Without changing its profit target for this year or the five-year forecast that it had outlined a year ago, the management of Wolverine Worldwide reduced its guidance for the group's turnover in 2014. Instead of growing by around 3 percent as previously forecast, it will more likely increase by only around 2 percent to an indicative level of $2,745 million.

Wolverine's consolidated revenues declined by 0.8 percent to $711.1 million in the third quarter ended Sept. 6 as compared to a year ago, but net earnings went up by 6 percent to $57.9 million as the gross margin improved by 0.1 percentage points to 40.0 percent and the operating margin increased by 0.3 percentage points to 12.3 percent.

Blake Krueger, chairman and chief executive of Wolverine, mentioned strong growth for the group in Canada and in the Europe, Middle East and Africa (EMEA) region during the quarter. He added that the outlook is “pretty good” in EMEA, where the U.K. represents about half of the group's turnover. He talked about a slowdown in Germany but said that Italy and Spain are up again.

Sales to distributors and licensees in Asia are up by about 30 percent so far this year. The ongoing international expansion of the group helped to offset a sales decline in the U.S. during the third quarter. In the fourth quarter, it should offset flat or lower U.S. sales, leading to an overall increase in group revenues of around 7 percent.

Sperry Top-Sider is the brand that is suffering the most at Wolverine. Its sales fell by about 11 percent in the third quarter. Outside the U.S., however, Sperry's wholesale-equivalent sales have grown by 23 percent so far this year. They have come to represent 10 percent of its revenues compared with 5 percent two years ago, just prior to its acquisition by Wolverine along with Keds, Stride-Rite and Saucony.

The number of countries covered by these so-called “Boston brands” has risen by 40 percent to 100 since their takeover. Across the group's 16 brands, international sales are now three times higher in terms of volume than two years ago.

  

In the third quarter, Sperry's problems and the planned shutdown of many Stride Rite children's shops led to a 6.7 percent decline to $277.9 million in Wolverine's recently redefined Lifestyle Group, which also includes Hush Puppies, Keds, Stride Rite and Soft Style. Keds grew by a double digit in the quarter.

Wolverine Worldwide Income Statement

(Million US$, Third Quarter Ended Sept. 6)

 

2014

2013

%
Change

Lifestyle Group

277.9

297.9

-6.7

Performance Group

257.1

251.5

2.2

Heritage Group

151.3

144.6

4.6

Other

24.8

22.6

9.7

REVENUES

711.1

716.6

-0.8

Cost of Goods Sold

426.3

430.6

-1.0

SG&A*

186.8

192.3

-2.9

Restructuring Costs**

8.1

0.0

-

Acquisition-Related Integration Costs

2.3

7.4

-68.9

Net Interest and Other Income

9.7

12.9

-24.8

Pre-Tax

77.9

73.4

6.1

Tax

20.0

19.0

5.3

NET

57.9

54.4

6.4

Cent/Share (Diluted)

0.57

0.54

5.6

*Selling, General and Administrative

**Acquisition Related Transaction and Integration Costs

Wolverine's biggest brand, Merrell, posted a low single-digit sales increase in the quarter, with strong growth in Latin America and some other international markets offsetting flat sales in the U.S.

Merrell's performance outdoor shoe collection has been generating dou le-digit sales growth for five consecutive quarters, and they should grow even more strongly in the fourth quarter.

Its men's active lifestyle category has been particularly buoyant, but the brand has not performed well in the women's sector, which has come to represent half of its sales.

Wolverine has added new design talent to improve the women's collection and is gearing up to launch a couple of major outdoor styles that should help Merrell to achieve mid- to upper single-digit growth in 2015.

It is particularly bullish about the Capra, which will be launched at Sundance Film Festival during the Outdoor Retailer Winter Market in January, to be rolled out internationally in March. Inspired by the agiliy of the mountain goat, it is described as a hybrid synthetic boot for running, walking and hiking in the mountains. The launch will be backed by the brand's first global marketing campaign in several years.

Merrell contributed to a 2.2 percent sales increase to $257.1 million for Wolverine's Performance Group, which also includes Saucony, Chaco, Cushe and the soon-to-be-discontinued Patagonia footwear line. Both Saucony and Chaco performed particularly well.

Wolverine's Heritage Group posted a higher sales increase of 4.6 percent to $151.3 million. The division comprises the Wolverine brand, which is boosting its “made in USA” program, plus Cat footwear, Bates, Sebago, Harley-Davidson footwear and Hytest. The Cat line went exceptionally well across the world.

Krueger and Don Grimes, chief financial officer of the group, told analysts that it is still open to new acquisitions - but not just any brands and not at just any price.

More in Shoe Intelligence.