03 May Wolverine’s Q1 Exceeds Guidance
Wolverine Worldwide reported second quarter earnings on an adjusted basis slid 18 percent but both revenue and earnings exceeded expectations. Said said Blake W. Krueger, Wolverine Worldwide’s Chairman, Chief Executive Officer and President.
Adjusted financial results exclude restructuring and impairment costs. References to underlying revenue indicate reported revenue adjusted for the impact of foreign exchange, retail store closures, and the exit of certain brand businesses.
“We exceeded expectations for both revenue and earnings in the first quarter and believe the company is well-positioned to achieve our objectives for the year,” said Blake W. Krueger, Wolverine Worldwide’s Chairman, Chief Executive Officer and President. “The actions we have taken over the past several quarters – particularly reorganizing our brand groups, adjusting our store fleet to address changing consumer preferences and assigning new leadership to key strategic initiatives – have gained traction and are already having a positive impact. Our portfolio of leading brands and continued operational excellence served us well during the quarter and will provide us with critical competitive advantages moving forward.”
FIRST-QUARTER 2016 REVIEW
- Reported revenue of $577.6 million exceeded guidance and consensus. Underlying revenue declined 6.6 percent, and reported revenue declined 8.5 percent versus the prior year.
- Adjusted gross margin on a constant currency basis was 41.6 percent, an increase of 20 basis points versus the prior year. Reported gross margin was 39.6 percent, compared to 41.4 percent in the prior year.
- Adjusted operating margin on a constant currency basis was 9.7 percent, down 20 basis points versus the prior year but slightly better than expected. Reported operating margin was 5.9 percent, compared to 10.1 percent in the prior year.
- Adjusted diluted earnings per share of $0.29 exceeded guidance. On a constant currency basis, adjusted diluted earnings per share were $0.34 versus $0.37 in the prior year. Reported diluted earnings per share were $0.18, compared to $0.39 per share in the prior year.
- Cash and cash equivalents were $158.2 million, and net debt was $712.1 million at quarter end.
- Inventory balances at the end of the quarter were approximately $6 million lower than the company’s plan.
- The company repurchased 200,000 shares during the quarter at an average price of $17.78 per share.
“The first quarter provided an encouraging start to the year, and we are pleased to have exceeded our expectations for revenue, earnings and inventory management,” stated Mike Stornant, senior vice president and chief financial officer. “More importantly, the initiatives we have recently implemented to drive product innovation, consumer insight and further operational excellence are moving forward on or ahead of our plans. The investments and actions that we are currently taking are focused on accelerating growth and enhancing our future operating margin and cash flow. We are energized by the opportunity to enhance shareholder value through these initiatives.”
FISCAL 2016 OUTLOOK
The company is reaffirming its revenue and adjusted diluted earnings per share guidance for fiscal 2016 as well as its outlook for inventory, as follows:
- Consolidated reported revenue in the range of $2.475 billion to $2.575 billion, representing an underlying revenue decline in the range of approximately 4.3 percent to 0.5 percent. On a reported basis, a revenue decline in the range of approximately 8.0 percent to 4.3 percent.
- Adjusted diluted earnings per share in the range of $1.30 to $1.40. On a constant currency basis, adjusted earnings per share in the range of $1.48 to $1.58. Reported diluted earnings per share in the range of $1.16 to $1.26.
- Inventory to reach normalized levels during the back half of the year in line with previous expectations.
“Our business model continues to provide a strong foundation and to mitigate global macroeconomic risks. Additionally, our recent strategic actions are progressing well and gaining strong momentum,” said Krueger. “I am pleased with our start to 2016, but we remain appropriately cautious given the slow pace of the global recovery and are reaffirming our outlook for the year. We continue to be confident in the initiatives in place to drive profitable growth, and I am excited about the direction of the company moving forward.”
The company’s portfolio of brands includes: Merrell, Sperry, Hush Puppies, Saucony, Wolverine, Keds, Stride Rite, Sebago, Chaco, Bates, and HYTEST. The company also is the global footwear licensee of the brands such as Cat and Harley-Davidson.