Wolverine Hunts for Growth

Wolverine Hunts for Growth
Merrell store

NEW YORK — Wolverine World Wide Inc. is upbeat on 2012 and is in the market for an acquisition, although analysts are mixed on the year.

The firm expects full-year revenue growth of between 5 percent and 8 percent, and earnings-per-share growth between 5 percent and 9 percent, with the back half driving the majority of the increases.

“We’ve talked to all our key retailers. We know their inventories are pretty healthy right now and that they’re not especially bloated, with maybe the exception of a little cold-weather product,” Wolverine Chairman, President and CEO Blake Krueger said in a call with analysts. “We know they’re looking for product innovation for the fall. We feel very good about the fall and our product innovation and our offerings.”

Donald Grimes, SVP and CFO, added, “Mathematically, we have much easier comps in the second half of the year. In the first half, we’re going against [a range of] plus 16 percent and plus 20 percent; [in the back half], they’re easier.”

But Susquehanna Financial analyst Christopher Svezia said, “They’re putting a lot of their eggs in one basket for the next fourth quarter. Many retailers are going to be conservative given how warm this past winter was, so I have an issue with that [far a] visibility.”

Kate McShane, analyst at Citi Investment Research, cited the expansion of the popular Merrell Barefoot range and the authentic American brand positioning as revenue drivers, but also sounded a note of caution. “Wolverine cited a tough reorder environment on sluggish cold-weather product,” she said.

Europe also may be a wild card, as the firm does about 20 percent of its volume in the region. Krueger noted the company is “seeing some softness, especially in the U.K. market, and maybe a little less so in southern Europe and then greater strength in northern Europe.”

As market sentiment continues to swirl around Wolverine possibly buying at least part of Collective Brands Inc., Krueger said, “We’re very good at taking brands and keeping them very distinct and plugging and playing them through our international network. There are some opportunities out there and we’re looking at them.” (He did not comment specifically on a potential Collective deal.)

Grimes added, “Suffice [it] to say, we have said repeatedly that we’d like our next acquisition to be a little larger than either Chaco or Cushe. So there is a sweet spot we’re targeting, and there are a number of opportunities that may fit that.”

The executives went on to detail how much debt they would be willing to take on to potentially fund a larger acquisition.

“We’re not looking to become a highly leveraged company, but … bankers are frequently in my office talking about ways that they can help us out,” said Grimes.

“We have a number of restrictions on our revolver regarding how much we can borrow, but revolvers can be refinanced,” he added. “If we did something that was kind of medium to medium-large, then we’d probably be looking at raising money anyway, in which case we probably would replace the revolver with something else.”

Wolverine ended the year with $140 million in cash.

For the quarter ended Dec. 31, the Rockford, Mich.-based firm earned 47 cents a share, down 9 percent from 52 cents a year ago. Revenue was impacted by soft at-once orders from the mild winter and advanced 5.6 percent to $406.5 million.

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