Futures Drive Wolverine

NEW YORK — Wolverine World Wide Inc.’s momentum is set to continue into the back half of the year, thanks to strong futures orders, said analysts.

“The backlog being up 55 percent is excellent,” said Susquehanna Financial analyst Christopher Svezia. “The fact that they’re doing more business on futures versus [at-once, and] that revenue is set to go up in the mid-teens in the fourth quarter, is directionally good.”

Mitch Kummetz, an analyst at Robert W. Baird & Co., noted that the company’s backlog is stronger for the first two quarters of 2011 than for the fourth quarter of this year. “In short, Wolverine now has some visibility into the first half of 2011, and the sales outlook seems to be very positive,” he said.

Executives at the company said the increase in futures is partly attributable to early order placement by key customers attempting to combat longer product lead times.

“[But] the vast majority of the order book increase reflects the success of our innovative product and marketing initiatives, enhanced consumer connections and greater customer service support,” Chairman and CEO Blake Krueger said on a conference call with analysts.

Looking ahead, Krueger predicted that the industry-wide supply chain challenges will start impacting the company’s bottom line from the fourth quarter into 2011, and hopes to counter the pressures with scale and pricing flexibility.

Wolverine saw broad-based growth in the third quarter, achieving the highest revenues and earnings per share in the company’s history, the Rockford, Mich.-based firm said.

Among the revenue drivers was “a strong consumer sentiment for things that are real, things that have a heritage, things that are authentic,” said Krueger, pointing to Wolverine’s Thousand Mile boots and Hush Puppies’ 1958 collection. Across the board, the Outdoor, Heritage Brands and Wolverine Footwear groups all delivered strong double-digit increases in operating profit.

“Our inventory is very, very clean, and right now we’re chasing demand,” Krueger said.

Wolverine’s third-quarter net income increased 27 percent to $34.1 million, from $26.8 million in the same period a year earlier. Earnings per share for the period ended Sept. 11 rose to 70 cents, from an adjusted 62 cents a year ago.

Revenue totaled $320.4 million, an increase of 12 percent. Analysts, as polled by Yahoo Finance, were looking for 67 cents on revenue of $320.2 million.

Despite stronger growth in the firm’s international markets, which typically yield a high gross margin, thanks to the royalty business, gross margin in the quarter remained flat, at 40 percent.

Operating expenses rose 9 percent to $80.7 million, driven by planned investments in “key strategic growth initiatives,” which included a 24 percent increase in marketing expenses, while general and administrative expenses fell 5 percent.

“The actions we took last year to position the company for accelerated growth coming out of a recessionary environment are having the intended beneficial impact,” said Krueger.

Wolverine ended the quarter with $95.3 million worth of cash and cash equivalents, up from $78.5 million a year ago, and no significant long-term debt. The company is increasing its full-year earnings outlook to between $2.04 and $2.08 per share, up from last year’s adjusted EPS of $1.77.

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