Wolverine World Wide posted another solid quarter, finishing Q3 with its eighth consecutive quarter of double-digit EPS improvement. The company now feels the time is right to extend the Merrell brand further, unveiling initial plans to have a Merrell Apparel program available for Fall ’07.

Total company revenue increased 7.0% to $279.1 million in the third quarter from revenue of $260.9 million in the year-ago period. The company saw no impact from foreign currency exchange rates, despite the fact that Europe growth outpaced the U.S. business. Europe sales were up 17% in the period. The revenue mix is about 75% U.S., 25% Europe, but earnings are split about 50/50, with a slight edge to the U.S.

Gross margins improved 130 basis points to 38.9% of sales, compared to 37.6% in Q3 last year. Net income rose 12.3% to $24.6 million, or 42 cents per diluted share, compared to $21.9 million, or 37 cents per diluted share, in the year-ago period.

The Outdoor Group, which includes Merrell and Sebago, saw 15% revenue growth in the period. Merrell sales were up in double–digits in the U.S., Europe, and Canada, due in large part to “broad global acceptance” of the Continuum program. Europe sales outpaced the U.S. by nearly a two-to-one margin, accounting for roughly 35% to 40% of sales.

Merrell reported strong retail sell-through of the AquaSport and Chameleon product. The women’s casual and performance sandal categories posted strong results as did the children’s business. Improved sell-through rates across the board led to a higher percentage of sales coming out of the fill-in end of the business. Early fall deliveries of sport fashion product has been a key driver to the growth in Europe and management feels it is becoming more important in the U.S. as well.

Merrell now has 158 shop-in-shop programs in the U.S. and another 22 in Europe. The company also opened two Merrell branded shops in partnership with an independent retailer, one on Long Island and another in Frankfurt, Germany. Those stores, along with other branded shops around the globe, including 28 Merrell stores in South America and Asia, already feature a “limited selection” of Merrell apparel.

As for the apparel initiative, the much anticipated line will apparently be done in-house and will be unveiled in late 2006 for Fall ’07 delivery. While management gave little detail on the product line, it will be multi-gender and cut across a number of categories. Primary focus for distribution is expected to be outdoor specialty, but they also hinted it will also go where they have been successful, such as department stores and sporting goods retailers.

Sebago sales were up more than 20% in both the U.S. and Europe, including a double-digit gain in the U.S. fueled by technical watersports product and fashion.

Hush Puppies saw a 6.2% increase in sales in the period and the Heritage Group, which includes the Caterpillar and Harley Davidson licensed brands, posted a 10% revenue gain and a “significant increase in profits.” The Wolverine Footwear Group was the lone decliner for the period, dipping 2.5% in the quarter due to a loss of military sales at the Bates brand.

Backlog was up 19% at period-end, prompting the company to up guidance for the year. EPS is now estimated to be in the $1.26 to $1.28 per share range for the year on sales between $1.05 billion and $1.06 billion. These estimates include an acceleration in investment in new growth initiatives in the fourth quarter that will cost the company about $1.5 million, or nearly two cents per share.