Merrell is firing on all cylinders.
Wolverine World Wide broke down Merrell’s wins for the quarter on the earnings call last week, noting that revenue grew 88% year-over-year, or nearly 30% compared to 2019, with direct-to-consumer gains of 40%.
But the brand isn’t resting on its laurels.
Speaking with FN, Merrell president Chris Hufnagel confirmed the brand was hard at work on the needle-moving efforts and product drops that he detailed in January. Those initiatives include the launch of an app, updates and additions to key footwear franchises including the Moab and becoming a global head-to-toe lifestyle business.
Below, Hufnagel offers a look at what will lead its business in the back half of 2021 and addresses industry-wide challenges such as supply chain pressures.
How have supply chain pressures and congestion at the ports impacted Merrell’s business?
Chris Hufnagel: “We’re not immune. It seems like it’s industry agnostic right now. There are supply chain issues and logistics issues across the board. I certainly spent a lot of my time on the supply chain right now, monitoring it or making decisions about how we can best navigate it. We’re working hard and quickly because there is strong demand for Merrell. The demand for the Merrell brand is there, and we’re chasing supply to meet that demand as best as we can. Wolverine World Wide is a big player, and Merrell benefits from being part of the portfolio, and we have a strong global operations group that’s working to solve [problems] whether it’s sourcing issues with tier one or tier two, or logistics issues, dealing with getting containers or getting to the ports or getting stuff on airplanes or trains.”
What is your outlook on the situation for the rest of the year?
CH: “Certainly the supply chain is going to take a little bit to work itself out. I have to constantly remind myself that while I’m sitting here with you in a room without masks and we can go out to dinner or have lunch in the U.S., there’s large swaths of the rest of the world that are far behind us. There are parts where the crisis is as bad now as it has ever been. So it’s certainly going to take itself a while to work itself out. At the same time, in places where we have seen pressure from COVID like Cambodia, for example, that should work itself out fairly quickly. Obviously, there’s lots of press right now about Vietnam because there’s a lot of shoes — mainly in southern Vietnam — and hopefully those things will work themselves out as well. The important thing is that this is not a Wolverine Worldwide issue, this is an industry issue, and the amount of supply coming in is not going to meet the current demand. Brands have to navigate that as best as they can.”
Merrell’s DTC was up roughly 40% for the last reported quarter. How will brick and mortar versus e-commerce settle out for the company?
CH: “E-commerce is a huge initiative, it’s a place that we’re investing. We have seen strong returns, and building those direct connections to consumers is critically important for the livelihood of brands going forward. Consumers love the convenience of online shopping. You can literally be in an elevator or on an airplane or watching watching Netflix and shopping. That isn’t going to go away. At the same time, there is something about the human emotion and psyche that makes people want to be back in stores. I don’t think brick-and-mortar is going to dry up — but it has to be reimagined. What it used to be probably isn’t what it’s going to need to be. The retailers that can reinvent that and reimagine that are ultimately going to win. We remain bullish on brick-and-mortar, especially the category like footwear where you want to see it and touch it and try it on. We operate brick-and-mortar stores in the U.S. today, and we’re pleased by how well our stores have hung in there in the midst of the COVID crisis. While traffic continues to be challenged, we’re converting at a much higher rate and we’re pleased with the results that we’re seeing, as well as the resiliency of our teams to navigate in a super challenging time. We believe being a really good retailer, running our own stores, running our e-commerce sites, is going to make us a better wholesaler, which is important to us.”
What is the status of the Merrell app?
CH: “We’re testing it, and we like the way it looks and the way it functions. We’re working hard to make a really good debut. Last thing we want to do is launch an app and create friction for the consumer. What you see on day one will not be what you experience on day 30, but day one is going to be really good. It’s going to be a combination of both being able to engage with the brand from a content perspective and there will be a commerce access aspect where you can purchase from us. We’ll talk about our brand and our brand purpose to connect people to the outdoors. As we work to become a younger brand by appealing to a younger consumer, apps are the way things are done today.”
The company has seen momentum around new performance looks, and the lifestyle business grew strong double digits in Q2. What is the priority for the back half of 2021?
CH: “First and foremost, Merrell is a performance outdoor brand. We have 40 years on the trail, we’ve got amazing core franchises that are worn and loved the world over, and the Moab franchise is exhibit A of that. The Moab 3 will continue the franchise next year, and we’ve extended that franchise to the Moab Speed and the Moab Flight, which have been good success stories for us. Consumer reaction and response has been great out of the gate and we’re incredibly bullish about how big the Moab franchise can be. At the same time, outdoor has changed, and I give credit to the athletic players. They’ve come in and made the outdoors more athletic. Merrell probably didn’t respond quick enough, but now we are responding in a big, meaningful way, and you’re seeing it show up in products like our MTL, the Merrell Test Lab, whether it’s the MQM or the Skyfire or the Nova and Antora. Those light, fast athletic hikers or trail run, that where the business has gone. I’m very bullish on performance. I think we make some of the best innovative products in the market and we have to better communicate to consumers about how good that product is. But we have a place in lifestyle and we’ve got great products to sell, whether it’s the iconic Jungle Moc or a move into products like the Hydro Moc or the Hut Moc. That easy-on, easy-off is just such an important silhouette today. And you’re going to see important launches from us next year around cold weather boots, which is an important category for just that we don’t generally play in. We’re a performance outdoor brand, I think we make great products, but to generate real long-term sustainable growth we have to play well in lifestyle.”
How can Merrell better attract a consumer who is interested in outdoor footwear from a fashion perspective?
CH: “Fashion changed and we didn’t show people how to wear our stuff. As a leading brand, as an editor and a curator of products, we have to show people how to wear a product. If you go to Merrell.com today or if you open one of our emails or go to our Instagram feed, we’re more purposely showing people how to wear our products. We’re engaging with influencers and our social channels asking, ‘How would you wear the Jungle Moc?’ It’s the quintessential shoe, such an iconic piece and it was right for reinvention and reinterpretation. We had a style contest, [#MocMadness], saying show us how you wear the Jungle Moc and engaging people from a fashion perspective on how they actually wear it. In the past, we didn’t do enough of that.”
Looking ahead, how will consumers spend their money?
CH: “We believe back to school is going to be a good season, I think travel is going to have a moment. I was pushing my team on, ‘How do we talk about travel without saying travel?’ Merrell makes great shoes for travel. They’re versatile, you can wear them in multiple different occasions, you can pack one pair of Merrells and wear them to the airport, on a hike or out for dinner. And I think occasions are going to be important because so many occasions were postponed.”