Wolverine World Wide Ups Guidance on Strong Double-Digit Backlogs

Excluding $2.7 million of charges in the quarter related to a now fully implemented strategic restructuring plan, diluted earnings were a record 39 cents per share, up from 27 cents a year ago. Revenues increased 4.8%. Robust organic growth was partially offset by expected lower closeout sales from several brands, particularly Merrell, and a delay at quarter-end of a significant shipment of Merrell and Caterpillar product to a distributor. Foreign exchange had a minimal impact.

In the Outdoor Group, revenues grew 5.4% to $97.9 million. Strong performance from Merrell footwear, Merrell Apparel and Patagonia footwear was tempered by significantly lower closeout sales and the previously mentioned shipment delay. The Outdoor Group still saw double-digit growth in the half. The Merrell Outventure “continues to generate excellent growth,”  and the Spring 2011 barefoot footwear launch in an exclusive alliance with Vibram is “already generating substantial interest from our existing customers,” said Blake Krueger, chairman, president and CEO, on a conference call with financial analysts and the media.
Merrell apparel retail sell-through this spring was “simply excellent,” and both sportswear and outerwear backlogs are up strong double-digits.  Merrell's consumer direct business saw “outstanding comp store increases” and a strong double-digit e-commerce growth.

Krueger said Merrell's brand's product development team has been reorganized with dedicated resources for men's, women's and children's offerings. Sales and marketing teams have been realigned to better target product segments and geographies with a goal of increasing overall brand awareness.
Patagonia footwear “continues to gain momentum in the marketplace.” Recent launches focusing on women's and a younger, more progressive consumer are performing well.
Chaco's Spring '10 product offering is “performing very well” and has “aggressive” growth expectations. Krueger told analysts, “Following the brand's acquisition early last year, we quickly learned that there was a pent-up demand for the brand in the U.S., a belief underscored by the phenomenal success of Chaco's online business, which has tripled and is now the company's number two branded website behind only Merrell.”

Wolverine Footwear Group's revenues jumped 10.3% to $54.9 million, driven by strong at-once business. Every brand (Bates, HYTEST, and Wolverine) and major geography in the Wolverine Footwear Group delivered revenue growth. 
Heritage Brands Group revenues, at $44.3 million, were slightly below last year as double-digit growth from Caterpillar in Europe and the U.S. was offset by the impact of delayed shipments late in the quarter. Sebago saw strong sales growth with the aid of a 40th anniversary initiative.

The Hush Puppies group's revenues slid 5.5% to $25.6 million as lower closeout sales for the Hush Puppies brand more than offset growth in the US for both Hush Puppies and Cushe, and growth in the group's “very profitable” third-party licensing business. Hush Puppies' toning footwear is reportedly “retailing well.”
Cushe saw significant growth in the U.S., driven by placement at better department stores such as Nordstrom and specialty outdoor and surf retail venues.

Wolverine's ‘Other Business’ unit generated a 6.8% revenue gain to $33.1 million.

Adjusted for restructuring charges, gross margin expanded 250 basis points to a record 40.3%, driven by fewer low-margin closeouts, modestly lower product cost, selling price increases and efficiencies from its restructuring program.

One downside was that Wolverine is “experiencing unexpectedly steep and swift” cost increases due to increases in raw materials, labor and freight and constrained capacity. Full year gross margins are now expected to be approximately flat with the prior year.

To address the challenges, WWW is implementing selective selling price increases; shifting factory production; leveraging owned manufacturing operations; reengineering product as appropriate; maximizing container utilization to the fullest extent possible and ordering ahead of announced factory cost increases.

Backlogs at quarter-end were up at a “very high double-digit” percentage rate.

Full year revenue guidance was raised to a range of $1.19 billion to $1.22 billion, representing growth of 8.1% to 10.8% versus the prior year. The estimate implies second half revenue growth between 7.9% and 13.0%. EPS is expected to range between $1.98 to $2.04, representing 11.9% to 15.3% growth.