Wolverine World Wide Cuts FY13 Revenue Outlook

Wolverine Worldwide reported that it expects earnings for 2013 to come in ahead of previous guidance but revenues would fall short due to a “tepid” retail climate.

On a preliminary basis for its ended Dec. 28, 2013, the company expects:

•    Revenue to approximate $2.69 billion, representing growth of 5.5 percent versus prior year pro forma revenue of $2.55 billion and growth of 64.0 percent versus prior year reported revenue of $1.64 billion. In reporting its third-quarter results on Oct. 8, the company predicted adjusted full-year revenue guidance in the range of $2.71 to $2.73 billion;
•    Adjusted fully diluted earnings – excluding transaction and integration expenses related to the PLG Acquisition, restructuring charges related to the company's owned manufacturing operations, and expenses related to the October 2013 refinancing – at the high end of the previous earnings guidance of $1.37 to $1.42 per share;
•    Reported fully diluted earnings at the high end of the previous earnings guidance of $0.85 to $0.90 per share.

In the fourth quarter, Wolverine generated double-digit revenue growth from Hush Puppies, CAT Footwear, and Keds and mid-single digit revenue growth from Merrell and Saucony. That helped offset softness from Sperry Top-Sider and Stride Rite.

“Sperry's performance, in particular, was impacted by fall weather conditions that heavily favored boot offerings versus casual product,” said Blake W. Krueger, chairman and CEO. “Geographically, double-digit revenue growth in each of the Asia Pacific and Latin America regions was offset by flat revenue growth in the U.S., our most significant market, and the EMEA region.  We are pleased that our multi-brand, multi-geography business model was able to deliver record full-year earnings at the high end of our previous guidance.”

Looking to 2014, Wolverine said it expects full-year revenue growth in the mid-single digit range, with year-over-year revenue growth accelerating over the course of the year. Full-year diluted EPS is expected to grow at a “solid double-digit rate.”

Speaking at ICR Xchange, Krueger said Wolverine’s preannouncement reflected the “pretty tepid retail environment here in the United States,” while outlining several growth initiatives for the current year.

A major accomplishment to build on from 2013 was the successful integration of its acquisition of the four PLG brands – Sperry Top-Sider, Saucony, Stride Rite and Keds. Said Krueger, “We are cross pollinating the talent from our Boston-based operations right now to our other locations and also best ideas.”

Overall, Wolverine has 16 brands representing over 1,000 years of brand equity, 7,000 associates globally, and over 10,500 points of distribution across brands in about 200 countries. The diversification across regions, distribution channels and fashion trends is helping Wolverine consistently weather challenges. Said Krueger, “This Q4 I think is a very good example given the challenges in the United States at retail for consumer soft goods and in particular apparel and footwear and some accessory classifications over the last three or four months.”

Referencing its five-year financial plan provided in October, Krueger said Wolverine expects growth of nearly 15 percent on average annually in the Asia-Pacific through 2018, 12 percent in Latin America, 7 percent in Europe and 8 percent in North America.

A primary growth driver will be international expansion, consumer direct and creating head-to-toe lifestyle brands. The consumer direct push includes opening stores in territories Wolverine oversees but also helping distributors open stores. Beyond growth, the stores “present our brands in the best possible light and to drive some deeper consumer connections with our consumers.”

Krueger also said lifestyles stores, including accessories, apparel as well as footwear, can create a “much more exciting consumer environment” than footwear-only stores.

Krueger particularly highlighted the growth prospects of Merrell, Sperry Top-Sider and Keds.

Merrell, its largest brand and the core driver of its growth over the last 15 years, continues to come out as number one or number two in ‘intent to repurchase’ surveys but still has “very little consumer awareness,” Krueger said. It also still has ample opportunity to expand as a head-to-toe lifestyle brand.

New leadership has been added to guide the brand with footwear veteran coming on as president, and Cushe Founder Martin Dean becoming new creative. Said Krueger, “The influence of those gentlemen are already significant even at these early stages.”
 
Merrell’s three segments are Performance Outdoor, a category it dominates globally; Outside Athletic, which started with its Barefoot push; and Active Lifestyle, the most casual part and an area Krueger admitted “we have stumbled over the last couple years.”

For 2014, the marketing program across segments is centered around Out.Perform backed by key launches in each silo. Said Krueger, “Spectacular early reads on all of these products from our retail customers not just in the United States but around the world.”

Sperry Top-Sider has made significant progress since acquired in October 2012 towards becoming a lifestyle brand with seven new programs, including sunglasses and watches. The most important will be the launch of apparel this fall through Li & Fung.

Direct to consumer is also a major focus for Sperry. A new e-commerce platform for the brand including a new platform and new imagery was launched last week as the first of an overhaul of all Wolverine’s branded websites. A new store format playing up accessories in greater detail is being developed. With over 90 percent of its sales in the U.S. when acquired, international growth remains a priority for Sperry, with “early wins” coming in the Asia-Pacific region.

Keds was an $80 million brand losing money when acquired by Wolverine after having once been an iconic $450 million lifestyle athletic brand. A big win was signing Taylor Swift as spokesperson to help reestablish the brand with its young demographic. Krueger said Swift “has helped catapult this brand in a very aggressive manner forward.”

Keds Facebook fans more than quadrupled in just the 12 months, and attitude and usage scores around Keds targeted consumer have “skyrocketed.” Collaborations with Kate Spade and Hollister are also supporting Keds’ budding turnaround.
 

About The Author

Thomas J. Ryan

Thomas J. Ryan Senior Business Editor | SGB Media tryan@sgbonline.com | 917.375.4699

Wolverine World Wide Cuts FY13 Revenue Outlook

Wolverine Worldwide reported that it expects earnings for 2013 to come in ahead of previous guidance although revenues would fall short.

The year ended Dec. 28 included a full 52-week contribution from the company's October 2012 acquisition of the Sperry Top-Sider, Saucony, Stride Rite, and Keds brands (the “PLG Acquisition”).  The company expects to report full fiscal year 2013 results on Feb. 18, 2014.

On a preliminary unaudited basis, for full fiscal year 2013 ended Dec. 28, 2013, the company expects:


  • Revenue to approximate $2.69 billion, representing growth of 5.5 percent versus prior year pro forma revenue of $2.55 billion and growth of 64.0 percent versus prior year reported revenue of $1.64 billion. In reporting its third-quarter results on Oct. 8, the company predicted adjusted full-year revenue guidance in the range of $2.71 to $2.73 billion;

  • Adjusted fully diluted earnings – excluding transaction and integration expenses related to the PLG Acquisition, restructuring charges related to the company's owned manufacturing operations, and expenses related to the October 2013 refinancing – at the high end of the previous earnings guidance of $1.37 to $1.42 per share.
  • Reported fully diluted earnings at the high end of the previous earnings guidance of $0.85 to $0.90 per share.
  • Consolidated inventories at year end to be materially lower than at the end of fiscal year 2012.

Wolverine stressed that the results are preliminary.



“Fiscal 2013 included several noteworthy accomplishments of which we are exceptionally proud,” said Blake W. Krueger, chairman and CEO. “Our revenue and earnings are expected to reach record levels, we successfully integrated and grew our newly acquired brands, and the performance of Merrell, our largest brand, strengthened as the year progressed. In the quarter, excellent double-digit revenue growth from Hush Puppies, CAT Footwear, and Keds and solid mid-single digit revenue growth from Merrell and Saucony were partially offset by softness from Sperry Top-Sider and Stride Rite.  Sperry's performance, in particular, was impacted by fall weather conditions that heavily favored boot offerings versus casual product. Geographically, double-digit revenue growth in each of the Asia Pacific and Latin America regions was offset by flat revenue growth in the U.S., our most significant market, and the EMEA region.  We are pleased that our multi-brand, multi-geography business model was able to deliver record full-year earnings at the high end of our previous guidance.”

Don Grimes, the company's SVP and CFO, stated “We are pleased with the momentum of our business as we move into 2014.  In light of the current tepid environment for consumer soft goods in the U.S., our preliminary outlook for fiscal 2014 is for full-year revenue growth in the mid-single digit range, with year-over-year revenue growth accelerating over the course of the year.  Consistent with the company's long track record of delivering earnings growth in excess of revenue growth, we expect full-year diluted earnings per share to grow at a solid double-digit rate.” 

Concluded Krueger, “We remain excited about our prospects for 2014 and beyond, and we expect to capitalize on our strong innovation platforms, powerful brand percents and well-developed international infrastructure to drive the global expansion of our 16-brand portfolio.  We remain committed to our strategies, which we believe position our company to deliver increased value for our shareholders.”

The company provided its update because it is scheduled to present at the 16th Annual ICR XChange conference held at the Grand Lakes Resort in Orlando, FL on Jan. 14.

About The Author

Thomas J. Ryan

Thomas J. Ryan Senior Business Editor | SGB Media tryan@sgbonline.com | 917.375.4699

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