Wolverine World Wide, Inc. reported strong sales and underlying earnings gains for the third quarter ended October 2, 2021, but slightly reduced its earnings guidance to reflect recent supply chain challenges.

“The Company delivered strong double-digit revenue growth and exceptional earnings leverage, despite the increased supply chain disruption caused by Vietnam factory closures and global logistics delays,” said Blake W. Krueger, Wolverine Worldwide’s Chairman and CEO. “Merrell was hit hardest by Vietnam factory closures but still delivered mid-single-digit growth. Saucony and Sperry both drove over 40 percent revenue growth. The unplanned supply chain disruptions resulted in at least a $60 million negative revenue impact in Q3. Demand for our brands remains very strong as evidenced by continued strength in sell-through trends at retail and a robust order book that extends into Q3 2022. We remain bullish on our outlook for the future in light of these trends and the composition of our portfolio which over-indexes on performance categories like hiking, running, and work. We are also excited about the addition of Sweaty Betty to our portfolio, a fast-growing brand that enhances the digital and apparel capabilities of the Company.”

Third-Quarter 2021 Performance
On August 2, 2021, Wolverine Worldwide acquired women’s activewear brand Sweaty Betty, a digitally-native, premium global apparel brand, which is expected to fuel growth and enhance the company’s eCommerce business. The following third-quarter results include Sweaty Betty during the period from August 2, 2021 until the end of the quarter.

  • Reported revenue was $636.7 million, up 29.1 percent versus the prior year. On a constant-currency basis, revenue was up 28.2 percent versus the prior year;
  • eCommerce reported revenue was up 45 percent versus the prior year and up 126 percent versus 2019;
  • Reported gross margin was 43.2 percent, compared to 41.0 percent in the prior year. The adjusted gross margin was 44.6 percent, compared to 41.3 percent in the prior year;
  • Reported operating margin was 6.7 percent, compared to 8.6 percent in the prior year. The adjusted operating margin was 12.0 percent, compared to 10.6 percent in the prior year;
  • Reported diluted earnings per share were $0.00, compared to reported diluted earnings per share of $0.27 in the prior year;
  • Current year reported earnings to include costs related to the acquisition of Sweaty Betty, debt refinancing costs, certain litigation-related costs, and air freight charges related to production and shipping delays caused by the pandemic.
  • Adjusted diluted earnings per share were $0.62, and, on a constant-currency basis, were $0.61, compared to $0.35 in the prior year;
  • Inventory at the end of the quarter was $412.0 million, up 26.5 percent versus the prior year. Sweaty Betty contributed 16.1 percent to the increase versus the prior year; and
  • Total debt at the end of the quarter was $1,024.4 million, or $147.8 million more than in the prior year. Total liquidity considering the October credit facility transaction was approximately $800 million.

Third-Quarter 2021 Underlying Performance
(excludes Sweaty Betty)

  • Underlying revenue was $597.6 million, up 21.2 percent versus the prior year and 4.0 percent versus 2019.
  • eCommerce underlying revenue was up 13.3 percent versus the prior year and up 77.3 percent versus 2019.
  • Adjusted underlying gross margin was 43.2 percent, compared to 41.3 percent in the prior year.
  • Adjusted underlying operating margin was 12.5 percent, compared to 10.6 percent in the prior year.
  • Adjusted underlying diluted earnings per share were $0.60, compared to $0.35 in the prior year.

“We are pleased with the third quarter’s strong double-digit revenue growth and even stronger adjusted earnings growth versus 2020,” said Mike Stornant, Senior Vice President and Chief Financial Officer. “Operating margin was stronger than expected and benefited from healthy gross margin performance across the portfolio. In addition, our nimble operating model and diverse portfolio allowed us to navigate the short-term disruption caused by Vietnam factory closures. We are encouraged to see factories re-open but the recent closures will impact our ability to fully service the incredibly strong demand we are seeing in Q4. As a result, we adjusted our full-year outlook for fiscal 2021.”

Full-Year 2021 Outlook 
For the full 2021 fiscal year, the Company now expects revenue of approximately $2.4 billion resulting in nearly 35 percent growth versus the prior year. This revenue outlook represents mid-single-digit growth over 2019 (including Sweaty Betty), and low-single-digit growth excluding Sweaty Betty. Reported diluted earnings per share are now expected to be in the range of $1.16 to $1.21, and adjusted diluted earnings per share are now expected to be in the range of $2.05 to $2.10.

Previously, Wolverine expected full-year sales in the range of $2,340 million to $2,400 million, representing growth of 5.6 percent over 2019 at the high end of the range. Reported diluted earnings per share were expected to be in the range of $1.85 to $1.95, and adjusted diluted earnings per share were expected to be in the range of $2.20 to $2.30.

Photo courtesy Sweaty Betty