NEW YORK — Analysts were upbeat about Wolverine World Wide Inc.’s new cost-cutting plan, which includes the elimination of 450 jobs, or about 10 percent of the company’s workforce. Also proposed is the closing of a tannery in Rockford, Mich., and the merging of distribution operations.
The company expects to save $17 million to $19 million annually from the restructuring, which will cost $31 million to $36 million (before taxes), with the charges recorded throughout 2009.
“In terms of the headcount, a lot of companies are finding that now that times are tougher, not everyone you employ is that necessary,” said Jeff Mintz, an analyst with Wedbush Morgan Securities. “They’re finding places were they can cut fat and not have a huge impact on business. In addition to cost savings, it also provides a really good opportunity to have a more streamlined organization.”
Sterne Agee & Leach analyst Sam Poser added, “Long term, it’s probably a good move for [Wolverine], and they’re doing it during a difficult time.”
On a conference call Thursday, Wolverine CEO and President Blake Krueger confirmed that the move is the second phase of a larger plan to reduce costs and realign the business, and that the state of the economy wasn’t a main catalyst for the various company changes.
“Very little of this was in direct response to the current market conditions,” said Krueger. “This has been under review for a little more than a year now. Even if the global economy was robust, we would still be having this announcement today.”
Still, Krueger did acknowledge that the staffing reduction and salary freeze for non-union employees was a response to the “challenging global economic conditions.”
The firm also said it will consolidate its European distribution operations into one facility and its North American distribution into existing warehouses in Michigan. It will also close its decades-old Rockford tannery in 2009 and likely outsource its leather manufacturing business. Collectively, the consolidation and closures will make up the majority of the employee cuts.
Separately on Thursday, the company announced the acquisition of Cushe, a U.K.-based fashion-forward action sports and comfort brand. The label will be headed by Martin Dean, the brand’s founder, who has also designed product for Wolverine brands in the past. Cushe will become part of the Hush Puppies group, Krueger said.
“The brand is not well known in the U.S., so it gives Wolverine the opportunity to introduce it in a big way,” said Mintz.
Krueger declined to make projections about Cushe’s performance for 2009, saying that the brand, which ships about 100,000 pairs annually, is small enough to be immaterial at this point.
“It’s an ideal plug-and-play fit for Wolverine,” said Krueger. “It’s a good fit for our international network.”