S&P Global Ratings upgraded the debt ratings on Wolverine World Wide Inc. due to the footwear conglomerate’s recent healthy performance, led by Saucony and Merrell, and its focus on debt reduction.
S&P raised its issuer credit rating on Wolverine to ‘B+’ from ‘B’. Ratings on Wolverine’s revolving credit facility were upgraded to ‘BB’ from ‘BB-‘ and the rating on its senior unsecured notes to ‘B’ from ‘B-‘. The stable outlook reflects S&P’s expectation that Wolverine will sustain leverage of about 4x, maintain EBITDA margins above 10 percent, and generate revenue growth of 2 percent to 5 percent over the next two years.
S&P said in its analysis, “The upgrade reflects our expectation that Wolverine will sustain leverage comfortably below 5x over the coming year, following its success in stabilizing its operating performance and improving profitability by year-end 2025. Strong results from Saucony and Merrell helped the company deleverage and modestly exceed its guidance for revenue, earnings, gross margin, and operating margin for 2025. We expect the company’s 2026 operating performance will be broadly similar, as growth in its active group is offset by more significant tariff costs than realized in 2025, continued marketing spending on Saucony, and continued investments into Sweaty Betty and its work group. Building off investments in key brands, cost reductions, debt repayment, and operating efficiency initiatives, Wolverine’s leverage has declined more than 5x in two years, with its adjusted EBITDA margins improving by about 720 basis points (bps) from 2023 levels.
“We expect stronger operating performance will help the company weather ongoing tariff and freight cost pressures. Our forecast incorporates expectations for about $65 million of tariff expenses—an incremental impact of about $50 million from 2025. While recent changes to U.S. tariff policies could modestly lower these costs, the company would likely feel those effects in the second half of 2026. Given the improvements in its cost structure and Wolverine’s market placement as a premium, but not ultra-premium, brand, we expect the company’s credit metrics will be able to withstand these and other pressures. This includes potential effects from the war with Iran that could elevate shipping costs, reduce consumers’ discretionary income, and negatively affect margins.
“Wolverine’s cash balance and conservative capital allocation strategy support the rating. Wolverine ended 2025 with over $200 million cash. Although we evaluate the company on a gross debt leverage basis, we recognize the strong cash balance provides additional financial flexibility when ultimately seeking to address the 2029 maturity. Despite the strong cash balance, the company has refrained from material share repurchases and has otherwise strengthened its balance sheet through reducing pension-related liabilities. We expect the company will refrain from material acquisitions over at least the next 12 months as we believe it will likely continue to focus on organic growth, further developing and demonstrating its capabilities as a builder of strong global brands before adding new brands.
“Continuing declines in established brands, increased returns to shareholders, and debt-funded acquisitions are risks to the rating. While Wolverine benefits from being a portfolio of relatively strong brands, we expect the successes at Saucony and Merrell will moderate in the next 12 months and the company will need stronger performance from its other brands. Sweaty Betty seems closest to joining Saucony and Merrell in terms of returning to margin expansion and growth, but women’s activewear remains highly competitive. With competition from Lululemon, Vuori, Alo Yoga, Fabletics, and Beyond Yoga, among others, it will be difficult for the brand to grow at or near the market’s pace. Still, we expect Sweaty Betty’s unit-level economics will improve over 2026 and 2027 as the brand’s focus shifts toward expanding distribution in select international markets and transitioning its U.S. business to a more premium direct-to-consumer model. The company’s namesake work brand, Wolverine, saw 9 percent revenue declines in 2025. We believe the Wolverine brand is nearing a trough, having missed out on a Western workwear trend, and believe the brand is better positioned to adapt to new trends going forward. However, with guidance for a flat revenue year, the speed and size of the brand’s recovery remains highly uncertain. In addition to operating performance, we see risks that activist investors could seek to exert pressure on the company to adopt a more aggressive financial policy through debt-funded acquisitions or to increase share repurchases.
“The stable outlook reflects our expectation that Wolverine will sustain leverage of about 4x, maintain EBITDA margins above 10 percent, and generate revenue growth of 2 percent-5 percent over the next two years.”
