Wolverine Worldwide reported that it delivered double-digit growth in both revenue and earnings per share in the third quarter along with record operating margin. Revenue rose 12.9 percent to $361.6 million from the prior year, representing the fifth consecutive quarter of record revenue. The top-line was driven by “exceptional growth” from the Outdoor Group, Lifestyle Group and consumer direct businesses.

Other highlights of the quarter:

  • Gross margin expanded 44 basis points to a record 40.6 percent;
  • Operating income rose 17.8 percent and operating margin expanded to a record 15.6 percent;
  • Earnings rose 18.4 percent to $40.4 million, or 82 cents a share, from $34.1 million, or 70 cents, a year ago. The EPS results represents the seventh consecutive quarter of record earnings per share; and
  • Trailing 12 months EBITDA (earnings before interest, taxes, depreciation and amortization) increased to $187.3 million.

“Strong global demand for our lifestyle brands, the consistent execution of our growth initiatives and the strength of our operating model drove another outstanding quarter for Wolverine Worldwide,” stated Blake W. Krueger, chairman and chief executive officer.  “Underscoring the global appeal of our brand portfolio, we generated unit volume growth of over 25 percent in each of the Latin America, Europe/Middle East/Africa and Asia Pacific regions during the quarter.  As we look ahead, we expect our operating model, which serves a variety of consumer groups through multiple distribution channels in more than 190 countries and territories around the world, to provide us with a sustained platform for growth.”  

Don Grimes, senior vice president and chief financial officer, commented, “The company's track record of financial excellence continued in the quarter.  The accelerating momentum of our brand portfolio in all major geographic regions keeps the company mindful of the importance of continuing to invest in key growth initiatives, while still delivering impressive returns to our shareholders.”

Additional details:

The Outdoor Group (consisting of Merrell footwear and apparel, Chaco and Patagonia footwear) delivered another outstanding quarter, with revenue growth of 19.9 percent.  The Lifestyle Group (Hush Puppies, Sebago, Cushe and Soft Style) also had impressive performance with 21.6 percent revenue growth, and the Heritage Group (Wolverine footwear and apparel, Caterpillar footwear, Bates, HyTest and Harley-Davidson footwear) posted a 6.8 percent increase during the quarter.  Foreign exchange contributed $8.3 million to reported revenue in the quarter.

Gross margin in the quarter expanded 44 basis points to a record 40.6 percent compared to prior-year gross margin of 40.1 percent.  The gross margin expansion during the quarter was primarily driven by selling price increases and favorable brand mix.

Operating expenses in the quarter of $90.2 million were 25.0 percent of revenue, compared to 25.2 percent of revenue in the prior year.  Operating expenses increased 11.9 percent versus the prior year, driven by variable costs associated with the excellent revenue growth, continued increases in brand-building investments and the weaker U.S. dollar.

The company repurchased approximately 948,000 of its own shares in the quarter at an average price of $34.45, or an aggregate cost of $32.7 million.  The company continues to have an exceptionally strong balance sheet, with $97.9 million of cash and cash equivalents at the end of the third quarter.

The company is raising its estimate for full-year revenue to a range of $1.40 billion to $1.43 billion (representing growth of 12.1 percent to 14.5 percent) and is raising its estimate for full-year diluted earnings per share to a range of from $2.46 to $2.52 (representing growth of 13.4 percent to 16.1 percent versus the prior year's adjusted earnings per share and 16.6 percent to 19.4 percent versus the prior year's reported earnings per share).  Included in the earnings guidance is the expectation for full-year gross margin that is flat to slightly up versus the prior year, modest full-year operating expense leverage and continued double-digit increases in marketing investments behind key growth initiatives.  

WOLVERINE WORLD WIDE, INC.




CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS


(Unaudited)


($000s, except per share data)














12 Weeks Ended


36 Weeks Ended




September 10,


September 11,


September 10,


September 11,




2011


2010


2011


2010












Revenue


$          361,590


$          320,396


$       1,002,601


$          863,492


Cost of products sold


214,907


191,825


596,003


512,245


Restructuring and related costs





1,406


Gross profit


146,683


128,571


406,598


349,841


Gross margin


40.6%


40.1%


40.6%


40.5%












Selling, general and administrative expenses


90,242


80,670


267,325


235,930


Restructuring and related costs





2,828


Operating expenses


90,242


80,670


267,325


238,758


Operating expenses as a % of revenue


25.0%


About The Author

Thomas J. Ryan

Thomas J. Ryan Senior Business Editor | SGB Media tryan@sgbonline.com | 917.375.4699

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