Wolverine Worldwide is no longer just a footwear company. The owner of Merrell, Saucony and Sperry has acquired women’s activewear and lifestyle brand Sweaty Betty for approximately $410 million.
As the footwear giant seeks to reach $500 million in e-commerce sales this year, Sweaty Betty certainly complements these direct-to-consumer ambitions. Digital sales comprise 70 percent of Sweaty Betty’s total revenue, while DTC sales are more than 80 percent.
In 2021 alone, Sweaty Betty approximates that it will generate $250 million, and expects its growth to outpace the greater market by a factor of four. Revenue from August to September is expected to reach $100 million, said Michael Stornant, chief financial officer of Wolverine Worldwide in an analyst call. On a two-year basis, Sweaty Betty revenues are up 35 percent, according to Stornant.
In addition to its website, Sweaty Betty has 65 shops in the U.K., Hong Kong and Singapore including concessions in Selfridges and Harrods.
Citing Euromonitor data, Wolverine Worldwide is confident it can capitalize on a $200 billion global activewear market, with the women’s premium activewear segment powered by several consumer trend tailwinds including digitization, health and wellness and casualization. Wolverine president Brandon Hoffman also pointed to additional trends towards more premium products, incorporating higher-quality materials, cutting-edge innovation and design, and sustainability.
From a product standpoint, Wolverine believes Sweaty Betty has been able to differentiate itself from competitive players, with Hoffman highlighting the brands’ breadth of end uses.
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“They have ski, they have swim, they have biking,” Hoffman said in the call. “We’re really excited with their whole management team, including their chief product officer who joined them from the contemporary market. You can see that in the way they’ve evolved their product to be beyond just performance activewear, but to be more lifestyle. We think that nails the way the trends are moving, with everyone going back to work but still wanting to stay very comfortable.”
Additionally, Wolverine believes that Sweaty Betty’s apparel design, development and sourcing expertise can influence its own brands like Merrell and Saucony. The company’s regional teams and global distribution network create an opportunity for broader global expansion that Sweaty Betty didn’t have prior to the deal.
The deal would bring the U.K.-based Sweaty Betty back in front of a larger U.S. audience. The brand closed its 12 U.S. boutiques during the Covid-19 pandemic after negotiating out of its leases, but sells products in 99 Nordstrom stores.
Hoffman said that Wolverine Worldwide is discussing a return to brick-and-mortar in the U.S. in gateway markets in an effort to “supercharge the overall direct-to-consumer business.”
“We all know there’s lots of vacancy out there and I’ve already got hit up from a couple of the big landlords wanting to chat so I think there’ll be no lack of opportunities,” Hoffman said.
The opportunities in the U.S. alone are big for both companies. According to a McKinsey consumer survey in November 2020, 73 percent of Sweaty Betty consumers in the U.S. said they would buy products from the company again, ahead of the 40 percent market average. Sweaty Betty also said that results from its own consumer survey indicated that its shoppers spent more than twice as much on activewear over the market average.
Sweaty Betty CEO Julia Straus will continue to lead the brand and will report to Hoffman.
“Sweaty Betty has seen incredible growth over the past few years, and we are excited to further accelerate this growth as part of the Wolverine Worldwide family,” Straus said in a statement. “From the moment I met the team at Wolverine Worldwide, I knew they were the right partner to support us in the next chapter of Sweaty Betty. Their portfolio of purpose-driven heritage brands, knowledge and expertise in building performance brands, robust international distribution and supply chain expertise provides a strong platform to expand Sweaty Betty and further our mission to ‘empower more women through fitness all over the world.’”
Sweaty Betty had been looking for a suitor for nearly a year, with rumblings of a potential sale first reported by Bloomberg in August 2020.
Wolverine Worldwide acquired all the shares of Lady of Leisure InvestCo Limited, the entity that owns the Sweaty Betty brand, from L Catterton and other shareholders. The deal was funded by cash and Wolverine’s revolving line of credit.
The deal is expected to be accretive to earnings and gross margin in year one. For the full year, Wolverine updated its outlook to generate consolidated net sales in the range of $2.44 billion to $2.5 billion, compared to the $2.34 billion to $2.4 billion pre-acquisition outlook during its recent earnings call.
Last week, Wolverine Worldwide announced record revenue for its fiscal second quarter of $632 million, 81 percent above last year’s totals. Direct-to-consumer revenue rose more than 17 percent from the year-ago period and increased 69 percent from 2019.