Wolverine Worldwide enjoyed a 50 percent increase in sales to foreign distributors in the last two years, and the company continues to see international expansion as being critical to the future growth of its 16 brands. In the first quarter ended March 28, Wolverine experienced a very strong double-digit increase in Asia-Pacific. Sales grew in all other geographies, but WWW's own operations for Europe, the Middle East and Africa (EMEA) suffered a low single-digit decline in local currencies and a drop of nearly 15 percent in U.S. dollars.

On the international front, Wolverine said it continues to make progress expanding the reach of the four brands—Sperry, Saucony, Keds and Stride Rite—it acquired from Collective Brands at the end of 2012. The brands are in 50 more countries than they were in 2013 as 400 new points of controlled distribution have opened in the last two years.

With much of the foreign expansion taking place on a distributor or licensing mode, the progress is not fully reflected in the company's revenues, which inched up by only 0.6 percent to $631.4 million in the latest quarter, up by 3 percent in local currencies. They fell short of the company's guidance due to the strength of the dollar, lower sales of Wolverine and Sebago shoes, and relatively weak sales for Merrell and Saucony in terms of dollars. On a currency-neutral basis, Merrell was flat and Saucony recorded a single-digit increase.

Each of WWW's operating groups posted improved revenues in constant currencies. In contrast with previous trends, the Performance Group scored less well than the Lifestyle and Heritage Brands segments, however. Led by Merrell, the Performance Group rose by 2.1 percent in local currencies but fell by 2.2 percent in dollars, down to $243.4 million.

At Merrell, sales of performance outdoor shoes experienced a high single-digit increase, helped by the global launch of the new Capra range, and men's active gained traction. On the flip side, the softness in women's casual shoes continued and the outside athletic segment declined from the high level of a year ago. A small component of WWW's Performance Group, Chaco, saw sales jump by 70 percent due to its new closed-toe styles.

Wolverine Worldwide Income Statement

(Million $, Quarter Ended March 28)

 

2015

2014

%
Change

REVENUES

631.4

627.6

-

Cost of Goods Sold

370,0

371,4

-0,4

Restructuring Costs

-

0,4

-

SG & A*

198,8

190,5

4,4

Acquisition Related Costs

-

1,6

-

Net Gain Restructuring Costs

1,0

-

-

Net Interest

8,5

11,7

-27,4

Pre-Tax

55,1

52,0

6,0

Tax

15,0

14,8

1,4

NET

40,1

37,2

7,8

Cent per Share (Diluted)

0,39

0,36

8,3

* Selling, General & Administrative

Sparked by the continued resurgence of its Sperry label, following significant investments that included the launch of a new brand platform, WWW's Lifestyle segment booked a sales increase of 2.1 percent to $243.0 million, with a currency-neutral rise of 3.6 percent.

Stride Rite and Hush Puppies were down in dollars and local currencies, but Sperry's sales grew by around 15 percent in the quarter, with a double-digit increase in its boat shoe business and double-digit expansion in e-commerce. Women's boat shoes returned to growth.

The Sperry brand is expected to record mid- to high single-digit growth. The management is also bullish on the outlook for Keds for the remainder of this financial year due to building momentum in Asia-Pacific and Latin America and the brand's sponsorship of Taylor Swift. In the first quarter, however, Keds' sales were flat in dollars and up by a low single digit in local currencies due to cold weather and the West Coast port situation in North America. The brand's EMEA business was negatively impacted by a shift to a distributor model in key markets.

At the Heritage Group, revenues rose by 4.5 percent to $126.1 million, and they were up by 7.0 percent currency-neutral. CAT Footwear expanded by almost 20 percent, with balanced geographic growth. The work shoe category advanced by a double digit, while men's and women's lifestyle products improved by 40 percent.

The group made strong progress in the deployment of its omni-channel retail platform. It is moving forward with a unified consumer database across its portfolio of brands, providing consumers with “endless aisle” access to its entire inventory.

The company reported a net profit of $40.1 million for the quarter, up by 7.8 percent from the year-ago period, beating Wall Street analysts' estimates, but the company warned that foreign currencies are expected to have a more significant impact on its results for the second quarter.

For the full financial year, Wolverine confirmed its sales forecast but reduced its guidance for earnings, leading to a drop of more than 6 percent in the share price. The management is projecting net earnings of between $146 million and $154 million, up from $133.1 million in 2014, on a sales increase of between 2 and 4 percent in dollars to a range of $2.82-2.87 billion. In local currencies, the growth would lie between 5 to 7 percent.