Wolverine World Wide announced a sales drop of 7.8 percent to $246.4 million for the second quarter ended June 20, but taking into account foreign currency effects, the decline was limited to just 3.1 percent. Excellent sales in the U.S. were countered by tough conditions in the rest of the world, and its outdoor brands performed better than its fashion brands.
Net earnings dropped by 53 percent to $7,906,000 after charges that lowered the group’s gross profits. The gross margin was 37.3 percent, 1 percentage point below last year’s, but excluding $1.0 million in restructuring charges, the gross margin was 37.7 percent. The figure was affected by higher product costs and an increase in close-out sales.
Sales declined by single digits in the so-called Heritage group, consisting of Sebago, Caterpillar and Harley Davidson, although operating margins improved. Instead, the outdoor group recorded a double-digit sales jump during the quarter to an estimated $92.9 million, with double-digit increases for Merrell and Patagonia footwear and a first-time contribution of $8 million from the newly acquired Chaco brand.
For Merrell, the management reported exceptional sales in its Out Venture segment, led by the Moab men’s style and the Siren women’s style and the Water Pro collection. The Siren line has also been welcomed warmly by European customers.
The management said the group began to see improved performance at retail in its U.S. stores and its virtual store toward in the middle of the second quarter, a trend that continued into the month of July, but U.S. retailers are still ordering close to their requirements.
The group’s orders are down overall in the mid-single digits on a constant dollar basis as compared to last year, but Merrell is doing better than the other 12 brands in the group’s portfolio and the management expects fewer order cancellations. Among the clients, sporting goods and specialty retailers are holding up better than other types of retailers.
The quarter’s results were better than expected, and this has led the management to improve its profit forecast for this year by 2 percentage points to an indicative level of between $52.6 million and $61.5 million for the full year. Sales should range between $1.07 billion and $1.12 billion, in spite of a negative foreign currency effect of $40-60 million.
