Wolverine Worldwide has great hopes for the ongoing progress of its biggest brand, Merrell, through the introduction of Capra, its new range of waterproof boots named after the goat, which is enjoying particularly strong demand in Europe.

The range features a sole, developed in cooperation with Vibram, that replicates the foot of the mountain goat, giving it the grip needed to climb on rocky terrain. It is described as a multi-functional shoe developed for fast hiking as well as leisurely walking.

The Wolverine group reported last month a net profit of $10.7 million for the fourth quarter of its financial year, ended on Jan. 3, compared with the loss of $1.7 million suffered in the same period a year ago. The turnaround occurred in spite of a year-on-year increase in extraordinary restructuring charges to $23.8 million from $19.3 million, and it was mainly due to higher sales.

Largely as its management had predicted, Wolverine's revenues grew by 9.2 percent to $808.9 million for the quarter. On a currency-neutral basis, sales jumped by 10.2 percent. Merrell raised its sales by a mid-single digit, while Sperry Top-Sider recovered from its recent weakness, posting a high single-digit gain. Nine other smaller brands in its portfolio delivered double-digit sales increases in the quarter, led by Chaco.

Wolverine Worldwide Income Statement

(Million US$, Fiscal Year Ended Jan. 3, 2015)



% Change





Cost of Goods Sold








Restructuring Costs**




Net Interest Expense




Other Expense (Income), net
















Cent/Share (Diluted)




*Selling, General and Administrative

**Acquisition Related Transaction and Integration Costs

Sales grew by 8.9 percent to $273.6 million in the broader Performance Group of Wolverine. Merrell, which is the most important component of this group, grew more strongly in North America and the Asia-Pacific than in the Europe, the Middle East and Africa (EMEA) region, but it should perform better there in 2015.

The brand's active lifestyle offerings performed better than before, but the group's management continues to feel that this segment has room for further improvement.

At 37.1 percent, the group's quarterly gross margin was down by 0.1 percentage point from the year-earlier period in reported terms and down by 1.1 percentage points on an adjusted basis. The company attributed the decline to various factors including a negative price mix in products sold outside the U.S. Wolverine continues to work to reduce input costs by using less leather, according to company officials.

In the full financial year, the group's revenues grew by 2.6 percent to a new record of $2.76 billion, with a minimum impact from currencies. A 7 percent increase in the Heritage Group, up to $607 million, and an increase of almost 5 percent to $990.7 million in the Performance Group were partially offset by an expected 3 percent decline for the Lifestyle Group to $1.06 billion.

The group's overall growth was sustained by its continued expansion outside North America. In fact, total sales were flat in the U.S. and down by a low single digit in Canada, but they rose by a high single digit in Europe, the Middle East and Africa, and by a double digit in the Asia-Pacific region.

Net earnings went up for the year to $133.1 million from $100.4 million, after a decline in special charges to $42.2 million from $49.8 million. The adjusted gross margin fell by 0.4 percentage points to 39.4 percent for the year, but the adjusted operating margin increased by 0.9 percentage points to 9.9 percent. Inventories decreased by 3.3 percent.

Operating cash flow reached a record level of $279.8 million, allowing Wolverine to reduce interest-bearing debt by more than $250 million to $677 million in the course of the year, and leaving the company with cash and cash equivalents of $223.8 million.

As previously indicated, the group plans to invest about $30 million this year in incremental spending on international expansion, marketing, omni-channel retailing and other brand-building initiatives. About 75 percent of the extra budget has been allocated for Merrell and Sperry, and the balance mostly for Keds and Saucony.

This is part of a previously announced, three-year, $100 million investment program whose effects will be felt mostly after 2015, but Blake Krueger, chairman, president and chief executive of the group, said they should help establish Wolverine as “the most admired family of performance and lifestyle brands on earth.”

In the short term, these initiatives and higher pension costs are likely to reduce the group's operating margin by around 0.8 percentage points this year, despite modest expansion in gross margins, but the margin should be more or less flat in reported dollars because of savings in foreign operating expenses. Net earnings should end up more or less flat, due in part to the planned closure of 140 retail stores.

The management is aiming for a consolidated sales increase this year of between 5 and 7 percent in constant currencies, negatively impacted by planned store closures and the termination of the Patagonia footwear license. The strength of the dollar should reduce the growth to a range between 2 and 4 percent, but there should be an improvement in the second half of the year.

Geographically, some recovery is expected in the U.S. and Europe, but it will likely be choppy in Central Europe. Stronger increases in Asia-Pacific will be offset by continued challenges in Russia and Latin America.

More in another publication of ours, Shoe Intelligence.