Susquehanna Financial Group LLLP analyst Christopher Svezia said three factors led him to upgrade previously neutral-rated Wolverine World Wide Inc.’s stock to positive this week.
“First, management’s full-year outlook is largely achievable as it appears that the worst of the sales and margin decline is behind the company,” Svezia wrote Thursday. “Second, consensus is underestimating the two-three year margin recovery with potential for up to 300 [basis points] of improvement.”
To round out the list, the analyst added that product trends appear to be moving in the company’s favor as evidenced by some enthusiasm he observed around Sperry’s spring non-boat-shoe business.
“Taken together, we believe that in a low-single-digit sales growth environment, management’s preliminary target of a 12 percent operating margin is becoming more tangible and could generate $2.00 to $2.15 earnings per share by FY18 versus our FY16 estimate at $1.39 (20 to 25 percent CAGR),” Svezia wrote. “Importantly, we only assume [230 basis points] of operating margin improvement by FY18 ($2.00).”
When Wolverine reported Q1 earnings in May, the parent company of popular shoe brands Sperry, Saucony, Stride Rite and Keds significantly surpassed market watchers’ estimates. Management said a series of initiatives — including reorganizing its brand groups, adjusting its store fleet (particularly for Stride Rite) and assigning new leadership to key strategic initiatives — were beginning to yield positive results.
Svezia also boosted his price target for the stock, from $18 to $25.
Nike Takes On WWE
Nike Inc. is serious about protecting its 25-plus-year-old slogan “Just Do It.”
Last week, the athletic footwear-and-apparel giant filed an opposition to the application of World Wrestling Entertainment Inc. to trademark its arguably similar slogan “Just Bring It.”
WWE initially filed its application to trademark the phrase with the U.S. Patent and Trademark Office in October 2014 — reportedly with plans to use it on clothing, including shirts, jackets, pants, underwear and sleepwear. In December 2015, the application became open to opposition, meaning that any party who believed it would be damaged by the registration of the mark could file a notice for a specified period.
In its opposition, filed on June 27, Nike said that WWE’s use of the phrase would create confusion and would cause brand dilution by “blurring.”
“[WWE’s] mark is confusing similar to [Nike’s] Just Do It mark,” Nike said in the filing. “Use and registration of [the Just Bring It] mark will inevitably lead to confusion, mistake, or deception of the public … all to [Nike’s] grave and irreparable damage.”