08 Aug Wolverine Again Lifts Guidance As Turnaround Gains Momentum
Wolverine World Wide Inc. reported financial results including strong earnings for the second quarter ended June 30, 2018, and updated progress on its 2018 Global Growth Agenda. The company raised its guidance for the year.
The company also raised full-year earnings guidance and updated its full-year outlook.
“We had a strong second quarter highlighted by solid revenue performance, especially from Merrell and Sperry, along with earnings that significantly surpassed expectations” said Blake W. Krueger, Wolverine World Wide’s chairman, chief executive officer and president. “Our underlying revenue growth during the quarter was the highest since the second quarter of 2015, and reflects early progress against our Global Growth Agenda. The strong operating margin expansion and earnings leverage reflects fundamental improvements in our business model related to our recent transformation initiatives.”
Second-Quarter 2018 Review
- Reported revenue of $566.9 million decreased 5.3 percent during the second quarter. Underlying revenue increased 3.9 percent and further adjusting for currency, increased 3.3 percent.
- Reported gross margin was 41.3 percent, as compared to 37.9 percent in the prior year. On an adjusted basis, gross margin of 41.3 percent expanded 250 basis points compared to prior year.
- Reported operating margin was 12.0 percent, compared to 5.2 percent in the prior year. Adjusted operating margin was 12.5 percent, an increase of 140 basis points compared to the prior year.
- Reported diluted earnings per share was 57 cents, compared to $0.21 in the prior year. Adjusted diluted earnings per share were 54 cents compared to 43 cents in the prior year, an increase of 26 percent.
- Inventories declined $39.9 million, or 12.0 percent compared to the prior year.
Wall Street’s consensus estimate was 46 cents a share on sales of $569 million.
“Operating margin in the second quarter benefited from broad-based expansion of gross margins across our brands primarily due to favorable product mix, lower product costs and benefits from a cleaner inventory pipeline,” said Mike Stornant, senior vice president and chief financial officer. “Importantly, we now expect to exceed our stated 12 percent adjusted operating margin goal for fiscal 2018.”
2018 Global Growth Agenda Update
“The company made nearly $20 million in key incremental investments intended to drive growth during the first half of 2018 as part of our Global Growth Agenda,” stated Krueger. “Investment has focused on several initiatives across the three key elements of the Agenda – a more robust and streamlined product development process, optimizing our social prospecting capabilities, and adding strategic and operational resources to our international teams, especially in China. We’re excited to see the benefits of the new tools and capabilities being put in place to better drive top-line performance.”
“We remain committed to our enhanced investment strategy related to the Global Growth Agenda, and similar levels of incremental investment spending are planned for the second half of 2018,” stated Stornant.
Updated 2018 Outlook
Primarily as a result of the strong second quarter earnings results, which were better than expected, the company is raising its earnings projection for the full year. The full-year outlook is summarized below.
- Revenue is expected to be in the range of $2.24 billion to $2.32 billion.
- Gross margin expansion is now expected to be in the range of 100 to 130 basis points higher compared to the adjusted prior year, despite a full-year negative mix impact of 20 basis points from 2017 store closures.
- Reported operating margin is now expected to be between 11.6 percent to 11.9 percent and adjusted operating margin is now expected to be 12.1 percent to 12.4 percent, inclusive of up to $45 million of incremental investments to support the company’s Global Growth Agenda.
- An effective tax rate now expected to be in the range of 18 percent to 20 percent.
- Reported diluted earnings per share are expected to be in the range of $2.05 to $2.12 and adjusted diluted earnings per share are expected to be in the range of $2.08 to $2.15.
Previously, Wolverine expected diluted earnings per share in the range of $1.92 to $2.02 and adjusted diluted earnings per share of $2.00 to $2.10. Gross margin expansion was projected in the range of 50 to 90 basis points. The updated revenue guidance remains the same.
Wolverine World Wide’s brands include: Merrell, Sperry, Hush Puppies, Saucony, Wolverine, Keds, Stride Rite, Chaco, Bates, HYTEST, and Soft Style. The company also is the global footwear licensee of the popular brands Cat and Harley-Davidson.