Christopher Svezia, an analyst at Susquehanna Financial Group, said that during the second quarter, retailers were focusing on at-once orders, still feeling the sting of the recession. But now they are moving toward a more normal ordering and pre-booking process, which could reap rewards for Wolverine in 2010.
“A lot of retailers have focused on the at-once business, and that was reflected in [the company’s] second quarter. The third quarter was based more on futures, which is good to hear,” said Svezia.
Robert W. Baird & Co. analyst Mitch Kummetz agreed that Wolverine has reason to be hopeful. “I don’t know that the pendulum has swung completely back, but [the business cycle] is getting more normal,” he said.
“Most retailers will be in a better position to pre-book orders for fall than they were for spring,” Kummetz added. “Retailers were reluctant to put pen to paper. … [Now] a lot of the manufacturers are saying they’re not going to build a bunch of product just to store it in a warehouse.”
At Sterne Agee, senior research analyst Sam Poser, too, is looking toward a more profitable future at Wolverine, prompting him last week to shift his rating on the stock to buy from neutral. “We are raising our rating … to reflect progressively better margin outlook, potentially bottoming sales and modest valuation,” he wrote in an earnings note.
Net earnings during the quarter fell 14 percent to $26.8 million, or 54 cents a diluted share, down from $31.2 million, or 62 cents, during the same quarter a year ago. At the same time, sales dipped 10 percent to $286.8 million, compared with $318.9 million the prior year.
Analysts surveyed by Yahoo Finance had expected earnings per share of 56 cents on sales of $292.3 million.
“During the quarter, our revenue results reflected the tough environment and unfavorable currency comparisons,” President and CEO Blake Krueger said during a conference call with investors and analysts. “However, consumers actually voted with their wallets, and the strength of our brands is clearly evidenced by the strong consumer response to our product offering.”
Even while striking a tone of optimism, the CEO stressed that the economy would continue to pose a challenge for the company.
“Looking ahead, we believe the current economic challenges could continue for some period of time. … While there has been some recent improvement in a number of macroeconomic indicators, retailers will likely take a very conservative approach to inventory levels,” Krueger said. “[However], we believe they have begun to adjust to the current retail environment and are placing future orders on a more normal basis in order to keep their stores fresh and to ensure that key product will be available when needed.”
The company raised its full-year guidance and now expects EPS of $1.65 to $1.75 on sales of $1.08 billion to $1.11 billion. Previously, the company had issued an earnings guidance of $1.55 to $1.73.c