Analysts Upbeat on Wolverine Q1 Performance

BOSTON — Wolverine World Wide Inc. had a self-described “blockbuster” quarter, where earnings more than doubled. Now analysts are expecting to see more of the same from the firm during the remainder of 2010.

After Wolverine reported new expectations for sales of $1.16 billion to $1.19 billion in the year, with adjusted earnings per share of $1.92 to $2, at least two analysts raised their annual EPS estimates on the company last week, saying those expectations were conservative. Wall Street, on average, is now predicting revenues of $1.19 billion and EPS of $2.02.

Analyst Sam Poser of Sterne Agee predicted that fashion trends would likely aid the firm’s sales this year. “The Wolverine collection boots fit in well with the developing men’s boot trend, vintage Americana trend and what we call ‘quality grunge’ trend,” Poser wrote in a note. He lifted his EPS estimate to $2.19 from $2.13.

“We contend that, due to trend-right product and an improving environment, the order backlog will remain over 20 percent when Wolverine reports earnings in July, and we expect guidance to catch up with our estimates,” the analyst said.

Indeed, backlogs were up 30 percent through the end of the prior week, Wolverine said on its conference call. That led analyst Christopher Svezia of Susquehanna Financial Group to state that the company’s guidance leaves room for improvement. “Current orders reflect about 80 percent of expected second-quarter revenue, 70 percent of third quarter and 40 percent of fourth quarter,” he wrote in a report. “However, given market share gains within key brands and increased door penetration of key product, we look for strong second-half sales trends that would ultimately yield greater operating leverage.”

Svezia is expecting adjusted EPS of $2, versus a prior estimate for $1.98. His prediction on revenues also rose to $1.19 billion from a previous outlook for $1.18 billion.

During its call, Wolverine management said comps at retail stores jumped 16 percent in the first quarter, which also gave Poser more faith in the firm’s long-term prospects.

“We expect to see the sales momentum continue throughout 2010 as boot sales continue to ramp up. It appears to us that we are about to experience a trend that will be similar to the boot trend of the mid-1990s, where brands such as Dr. Martens excelled,” he said.

Wolverine reported last Tuesday that first-quarter earnings rose to $27.5 million, or 54 cents a share, from $10.5 million, or 21 cents, last year. Excluding a charge related to restructuring, the company said it would have earned 56 cents, which would compare with 41 cents last year. On this basis, analysts were expecting 49 cents.

Revenues rose to $284.9 million from $255.3 million a year ago. By division, Wolverine Footwear Group revenues totaled $56.7 million from $53.4 million a year ago. Sales in Wolverine’s Outdoor Group rose 38 percent to $113.5 million, while Hush Puppies saw sales increase 14 percent to $39.3 million. In the Heritage Brands Group, sales grew 18 percent to $49.4 million.

Poser noted that this was the first time since the third quarter of 2005 that Wolverine had sales increases in all its divisions.

International revenue, meanwhile, made up about 42 percent of the firm’s revenues. “Many of our key global markets are showing signs of economic recovery, and the footwear sector, consistent with our expectations, is one of the consumer categories that is on the leading edge of the recovery,” Blake Krueger, chairman and CEO of Wolverine, said on the call.

He later added, “While retailers appear to be placing orders somewhat earlier to make sure their shelves are full and to ensure fresh product is available when needed, the increased flow of incoming orders is consistent with the global economic recovery and the momentum we see in our business.”

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