With customers increasingly shopping there, Wolverine World Wide has opened up distribution for all its brands on Amazon, as well as its sister company, Zappos. Asked last week about distribution with Amazon at CL King & Associates Best Ideas Conference, Don Grimes, Wolverines SVP, CFO and treasurer, said the strategic decision was made about a year or two ago on the last few brands as to whether to actually kind of breakthrough that barrier and sell directly to Amazon.
The decision came after management recognized that the vast majority of its competitors were selling through Amazon although the company still closely monitors the relationship.
It’s about maintaining the integrity of our MAP policy, our minimum accessible pricing policy, and so thus far Amazon has been great, said Grimes. They have been great to work with. Were getting some nice growth on the relationship and we have had very few issues as it relates to pricing. And so we continue to watch it closely and we are optimistic about the growth that we can generate from that relationship going forward.
Grimes at the conference also reiterated that Wolverine was no longer interesting in doing small tuck-in acquisitions with the companys size reaching $3 billion with its 2011 acquisition of the Sperry Top-Sider, Saucony, Keds and Stride Rite brands. The size range is closer to $75 to $100 million. But he stressed that while outdoor and casual footwear represent acquisition candidates, an apparel brand is definitely a consideration.
We have what I will call fledgling apparel businesses across a handful of brands in our portfolio with different levels of growth trajectories and different levels of current profitability, but doing a meaningful apparel acquisition and bringing a great apparel brand into the portfolio, and, importantly, with apparel expertise, into the company is something that we would look quite favorably upon, said Grimes.
On Sperry Top-Sider, Grimes noted the significant order cancellations in Q4 and Q1 occurred due to a slow down in the boat shoe category after a robust five-year run that was exacerbated by an early winter last year. Some product missteps in Q213 also bled over and impacted Q4 2013. Grimes said while Wolverine had projected last year at its Investor Day that both Merrell and Sperry would reach $1 billion in sales by 2018, Sperry is the one that is probably most in question.
Sperrys management team has been revamped with Rick Blackshaw, who had run Keds, now running the brand. Separate heads of sales and marketing were named for the brand from internal promotions; and a new head of product development was hired from Converse. Although Sperrys team may have an opportunity to freshen up the women’s boat shoe category, the mens product is on-trend and both retailers and customers have high regard for the brand. With Blackshaws experience at Keds, marketing may be tweaked to jumpstart growth.
Said Grimes, We do view 2014 as a year of kind of the brand stabilizing and normalizing and some of that fast business that attached itself to the brand during its rocketship ride up has kind of fallen off. But what’s left is a very stable base of business from which we can grow going forward and it’s a very profitable base of business.
Addressing its other key athletic and outdoor brands:
Merrell has seen strong double-digit growth year-to-date in its performance outdoor product, its more technical hiking models; and growth in mens active style, its more casual product. Womens active is still working through some product challenges. Growth in the mid-single digits expected this year would have been stronger if not for declines in its lightweight trail offerings, which is competing against the launch of the M Connect collection last year;
Chaco, which was doing about $15 million in sales when acquired in 2009, is doing phenomenally well and could be a $100 million brand for us not too many years down the road;
Keds, an $80 million brand when acquired in 2012, has growing at a strong double-digit clip, surpassed $100 million last year, and will end up well north of $100 million this year. With reinvestments in its marketing campaigns around Taylor Swift, Keds is showing meaningful improvement in profitability in 2014;
Saucony continues to deliver great results and has not yet failed to disappoint us at any quarter in terms of delivering high single-digit to low double-digit growth with improvements in gross margin and operating margin.