Merrell, one of greatest growth stories in the outdoor specialty channel of the last ten years, remains a key pillar of Wolverine Word Wide’s growth strategy.
Much of the growth at WWW in coming years will come from expanding awareness of the brand both nationally and internationally, the company’s SVP and CFO Don Grimes told analysts at Cowen and Co.’s 8th Annual Consumer Conference in New York City. Merrell sales have grown from $25 million to more than $400 million since WWW acquired it in 1997. Wolverine expects it to become its first $1 billion brand through a combination of greater apparel and accessories sales, greater direct sales and greater penetration within existing channels.
“Merrell apparel is still below breakeven, but moving rapidly toward break even,” said Grimes. “Apparel is key component of our strategy to become a company of lifestyle brands.”
Grimes cited recent research which showed unaided awareness of the Merrell brand among men at a mere 8%, placing it 79th on a list of global footwear brands.
“I get chided for saying this, but when I was contacted by Wolverine for the CFO opportunity, I was not aware of the Merrell brand or the Wolverine brand,” said Grimes. “It seems like if it’s a brand that is that important, the average consumer ought to at least be aware of it. Eight percent brand awareness among male consumers indicates there is an opportunity there.”
WWW will seek to grow Merrell by spending more money on direct consumer messaging, paid for in part by more savings from operations. The company has recruited new leadership to boost apparel and accessories sales, which WWW thinks can make up 15% of Merrell’s sales by the time it becomes a $1 billion brand.
Grimes said the greatest short-term growth opportunity is probably in Europe. While the EMEA market is half again as large as the U.S. market, WWW sales in the region are 36% below its sales in the United States. Similarly, WWW’s sales in Asia are just 18% of its US sales although that market is 18% larger. WWW sees an opportunity to sell 4.4 million more pairs in Europe and 5 million more pairs in Asia.
WWW’s other big growth strategy is expanding owned retail from 7% of sales to 15% by opening more stores and expanding e-Commerce sales. Comps sales at owned retail rose 5.5% from May 2009 to January 2010, Grimes said.
Grimes emphasized that tight distribution will remain a hallmark of the Merrell brand.
“A big part of Merrell’s success to date has been from having a very clean, almost pristine distribution strategy and making sure we earn full margin on Merrell and expect and want our retailers to earn full margin on Merrell,” he said. “But going mass and discount is not a way to present the brand equity that Merrell represents. Having said that we need to look at our distribution strategy as a way to expand the broader consumer awareness of the Merrell brand. “
