Wolverine World Wide, Inc. said it plans to shift its Merrell and Saucony businesses in China from a joint venture model with Xtep to a license and distribution rights model. It also agreed it sell its Asia-based Wolverine Leathers business. Both actions are expected to simplify Wolverine’s business model and generate $70 million in proceeds.

“We’ve taken fast, bold, and decisive actions to stabilize the company today while working to transform Wolverine Worldwide for the future,” said Chris Hufnagel, who was promoted to president and chief executive officer in mid-August. “Our actions over the past four months have served to simplify our business model, reduce our cost structure, and strengthen our balance sheet. While our work isn’t done, we enter the new year with a clear vision for the future, enhanced ability to invest in our brands and platforms, and ultimately, a better position to deliver stronger returns for our shareholders.”

New Operating Model for Merrell and Saucony in China
Strategic actions announced include evolving and optimizing the company’s successful Merrell and Saucony joint venture in China by entering into agreements for a total amount of $61 million to accelerate an existing option to sell a minority ownership interest in the entity that owns the Saucony intellectual property in China to Xtep, its joint venture partner, and sell the company’s equity interest in the Merrell and Saucony joint venture entities to Xtep.

Wolverine Worldwide formed a joint venture with Xtep in 2019 to launch the Merrell and Saucony brands in China. Xtep is a vertical player in the sportswear market, with over 8,200 stores in Asia-Pacific, North America, and EMEA, and a strong network of distributors and shopping mall operators.

Under the joint venture agreement, Xtep held the option to purchase a 40 percent minority ownership interest in the entity that owns the Saucony intellectual property in China if the business met certain financial targets. Due to the early success and profitability of Saucony in China, the company and Xtep have agreed to accelerate the exercise of this purchase option.

The company and Xtep also agreed the company would sell its equity interest in the Merrell and Saucony joint venture entities to a wholly-owned subsidiary of Xtep, transitioning the business from a joint venture model to a license and distribution rights model under which Xtep will exclusively carry out the development, marketing and distribution of footwear, apparel, and accessories for the Saucony and Merrell brands in China. This evolution underscores the growth prospects of these two brands in China, and is the result of the early success and maturity of the joint venture. Wolverine said, “The new operating model is expected to further leverage Xtep’s expertise and significant resources in China, unleashing the brands’ full potential in this key market while allowing Wolverine Worldwide to focus on brand-building by developing awesome products and telling amazing stories across its global footprint.”

Selling Asia-based Leathers Business
Wolverine Worldwide also entered into a definitive agreement to sell its Asia-based Wolverine Leathers business to Interhides Public Company Limited, a materials vendor of the company, for approximately $9 million. This completes the company’s previously announced objective to sell its leathers business to focus on its portfolio.

These latest action are in addition to WWW’s previously announced transactions, including:

  • Selling Keds in February 2023 for over $90 million;
  • Selling the Hush Puppies intellectual property in China, Hong Kong, and Macau in August 2023 for approximately $58.8 million;
  • Selling the U.S. Wolverine Leathers business in August 2023 for approximately $6 million; and
  • The previously announced strategic alternatives process for the company’s Sperry brand is ongoing.

Wolverine said it will provide more detail regarding these actions and other strategic initiatives at the Annual ICR Conference on January 8, 2024.

Photo courtesy Merrell