Wolverine Expects Back Half to Drive Full Year

Analysts are concerned with Wolverine World Wide Inc.’s reliance on the back half to buoy full-year earnings.
According to Wolverine CFO Donald Grimes, second-quarter-to-date consolidated at-once business across all brands is up almost 20 percent and had risen more than 30 percent in the last week alone, “supporting our belief that retailers have shifted and will continue to shift a substantial portion of their business to at-once orders and that our brands continue to sell-through well at retail.”
Mitch Kummetz, analyst at R.W. Baird & Co., said, “We’re encouraged by the recent uptick in at-once order activity, which could lead to upside in the second quarter, but we’re not ready to assume that at-once activity will be robust in the fourth quarter.”
Jim Duffy, analyst at Stifel Nicolaus, agreed, saying there are limited operating catalysts in the near term, when visibility is made difficult with increased reliance on at-once orders.
“We continue to take a wait-and-see approach given near-term pressures,” added Susquehanna Financial analyst Christopher Svezia.
But management sounded upbeat. Blake Krueger, chairman and CEO of Wolverine, said fashion and macro lifestyle trends continue to work in the firm’s favor globally.
“The Merrell Barefoot Collection continues to drive performance and open up new distribution for the brand,” Krueger said.  “The women’s land sandals, heel clog, Lorelei [and] sport casual programs experienced very high sell-through in the first quarter and correspondingly high reorder rates. Strategic inventory investments in key styles allowed us to fill in replenishment orders during the quarter.”
Krueger also is looking forward to what he calls “the most stable pricing environment that we’ve had in probably four years” in the second half. “I’m not saying we’re back to the good old days, but at least it’s a much more stable environment for the entire industry, and that’s reflected in our price increases,” he added.
While the firm was mum on any potential acquisitions, it expressed bullishness on its new joint ventures on foreign shores, which it inked last week in Colombia and this week in India.
“The international group has provided the vehicle for us to make significant investments in people and infrastructure to help our brands dominate on a global scale,” said Krueger. “Colombia is a country of almost 50 million people that, like many global markets, is experiencing accelerated economic growth. We have also recently executed a distribution agreement with the largest footwear and sportswear marketer and retailer in China, Belle International … for the Hush Puppies brand. These new initiatives [reflect] our strategic focus on driving accelerated growth in key global markets.”
For the period ended March 24, the Rockford, Mich.-based firm earned 64 cents a share, a decrease of 11.1 percent from 72 cents earned the same period a year ago. Net income fell 13.1 percent to $31.2 million. Revenue for the quarter slipped 2.4 percent to $322.8 million, which the firm attributed to macroeconomic and financial uncertainty in Europe leading to a soft retail environment in that market.
Wolverine raised its full-year earnings per share guidance to a range of $2.70 to $2.80, representing growth of 8.9 percent to 12.9 percent. And full-year revenue guidance also was raised to between $1.46 billion and $1.50 billion, representing full-year growth of 3.6 percent to 6.5 percent.
The firm, which is said to be in the bidding process for Collective Brands Inc., ended the quarter with $123.3 million in cash and cash equivalents.

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