Wolverine Stock Dips On Mixed Q1

Keds canvas sneakers
Keds canvas sneakers.
Courtesy photo

Wolverine World Wide Inc.’s share price fell more than 6 percent today following the company’s release of Q1 financials that missed Wall Street’s revenue forecasts but beat earnings-per-share estimates. The parent company of Keds, Sperry and Stride Rite said its performance this quarter was negatively affected by the stronger dollar.

Net Income: The company posted profits of $40.1 million for the quarter ended March 28, 2015, up from the year-ago quarter’s earnings of $37.2 million.

EPS: Earnings per diluted share were 39 cents, compared with the year-ago quarter’s 36 cents per diluted share.

Adjustments: Adjusted diluted earnings per share fell 2.6 percent, to 37 cents, compared with an adjusted 38 cents per share in the prior year (adjusted for non-recurring costs). On a constant-currency basis, adjusted diluted earnings per share rose 2.6 percent, to 39 cents.

Net Revenue: Revenues for the first quarter totaled $631.4 million, a 0.6 percent increase from last year’s Q1 revenues of $627.6 million.

Hit, Miss or Beat: Wolverine’s Q1 performance was mixed against Wall Street’s forecasts. Analysts polled by Yahoo Finance had predicted revenues of approximately $643.7 million, which the company missed by around $12 million. But EPS performance beat analysts’ estimates. Market watchers’ average estimate was 34 cents per share.

Executive Insights:  “The performance of the Wolverine brand in the quarter was impacted by timing delays associated with the West Coast port situation. We expect to recoup the majority of these sales in the second quarter and expect strong growth from Wolverine for the full year. The brand remains a category leader in work, while the heritage category continues to post strong results driven by the iconic 1000 Mile and Since 1883 collections.” — CEO Blake Krueger in the April 28 conference call.

“Sperry continued its resurgence following its high-single-digit growth in the fourth quarter of last year. The brand continued its positive performance by posting strong mid-teens reported growth in the quarter.” – Krueger on Sperry

“The company delivered earnings in the first quarter that exceeded our expectations. Reported financial results were excellent given the negative impact of foreign exchange, incremental pension expense and accelerated investments in demand creation and omnichannel initiatives. On a reported basis, low single-digit growth in the U.S. and Latin America and very strong double-digit growth in Asia Pacific contributed to the revenue gain in the quarter. On a constant-currency basis, we were pleased to deliver revenue growth in almost all of our major geographic regions.” – Don Grimes, Wolverine’s SVP and CFO, in a release.

Looking Ahead: Based on Q1 and expectations for the balance of the year — including continued pressure from the significantly stronger U.S. dollar and the previously announced increase in brand-building investments — the company said it is reaffirming its full-year revenue and adjusted earnings-per-share guidance. This includes consolidated reported revenue in the range of $2.82 billion to $2.87 billion and diluted earnings per share in the range of $1.53 to $1.60.

The Rockford, Mich.-based company did, however, adjust its initial reported earnings-per-diluted-share guidance from $1.46 to $1.53 to a lower range of $1.42 to $1.49.

Analysts Insights: “We expect Wolverine’s stock to trade down given the lower-than-expected revenue implications. We think Wolverine’s management experience offers stability for the business based on the officers’ number of years at the company and in the industry. The company’s dividend also appears safe because of its healthy cash flow.” – Kate McShane, Citi Research analyst

“We believe [Wolverine] remains focused on supporting the global growth of its branded portfolio, deepening consumer engagement, deleveraging the balance sheet and returning cash to shareholders. That said, increased investments and pension expenses are weighing on near-term results, and while we agree with management’s initiatives to fuel long-term growth, we prefer to remain on the sidelines for more conviction that investments will, in fact, drive greater returns.” — Danielle McCoy, Wunderlich Securities Inc. analyst

“Revenue growth continues to be elusive. The Sperry and Merrell brands are properly positioned and it’s unclear if true progress is being made. [Fiscal year 2015] revenue guidance is more back-half weighted than it was following [the fourth quarter of 2014]. The 2015 guidance for a 2 percent – 4 percent increase in reported revenue remains a risky proposition.” –Sam Poser, Sterne Agee analyst.