The European business for the Outdoor group was up in the mid-teens. While management pointed to the Continuum program for helping to continue energy in the U.S., it was the multi-sport category within the program that was the highest performing segment of the business.

The Merrell test at The Finish Line was described as “a work in progress” as they try different product in different stores in different geographies. Mr. O’Donovan said it would be “premature” to predict the results at the retailer.

Merrell currently has 135 shop-in-shop destinations and plans to add 25 in the U.S. and another 18 to 20 in Europe this year.

Hush Puppies posted a 14% increase in sales for the first quarter, led by a “very strong performance” in the International business and a 7% gain in the U.S. market, which was driven by a 15% increase in the department store business. The Heritage Brands group, which includes Caterpillar and Harley Davidson, saw revenues rise 8%, led by a 17% increase for the CAT brand in Europe. Harley Davidson posted a double-digit earnings gain on “modestly lower” revenues. The Wolverine Footwear group, which houses the Wolverine Boot, Bates, and Stanley brands, saw a 3% revenue decline for the period, due entirely to a shift in U.S. DOD shipments for Bates. Wolverine brand sales were up 4% on a “significant increase” in average selling prices from a product mix shift. Bates revenues were down $3.8 million, in-line with 2005 expectations.

Total company revenue increased 9.0% to $245.2 million in Q1, compared to $224.9 million in the year-ago quarter. The U.S. business saw a 7.2% increase in sales, while Europe and Other International markets posted a 14% gain for the period. Total revenues would have grown 7.8% excluding the impact of currency.

Net income increased 23.2% to $16.3 million, or 27 cents per diluted share, compared to $12.3 million, or 20 cents per diluted share, for the same quarter last year. The strong earnings growth was said to be driven by “significant gross margin expansion,” as GM improved 130 basis points to 39.3% of sales for the first quarter. Roughly half the improvement was attributed to the FX rate benefits from the weaker dollar, while the balance of the gain came from “increased sales of higher margin lifestyle products.”

Inventories were up 11.6% at quarter-end to $193.8 million, which came entirely from the Outdoor Group and continued investment in Sebago growth and Merrell’s Continuum program.

Quarter-end order backlog was up over 11%, but the company said that the Fall business was coming in “a little later” than last year. Excluding the Bates effect, backlog would have been up roughly 14% at quarter-end.

WWW boosted full year earnings estimates by three cents, now forecasting EPS in the $1.22 to $1.27 per share range, while the sales forecast got a $5 million boost for the year to a range of $1.045 billion to $1.065 billion.

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