Wolverine Upbeat on 2010

Wolverine World Wide Inc. is looking ahead.

Despite the fact that restructuring costs and the weak economy pulled down last year’s earnings, the Rockford, Mich.-based firm was generally optimistic about its prospects for 2010.

“We saw the economic tide begin to shift in favor of our brands during the fourth quarter, with continued strong sell-throughs of our products at retail and a steady improvement in our incoming orders,” Blake Krueger, chairman and CEO, said on a post-earnings conference call. He added that backlogs were up 7 percent at year end.

Wolverine said it sees revenue growth of 3.5 percent to 6.3 percent, to $1.14 billion to $1.17 billion in fiscal 2010, while Wall Street is expecting revenues of $1.15 billion. Earnings per share are expected at $1.88 to $1.96, adjusted for restructuring charges, versus Wall Street expectations for $1.97.

Citing the positive backlogs, Christopher Svezia of Susquehanna Financial Group said in a report that “the company should see moderate fiscal-year 2010 gross margin expansion from improving product costs and lean inventories. … Ultimately, we believe that guidance will prove conservative and that the company could see both gross-margin and sales upside. Management has historically guided conservatively, and regularly exceeds quarterly expectations.” Svezia said he expects mid-single-digit sales growth in 2010.

Sam Poser of Sterne Agee agreed that Wolverine’s guidance could prove light. “The response to the product [in the second half] is far better than [what] I was hearing in the first half of the year,” he said. “So there’s upside potential.”

Wolverine reported last Wednesday that in the fourth quarter it earned $16.7 million, or 33 cents, versus a profit of $24.1 million, or 49 cents, a year ago. Adjusted for the restructuring activities, Wolverine said it would have earned 45 cents.

Revenues slipped to $312.5 million from $346.1 million the previous year.

Among Wolverine’s brands, Merrell, once again, contributed significantly to the quarter’s results. In Wolverine’s Outdoor Group, made up of Merrell, Patagonia and Chaco brands, revenues rose in the mid-single digits, and the company reported double-digit order backlogs for the first half of 2010.

Krueger said Hush Puppies “exceeded internal forecasts for the year,” while one of the firm’s newest brands, Cushe, was a success. The product is selling through nicely, and “the brand is creating buzz in the market,” he said. For Sebago, revenues increased in the double digits during the quarter in Europe, but declines were seen in the U.S.

Wolverine hinted that it is close to making a new acquisition. “We like brands with some heritage. We like brands that are authentic. They don’t necessarily have to be big. They don’t necessarily have to be important yet in the U.S.,” Krueger said.

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