STRONG BACKLOG PROMPTS WOLVERINE TO EXPECT BETTER EARNINGS
Wolverine Worldwide’s revenues were up by just 3.8 percent to $310.2 million in the 3rd quarter, ended Sept. 8, but the order backlog was up by more than 11 percent at the end of the quarter. In light of this the Michigan-based group has raised its guidance for this year’s earnings per share to $1.65 from $1.63. Revenues are still projected to reach $1.20-1.23 billion for the year.
In the latest quarter, group revenues were about $15 million below normal because of the discontinuation of some low-margin businesses. This was offset by growth by most of WWW’s brand groups as well as by positive foreign currency exchange conversions. Operating earnings before interest and income taxes (EBIT) rose to $44,331,000 in the quarter, as compared to $39,133,000 a year ago. Net earnings grew to $29,483,000 from $26,140,000.
As usual the company’s outdoor group was a primary growth driver, with sales up by double-digits in the quarter. And like always, Merrell was a strong leader within this division, its sales growing by nearly 20 percent. During a conference call to discuss the results, in reply to an analyst’s questions, the management said Merrell continued to open new accounts, while existing accounts have had trouble keeping Merrell shoes in stock. In addition, Merrell is taking shelf space from competitors, increasing the number of SKUs at existing accounts.
The Patagonia footwear range is expected to generate total revenues of $12-13 million in its first full year of operation. Company officials said they weren’t worried that it would cannibalize Merrell’s offering because Patagonia shoes are priced 15-20 percent higher and styled differently.
The Merrell apparel line generated less enthusiasm among WWW executives, who said that they would be making changes to the offering. The current clothing line is too casual and needs to be more athletic, company officials said. Furthermore, in markets outside of the USA the line’s branding needs to have a more prominent logo. On the other hand, the Sebago brand continues to generate solid sales.
WWW opened more Hush Puppies stores around the world in the 3rd quarter, and the door count reached 385 units. WWW’s Heritage brands group was flat in the quarter. Caterpillar Footwear’s revenues were lower in Europe and Canada, but the management said that the brand has good momentum overall outside of the USA. The Harley Davidson brand’s sales increased in all global markets. The brand now has 1,600 accounts throughout the world, about half of which are in the USA.
The Wolverine footwear group continued to decline in the quarter, again due to lower orders from the U.S. military. WWW’s e-commerce business was strong in the quarter and has been growing by double-digits yearly for the past four years.
During the period WWW repurchased about 1.2 million shares at a price of $27.16 per share. Year-to-date it has bought back 3.5 million shares at an average price of about $28.11. Another 4.6 million shares are available for repurchase under a program authorized by the company’s board in April 2007.
