Earnings Preview: Wolverine, Skechers, Under Armour & VF. Corp

Wolverine World Wide Inc.

After a mixed start for its fiscal year, Wolverine showed slight comeback potential in Q2 with a Wall Street beat driven by international and domestic wholesale growth.

But even with better-than-expected revenues and earnings per share (EPS), the firm’s profits declined 8 percent year-over-year, while sales at Sperry remained flat.

Also in the second quarter, Wolverine’s management announced the divestiture of Cushe to put more focus on its more profitable labels, including Keds, Merrell, Saucony and Stride Rite.

In mid-September, Wolverine pre-announced its Q3 results, revealing adjusted EPS of 47 cents to 49 cents; a low-single-digit revenue decline after adjusting for the impact of foreign exchange; flat revenue after adjusting for the impact of foreign exchange, retail store closures and termination of the Patagonia license; and a revenue decline of 4 percent to 5 percent on a reported basis.

Wolverine will release its full Q3 results on Oct. 20.

Skechers USA Inc.

Winning has been the mantra for the Manhattan Beach, Calif.-based firm for quarter after quarter this year. For the second quarter, ended June 30 2015, the firm posted revenue gains of 36 percent, obliterating Wall Street’s estimates for earnings per share — posting $1.55 for the quarter, compared to an average Street bet of $1.01.

“We expect EPS of 53 cents, which is slightly below consensus of 55 cents on higher SG&A, though we still see potential for the company to beat on top-line and margins. … ” wrote Citi Research analyst Kate McShane in a Q3 preview note on Oct. 19. “We are forecasting 29 percent total top-line growth (on 29 percent domestic wholesale, 40 percent international wholesale, and 9 percent retail comps). …”

Sterne Agee CRT analyst Sam Poser, in an Oct. 16 note, said he expects another solid quarter from the firm — making an EPS bet of 58 cents, well above consensus estimates.

“We expect international wholesale to represent 31 percent of sales in 3Q15 compared to 29 percent in 3Q14,” Poser wrote. “Skechers expects gross margin to be down modestly due to FX pressures. We are forecasting GM to decline 16 basis points, but would not be surprised by upside due to lack of promotional activity, [direct-to-consumer] and the international business.”

Skechers is expected to release Q3 earnings on Oct. 22.

Under Armour Inc.

The Baltimore-based firm started the fiscal year with mixed earnings, but a boost by NBA MVP Stephen Curry’s signature shoe helped the company land double-digit improvement in footwear and overall sales in Q2.

Under Armour’s revenues increased 29 percent year-over-year, to $784 million. However, higher expenses drove down profits by 17 percent, to $15 million, during the second quarter.

“We expect an in-line quarter (EPS of 44 cents in Q3), with focus likely turning to the preliminary FY16 outlook and recently announced management changes,” wrote Susquehanna Financial LLLP analyst Christopher Svezia. “On the latter, we don’t believe Brad Dickerson’s [COO/CFO] resignation is a signal of anything, but we hope to hear more details as his shoes will be hard to fill.”

Under Armour is expected to release Q3 earnings on Oct. 22.

VF Corp.

VF Corp.’s second-quarter earnings were an improvement following a relatively flat first quarter. The Greenboro, N.C.-based company beat Wall Street forecasts for Q2 and saw accelerated revenues across many of its key divisions.

The firm has continued to face FX pressures, however, with its international sales declining 1 percent in Q2 — though they would’ve improved by 13 percent were it not for FX woes.

Earnings for the first quarter were up 8 percent year-over-year, to $170.8 million, while sales improved 5 percent (10 percent currency neutral), to $2.48 billion.

“VF Corp. has competing forces in 3Q: weather (a warm weather U.S. drag versus an early cold [in] Europe); denim (can encouraging category signs for first time in years offset warmer U.S. trends?),” wrote UBS Investment Bank analyst Michael Binetti, “We believe the positives outweigh the negatives — and will result in a slight EPS beat in 3Q (UBS estimates: $1.13; Street: $1.12).”

VF is scheduled to release its Q3 earnings on Oct. 23.

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