At the ICR Xchange conference, Blake Krueger, chairman, president and CEO, said its acquisition of the Performance & Lifestyle Group (PLG) since its close in October has been going much better than we could have expected with the integration running ahead of schedule.
PLG includes Sperry Top-Sider, Saucony, Stride Rite and Keds.
We were fortunate to acquire a company here where we were very familiar with the management teams, but also pretty familiar with the culture, said Krueger. And the culture of the two companies are very close and very good dovetail fit for us. So, we have been very pleased with the integration so far. We are three months into it, but we are already seeing the upside, the synergies and the global potential.
He said Wolverines decision announced on January 8 to migrate from four to three brand Operating Groups – The Heritage Group, The Lifestyle Group, and
The Performance Group-was done for strategic reasons rather than due to a location focus. Said Krueger, We were trying to view these brands by target consumers, by distribution channels, by global potential, and we feel very comfortable with our new three-group organization structure.
As reported, The Heritage Group-comprising of the Wolverine, Caterpillar Footwear, Bates, Sebago, Harley-Davidson Footwear, and HyTest brands-will be led by Ted Gedra. The Lifestyle Group-comprising of the Sperry Top-Sider, Stride Rite Children’s Group, Hush Puppies, Keds, and Soft Style brands-will be led by Mark Neal. The Performance Group-comprising of the Merrell, Saucony, Chaco, Patagonia Footwear, and Cushe brands-will be led by Jim Zwiers.
Krueger again stressed the international growth potential for the acquired brands. About 10 percent of PLGs sales and about 15 percent of their pairs are sold outside the U.S. Before the acquisition, two thirds of its pairs were sold outside the U.S. in about 190 countries. Wolverine first branched out internationally in 1959 with Hush Puppies.
Untapped international growth is also seen from existing brands in its portfolio. For instance, Merrell does almost 90 percent of all of its business in only about 20 of its top countries, and remains very early yet in the growth cycle for its international scope and business, said Krueger. He also noted that Merrell has about 150 stand-alone stores today around the world versus 700 standalone mono-branded stores in its more established Hush Puppies brand.
With PLG, Wolverine Worldwide has established a mid-term goal of having direct sales growing to 30 percent of its sales, according to Krueger. Direct-including e-commerce-currently accounts for 14 percent of sales through 450 stores-including just-acquired Stride Rite and Sperry Top-Sider locations – and 63 e-commerce websites. Prior to the PLG acquisition, controlled retail made up 7 percent of sales through about 40 e-commerce sites and about 100 stores.
This doesnt include stores being opened by international distributors in China and other countries, with overseas stores opening at about a 20 percent growth clip over the last seven to eight years.
Krueger finally added that Wolverine was able to fill white space in children’s, women’s, athletic and casual areas that werent being tapped within its existing portfolio.
The acquisition had the benefit of us acquiring four brands not at four locations with four different cultures, but four brands at a single location in Lexington, MA, with one culture, said Krueger. It’s been a great fit for the two businesses.
In sum, the acquisition builds Wolverines portfolio to 16 brands reaching 200 countries with over 1000 years of brand equity. That compares to 12 legacy brands previously. Prior to 1994, Wolverine had three brands in about 60 countries around the world, and Krueger said Wolverine has a proven track record of successfully acquiring and growing brands.
Said Krueger, We have been able to bring those brands into our company, keep them separate and distinct, let them operate in distinct product, marketing, design, operating silos, and give them the benefit of a pretty extensive and global backroom capability to make them successful.
