Six months on the job, Wolverine Wordwide President and CEO Chris Hufnagel had to oversee changes in many aspects of the group’s overall business, including excess inventory, shedding businesses, lowering debt levels, and improving the supply chain. Progress has been made, but the turnaround will take more time to complete with key new products and innovations, paving the way under a more simplified structure for the company that will spend $30 million re-investing in its brands this year.
“We are in the late innings of the stabilization phase of the company’s turnaround and are ahead of schedule in many key areas, including portfolio optimization, gross margin expansion, operating cost improvement, healthier inventory, and much lower debt,” CFO Mike Stornant told analysts. “Importantly, we expect to deliver at least $140 million of incremental profit improvements in 2024…”
Earlier, Hufnagel said, “The next few months will be critical as we continue to aggressively advance our transformation.”
Operating loss in the quarter and FY
Wolverine reported a Q4 operating loss of $186.9 million, lower than a year ago’s operating loss of $454.7 million on a 21 percent drop in revenues to $526.7 million from $665.0 million for the period ended Dec. 30. The net loss was $90.6 million against a loss of $360.8 million as gross margin improved by 290 basis points to 36.6 percent. For the full year, the group reported an operating loss of $68.2 million, a 100-basis point contraction in gross margin to 38.9 percent, and a 10 percent decline in total sales to $2.24 billion from $2.68 billion in FY22. Merrell sales slid by 11.6 percent to $675.8 million. Saucony sales fell by 1.9 percent to $495.8 million; Wolverine brand sales tumbled by 18.7 percent to $201.2 million; and Sweaty Betty sales declined by 3.6 percent to $203.8 million.
The group’s current FY24 outlook calls for revenues of $1.7-$1.75 billion from ongoing businesses, a decline of 13.4 percent from FY23 at the midpoint but a 310-basis point improvement in adjusted operating margin to 7.0 percent. Gross margin is forecast to increase by approximately 460 basis points year-over-year to 44.5 percent as total inventory falls by at least $70 million. Brand-wise, Merrell’s annual sales are forecast to fall by double-digits but grow in H2; Saucony sales are expected to slip around 20 percent but improve sequentially each quarter; Sweaty Betty annual revenues will be flat; and Wolverine brand sales will slip by mid-single digits.
Outlook
Wolverine expects its healthier inventory levels and increased brand protection actions, including the recent shutdown of 20 “gray market” customers and 400 accounts that don’t align with the company’s go-forward distribution strategy, will lead to a lower promotional cadence in H2 when there will be easier year-over-year comparisons. However, currency headwinds that impact inventory costs will harm gross margin.
At both Saucony and Merrell, Hufnagel said the company is encouraged by product pipelines this year into FY25, including the Guide 17 and Triumph 22 at Saucony and Merrell’s Moab Speed 2, Agility Peak 5 and the MTL Skyfire 2 Matryx developed by its test lab.
