Wolverine World Wide Inc. Chairman and CEO Tim ODonavan said that Merrell and the Outdoor Group continue to be the companys most significant growth driver, but also indicated that three of the companys four major marketing groups contributed to the consolidated WWW revenue increase and achieved double-digit earnings gains for the fourth quarter.
Management said they saw “solid results” in the U.S., Canadian, and European wholesale businesses, as well as the international licensing and distribution businesses in 2005. But ODonovan also said Europe was “a particular bright spot,” posting just under $200 million in revenues, a 15% increase over a pretty solid 2004 performance. The European business apparently benefited from positive FX rates in the early part of the year, the shift of the Merrell business in Scandinavia from a distributor to a wholesale model, and the conversion of the Sebago business to a wholesale model in several countries. The CEO said that Europe is now producing solid returns after performing below the company average since expansion efforts began in 2001.
Fourth quarter revenue increased 4.4% to $321.0 million from $307.4 million in the year-ago quarter. Foreign currency exchange rates reduced Q4 revenues by a half percentage point. Fourth quarter net income dipped 1.9% to $20.4 million, or 36 cents per diluted share, compared to net income of $20.7 million, or 34 cents per diluted share, in the year-ago period. Gross margins declined 140 basis points to 36.0% of sales in the period, offsetting the 140 basis point gain in SG&A line to 26.0% of sales.
Year-end backlog was up approximately 11% for the company, or up “slightly north” of 14% on a currency-neutral basis.
The Outdoor Group, which includes Merrell and Sebago, and will include the Patagonia footwear line going forward, posted an 18% increase in sales for both the fourth quarter and the year. Merrell apparently reported its seventh consecutive year of double-digit sales and earnings growth. Double-digit revenue growth was reportedly achieved in the U.S., Canada, and Europe. Mr. ODonovan said the Merrell brand shipped over 10 million pairs to over 140 countries. The brand has over 300 concept stores and shop-in-shops around the world. The Group has recruited the team to develop and source the Merrell apparel line, which will be presented to the trade in early 2007 for Fall 07 delivery. ODonovan said distribution will be limited to outdoor specialty at first. The Patagonia footwear line is also on track to launch this summer for Spring 07 delivery. Sebago saw solid growth in Q4 and the year, particularly in Europe where the company transitioned away from distributorships.
The Heritage Group, which includes Caterpillar and Harley Davidson, posted a 5.9% sales increase for the year, due primarily to gains in Europe and the conversion of the CAT business in Canada to a wholesale business. Group revenues declines 2.1% in the fourth quarter as lower CAT sales in Europe offset gains in the U.S., Canada, and other global markets.
The Wolverine Group, which contains the Wolverine boot, Bates, and Stanley brands, saw a 4.7% revenue increase in Q4 on a flat Bates business and increases in the other brands. But Group revenues still declined 2.4% for the year, due primarily to reduced military shipments for Bates. Earning contribution was up 20% in Q4 and up 15% for the year.
| Wolverine Worldwide | |||
| Full-Year Results | |||
| (in $ millions) | 2005 | 2004 | Change |
| Total Sales | $1,061 | $991.9 | +7.0% |
| Gross Margin | 38.2% | 37.7% | +50 bps |
| SG&A | 27.5% | 27.6% | -10 bps |
| Net Income | $74.5 | $66.2 | +12.5% |
| Diluted EPS | $1.27 | $1.09 | +16.5% |
| Inventory* | $161.3 | $182.9 | -11.8% |
| Accts Rec* | $157.1 | $151.2 | +3.9% |
| *at year end | |||
