Pondering Wolverine’s Strategy Post Deal

For Wolverine World Wide Inc. Chairman and CEO Blake Krueger, last week’s $1.23 billion acquisition of Collective Brands Inc.’s Performance & Lifestyle Group marked the conclusion of an arduous deal-making process that began last summer.

But in many ways, the hard work is just beginning for the executive, who has already begun crafting his strategy for PLG’s Saucony, Sperry Top-Sider, Keds and Stride Rite brands.

“I’m kind of champing at the bit to get our hands on it, start working with the management team and thinking through some synergies and growth ideas,” Krueger told Footwear News last week.

While industry insiders cautioned that obstacles remain, particularly for Keds and Stride Rite, they were overwhelmingly upbeat on the deal as a whole, namely the long-term potential for Saucony and Sperry.

“These brands will give [Wolverine] a platform to do some very creative things in the U.S. and overseas,” Larry Tarica, co-president of Jimlar Corp., a division of Li & Fung, said at last week’s American Apparel & Footwear Association conference in New York.

Analyst Mitch Kummetz of R.W. Baird & Co. noted that before the acquisition Wolverine’s growth prospects were overly dependent on its Merrell brand, but the new labels now offer plenty of opportunity.

“Sperry and Saucony are benefiting from strong underlying trends in their core businesses,” Kummetz said, adding that their futures hold a lot of promise. For example, Sperry can become a bigger player in the international sphere, add retail doors and continue to expand into new categories. And for Saucony, there is potential for global expansion and growth in apparel and accessories, the analyst said.

Matt Powell, analyst at SportsOneSource, said, “Merrell has been edging into the running business through outdoor, and now Saucony gives [Wolverine] a legitimate running brand. There can be a lot of sharing of ideas and manufacturing techniques between the two of them.”

But, he added, “Keds is the one name that doesn’t fit quite as well into the rest of the portfolio. Do they spin it off or take it down-market? It’s been on a very slow road to recovery.”

Ed Habre, president and CEO of Portland, Ore.-based The Shoe Mill, took a different view. “Maybe Keds can be revived to its glory days,” he suggested. “[Wolverine] has great sourcing connections, and more than that, they get creative with their brands.”

Other executives also weighed in on a much-needed overhaul of Stride Rite, as well as some possible cannibalization between Sperry and Wolverine’s Sebago brand.

Bob Campbell, chairman and CEO of BBC International, said he couldn’t think of a better company to oversee these businesses. But, he cautioned, “The Stride Rite business is going to take time for them to figure out. They’ll have a harder time with this. Stride Rite needs to be fixed, repositioned a bit, brought back to its roots. It will be interesting to see whether they decide to keep the kids’ portion of their business in-house or [seek the expertise] of a licensee or partner.”

Roger Brooks, president of Brooks Shoes for Kids, which has locations across California, noted that Stride Rite had veered away from its core business under Collective. “They let other vendors eat away at [it],” he said. “I’d like to see [Wolverine] bring back a widths selection. I would hope that these new businesses could be run with the same energy as a brand like Merrell.”

Meanwhile, Dave Levy, owner of Hawley Lane Shoes in Connecticut, wondered how much Sperry and Sebago, both with a boat shoe heritage, would overlap. “It would make a lot of sense for them to change up the distribution strategy, keeping Sperry in the better channels and moving Sebago into lower distribution channels,” he said.

Management, for its part, touted synergy between the two brands. Speaking on a call with analysts last week, Krueger said they are very distinct players with strengths in different parts of the world.

“Sebago as a brand is more premium, more classic, extremely strong in Europe and certain international markets, [and] still primarily a men’s brand. Sperry [is] virtually a U.S.-only business. Already it’s got non-boat-shoe businesses approaching 50 percent. It skews much more heavily to women’s. It’s younger. It’s more fashion-oriented. There’s certainly a place for both of these brands, and frankly, a lot of growth. We didn’t limit ourselves to one workboot brand, and that’s served us very well over the years. We like having a lot of ammunition,” Krueger said.

He added, “Sperry is a true gem. The brand is simply on fire. When you stop and look at the two or three biggest short-term opportunities [from this deal], first and foremost, you’d obviously have to say Sperry.”

The CEO said Keds gives Wolverine a foothold in vulcanized footwear, “which, as everyone knows, is a very sizeable space in the global footwear market. Keds is sitting there today with a blank piece of paper. I’ve spoken to their new leader, [Rick Blackshaw], and he’s got some great ideas. It’s the smallest business in the portfolio, but one with the best [brand recognition].”

Krueger reiterated that all four new brands fill white spaces in Wolverine’s portfolio. The deal, the largest since VF Corp. acquired The Timberland Co. for $2 billion last June, will lead to combined revenues of $2.5 billion for the firm.

As for internal changes, the PLG headquarters will remain in Lexington, Mass., and Gregg Ribatt, president and CEO of PLG, will report directly to Krueger.

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