Wolverine Ups Q4 Sales Forecast, But Sees Flat Earnings in Fiscal 2015 

Wolverine Ups Q4 Sales Forecast, But Sees Flat Earnings in Fiscal 2015 

Wolverine Worldwide Inc. upgraded its forecast for fourth quarter sales and earnings, but said it expects diluted earnings per share to come in flat in 2015 due to a strong dollar, the phasing out of Patagonia footwear and rising pension expense and investment in its many other brands, which include Merrell, Sperry-Top Sider, Keds and Chaco.

Wolverine said it now expects revenues for the fourth quarter of approximately $808 million, representing growth of 9.1 percent compared to prior-year revenue of $741 million. Adjusted diluted earnings per share for the full-year 2014 are expected to come in at the high end of the previous earnings guidance of $1.57 to $1.63 per share.  On a reported basis, diluted earnings per share to be consistent with the previous guidance of $1.32 to $1.38.

The preliminary earnings were released in conjunction with the presentation by Blake W. Krueger, the company’s Chairman, Chief Executive Officer and President, at the 17th Annual ICR XChange Conference. In addition, the company provided its initial outlook for fiscal 2015.  The company expects to report full fiscal-year 2014 results, along with additional commentary for fiscal 2015, on Feb.17, 2015.

–    Revenue for the full-year 2014 of approximately $2.76 billion, representing growth of 2.6 percent compared to prior-year revenue of $2.69 billion.

–    Anticipated record operating cash flow for the year, enabling the company to reduce interest-bearing debt by approximately $250 million during fiscal 2014, including $175 million of accelerated, voluntary principal payments during the fourth fiscal quarter, a portion of which were attributed to the company’s new accounts receivable financing facility.

“We finished the year with a strong quarter, and we expect fiscal 2014 to be successful by any number of measures,” commented Mr. Krueger.  “I am extremely pleased our company is expected to deliver another year of record revenue and earnings.  The company remains focused on driving growth across our portfolio, and our expected strong earnings performance and cash flow generation for the year are a testament to our team’s disciplined execution against our global, diversified business model – a robust model that delivers consistent results in virtually any economic environment.”

Don Grimes, Senior Vice President and Chief Financial Officer, commented, “We are very pleased with the expected excellent close to the fiscal year – especially the acceleration of some of our key brands in the quarter.  Nine of our 16 brands are expected to deliver double-digit revenue growth in the quarter, and Sperry is expected to have finished the year strongly, generating high-single digit revenue growth in the quarter.  Additionally, the expected outstanding cash flow performance enabled us to reduce our estimated net debt to below $700 million at year end.”

2015 Outlook And Multi-Year Investment Plan

In order to capitalize on opportunities for accelerated growth around the world, the company plans to significantly increase brand-building investments in fiscal 2015 – specifically, investments in consumer-demand creation, omnichannel initiatives and international expansion – all focused on deepening connections with consumers, elevating brand awareness and driving sustained growth for the company’s portfolio of brands.  The company estimates these incremental investments will total approximately $100 million over the next three years, approximately $30 million of which is currently planned for fiscal 2015.

With a strong close to fiscal 2014 and the current momentum in the business – coupled with the implementation of the aforementioned investment plan – the company’s preliminary outlook for fiscal 2015 is for mid-single digit revenue growth.  This outlook reflects the impact of a significantly stronger U.S. dollar, the exit of the Patagonia Footwear license and the net impact of retail store closures associated with the previously announced Strategic Realignment Plan.  In light of the strategic brand-building investments – combined with headwinds from foreign currency and pension expense (together, approximately $0.18 to $0.22 per share) – the company currently expects its full-year 2015 adjusted diluted earnings per share to be approximately flat compared to 2014.

“The company remains intently focused on building the most admired family of performance and lifestyle brands on earth and the significant incremental investments we are planning for 2015 are the next step in achieving that vision,” commented Mr. Krueger.  “We are confident it is the right time for these investments and that this strategy will position our company for accelerated growth around the world and drive significant shareholder value.”