Wolverine Worldwide’s Q3 results weren’t pretty, but they did exceed Street estimates on several fronts as the Merrell, Saucony, and Sweaty Betty parent moved forward with numerous initiatives aimed at reducing annualized costs by $215 million and turning the company’s fortunes in the right direction again.
Net income slid by 77 percent to $9.0 million on a 24 percent decline in total revenues to $527.7 million from $691.4 million for the period ended Sept. 30. Ongoing total revenue from continuing businesses was down by 20 percent to $519.5 million. All groups and brands, except for Wolverine and Sweaty Betty, suffered double-digit sales declines in Q3, led by a 46.6 percent drop for the Lifestyle group to $62.8 million. Merrell sales tumbled 24 percent to $157.0 million; Saucony revenues slipped 14.0 percent to $116.4 million; Sperry sales dipped by 41.4 percent to $46.2 million. Meanwhile, Wolverine brand sales fell by 4.7 percent to $56.3 million and rose by 19.0 percent at Sweaty Betty to $45.0 million.
| Wolverine Worldwide | ||||
|---|---|---|---|---|
| Q3 ($ million) | ||||
| 2023 | 2022 | Change | ||
| Reported segment revenue | ||||
| Active Group | 328.6 | 398.2 | -17.5% | |
| Work Group | 123.0 | 157.8 | -22.1% | |
| Lifestyle Group | 62.8 | 117.7 | -46.6% | |
| Other | 13.3 | 17.7 | -24.9% | |
| Total | 527.7 | 691.4 | -23.7% | |
| Ongoing total | 519.5 | 649.7 | -20.0% | |
| Reported | ||||
| Gross margin | 40.8% | 40.2% | 60 bps | |
| Operating margin | 5.2% | 8.5% | -330 bps | |
| Diluted EPS | 0.11 | 0.48 | -77.1% | |
| Non-GAAP and Ongoing business | ||||
| Adjusted gross margin | 41.2% | 41.2% | 0 bps | |
| Adjusted operating margin | 4.3% | 9.4% | -510 bps | |
| Adjusted diluted EPS | 0.07 | 0.47 | -85.1% | |
| Constant-currency EPS | 0.11 | 0.47 | -76.6% | |
| Source: Wolverine Worldwide | ||||
Operating income fell by 54 percent to $27.3 million. Inventories declined by 13 percent from the end of Q2 to $564 million and were down by 33 percent year-over-year. They are projected to fall another 13 percent to $490 million by the end of the FY.
With the results, Wolverine updated its FY23 guidance for ongoing businesses. Total annual revenues are now pegged at $2.19 to $2.20 billion, down 13 percent year-over-year. Third-quarter wholesale revenues fell by 14 percent and are currently forecast to drop by approximately 35 percent in Q4 as the company continues to be impacted by an ongoing decline in the hike category, excessive gray market selling of the Merrell brand, and increased price-point pressure from private label brands in the work category among other factors. Adjusted gross margin is pegged at 39 percent, with the adjusted operating margin at 3.4 percent. Full-year EPS is forecast at $0.05 to $0.10 a share. The company says it remains committed to achieving a 12 percent operating margin in the near term.
The group’s wide-ranging, annualized cost-saving initiatives include approximately $85 million from a global workforce reduction announced today, $100 million in supply chain and logistics by the end of FY24, and $30 million in lower indirect spending. Additionally, Wolverine’s ongoing transformation initiatives under CEO Chris Hufnagel include restructuring the North American commercial structure that will focus on aligning Canadian and US operations, a new global licensing function, and a new product lifecycle management and digital product design team focus.
Hufnagel told analysts that Wolverine’s transformation will not be completed in a quarter or two, given the challenging environment that the company is facing today.
