Market Watchers Upbeat on Wolverine After Solid Results

Market Watchers Upbeat on Wolverine After
Fall '11 styles from the Wolverine 1000 Mile Collection

After Wolverine World Wide Inc. posted a strong third quarter last week, analysts said the company is well positioned for the next six months.

“They mentioned that backlog is pretty evenly balanced between [the] fourth and first [quarters], which suggests they should get off to a good start next year,” said Mitch Kummetz, an analyst at R.W. Baird & Co.

And a strong performance in the Outdoor Group, which comprises Merrell, Patagonia Footwear and Chaco, should continue to drive the firm.

“They’ve often talked about the potential for Merrell to be a $1 billion [brand], and it seems likely the Outdoor Group and Merrell will continue to outpace [the other brands in the portfolio],” Kummetz said.

In a conference call to analysts last week, the firm’s president, chairman and CEO, Blake Krueger, said, “The Outdoor Group … continues to be the company’s largest revenue and earnings contributor, and was the biggest source of revenue growth in the third quarter. All three brands grew revenue at a strong double-digit pace in the quarter.”

In particular, he highlighted Merrell’s Barefoot and Origins collections as standouts.

Operational savvy should also help the company maneuver through any economic uncertainty, according to Jonathon Grassi, an analyst at Longbow Research.

 “The management team continues to be one of the better groups from an operational standpoint, and that’s shown through the improvement they had in gross margin despite product cost increases,” he said.

Net income for the quarter ended Sept. 10 rose 18 percent to $40.4 million, or 82 cents a diluted share, from $34.1 million, or 70 cents, a year earlier.

Wolverine CFO Donald Grimes said that while backlogs had increased 8 percent in the quarter compared with the year-ago period, at-once orders for the company have risen 20 percent in the past few months, a trend he said coincided with the “pretty significant downward shift in the macroeconomic environment.”

However, Wolverine was projecting year-end inventory to be in line with its full-year revenue growth.

Sales during the recent period increased 13 percent to $361.6 million, from $320.4 million, driven by a 20 percent increase in revenue by the Outdoor Group, and 22 percent growth in the Lifestyle Group, which includes Hush Puppies, Sebago, Cushe and Soft Style.

The company now expects full-year earnings will range from $2.46 to $2.52, up from the $2.40 to $2.50 previously anticipated. 

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