Moody’s Investors Service upgraded Wolverine World Wide Inc.’s debt ratings outlook from negative to stable due to expectations of improved performance and credit metrics in coming quarters.
Ratings affirmed include Wolverine’s Ba1 corporate family rating, Ba1-PD probability of default rating and Ba2 senior unsecured notes rating. The company’s speculative grade liquidity rating was upgraded to SGL-1 from SGL-2.
“The outlook change to stable reflects our expectation for improved operating performance and credit metrics as the company recovers from the global coronavirus pandemic,” stated Moody’s vice president, Mike Zuccaro. “Wolverine is exhibiting strong demand, particularly in running, outdoor and work, with a healthy wholesale order book, strong growth in direct to consumer channels as well as international markets.”
The upgrade to SGL-1 reflects the company’s “very good liquidity,” supported by $365 million of cash as of Q1 2021 and nearly full excess availability on its undrawn $800 million revolvers and Moody’s expectation for continued positive free cash flow.
Moody’s wrote in its analysis, “Wolverine’s Ba1 CFR reflects its meaningful scale in the global footwear industry, its sizable portfolio of brands which appeal to a broad range of consumer needs, and dependable replenishment demand cycles of the footwear category due to normal product wear and tear. The rating also reflects Moody’s expectation for a significant improvement in financial metrics, with lease-adjusted debt to EBITDA falling below 3.5x and EBITA to interest coverage above 5 times in 2021, as the business rapidly recovers from the global coronavirus pandemic. Liquidity is very good, supported by balance sheet cash, positive free cash flow and ample availability under its revolving credit facility. Wolverine is constrained by its relatively small absolute revenue scale and its narrow product focus in the footwear segment and greater degree of a fashion risk for certain brands.”
Wolverine’s portfolio includes Merrell, Saucony, Sperry, Hush Puppies, Wolverine, Keds, Chaco, Bates, Hytest, and Stride Rite. The company also is the global footwear licensee of the Cat and Harley-Davidson brands.
Photo courtesy Wolverine Worldwide
