Wolverine World Wide Returns to Double-Digit Growth in First Quarter

 

With order backlog up “very strong double digits with all brands showing significant increases,” the company hiked its FY10 earnings and revenue guidance.

 

“While retailers appear to be placing orders somewhat earlier to make sure their shelves are full and to ensure fresh product is available when needed, the increased flow of incoming orders is consistent with the global economic recovery and the momentum we see in our business,” said Blake Krueger, chairman and CEO, on a conference call.

 

Outdoor Group’s revenues grew 15.7% to $113.5 million with sales and earnings at all three brands-Merrell, Patagonia and Chaco-accelerating at a strong double-digit pace.

 

At Merrell, the Outventure performance category is seeing strong double-digit increases in 2010. Key product successes include the women’s Chameleon Arc Wind hiker and continued retail momentum with established product platforms, including the men’s Moab as well as the women’s Siren and Water Pro. The new Cole hiker has also sold through well at retail. Merrell’s Fushion casual collection has also been “very good.” Standouts include the next generation of women’s Land sandals and the new Zenith flats line. Updated World and Encore styles have increased momentum among men’s Fushion offerings.

 

Merrell apparel shipments significantly increased in Q1, and has benefited from press exposure. Orders for Fall 10 are up strong double digits. Company-owned Merrell concept and value stores also “had an exceptional quarter, posting a substantial double-digit comp store sales increase,” Krueger said.

 

Patagonia footwear achieved strong sell-through with its top outdoor specialty retailers with strength seen in hikers, trail-runners and other casual styles. Chaco’s sales increased double digits, and is benefitting from enhanced consumer marketing programs and a bigger inventory commitment since Wolverine acquired Chaco in January 2009.

 

“Many retailers are looking to expand their Chaco business, especially with the new closed shoe product offerings we introduced for fall 2010,” said Krueger. “Chaco is an important growth vehicle for the company and has a very bright future.”

 

Among other segments, Wolverine Footwear Group’s revenues gained 6.0% to $56.7 million with earnings up at a significant double-digit pace. The Wolverine brand saw a double-digit increase with solid sell-throughs in its major retailers. The success of its premium Wolverine 1883 and 1000-Mile Boot programs drove a significant increase in Wolverine’s rugged casual business.  Bates sales were flat due to planned reductions in military shipments.

 

At its Heritage Brands Group, sales rose 6.9% to $49.4 million, and saw strong double-digit earnings gains. Sebago posted a double-digit revenue increase, with particular strength in Europe and other international markets. Recent collaborations with designers are helping Sebago reach a younger consumer segment and gain floor space at Nordstrom and Saks. Harley-Davidson footwear’s revenue declined low single digits, reflecting the continuing weak motorcycle market.

 

Caterpillar sales increased in the mid-single digit range, driven by Europe.

 

Hush Puppies Group revenues jumped 13.0% to $39.3 million, with earnings up double-digits. The Hush Puppies brand posted a high single-digit revenue increase, with increases in the U.S., Europe, and its international distributor businesses more than offsetting a slight decrease in Canada. Sell-through of Hush Puppies new Body Shoe line have been solid and the company plans to capitalize on the momentum in the toning and shaping category. Cushe was well above internal plans, and Nordstrom, Orvis and Whole Earth have become new accounts in the U.S. for the brand.

 

Wolverine also saw comp store sales increases of nearly 16% across its 85 brick & mortar retail stores, continued strong double-digit growth in its e-commerce business and improved results from its Wolverine Leathers business.

 

Adjusted gross margins improved to 41.6% from 41.2% due primarily to lower product costs; benefits from the restructuring initiatives; a mid single-digit increase in average selling prices and strength in some of its highest gross margin businesses – the Outdoor group, Hush Puppies and Retail. Adjusted operating expenses were reduced to 27.6% of sales from 29.5% despite a 15% increase in advertising and promotions.

 

As of April 16, its footwear and apparel backlog were up about 30%. But Don Grimes, the company’s CFO, cautioned that part of it was due to a change in order patterns with year-to-date futures orders up significantly and at-once orders up modestly.

 

“This shift in order patterns is being driven not only by retailers confident about consumer behavior in the second half of the year, but also by concerns about factory capacity in Asia as the global economic recovery continues. Retailers and wholesalers are concerned that factory capacity taken offline last year will not be reinstated at the same pace, and about the potential impact on lead times as factories shift to other locations both within and outside of China,” said Grimes.

 

Wolverine increased its revenue estimate to a range of $1.160 billion to $1.190 billion, representing growth of 5.4% to 8.1% versus the prior year. Adjusting for restructuring charges in the range of 3 cents to 5 cents per share, EPS guidance is expected to range between $1.92 to $2.00, representing growth of 8.5% to 13.0% over the prior year.