Wolverine Looks for Bright Year Ahead

NEW YORK — Analysts last week said Wolverine World Wide Inc. is off to a running start in 2011, thanks to momentum in the higher-margin end of the business and a favorable shift in its product mix.

“Their overall spring backlog is up 38 percent, a figure that is better than the industry average,” said Mitch Kummetz, analyst at Robert W. Baird. “It’s indicative of how strong their brands are, and the Merrell piece is probably the strongest, with the Barefoot Collection definitely contributing to that.”

Wolverine CEO Blake Krueger said on a conference call with analysts that as of year’s end, the backlog for Merrell Barefoot was roughly 400,000 pairs, exceeding all previous product launches for the brand, even that of the now-iconic Jungle Moc in 1998.

“Four hundred thousand pairs is a big number. Assuming an average price point of $100, that means a wholesale price point of $50, so you can think of it as a $20 million business, and that’s just for the spring-summer,” said Kummetz.

The Merrell Barefoot Collection is being delivered to retailers this month.

Meanwhile, Wolverine’s fourth-quarter sales saw broad-based, double-digit growth. Asia Pacific was the fastest-growing region with a 39 percent jump in sales, followed by Latin America at 17 percent and Canada at 16 percent, according to Donald Grimes, SVP and CFO of the company.

The Wolverine Footwear group, comprising the Wolverine and Bates brands, logged fourth-quarter revenue of $97.9 million, up 28 percent from last year, and full-year revenue of $274.9 million, an increase of 18 percent.

The Heritage Brands group, which includes Sebago, Caterpillar and Harley-Davidson, finished the year with double-digit sales growth.

And the Outdoor group, the company’s largest revenue and earnings generator, consisting of Merrell and Patagonia, saw sales swell 22 percent to $134.9 million in the fourth quarter, and they rose 12 percent to $467.6 million for the full year.

Wolverine’s e-commerce business also had a good year, achieving a sales increase of more than 50 percent. “We view our Consumer Direct business as a huge growth opportunity for the company as it only accounts for about 7 percent of our reported sales,” Krueger said.

Turning to costs, the firm anticipates product cost increases in the mid-single-digit range for the first half of the year and the upper single-digit range in the second half. Grimes said this would translate to a negative impact of between 200 and 250 basis points on gross margin.

“[But] we expect higher product costs [to] be offset both by positive mix shifts across brands, geographies and channels, [and] from selling-price increases,” he added.

For the fourth quarter ended Jan. 1, Wolverine earned $25.6 million, or 52 cents a share, up from $16.7 million, or 33 cents, in the same period a year ago. Group revenue increased 23 percent to $385 million.

For the full year, earnings rose to $104.5 million, or $2.11 per share, from $61.9 million, or $1.24 per share, in 2009.

Wolverine said it expects earnings per share for fiscal 2011 to be $2.35 to $2.45, reflecting a year-on-year growth of between 8 percent and 13 percent.

Wolverine also stated that it “continues to seek the right brands to add to the portfolio, although we will remain disciplined to pursuing acquisitions and shareholder value.”

The firm ended the period with cash and cash equivalents of $150.4 million, down 6 percent from $160.4 million as of Jan. 2, 2010.

Wolverine’s stock also hit a new 52-week high of $35.24 last Thursday.

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