14 Oct Wolverine Worldwide Tops Q3 Profit Expectations
Wolverine Worldwide reported third quarter revenues reached $711.1 million – down 0.8 percent versus the prior year, but in line with the company’s previous guidance – and strong adjusted diluted earnings per share growth of 8.6 percent to 63 cents a share. Wall Street’s consensus estimate had been 59 cents a share.
“Highlighting the strength of our diverse global business model, strong revenue results across multiple geographies, particularly Asia Pacific and EMEA, offset what continues to be a somewhat tepid retail environment in the U.S.,” said Blake W. Krueger, Wolverine Worldwide’s Chairman and Chief Executive Officer. “We still expect 2014 to be another year of record revenue and record earnings for the company, driven by the global appeal of our brand portfolio and our disciplined operations.”
THIRD-QUARTER 2014 REVIEW
Third-quarter financial results included the following highlights. Adjusted financial results exclude acquisition-related integration and restructuring costs.
- Consolidated revenue declined slightly to $711.1 million, as mid-single digit growth from the Heritage Group and low-single digit growth from the Performance Group were offset by a mid-single digit decline in the Lifestyle Group.
- Gross margin was 40.0 percent compared to the prior year’s gross margin of 39.9 percent.
- Adjusted operating expenses in the quarter were $186.8 million, a decline of 2.8 percent versus the prior year. As a percentage of revenue, adjusted operating expenses were 26.3 percent compared to 26.8 percent in the prior year. Reported operating expenses in the quarter were $197.1 million, a decline of 1.3 percent versus the prior year.
- Adjusted operating margin expanded 70 basis points to 13.8 percent. Reported operating margin expanded 30 basis points to 12.3 percent.
- Adjusted diluted earnings per share increased 8.6 percent to $0.63, compared to an adjusted $0.58 per share in the prior year. Reported diluted earnings per share were $0.57, an increase of 5.6 percent compared to the prior year’s reported earnings of $0.54 per share.
- Inventory at the end of the third quarter was up slightly – only 0.8 percent – compared to the prior year.
- Operating free cash flow was $39.6 million in the quarter – a significant increase over the same period last year – and $90.4 million for the first three fiscal quarters of the year. The company reduced its debt by approximately $35 million in the quarter, reflecting both scheduled payments and a voluntary $25 million principal payment made in mid-July.
- The company ended the quarter with cash and cash equivalents of $231.5 million and net debt of $865.1 million, a reduction of $129.2 million from the same period last year.
Don Grimes, Wolverine Worldwide’s Senior Vice President and Chief Financial Officer, commented, “The company remains focused on driving growth across our portfolio, and we are very pleased to have delivered strong earnings performance – above our expectations going into the quarter – with revenue in line with guidance, gross margin expansion and continued expense discipline.”
Based on third-quarter results and expectations for the balance of the year, the company is adjusting its outlook for full-year consolidated revenue to approximately $2.745 billion, representing growth of approximately 2 percent compared to the prior year’s revenue of $2.69 billion. The company is reaffirming its adjusted diluted earnings per share estimate in the range of $1.57 to $1.63 – growth of 10 percent to 14 percent compared to the prior year’s adjusted diluted earnings per share of $1.43. On a reported basis, diluted earnings per share are expected in the range of $1.32 to $1.38.
The company’s portfolio of highly recognized brands includes: Merrell, Sperry Top-Sider, Hush Puppies, Saucony, Wolverine, Keds, Stride Rite, Sebago, Cushe, Chaco, Bates, HYTEST, and Soft Style. The Company also is the global footwear licensee of the popular brands Cat and Harley-Davidson.