Wolverine Worldwide's three biggest brands – Merrell, Sperry and Saucony – posted a combined 11.5 percent increase in constant currencies during the third quarter ended on Sept. 28. Revenues rose by only 2.8 percent to $574.3 million across the group's entire portfolio of 12 footwear brands, with growth of 3.6 percent local currencies, due in part to the timing of international shipments for Cat Footwear. The management is predicting a currency-neutral increase of 7 percent in the fourth quarter, with the three main brands going up altogether by around 9 percent.
Merrell and Cat are part of Wolverine's so-called Michigan Group, whose total sales went down by 1.9 percent in constant currencies in spite of a high single-digit increase for Merrell, with gains in the U.S., Canada and EMEA. Sales went up in all the categories, including lifestyle, with exceptional growth in the Nature's Gym segment. Merrell's online sales grew by almost 20 percent, with customer retention levels that have doubled.
The so-called Boston Group had a 13.3 percent sales boost on a currency-neutral basis, with gains by all four of its brands. In particular, while Sperry enjoyed low-teen growth, Saucony grew at a mid-teen rate, but it was basically flat on an organic basis. Most of the growth came from the previously reported takeover of the brand's distribution in Italy.
Saucony, whose new products received many industry awards recently, booked a 30 percent sales increase over the internet during the quarter, or a growth of 40 percent since the beginning of this year. The management was optimistic for the brand going forward, noting a rise in recent at-once orders in the U.S. and a planned steady stream of additional new products for next year.
The agreement with Xtep in China will have only a marginal effect next year. However, it has taken only four months to develop a line of Saucony apparel for the Chinese market.
The group is anticipating a sales increase of 3 percent for the full year, with the gross margin matching last year's record level of 41.0 percent and the adjusted operating margin reaching a level of 12.0 percent. In the latest quarter, the gross margin rose by 0.8 percentage points to 41.6 percent and the adjusted operating margin expanded by 1.5 percentage points to 14.1 percent.
The management is planning to apply its successful “growth agenda” to other brands in its portfolio such as Chaco, Wolverine and Hush Puppies. At Chaco, the group is seeking a diversification away from its very profitable sandals business into new entry-price models, water products and more closed-toe styles.
Higher margins than before are being generated in the company's offline and online direct-to-consumer operations, which have come to represent between 12 and 13 percent of sales. They are expected to account for 15 percent of sales in the fourth quarter.
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