Wolverine Worldwide reported revenue for the second quarter ended June 16 reached a record $312.7 million, up 0.8 percent compared to the prior year's second quarter when revenue grew over 20 percent.
“We are pleased that despite the softness in certain global markets, most notably Europe, we remain on track to deliver another year of record financial results,” said Blake W. Krueger, chairman and CEO. “Our diverse brand portfolio and a business model that spans geographies and distribution channels help to mitigate risk and smooth out a choppy global retail environment. Our U.S. business had a solid quarter, and the company's consumer direct business was also a bright spot, posting a strong double-digit revenue increase from both brick-and-mortar locations and the e-commerce channel. Our Outdoor Group, consisting of Merrell, Chaco and Patagonia Footwear, delivered a solid revenue increase in the quarter.”
- Gross margin in the quarter decreased 160 basis points to 37.8%, compared to prior-year gross margin of 39.4%, as higher product costs and unfavorable sales mix (including increased closeout sales of excess fall/winter product as a result of the unseasonably warm winter season) were only partially offset by selling price increases and foreign exchange contract gains.
- Reported operating expenses were $95.2 million, compared to $88.8 million in the prior year. The quarter's increase was attributable to $4.9 million of expenses related to the PLG acquisition (primarily third-party advisory fees) and $2.4 million of incremental non-cash pension expense. The company continued to demonstrate significant spending discipline, as each branded operating group and Wolverine Retail delivered operating expense leverage in the quarter.
- The effective tax rate in the quarter benefited from a favorable court decision in a foreign tax jurisdiction supporting the company's long-term tax planning strategies that lowered tax expense by $3.3 million, or 7 cents per share.
- Inventory at the end of the second quarter was down 1.3% compared to the prior year, reflecting aggressive actions taken to manage working capital. The company is focused on a “narrow and deep” inventory philosophy as it navigates through the current cycle of retailers being more reliant on wholesalers to supply products on an at-once basis.
- Continued disciplined working capital management in the quarter contributed to a $38.2 million increase in year-to-date operating free cash flow compared to the prior year.
Based on expectations of strong at-once orders in the second half of the fiscal year, primarily the fourth quarter, the company is reaffirming its full-year revenue guidance in a range of $1.46 billion to $1.50 billion, representing full-year growth of 3.6% to 6.4% compared to the prior year.
Krueger concluded, “Recent feedback from key retailers reinforces our positive outlook for the remainder of 2012, and we fully expect to deliver another year of record financial performance. We are tremendously excited about adding the Sperry Top-Sider, Saucony, Stride Rite and Keds brands and team members to our already powerful portfolio of global lifestyle brands. We remain on track to close the transaction in late summer to early fall.”