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Wolverine Up 22% in a Year on Solid Earnings & Growth Plans

Zacks Equity Research

Shares of Wolverine World Wide, Inc. WWW have outperformed the industry in a year’s time. Notably, this Zacks Rank #3 (Hold) stock has gained 22% in the said time frame compared with the industry’s growth of 20.8%.

The stock’s bullish run on the bourses can be attributable to its impressive earnings history. Further, Wolverine is on track with its Global Growth Agenda that focuses on empowering brands. Additionally, e-commerce efforts and international expansion plans bode well for the company. Let’s delve deeper.

Solid Bottom-Line Trend

Wolverine boasts an impressive bottom-line performance, as earnings have surpassed the Zacks Consensus Estimate in 11 out of the last 12 quarters. In fact, in the trailing four quarters, the company delivered average positive earnings surprise of almost 18%. Moreover, the bottom line has been registering year-over-year growth for a while.

Notably, in the fourth quarter of 2018, earnings rallied 26.8% from the prior-year quarter’s figure, courtesy of decline in cost of goods sold, lower operating expenses and reduced interest expenses. Encouraged by this, management envisions adjusted earnings for 2019 to be $2.20-$2.35 per share, up from $2.17 in 2018.

Growth Plans Bode Well

Wolverine is progressing well with its Way Forward initiative, a strategic platform aimed at driving growth and profitability amid a competitive market scenario. In fact, a significant portion of gross margin growth during the first, second, third and fourth quarters of 2018 was driven by this initiative.

Further, the company entered the next phase of its Way Forward initiative, the Global Growth Agenda, which focuses on three key strategies — Powerful Product Creation Engine, Digital-Direct Offense and International Expansion. Wolverine anticipates additional investments in this direction to be $40 million for 2019.

Moreover, the company’s e-commerce efforts are gaining traction. In this regard, Wolverine focuses on boosting social presence, digital content and flow of information. The company also intends to better manage consumer database. Owing to such dedicated growth strategies in the digital spectrum, the company’s e-commerce business grew close to 30% in 2018.

Also, Wolverine is making efforts to expand customer base. The company plans to add greater strategic resources to strengthen its regional teams, especially in the emerging regions of Asia-Pacific such as China. In this regard, the company has recently inked a deal with Chinese sportwear retailer, Xtep International Holdings Limited, to popularize its key brands in China, Macau and Hong Kong.

All said, we believe that the above-mentioned strategies will help the company achieve top-line growth in the near future. In fact, management expects revenues to be $2.28-$2.33 billion, reflecting 3% growth in 2019.

3 Stocks to Bank On

Foot Locker FL has a long-term earnings growth rate of 9.5% and a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Skechers SKX has a long-term earnings growth rate of 7% and a Zacks Rank #2 (Buy).

Carter’s, Inc. CRI has a long-term earnings growth rate of 8% and a Zacks Rank #2.

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