Wolverine Worldwide Inc. narrowed its net loss in the fourth quarter ended Dec. 28, to $1.7 million, or 2 cents a share, from $3.7 million, or 4 cents, a year ago. Fourth quarter sales on a pro-forma basis inched up 0.6 percent to $736.4 million.
Full-year results include a full 52-week contribution from the company's
October 2012 acquisition of the Sperry Top-Sider, Saucony, Stride Rite,
and Keds brands (the “PLG Acquisition”). References to adjusted
financial results exclude transaction and
integration expenses related to the PLG Acquisition, restructuring
charges related to the company's manufacturing operations, non-cash
retail store impairment charges, and expenses related to the October
2013 debt refinancing, where applicable.
Highlights from the year and fourth quarter 2013 include:
Consolidated
full-year revenue increased to a record $2.69 billion, representing
growth of 5.6 percent versus prior year pro forma revenue of $2.55
billion and growth of 64.0 percent versus prior year reported revenue of
$1.64 billion. All three of the company's branded operating groups
contributed to the 2013 record revenue results, with the most
significant contributions to revenue growth coming from the Sperry
Top-Sider, Saucony, Keds, and Merrell brands.
Consolidated
fourth quarter revenue was a record $740.8 million, growth of 0.6
percent vs. prior year pro forma revenue of $736.4 million and growth of
13.6 percent versus prior year reported revenue of $652.2 million.
Adjusted
full-year gross margin increased 120 basis points to 39.8 percent. The
strong gross margin improvement was driven by a mix shift towards
higher margin consumer-direct channels, select price increases taken at
the beginning of the year, efficiency gains in our owned manufacturing
operations and lower LIFO expense. These were partially offset by
higher product costs and unfavorable variances on FX forward contracts.
Reported gross margin was 39.6 percent.
Adjusted full-year
earnings increased 25.4 percent to a record $1.43 per fully diluted
share. Reported earnings for the full year were $0.99 per fully diluted
share.
In the fourth quarter, adjusted fully diluted earnings
were $0.22 per share. As noted during the company's previous earnings
call, fourth quarter earnings were negatively impacted by incremental
pension and incentive compensation expense and a higher tax rate and
share count. Reported earnings in the fourth quarter were $(0.02) per
fully diluted share.
Among its three segments in the fourth quarter:
- Lifestyle Group revenues rose 25.9 percent on a recorded basis to, $265.3 million from $210.7 million. On a pro-forma basis, sales were down 3.4 percent to $265.3 million. The segment includes the Sperry Top-Sider, Stride Rite Children's Group, Hush Puppies, Keds, and Soft Style brands.
- Performance Group rose 13.8 percent to $251.3 million from $220.9 million. Pro-forma sales increased 3.9 percent to $251.3 million. The segment includes Merrell, Saucony, Chaco, Patagonia Footwear, and Cushe.
- Heritage Group's revenues inched up 2.2 percent to $193.7 million from $189.6 million. Heritage Group sales rose 2.2 percent to $193.7 million. The segment includes Wolverine, Caterpillar Footwear, Bates, Sebago, Harley-Davidson Footwear, and HyTest.
Operating free cash flow for the full fiscal
year was a record $157.6 million. The company ended the year with cash
of $214.2 million and net debt of $935.8 million, with the latter down
$142.8 million from the prior year end.
“Fiscal 2013 was a
year of many milestones for the company, highlighted by record earnings
per share and our fourth consecutive year of record revenue,” said Blake
W. Krueger, chairman and chief executive officer. “We integrated the
newly acquired brands into our business and successfully executed
numerous global growth initiatives across our brand portfolio while also
expanding and strengthening our direct-to-consumer platform. Even as a
sluggish retail environment and very cold weather in the U.S. tempered
growth for our Sperry Top-Sider and Stride Rite brands during the fourth
quarter, many of our other brands, including Merrell, delivered
excellent results. For the year, nearly every geographic region grew
nicely, with the only exception being the EMEA region that still
delivered results consistent with our expectations. In addition, we
were particularly pleased with the accelerated momentum in the Latin
America and Asia Pacific regions during the back half of 2013, important
regions for future growth across our portfolio and, particularly, for
our newly acquired brands.
“As we begin fiscal 2014, we are
pleased with the tremendous progress we have made over the past few
years to position the company for continued success around the world.
Our fanatical focus on product creation and innovation is delivering
exciting products to our global consumers, and we continue to tell
compelling marketing stories each season all while our talented and
motivated teams deliver revenue growth and increased profitability
across the portfolio. We remain steadfastly focused on achieving
impressive returns for our shareholders in any macroeconomic
environment.”
Don Grimes, senior vice president and chief
financial officer, commented, “The company delivered exceptional
financial results in fiscal 2013, and we couldn't be more pleased with
our strong cash flow generation and debt retirement since the close of
the PLG Acquisition in October 2012. Our focus remains on growing our
wonderful collection of lifestyle brands and driving continued excellent
cash flow.”
Additional details:
- Adjusted full-year
operating expenses were $830.0 million, or 30.8 percent of revenue,
which compares to 29.4 percent of revenue in the prior year. The
increase in operating expense as a percentage of revenue was driven by
incremental pension and incentive compensation expenses, incremental
amortization expense related to purchase price accounting for the PLG
Acquisition, a higher mix of consumer direct activities, and investments
in key brand-building initiatives. Reported operating expenses were
$872.2 million. - Inventory at year end was meaningfully lower than the
prior year, decreasing 8.2 percent. The company employs a “narrow and
deep” inventory philosophy that ensures its brands are in stock on key
styles, and the normalized fall/winter weather patterns in the fourth
quarter led to early product sell-outs for several of the brands in the
portfolio.
Grimes concluded, “A more challenging 2013 holiday selling
season and lingering uncertainty in the U.S. are balanced with 2014
expectations for continued double-digit growth from our brands in Latin
America and Asia Pacific. International efforts for our newly acquired
brands will begin showing results in the back half of the year and are
expected to gain meaningful momentum into 2015.”
In light of
these expectations, the company is offering the following guidance for
fiscal 2014 (excluding carryover expenses related to the final
integration activities related to the PLG Acquisition and remaining
restructuring charges related to the company's owned manufacturing
operations):
- Full-year consolidated revenue in the range of
$2.775 to $2.85 billion, representing growth in the range of 3 percent
to 6 percent versus reported fiscal 2013 revenue of $2.69 billion. - Slight full-year gross margin expansion.
- Modest full-year operating expense leverage, driven partially by lower year-over-year pension expense.
- Full-year interest expense of approximately $47 million.
- Full-year effective tax rate of approximately 28 percent.
- Fully diluted weighted average shares outstanding of approximately 100 million.
- Adjusted
fully diluted earnings per share in the range of $1.57 to $1.63,
representing growth of 10 percent to 14 percent versus the fiscal 2013
adjusted earnings per share of $1.43. Reported fully diluted earnings
per share are expected in the range of $1.52 to $1.58.
The company's portfolio of brands includes: Merrell®,
Sperry Top-Sider®, Hush Puppies®, Saucony®, Wolverine®, Keds®, Stride
Rite®, Sebago®, Cushe®, Chaco®, Bates®, HYTEST®, and Soft Style®. The
company also is the global footwear licensee of brands including
Cat®, Harley-Davidson®, and Patagonia®.
