Wolverine Performance Sales Decline in First Quarter

Wolverine Performance Sales Decline in First Quarter

Wolverine Worldwide reported flattish sales for its first quarter ended March 28, as mid single-digit growth from the Heritage Group and low single-digit growth from the Lifestyle Group were partially offset by a low single-digit revenue decline from the Performance Group.

Consolidated revenue increased to $631.4 million, up just 0.6 percent versus prior year revenue of $627.6 million.    On a constant currency basis, revenue grew 3.4 percent.  Retail store closures associated with the company’s realignment plan and the exit of the Patagonia Footwear license had a negative 170 basis point impact on reported revenue growth.

“Our first-quarter results reflect the continued strength of our brand portfolio and a global business model that is built on 15 brands, targeting multiple consumer groups, distribution channels and geographies,” commented Blake W. Krueger, Wolverine Worldwide’s Chairman, Chief Executive Officer and President.  “We believe the strategic investments we are making in our brands – including investments in consumer-demand creation and omnichannel initiatives – position us to capitalize on the many opportunities we have identified to accelerate our growth around the world in 2016 and beyond.”

Gross margin was 41.4 percent, a solid increase of 60 basis points versus the prior year’s reported and adjusted gross margin.  The gross margin expansion was driven primarily by price increases and lower close out sales, partially offset by product cost increases.

As expected, adjusted operating margin decreased 60 basis points to 9.9 percent due to increased brand investment and higher pension expense.  Reported operating margin was flat compared to the prior year at 10.1 percent.  Adjusted financial results exclude restructuring and acquisition-related integration costs.

Adjusted diluted earnings per share decreased 2.6 percent to $0.37, compared to an adjusted $0.38 per share in the prior year.  On a constant currency basis, adjusted diluted earnings per share increased 2.6 percent to $0.39.  Reported diluted earnings per share were $0.39, compared to $0.36 per share in the prior year.

The company ended the quarter with cash and cash equivalents of $121.3 million and net debt of $736.0 million, a reduction of $271.5 million from the same period last year.

“The company delivered earnings in the first quarter that exceeded our expectations,” commented Don Grimes, Senior Vice President and Chief Financial Officer.  “Reported financial results were excellent given the negative impact of foreign exchange, incremental pension expense, and accelerated investments in demand creation and omnichannel initiatives.  On a reported basis, low single-digit growth in the U.S. and Latin America, and very strong double-digit growth in Asia Pacific contributed to the revenue gain in the quarter.  On a constant currency basis, we were pleased to deliver revenue growth in almost all of our major geographic regions.”

Wolverine’s brand portfolio includes: Merrell, Sperry, Hush Puppies, Saucony, Wolverine, Keds, Stride Rite, Sebago, Cushe, Chaco, Bates and HYTEST.  The company also is the global footwear licensee of the popular brands Cat  and Harley-Davidson.  The company’s products are carried by leading retailers in the U.S. and globally in approximately 200 countries and territories.

Fiscal 2015 guidance
Based on first-quarter results and expectations for the balance of the year – including continued headwinds from the significantly stronger U.S. dollar and the previously announced increase in brand-building investments – the company is reaffirming its full-year revenue and adjusted earnings per share guidance, as follows:

Consolidated reported revenue in the range of $2.82 billion to $2.87 billion, representing growth in the range of approximately 2 percent to 4 percent versus the prior year.  Constant currency revenue growth is expected in the range of approximately 5 percent to 7 percent.

Adjusted diluted earnings per share in the range of $1.53 to $1.60.  Constant currency adjusted diluted earnings per share is expected in the range of $1.71 to $1.78.

The company now expects to incur total pretax charges of approximately $44 million to $48 million related to the previously announced Strategic Realignment Plan.  Of this amount, $26 million was recorded in fiscal 2014, and we expect to incur $18 million of charges in fiscal 2015 with the balance recorded in fiscal 2016.  As a result, reported diluted earnings per share in fiscal 2015 is expected in the range of $1.42 to $1.49.