Wolverine World Wide Inc. reported earnings and revenues down in the third quarter due to the pandemic, but managed to beat analysts’ expectations on several levels and saw healthy performances by its Saucony, Chaco and Merrell brands and with e-commerce.
The company expects to return to “meaningful” growth in the first quarter of 2021.
Net profit for the three months ended Sept. 26 fell to $21.7 million, versus $48.6 million a year ago, while revenue was $493.1 million, down 14.1 percent versus the prior year. Revenues were $33 million above consensus expectations. On a constant currency basis, revenue was down 14.6 percent versus the prior year.
Owned e-commerce revenue grew 56.4 percent versus the prior year’s period.
“The company’s third quarter results significantly exceeded our expectations, reaffirming the inherent strength of our portfolio and strong brand positioning in winning product categories and distribution channels,” said Blake W. Krueger, Wolverine Worldwide’s chairman and CEO.
“Saucony and Chaco delivered double-digit revenue growth in the quarter compared to the prior year, while Merrell and our work brands drove meaningful sequential revenue improvement versus Q2. Innovative, fresh product paired with compelling storytelling continued to fuel demand, as evidenced by our owned e-commerce business, which grew over 56 percent compared to last year.”
Product design and development of digital capabilities “will remain central to our multi-year investment strategy,” Krueger added.
“I am encouraged by our growing momentum in the face of the headwinds created by the global pandemic and excited about the growth opportunities in front of the company for 2021 and beyond. Our strong digital strategy and improved visibility to wholesale demand should enable us to return to meaningful growth in Q1 of 2021.”
Executives said that in addition to beating Wall Street analyst estimates on revenue, the company beat estimates on adjusted operating margin and cash flow as well. Adjusted operating margin was 10.6 percent, compared to 14.1 percent in the prior year. Cash flow from operating activities in the quarter was $96.5 million, compared to $12.1 million in the prior year.
Gross margin was 41 percent compared to 42.4 percent in the prior year.
Reported diluted earnings per share were $0.27, compared to earnings per share of $0.57 in the prior year. Adjusted diluted earnings per share were $0.35, and, on a constant currency basis, $0.34, compared to $0.68 in the prior year.
Inventory at the end of the quarter was down 22 percent versus the prior year and down 22.8 percent when excluding the impact of new stores and the incremental cost of new tariffs.
Cash on hand at the end of the quarter was $342 million, compared to $125.2 million in the prior year.
“The company continued to deliver quality results by executing on the key priorities we outlined earlier this year, which included a heightened focus on positive cash flow, a healthy balance sheet, profitability, and setting the company up for growth in 2021,” said Mike Stornant, senior vice president and chief financial officer.
“During the last two quarters, which were significantly impacted by the global pandemic, the company delivered solid earnings and exceptional cash from operations of over $210 million. While consumer demand exceeded our expectations during this time, we have been able to service the business at a high level and manage our inventory levels down by 22 percent compared to last year at quarter-end,” Stornant said. “We expect that headwinds caused by the pandemic will persist in the near-term and that fourth quarter revenue will be down no more than 25 percent year-over-year, including the effects of a partial shift in revenue from our international business into the first quarter of 2021. We will continue to invest behind the ongoing momentum of our key brands to enable accelerated growth in the first quarter of 2021.”
As reported, Brendan Hoffman, former Vince CEO, became president of Wolverine in early September and is CEO-designee.
The Rockford, Mich.-based company’s portfolio includes Sperry, Hush Puppies, Wolverine, Keds, Stride Rite, Bates and HyTest, as well as Saucony, Chaco and Merrell. Wolverine Worldwide is also the global footwear licensee of Cat and Harley-Davidson.
Reporting by David Moin.