Wolverine Worldwide swung to a better-than-expected annual profit and narrowed final-quarter losses, boosted by its recent acquisition of Sweaty Betty, the U.K.-based brand of women’s fitness apparel, and it forecast sales growth of 15-18 percent for 2022.
The Michigan-based owner of Merrell, Saucony, Sperry, Keds and other brands reported a net loss of $14.6 million for the quarter to Jan. 1, 2022, down from a loss of $170.7 million a year earlier, after extraordinary items.
The bottom line was hit by $44 million in costs from legal settlements and costs associated with the $410 million Sweaty Betty acquisition last August. In the same quarter a year ago, group earnings had been weighed down by a $222.2 million impairment charge on the Sperry brand. On an annual basis, Wolverine made a net profit of $68.6 million versus a loss of $136.9 million in 2020.
The group’s quarterly revenues grew by 24.7 percent to $635.6 million, beating consensus estimates of $629.2 million, with e-commerce rising by 58.3 percent. Excluding Sweaty Betty, revenues increased by 9.4 percent versus the prior year and were 8.2 percent lower than in 2019.
Wolverine’s recently appointed CEO, Brendan Hoffman, said the contribution from Sweaty Betty helped offset inventory constraints at Merrell, Saucony and other brands, which were hit by factory closures in Vietnam due to the Covid-19 pandemic, resulting in demand being unmet.
Full-year revenues went up by 34.8 percent to $2.42 billion across the group. Excluding Sweaty Betty, they rose by 28.3 percent versus the prior year and 1 percent versus 2019.
The quarterly gross margin of 41.3 percent implied a gain of 1.2 percentage points year-on-year, despite higher ocean freight and air freight costs. The gross margin rose by 1.5 percentage points to 42.6 percent for the full year.
Quarterly sales at Wolverine’s Michigan Group (Merrell, Cat, Wolverine, Chaco, Hush Puppies, Bates, Harley-Davidson and Hytest) rose by 7.9 percent to $322 million. The Boston Group (Sperry, Saucony, Keds and the Stride Rite licensed business) reported a 10.2 percent gain to $218.1 million.
On a brand-by-brand basis, Sweaty Betty delivered $75 million in revenues during the final quarter, ahead of expectations, with sales up more than 40 percent on a full-year pro-forma basis. Hoffman said more than a third of the label’s sales had come from outside the U.K. by the end of the year. The total number of active customers rose by 24 percent.
He added that after opening stores in Singapore and Ireland, Sweaty Betty would expand into “several” markets, including the U.S. The brand will also unveil a range of ski and snow clothing and is entering a first-time collaboration with Merrell on a range of hiking shoes.
On an annual basis, revenues grew by 24 percent to $1.29 billion at the Michigan Group and by 34 percent to $935.8 million at the Boston Group. Merrell and Saucony both reported record annual revenues, with growth of 22 and 57 percent, respectively.
The Vietnam factory closures cost Merrell almost $50 million in unmet demand, affecting the brand’s fourth-quarter revenues. Merrell’s lifestyle category grew by mid-single-digits during the quarter, while its work category booked a gain of nearly 30 percent. The brand’s direct-to-consumer (DTC) business was up by almost 10 percent year-on-year.
Saucony delivered growth in all geographic regions delivered, led by North America and Asia-Pacific. The brand achieved market share gains in the road running and trail running categories in the U.S. and improved its strong market share in Europe. It also gained further market share in the lifestyle category in Italy.
The Wolverine brand, which specializes in work footwear, saw sales rise by 28 percent for the year.
Sperry, which faced “significant” headwinds during the early part of the pandemic, recovered in 2021, delivering revenue growth of 25 percent. Hoffman said the group added 14 new distributors in the EMEA region, where the company saw “incredibly strong” demand for boat shoes.
On a regional basis, EMEA generated revenues in excess of 2019 pre-pandemic levels but was flat year on year due to late product deliveries and factory delays. However, Wolverine said it was encouraged by a strong regional order book and expected improved results as inventory levels improve and normalize.
Asia-Pacific and Latin America had annual revenue growth of 30 percent and 50 percent, respectively, being poised to reach pre-pandemic levels in the first half of 2022. For the latest quarter, Wolverine reported a 27 percent sales increase in the region, helped by 60 percent sales growth in China through Wolverine’s joint venture there with Xtep for Merrell and Saucony.
Fourth-quarter DTC revenues, including Sweaty Betty, grew by 60 percent year-on-year, building up to 35 percent of total sales. DTC e-commerce revenue grew by 58 percent in 2020 and 109 percent versus 2019. Revenues for directly operated stores were up by 68 percent versus the prior year and 45 percent against 2019.
Looking ahead to 2022, the company expects to reach record revenues of $2.78 billion to $2.85 billion, representing 15-18 percent growth, due to an “incredibly strong” order book for its four largest brands, which it said would provide around two-thirds of full-year sales. Organically, sales are seen rising by double digits, while Sweaty Betty should go up by 20 percent on a pro forma basis.
The gross margin is expected to improve by about 0.5 percentage points for the year, benefitting from Sweaty Betty’s higher margins and a higher proportion of DTC revenues, which should make up about 30 percent of global sales. Revenues from outside the U.S. should account for around 35 percent of the total turnover. Indicatively, the management is guiding for net earnings of more or less $197 million.
Production in the Vietnam factories has improved to about 70 percent of pre-closure levels, but the recovery is taking longer than planned. Wolverine said, adding that the group has placed 75 percent more orders than a year ago to help meet the demand from the market.
