By the end of next fiscal year, the Rockford, Mich.-based firm intends to shutter 140 retail locations — primarily Stride Rite stores — in addition to consolidating its retail operations and implementing other organizational changes.
On a conference call with analysts and investors last week, Blake Krueger, chairman and CEO, said the realignment of its direct-to-consumer business will allow the company to bolster online capabilities and accelerate wholesale growth.
“To expedite the realignment, we announced the planned closure of up to 140 brick-and-mortar retail locations over the next 18 months and the related consolidation of store-operation functions,” Krueger said, noting he expects the plan will result in pretax benefits of about $11 million annually. “We anticipate reinvesting much of this benefit into e-commerce, mobile, and other omnichannel capabilities and opportunities intended to enable our consumers to engage with our brands anywhere, anytime.”
The shift comes as Wolverine posted second-quarter results that beat Street expectations.
Revenue for the period rose 4.4 percent to $613.5 million, surpassing analysts’ consensus forecast of $608.8 million.
Despite the better-than-expected results, however, analysts remained cautious about the company’s outlook for the full year.
“Given conversations with industry contacts, and despite an apparently strong backlog and new product offerings from Merrell and Sperry Top-Sider, we do not share management’s confidence for fourth-quarter results,” said Sterne Agee analyst Sam Poser.
“We expect fiscal 2014 revenue and earnings per share to fall short of guidance,” he added, noting he foresees that Wolverine will fail to reach its revenue target of $4.1 billion by 2018.
Based on Wolverine’s expectations for the remainder of the year as it rolls out its consolidation plan, the company anticipates revenue growth of 3 percent to $2.78 billion, year-on-year, at the lower end of its previously provided guidance range of $2.78 billion to $2.85 billion.
Don Grimes, Wolverine’s SVP and CFO, said that while the firm is pleased with the first two quarters of fiscal 2014, he remains cautious on the full-year outlook.
“We expect continued challenging retail conditions in the U.S. during the important back-to-school and holiday shopping seasons. More specific to third quarter, we expect that both revenue and EPS will be flat versus the prior year,” Grimes said.
Mitch Kummetz, an analyst at Baird Equity Research, said he remains lukewarm on the company after it lowered its full-year revenue outlook on revised projections for its Stride Rite and Hush Puppies brands.
“Wolverine is now taking a somewhat more conservative approach to its revenue outlook, reflective of a continued soft retail environment in the U.S.,” Kummetz said.
Based on this guidance, Kummetz lowered his fiscal 2014 EPS estimate from $1.63 to $1.60.