Wolverine Worldwide saw revenues in the third quarter rise by 29.1 percent to $636.7 million compared with the prior year, boosted by incremental revenues of $39.1 million from the recent acquisition of Sweaty Betty, which saw pro forma sales growth of over 50 percent in the quarter, and the strong performance of its Saucony brand. However, the management said that supply chain disruptions shaved an estimated $60 million off the top line. Without the contribution of Sweaty Betty, the women’s activewear brand purchased at the start of August, revenues were up by 21.2 percent to $597.6 million.
In the three months ending Oct. 2, the footwear company’s e-commerce revenues rose by 45 percent as compared to the third quarter of 2020 and were up by 126 percent versus the third, pre-pandemic quarter of 2019. Without Sweaty Betty, which traces over 80 percent of sales to direct-to-consumer (DTC) channels, e-commerce growth stood at 13.3 percent from the year earlier and 77.3 percent against 2019. Sales at Wolverine’s stores were up by about 35 percent.
In Wolverine’s Boston Group, sales rose by 33.5 percent to $258.8 million, with an increase of about 60 percent from the 2019 period, despite some supply chain challenges. The division’s performance was led by a growth of around 42 percent at Saucony, driven by new models of Ride, Triumph and Endorphin running shoes. The brand’s e-commerce saw a sales increase of over 50 percent. Its sales in Europe went up by about 30 percent. Wolverine sees a big opportunity for the brand’s expansion in the Asia-Pacific region, where sales growth exceeded 60 percent in the quarter, with both Saucony stores and its online business “performing well” in China through its local joint venture with Xtep International.
Wolverine’s Michigan Group saw sales rise by 13.1 percent to $324.8 million, but sales of its flagship Merrell brand grew by just 4 percent on the year earlier. Wolverine quantified missed revenue opportunities for Merrell tied to factory closures in Vietnam at a minimum of $25 million. Merrell’s DTC business also grew at a mid-single-digit rate in the quarter. The Moab Speed and Moab Flight collections led in the performance category, but lifestyle products sold better.
Among other brands, Sperry posted sales growth exceeding 40 percent, with its DTC business up by 25 percent, driven by ongoing e-commerce growth and “very good” performance at Sperry stores. A new Sperry Sport collection is in the pipeline for market introduction next spring.
The work category accounted for nearly 20 percent of the revenues in the quarter. Wolverine, the leader in the U.S. work boot category, saw sales increase by over 16 percent while Cat Footwear was up by nearly 40 percent.
On the earnings front, Wolverine reached breakeven results on the bottom line compared to a net profit of $22.4 million the year earlier, as earnings were hit by costs tied to the acquisition of Sweaty Betty, debt refinancing and litigation as well as extra air freight charges tied to production and shipping delays resulting from the Covid-19 pandemic. Eliminating these and other extra charges, the group’s net profit would have risen to about $50.2 million.
The reported gross margin increased to 43.2 percent from 41.0 percent in the prior year. The adjusted gross margin improved by 3.3 percentage points to 44.6 percent thanks to higher average selling prices, a favorable product mix and the addition of Sweaty Betty for nearly two months during the quarter.
Total inventories grew by 26.5 percent versus 2020, including 16.1 percentage points of growth from Sweaty Betty. While the inventory position has improved over the last two quarters, in particular for Saucony, Sperry and the group’s work brands, Wolverine said it still does not align with higher demand. As Merrell continues to recover from the impact of closed Vietnam factories, management expects inventory levels to keep improving, benefitting from supply chain diversification and the addition of several new factories and incremental capacity for 2021.
Wolverine now forecasts full-year revenues of $2,400 million, at the top end of its previous $2,340 million to $2,400 million guidance, supported by the contribution from Sweaty Betty and positive momentum for its performance and work footwear brands, offset by the negative impact from factory closures and a “volatile” logistics environment. The company is guiding for net income of between $99 and $103 million, or $174 to $178 million on an adjusted basis.
Like other major players, Wolverine is considering price increases next year, but wants to see first what competitors are going to do.
