05 Nov Wolverine Worldwide Tops Expectations On Strength In Performance And Work Brands
Wolverine Worldwide reported earnings fell in the third quarter ended September 26 on a 14 percent revenue decline, but both exceeded internal expectations. Saucony and Chaco delivered double-digit revenue growth, while Merrell and its work brands drove sequential revenue improvement versus Q2.
“The company’s third-quarter results significantly exceeded our expectations, reaffirming the inherent strength of our portfolio and strong brand positioning in winning product categories and distribution channels,” said Blake W. Krueger, Wolverine Worldwide’s chairman and chief executive officer. “Saucony and Chaco delivered double-digit revenue growth in the quarter compared to the prior year, while Merrell and our work brands drove meaningful sequential revenue improvement versus Q2. Innovative, fresh product paired with compelling storytelling continued to fuel demand, as evidenced by our owned eCommerce business, which grew over 56 percent compared to last year. Our relentless focus on product design and the development of digital capabilities has served the business well and will remain central to our multi-year investment strategy. I am encouraged by our growing momentum in the face of the headwinds created by the global pandemic and excited about the growth opportunities in front of the company for 2021 and beyond. Our strong digital strategy and improved visibility to wholesale demand should enable us to return to meaningful growth in Q1 of 2021.”
Third Quarter 2020 Review
- Reported revenue was $493.1 million, down 14.1 percent versus the prior year. On a constant-currency basis, revenue was down 14.6 percent versus the prior year. Owned eCommerce revenue grew 56.4 percent versus the prior year. Sales were ahead of Wall Street’s consensus estimate of $460.81 million.
- Wolverine Michigan Group’s sales were down 9.9 percent on a reported basis to $287.3 million and off 10.2 percent on a currency-neutral basis. The Michigan Group includes Bates, Cat Footwear, Chaco, Harley-Davidson Footwear, Hush Puppies, HyTest, Merrell, and Wolverine.
- Wolverine Boston Group’s sales fell 19.7 percent on a reported basis to $193.8 and fell 20.3 percent on a currency-neutral basis. Wolverine Boston Group includes Keds, Saucony and Sperry Top-Sider.
- Reported gross margin was 41.0 percent compared to 42.4 percent in the prior year.
- Reported operating margin was 8.6 percent, compared to 11.9 percent in the prior year. Adjusted operating margin was 10.6 percent, compared to 14.1 percent in the prior year.
- Reported diluted earnings per share were 27 cents a share compared to earnings per share of 57 cents in the prior year. Adjusted diluted earnings per share were 35 cents and, on a constant-currency basis, were 34 cents, compared to $0.68 in the prior year. Results exceeded Wall Street’s consensus estimate of 27 cents.
- Inventory at the end of the quarter was down 22.0 percent versus the prior year and down 22.8 percent when excluding the impact of new stores and the incremental cost of new tariffs.
- Cash flow from operating activities in the quarter was $96.5 million, compared to $12.1 million in the prior year.
- Cash-on-hand at the end of the quarter was $342.0 million compared to $125.2 million in the prior year.
“The company continued to deliver quality results by executing on the key priorities we outlined earlier this year, which included a heightened focus on positive cash flow, a healthy balance sheet, profitability, and setting the company up for growth in 2021,” said Mike Stornant, senior vice president and chief financial officer. “During the last two quarters, which were significantly impacted by the global pandemic, the company delivered solid earnings and exceptional cash from operations of over $210 million. While consumer demand exceeded our expectations during this time, we have been able to service the business at a high level and manage our inventory levels down by 22 percent compared to last year at quarter-end. We expect that headwinds caused by the pandemic will persist in the near-term and that fourth-quarter revenue will be down no more than 25 percent year-over-year, including the effects of a partial shift in revenue from our international business into the first quarter of 2021. We will continue to invest in the ongoing momentum of our key brands to enable accelerated growth in the first quarter of 2021.”