What To Expect When Wolverine Reports Q4

Keds blue shoes
A style by Keds.
Courtesy of brand.

Much of fiscal year 2015 has been rife with challenges for the retail sector, and Wolverine World Wide Inc., with its full stable of shoe brands, has been no exception.

In Q3, the firm met Wall Street financial forecasts, although both its revenues (down 4.5 percent) and profits (down 21 percent) declined.

While macroeconomic challenges — including a stronger U.S. dollar, sluggish retail traffic overall and China’s economic perils — created headwinds in FY15, analysts also pointed to company-specific issues. Among their concerns, insiders have mentioned ongoing flat revenues at Sperry, lackluster brick-and-mortar performance at Stride Rite and low brand awareness for Merrell — something Wolverine Chairman and CEO Blake Krueger said he is aggressively working on.

As Wolverine readies to report Q4, analysts expect that ongoing challenges could continue to weigh.

In light of the warmer-than-expected weather patterns throughout most of the continental United States during the fourth quarter, we are trimming our sales and earnings estimates accordingly,” CL King & Associates analyst Steve Marotta wrote on Feb. 11. “Retail traffic trends, already under pressure from e-commerce activity, were further pressured by the aforementioned unseasonable temperatures… We are lowering our FY15 earnings-per-share (EPS) estimate to $1.41 from $1.46, FY16 to $1.50 from $1.55 and initiating an FY17 EPS estimate of $1.70. We are lowering our price target for the stock to $21 from $24 commensurate with the reduction in our earnings estimates.”

Still, Marotta said he believes Wolverine’s stable of brands “remain relevant.”

“The company’s position as consolidator in a consolidating industry is a competitive advantage which, we believe, will lead to valuation multiple expansion over time,” Marotta added, maintaining a buy rating on the stock.

Consensus estimates see Wolverine posting Q4 diluted EPS of 28 cents and revenues of $751.35 million. Citi Research analyst Corinna Van der Ghinst said her expectations are mostly in line with Wall Street’s forecasts.

We expect EPS of 28 cents, in line with consensus and below guidance of 31 cents to 34 cents,” Van der Ghinist wrote in a preview note. “We are forecasting a 6.6 percent revenue decline year-over-year, including 500 basis points of FX headwinds and over a tougher comparison last year… While Heritage likely outperformed the portfolio on a strong heritage boot trend, we believe Merrell, Saucony, and Keds likely underperformed versus plan.”