Wolverine World Wide, Inc. had a good third quarter as low-single-digit sales growth was outpaced by stronger net income gains and the companys Outdoor Group once again the shining star. It was the companys 25th consecutive quarter of record sales and earnings per share. On a conference call with analysts, management also called out the International business as being particularly strong.
On an even brighter note, WWW ended the quarter with a positive backlog when measured in dollars and nearly a double-digit increase in order backlog when measured in actual pairs.
Orders were said to be up for Merrell, Wolverine, Sebago, Harley and Patagonia, but were partially offset by decreased backlogs for Bates, Caterpillar and Hush Puppies. Currency-exchange impacted order backlog by approximately two percentage points to the negative.
Sales for the Outdoor Group, which includes the Merrell brand and Patagonia footwear and is WWWs largest generator of revenues and earnings, were up almost 9% for the quarter and earnings increased at a strong double-digit rate. Merrell brand revenues increased 8.6% over the year-ago period, with the Outventure performance line showing a strong double-digits increase over last year.
Outdoor Casual and Womens Sandals also performed well in the corner, while Merrell also launched its road running initiative in the quarter. Merrell footwear sales increased upper mid-single-digits for the quarter.
During the quarter, WWW continued to grow Merrells owned-retail presence, including store openings in Korea, Peru and the Philippines, while opening its first U.S. flagship in San Francisco two weeks ago.
Patagonia Footwear sales in the quarter were said to be up double-digits. Management said the brand was experiencing steady progress in the North American market and it continues to add international territories. The men’s product had strong sales in the Casual category with management expecting strong sales of Casual Boots for women this fall.
There are nine new Merrell concept stores planned in the fourth quarter, including Portland, OR; Birmingham, AL; Indianapolis, IN and Beijing, China. They expect to end the 2008 year with about 70 Merrell mono-branded stores and around 700 shop-in-shop locations around the world.
The Hush Puppies business was down 11% for the quarter, with large declines in the U.S. and Canada and a softer decline in Europe offsetting nearly 30% growth in the International business. Soft retail conditions, some factory product delays, and the bankruptcy of a significant U.S. retail customer contributed to the lower sales in the quarter.
The business continues to struggle against the exit of Slippers last year. Globally, Hush Puppies will produce over 19 million pairs in 2008. At quarter-end, Hush Puppies operated 479 stores and 840 shop-in-shops. China alone added 55 shop-in-shops in Q3, bringing its total to over 200.
The Heritage Brands group, which includes Sebago and the licensed Caterpillar and Harley-Davidson footwear business, reported flat sales in the quarter. Strong double-digit sales in the U.S., Canada and International markets were offset by challenging conditions in Europe.
Management reported that the Heritage Group achieved “excellent leverage in the quarter with significant increases in operating profits.” Sebago sales declined in the single-digits as “very strong double-digit growth” in the U.S. was offset by lower sales in the international markets.
Strong demand for the classic Docksides Marine product as well as the new Officers and Lakes Collections drove the growth in the U.S. Caterpillar sales were up mid-single-digits in the U.S. and double-digits in Canada.
International posted a very strong double-digit increase. Harley-Davidson achieved double-digit sales growth in the quarter, with the U.S. and Canada posting strong double-digit increases.
Revenue for the Wolverine Footwear group declined in the mid-single-digits for the period. The decrease was attributed to declines in the private-label and Stanley businesses that WWW is exiting this year. Bates and HYTEST were both up for Q3.
WWW took the interesting step of lowering its sales guidance for the fiscal year but raising its expectations for earnings per share. Sales, which had been forecast for $1.23 billion to $1.26 billion at the end of Q2, are now expected to be between $1.22 billion to $1.24 billion, up from the $1.20 billion reported last year.
Fourth quarter sales growth is expected to be “more modest” than the 3.9% gain reported for the first nine months of the year. Diluted earnings per share for the full year are expected to range between $1.87 and $1.92 for the year, up 10% to 13% over 2007 earnings per share of $1.70 and up from previous guidance of $1.83 to $1.90.
