Wolverine Worldwide reduced its Q4 inventory total from the prior quarter by 8.5 percent to $805 million, but the effort is forecast to weigh negatively on the company’s FY22 and Q4 adjusted diluted earnings. Wolverine says final earning results, when reported next month, will be at the low end of its prior guidance.
Full-year revenues rose 11 percent or 14 percent on a constant-currency basis to $2.685 billion, with the Merrell, Saucony, and Wolverine brands achieving record sales. Meanwhile, the company’s top five brands represented 73 percent of all revenues, and the company’s Direct-To-Consumer penetration grew to 26 percent of revenues from 15 percent in 2019. Fourth-quarter revenues increased by 8 percent on a constant-currency basis to $665 million, but the period’s adjusted diluted earnings are forecast to come in at the low end of the company’s guidance. Operating free cash flow in the final period was $280 to $300 million.
CEO Brendan Hoffman, talking at the ICR Conference, said the company adopted a 100-day plan after being caught with “a lot” of excess inventory that involved reducing the total amount and gridlock in company warehouses.
“Agility is something this company needs to learn,” Hoffman said, later adding, “We are looking for simplicity in everything we do.”
That strategy includes trimming SKU counts as needed, reducing the current inbound flow of goods by 50 percent year-over-year, and bringing inventories to a “normal level” over the next 2 to 3 quarters and to approximately $600 million by the end of 2023. The company believes its portfolio of 13 performance and lifestyle brands is well-positioned in the hiking, running, athletic apparel, and work categories.
Overall, Wolverine is aiming to evolve its digital business and no longer be wholesale segment-driven only as it continues working to grow its international business which hit 41 percent of total revenues in 2022.
Within its brand portfolio, the company is expected to put more resources behind its five largest businesses – Merrell, Saucony, Sperry, Wolverine, and Sweaty Betty which accounted for 73 percent of FY22 revenues – and likely look to shed more of its smaller, less profitable businesses. The Keds and Wolverine Leather segments are presently in an active sale process.
