Wolverine Reports Robust Q2; Headwinds Lower Full-year Forecast

Wolverine World Wide Inc., whose portfolio includes the Merrell, Saucony, Sperry and Stride Rite footwear brands, had a strong, profitable second-quarter performance.

The footwear, apparel and accessories company beat Wall Street expectations on the bottom line but missed on the revenue side.

Wolverine World Wide expects growth in the second half, but headwinds revolving around supply chain issues, inflation, changing consumer preferences and the industry’s promotional environment which is heating up caused management to trim its forecasts for the full-year top and bottom lines.

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In the quarter ended July 2, net earnings tripled to $124.5 million, from $44.4 million in the year-ago quarter.

Total revenue for the quarter rose 12.9 percent to $713.6 million from $631.9 million a year ago.

Executives told WWD they were pleased with the second-quarter performance of Wolverine World Wide, and that the company remains healthy and resilient.

“We are pleased with the continued growth we are seeing particularly with strength among our performance and work brands,” Brendan Hoffman, Wolverine World Wide’s president and chief executive officer, told WWD.

Mike Stornant, executive vice president and chief financial officer, cited “nice growth over last year, overall. We saw some bright spots especially at Merrell, and at our international business.”

He said the corporation had “a very strong earnings performance. The gross margin exceeded our expectations and Street expectations.”

He noted that the revised revenue forecast is close to the original forecast while the company has “a more conservative view on earnings. The fundamentals of the business are in place.”

For all of 2022, revenue is now expected to be in the range of $2.74 billion to $2.79 billion, compared to a previous forecast in the $2.775 billion to $2.85 billion range.

Diluted earnings per share are expected to be between $2.30 to $2.45, and adjusted diluted earnings per share are seen between $2.50 to $2.65. Previously, the forecast called for diluted earnings per share of between $2.62 to $2.72 and adjusted diluted earnings per share of between $2.10 to $2.20.

Last quarter, the Merrell brand rose 14 percent to $203.6 million. Wolverine rose 16.3 percent to $57.7 million. Saucony rose 7.2 percent to $135.5 million. However, Sperry declined $13.4 percent to $70.1 million.

According to Stornant, because the company is well positioned with Saucony and Merrell in the performance, running and outdoor footwear markets, it’s been able to capitalize on the continued consumer appetite for those categories.

Wolverine, the company’s biggest workwear brand, also has a strong market share position in the U.S. and performed well with workboots.

Regarding Sperry’s shortfall, Stornant attributed it to some slowing in consumer spending on casual lifestyle products.

In a statement released earlier on Wednesday, Hoffman said, “Despite a slowdown in June shipments, we are pleased with delivering record organic revenue in the quarter. We are encouraged by 14 percent growth in our largest brand Merrell, and 45 percent growth in our international business.

“We faced unplanned headwinds related to elevated customer inventory, a stronger U.S. dollar, and some lingering supply chain delays, but our operating margin was better-than-expected in the quarter,” Hoffman said. “While we continue to expect sequential growth acceleration in the second half, we now have a revised outlook for the back-half of this year that assumes higher promotional activity and elevated inventory in our wholesale channels.

“The company has performed well in the first half of 2022. Several factors have impacted our outlook for the second half, including certain negative trends that accelerated in June,” Stornant indicated in his prepared statement. “We now expect a stronger U.S. dollar, inflation, excess inventory across channels and changing consumer behavior will have a more meaningful negative impact on our industry and the company for the remainder of the year. We are adjusting our full-year outlook accordingly.”

In other results, excluding Sweaty Betty, revenue reached $666.2 million, a record for the quarter and up 17.2 percent compared to 2019.

The international business was up 45.3 percent to $295.2 million including Sweaty Betty, and up 26.4 percent to $256.8 million excluding Sweaty Betty.

Direct-to-consumer revenue including Sweaty Betty was up 21.1 percent to $166.2 million, and excluding Sweaty Betty was down 8.2 percent to $125.9 million.

The operating margin, which Hoffman called out, rose to 23.5 percent, up 1,340 basis points from 10.1 percent a year ago.

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