Wolverine World Wides fourth quarter profit fell on currency exchange impacts, restructuring costs, and a 9.7% sales decline to $312.5 million. But the company predicted a return to growth in 2010, citing a strong performance at its owned-retail businesses, strengthening at Merrell, and noticeably improved backlog across its brands in the fourth quarter.
Net income fell 31% to $16.7 million, or 33 cents a share, from $24.1 million, or 49 cents a share, a year earlier. 

 

Excluding 12 cents a share in restructuring charges, earnings would have been 45 cents a share.


On a conference call with analysts, company President and CEO Blake Krueger said continued strong sell through of their products at retail and a steady improvement in new orders, resulted in an order backlog increase of over 7% at year end. Backlogs were up approximately 8% at the end of week before results were reported.

 



Krueger also noted that the retail industry shifted back to more normalized ordering patterns in the quarter in a shift away from a recent trend toward at once orders. Im not sure we are all the way back yet to the level of the pre-recessionary environment but we are seeing a more normalized pattern, explained Krueger.


At the Outdoor Group, which includes Merrell, Patagonia footwear and Chaco, sales rose mid-single digits in Q4 after adjusting for one less selling week in the quarter and the group entered 2010 with a very healthy future orders position. Krueger noted, These brands performed very well for our retail partners throughout a tough 2009, which helped to fuel their enthusiasm for our upcoming fall offerings.


At Merrell footwear, the companys business in the U.S., Canada, and Europe posted mid-single digit to double-digit sales increases in the quarter. Outventure, the outdoor performance category, generated double-digit increases. The new women’s Chameleon Arc Wind hiker was received very well by retailers for Spring 10 and Merrell’s key product franchises continue to sell through at a strong velocity, including the men’s Moab, the women’s Siren and the Water Pro collection. The new Coal lightweight hiking collection also saw an excellent response. Merrell’s Fusion, the outdoor casual segment, achieved a high-single digit sales increase.


Merrell Apparel is seeing strong double-digit backlog for the first half and is also feeding the expansion of Merrell lifestyle stores, including new concept stores in Italy and Korea and a company-owned store in Boston. Merrell ended the year with about 100 branded stores and nearly 950 shop-in-shops globally.


Patagonia footwear had a solid quarter with order backlog up into the high double digits across all product categories.


Chaco, acquired in early 2009, was helped by a quick integration that led to much better than planned revenue and earnings for Q4 and the full year. Added Krueger, Fall at once business was very good, consumer loyalty remains very high, and we are poised for strong growth in 2010.  The expansion of closed-shoe offerings is also helping lift backlogs.


Fourth quarter revenue in the Wolverine Footwear Group was down low-single digits after adjusting for one less week of sales, as the U.S. work boot market continued to feel the impact of the recession. But a strong response to the new work product and vintage boot programs has resulted in a strong double-digit backlog increase for 2010 delivery. The Wolverine brands vintage 1000 Mile Boot program, priced at about $250 to $350, is receiving substantial interest from fashion accounts.  

At the Hush Puppies Group, Q4 revenues were down double digits for the group as over-plan performance in Europe was offset by decreases in other regions. Cushe, acquired early 2009 and part of the Hush Puppies Group, was a solid success, and secured distribution in the U.S. in retailers including Harry’s, Littles, The Tannery, Tip Top Shoes, Ron Jon Surf Shop, REI and Fred Segal. Said Krueger, The product is selling through nicely and the brand is creating a buzz in the market.
At its owed-retail operations, the 88 company-owned stores recorded a strong double-digit revenue increase in the quarter, driven by a high-single digit comp gain. Its most recent openings, including the Hush Puppies concept stores in Montreal and the Merrell Boston store are easily exceeding our initial expectations, said Krueger.


Overall revenues in the quarter would have been down 4.1% in the latest period excluding an extra week. The decline was attributed to retailers delaying shipments of spring merchandise as long as possible. On an adjusted basis for nonrecurring restructuring charges and negative foreign exchange, EPS was down 8.2% to 45 cents a share. Foreign currency negatively impacted Q4 results by 11 cents per share.
Looking ahead, Wolverine set its initial sales guidance for 2010 in the range of $1.14 billion to $1.17 billion, representing growth of 3.5% to 6.3%. Adjusted EPS is expected to range between $1.92 to $2.00 a share, or growth of 8.5% to 13% versus 2009, marked by modest margin improvement and slightly higher operating expenses.