Wolverine World Wide has reiterated its intention to carry out acquisitions. The focus remains on buying new brands, but the group does not rule out a move that could increase its retail activity. There is speculation that Wolverine is interested in Saucony, Sperry Top-Sider and other properties of Collective Brands.
The group had about $140 million in cash on its balance sheet at the end of 2011 and has only drawn $11 million on its $150 million revolving credit facility. The management noted that there are a number of opportunities but that it will be “very disciplined” in its acquisition policy. It did not set a limit on the size of a possible takeover.
Wolverine can increase its borrowing capacity, but the management stressed that it does not want the company to become highly leveraged. The group has repeatedly said that it would like the next acquisition to be bigger than the Chaco or Cushe brands bought separately in 2009.
All the divisions of the group booked double-digit increases in the past financial year, but the heritage and lifestyle divisions outperformed its outdoor segment in the fourth quarter because of unseasonable weather patterns.
The group's outdoor division saw its revenues rise by only 4.5 percent to $141.1 million in the fourth quarter, slightly underperforming the rest of the group, whose total revenues rose by 5.6 percent during the period to $406.5 million thanks to a 13.4 percent rise in the lifestyle segment. Fourth-quarter results were affected by soft at-once orders, hit by a moderate fall in most of the U.S. and Europe as retailers focused on keeping inventories lean. Re-orders for cold-weather products are being hit by some excess inventory at retail because of a tough business environment.
For the full financial year, the group booked a 12.9 percent increase in revenues to $1.409 billion and shoe sales rose by more than 12 percent to over 52 million pairs. Turnover in the U.S. rose by a high-single-digit rate, while international revenues registered a double-digit growth. The increase was strongest in Latin America, Greater China and India.
More than half of the group's sales volumes were achieved through its distributors and licensee partners, channels that are “enormously profitable,” generating substantially higher operating margins than the already “very profitable” subsidiary markets. The group has subsidiaries in the U.S., Canada and most of Western Europe, including the U.K. Revenues grew by a very strong double-digit pace at licensees and distributors, with sales volumes up by almost 20 percent, while revenues booked by subsidiaries nearly reached 10 percent.
During the year, the outdoor division increased sales by 18.0 percent to $551.8 million. Wholesale revenues of the Merrell brand exceeded $500 million, but this doesn't include sales under license. The Merrell Barefoot collection sold more than 1 million pairs in its first year, as it managed to make inroads in the athletic and running specialty retail channels. The Chaco and Patagonia Footwear brands, which are also part of the outdoor division, each registered growth reaching upper-teen rates. In the fourth quarter, the group opened 50 new accounts in the U.S. for the Chaco brand partly thanks to the introduction of the closed-toe footwear range. Chaco is currently present in 25 countries.
Selling, general and administrative expenses dropped to 27.4 percent of full-year sales, from 28.1 percent a year earlier, despite a significant increase in marketing. Advertising expenses for Merrell increased by 25 percent in the full year and by 75 percent for Cushe. In a conference call, Wolverine's chairman, Blake Krueger, said that the company does not plan to take the “foot off the gas pedal” this year in terms of marketing efforts.
The group's operating margin narrowed to 7.6 percent from 8.1 percent in the last quarter but widened to 12.1 percent from 11.4 percent in the full year. The net profit dropped to $23.0 million in the fourth quarter from $25.6 million a year earlier, but rose in the full year to $123.3 million from $104.5 million.
The company expects 2012 full-year revenues to rise by 5.4-8.2 percent to $1.485-1.525 billion and to book a moderate increase in gross margins. Earnings per share are forecast to grow by 4.8-8.9 percent to $2.60-2.70 (more in Shoe Intelligence)