Driven by Merrell and Sperry Top-Sider, Wolverine Worldwide projected last week that its revenues would reach $4.1 billion by 2018, up from $2.7 billion projected for the current year. The goal, offered at its annual investor meeting, represents a compound annual growth rate (CAGR) of 8.5 percent.
On a combined basis, revenues for Merrell and Sperry Top-Sider, its two biggest brands, are expected to represent $2 billion in 2020, when overall revenues for Wolverine Worldwide are expected to reach between $4.6 billion and $4.7 billion. Merrell currently was said to be “approaching $600 million” with Sperry at a similar level. Growing “a little bit faster,” Sperry is expected to surpass Merrell in terms of overall revenue size within four years.
Among its different segments, Lifestyle Group (including Sperry, Hush Puppies, Keds and the Stride Rite Children's Group) is expected to see the strongest growth rate, rising 9.1 percent on CAGR basis from 2013 to 2018. Growth well above the company CAGR average of 8.5 percent in the double-digits is planned for Sperry with even faster growth for Keds. Low-to-mid-single digit growth was projected for Stride Rite Children's Group and Hush Puppies.
The Performance Group (Merrell, Chaco, Cushe, and Patagonia Footwear) is expected to expand at an 8.0 percent CAGR over the four-year period. Merrell’s growth is expected to come in slightly ahead of the company’s average of 8.5 percent with Saucony expected to expand closer to a double-digit rate. On a much smaller base, Chaco is expected to see healthy double-digit growth, with slightly faster growth for Cushe.
Heritage – consisting of Wolverine, Cat Footwear, Bates, Sebago, Harley-Davidson Footwear and HyTest – is expected to grow at a 7.7 percent CAGR. Healthy, better-than-average growth is projected for Sebago and Harley Davidson.
By 2018, Lifestyle is expected to make up 44 percent of Wolverine Worldwide’s sales; Performance, 35 percent; and Heritage, 21 percent;
Other projections made for the period from 2013 to 2018:
In the U.S., CAGR of 8 percent companywide is expected over the 4-year period, aided by new store openings, largely Merrell and Sperry Top-Sider stores; as well as a planned multi-brand concept. By 2018, the U.S. will still be by far its biggest market, contributing 69 percent of sales;
In other regions, the highest growth is expected to come from Asia-Pacific, expected to grow at a CAGR of 15 percent. The Latin America is expected to grow at a CAGR from 2013 to 2018 of 12 percent; Canada, 8 percent; and EMEA, 7 percent. By 2018, the EMEA will account for 15 percent of revenues; Canada, 7 percent; Asia Pacific, 5 percent; and Latin America, 4 percent;
International revenues are expected to grow at a 9 percent CAGR from 2013 to 2018. Its recently-acquired Boston-based brands (Sperry, Saucony, Keds, Stride Rite) are expected to grow revenue outside the U.S. to over $300 million by 2018, more than double from where it is currently. Wholesale outside the U.S. are expected to account for 21 percent of sales for those four brands revenues by 2018, up from mid-teens percent currently. That international expansion is expected to be led primarily by Sperry and Keds, given that Saucony has a bigger base of international business today;
Consumer Direct is expected to expand at a CAGR of 10 percent over the 4-year period. Across all brands, its store count is expected to reach 591 by 2018, up from 466 expected at the close of 2013. By channel, wholesale is expected to represent 81 percent of sales by 2018; brick & mortar, 14 percent; and e-commerce, 5 percent. The gain is also expected to be supported by comp growth of 4 percent on average;
Apparel and accessories are expected to reach $175 million in revenues by 2018 through Sperry, Wolverine, Merrell, Hush Puppies and Sebago. By 2018, apparel/accessories are expected to make up 5 percent of sales, footwear, 96 percent.
Gross margins are expected to improve 190 basis points to 42.1 percent by 2018, up from 40.2 percent in 2013;
SG&A is expected to be cut 170 basis points to 29.6 percent from 31.3 percent;
Marketing investments are still expected to expand to 6.5 percent of sales by 2018, up from 4.8 percent in 2013;
Operating margin is expected to improve 360 basis points to 12.5 percent from 8.9 percent;
EPS is expected to reach $5.80 in 2018 from $2.78 in 2013, representing a CAGR of 15.8 percent;
Merrell and Sperry are expected to make the biggest impact on operating profits, with Saucony and Stride Rite being positioned as similar profit drivers in the future. “Small but profitable brands” include Harley-Davidson, Bates, Sebago, Chaco, and Patagonia. Both Keds and Cushe are losing money but expected to earn a profit in 2014.
