Wolverine World Wide increased its guidance for the present financial year after booking a record first quarter, driven by its outdoor and heritage business units. The U.S. footwear and apparel company now sees 2011 sales rising by 10.5-13.7 percent to $1.380-1.420 billion and fully diluted earnings per share (EPS) up by 10.6-15.2 percent to $2.40-2.50.
Financial analysts see the group’s revenues reaching $1.4 billion this year and net profits exceeding $120 million. The group’s previous guidance was for a top line increase of 8.1-11.3 percent, while fully diluted EPS were expected to rise by 8-13 percent.



In the first quarter ended March 26, group sales rose by 16.1 percent to $330.9 million, beating market expectations thanks to strong consumer demand, and advertising expenditures grew at a similar pace. Net income went up by 30.6 percent to $35.9 million.
The Outdoor Group, the American group’s largest business unit, increased sales by 21.6 percent to $138.1 million. The Heritage unit boosted revenues by 18.3 percent to $111.1 million and the Lifestyle group was up by 1.1 percent to $52.0 million.
The order backlog was up by more than 30 percent at the end of the quarter, beating the group’s expectations. The Lifestyle unit booked the highest percentage increase. The backlog grew by a strong double-digit for the Outdoor and Heritage groups.
Wolverine generated 59 percent of its revenues in the U.S. and 41 percent abroad but the home market represented only about a third of its sales in volume. Over the past 15 years, the group has taken control of the distribution of its brands in Canada and in most of Europe.
Currently, about half of the shoes it sells are marketed through company-owned operations in North America and Europe and the remainder through international distributors and licensees. Last year, the group sold some 50 million pairs of shoes and pieces of apparel via nearly 6,300 dedicated points of sale around the world.
In the Outdoor Group, Merrell, Chaco and Patagonia each increased revenues by more than 20 percent. Merrell, a brand in which the group continues to invest heavily, booked strong double-digit growth in domestic retail and wholesale revenues as well as in foreign markets, partly supported by triple-digit growth in apparel sales.
The launch in February of Merrell Barefoot, a lightweight and versatile outdoor shoe created in partnership with Vibram, exceeded the group’s expectations. The collection is benefiting from significant reorders to meet demand. At the end of 2010, orders for the Barefoot line totaled 400,000 pairs. The fall/winter collection will be broader, comprising additional product categories, in order to attract mainstream consumers. No significant price rises are expected for the Barefoot line in the next six to 12 months.
The group’s gross margin rose to 41.6 percent from 41.3 percent in the same quarter a year ago as price increases and more favorable foreign exchange rates offset higher product costs. The company is facing product cost increases in the mid-single digits during the first half of this year and the inflation should build up to a high single digit in the second half.
Wolverine is seeking to offset cost increases by raising selling prices and improving the price mix. So far, the group has met little resistance to the price hikes from clients. As a result, the management forecasts that its gross margin will be in line with the previous year in the forthcoming quarters and will finish the year unchanged compared with 2010. In 2010, the reported gross margin stood at 39.5 percent. (more in Shoe Intelligence).