Strong Backlogs Buoy Wolverine

Wolverine World Wide Inc.’s solid performance in the first quarter typifies continued strength in the footwear category, analysts said.


“Right now, higher prices have not yet affected consumers’ appetite for soft goods, and stores are not in an overly promotional environment, which is all great news for the first quarter,” said Steve Marotta, an analyst at CL King & Associates.


Wolverine managed to deliver a slight increase in gross margin — 30 basis points — in the first quarter, despite supply-chain headwinds that still plague the industry. And the Rockford, Mich.-based firm said it will continue to offset price increases by moving to factories in lower-cost regions, re-engineering product and making selective price increases.


“At the moment, we are seeing virtually no push-back to the product price increases that we put [out in] the marketplace,” Wolverine Chairman and CEO Blake Krueger said in a call with analysts. “We’re a firm believer in being smart enough and doing enough to maintain our gross margins, even in this tough and [costly] environment. So we take a blended, multipronged approach, and our strategies really haven’t changed.”


All divisions reported sales growth in the quarter, with the Outdoor group leading the charge, thanks to Merrell’s new Barefoot collection, which launched in February and “exceeded our initial expectations [with] sell-throughs [being] better than expected,” said Krueger.


Revenue from the Outdoor group grew 22 percent to $138.1 million, while Heritage sales advanced 18 percent to $111.1 million and sales from the Lifestyle brands inched up 1 percent to $52 million.


Following the successful debut of Merrell Barefoot, Wolverine will introduce a broader, more versatile fall collection under the label that will feature new materials, colors and leathers, said Krueger, as the firm continues to see “a significant amount of at-once orders as retailers try to keep up with strong consumer demand.”


Overall backlog was up more than 30 percent at the end of the quarter, “which is frankly a little bit higher than where we expected to be at this particular time,” said Krueger. Meanwhile, inventory was up 46 percent, reflecting the impact of accelerated purchases, higher product costs and the strength of the backlog.


“Every brand group in our portfolio [is] poised for strong growth for the remainder of the year,” said Donald Grimes, Wolverine’s CFO and SVP. “We also delivered strong revenue growth in every global region.”


For the first quarter ended March 26, the firm earned $35.9 million, or 72 cents a share, an increase of about 30 percent from $27.5 million, or 54 cents, the same period a year ago. Revenue totaled $330.9 million, an increase of 16 percent.


Wolverine blew past analysts’ estimates, which called for earnings per share of 66 cents on revenue of $324.4 million, as polled by Yahoo Finance.


Based on continued strong order trends throughout the quarter, the firm is raising its guidance for the full year. It now predicts EPS will rise 10 percent to 15 percent, to between $2.40 and $2.50. Revenue is expected to grow to about $1.4 billion.


Wolverine ended the quarter with cash and cash equivalents of $91.6 million, up from $84.9 million a year ago, and no long-term debt.


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