Wolverine Worldwide Deepens Loss but Sees Progress in Turnaround

Wolverine Worldwide Inc., in the midst of turnaround efforts and maintaining confidence about achieving long-term growth, fell deeper in the red last year.

The footwear and apparel firm on Wednesday reported a net loss of $361 million for the fourth quarter ended Dec. 31, compared to a loss of $14.6 million in the year-ago period. The loss per diluted share was $4.59 last quarter versus a loss of 18 cents in the fourth quarter of 2021.

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However, revenues grew 4.6 percent to $665 million last quarter on a constant currency basis, from $635.6 million in the year-ago quarter. Wolverine’s international business was strong, rising 22.2 percent, or 31.9 percent on a constant currency basis, to $281.5 million. Direct-to-consumer revenue of $224.4 million was flat compared to 2021, and up 4.8 percent on a constant currency basis.

The higher revenues and bigger loss was expected by the stock market, with shares rising 6.3 percent to close at $15.99 on Wednesday.

Gross margin of 33.7 percent last quarter versus 41.3 percent in the prior year reflects the accelerating inventory liquidation, increased promotions and a higher mix of international distributor sales that carry relatively lower gross margin, the company indicated. Inventory was down by $90 million at the end of the quarter to $745.2 million, which does not include $43.1 million from held-for-sale businesses.

The company’s portfolio of lifestyle and footwear brands includes Merrell, Saucony, Sweaty Betty, Sperry, Hush Puppies, Wolverine, Chaco, Bates, Hytest and Stride Rite. Wolverine Worldwide is also the global footwear licensee of the Cat and Harley-Davidson brands.

Wolverine Worldwide has been simplifying its business, reducing inventory, morphing into more of a direct-to-consumer business, and focusing on smarter investments. Last year, the company reorganized from its former Michigan and Boston brand groups to active, lifestyle and work groups to help clarify the business and achieve greater synergies.

Earlier this month, the company sold the Keds brand to Designer Brands Inc., the parent company of footwear retailer DSW. Wolverine also disclosed it intends to grant an exclusive license to DBI for Hush Puppies footwear in the U.S. and Canada, where DSW has been the exclusive retail partner for Hush Puppies. The sale of Keds and the license agreement will generate more than $90 million in cash.

For all of last year, Wolverine lost $188.3 million, versus net earnings of $68.6 million in 2021. Revenues in 2022 rose to $2.69 billion, from $2.42 billion in 2021.

“Despite a challenging year in 2022, we’ve taken important steps to become a more disciplined and agile company while focusing on long-term growth. Encouraging results from our 100-day action plan, initiated in the fourth quarter, include a reduction in inventory and debt levels, the sale of Keds, and the establishment of a new profit improvement office to unlock savings to support growth acceleration in our highest potential brands,” Brendan Hoffman, Wolverine Worldwide’s president and chief executive officer, said in a statement.

“Our priorities for 2023 are to fuel growth in our active group, sustain positive momentum in our work group, and address underperforming brands while we further strengthen our financial position,” Hoffman said. “We expect to grow 2023 revenue from our ongoing business by approximately 0 percent to 2 percent and 1 percent to 3 percent on a constant currency basis, and deliver approximately 8.5 percent operating margin. We remain confident in our ability to deliver a 12 percent operating margin in 2024.”

“We are encouraged by the progress made to simplify the business and improve the balance sheet in the fourth quarter,” added Mike Stornant, executive vice president and chief financial officer. “We enter 2023 with excellent visibility to costs savings and operational efficiencies that we believe will benefit the year. We expect that during the first half of the year, gross margin will continue to be impacted by expense timing of higher transitory supply chain costs from 2022 and the sell-off of end-of-life inventory. As a result of the proactive work started several months ago, we expect profitability to improve meaningfully in the second half of the year as supply chain costs and inventory levels normalize, and the profit improvement office initiatives deliver benefits.”

For the year ahead, the company expects revenue from ongoing businesses in the range of $2.53 billion to $2.58 billion, representing growth of about 0 to 2 percent, and constant currency growth of about 1 to 3 percent.

Diluted earnings per share are expected to be between $1.50 to $1.70 and adjusted diluted earnings per share are expected to be between $1.40 to $1.60. These full-year EPS expectations include an approximate 14 cents negative impact from foreign currency exchange rate fluctuations.

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