Wolverine (WWW) Announces Its Preliminary Results for 2023
Wolverine World Wide, Inc. WWW has announced its preliminary results for 2023 ahead of its 2024 ICR Conference presentation. The announcement included details of the company's ongoing transformation efforts.
The comprehensive update from Wolverine showcases its strategic efforts to stabilize and grow the business, manage debt and inventory effectively, and focus on brand development and market positioning.
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Key Highlights of Financial Performance
Wolverine expects to report 2023 and fourth-quarter revenues of $2.24 billion and $527 million, respectively. The revenue expectations are consistent with the company’s guidance of $2.20 billion for 2023 and $521 million for the fourth quarter provided in November 2023.
Wolverine anticipates 2023 and fourth-quarter adjusted gross margins to be above 39% and 36%, respectively, aligning with the prior guidance. Adjusted pre-tax earnings for these periods are expected to meet the company's previous expectations. It earlier anticipated an adjusted loss per share of 25-30 cents for the fourth quarter, suggesting a broader loss from the 15 cents per share incurred in the year-ago quarter. For 2023, the company earlier envisioned adjusted earnings per share of 5-10 cents, indicating a dip from earnings of $1.41 per share recorded in the prior year.
As of Dec 30, 2023, the company's inventory levels are projected to be $460 million, lower than the previously stated $490 million. Net debt is estimated at $750 million, significantly less than the earlier mentioned $850 million.
Asset Monetization and Debt Reduction Efforts Bode Well
In 2023, Wolverine undertook a series of asset monetization transactions, significantly impacting its business operations and aiding in debt reduction. These strategic moves generated nearly $250 million in cash, of which $91 million was received in the fourth quarter of 2023. This marks a pivotal shift in the company's asset management and operational strategy.
A key transaction was the sale of the Kentucky distribution center on Dec 28, 2023. This sale brought in $23 million in the fourth quarter of 2023. Despite the sale, the Saucony and Sperry brands will continue to operate from this facility under a lease agreement, ensuring operational continuity while benefiting from the liquidity boost.
In addition to the distribution center sale, Wolverine executed various asset monetization transactions throughout 2023. These included the sale of the Keds brand, the divestiture of Hush Puppies intellectual property rights in China and the sale of Wolverine Leathers.
Moreover, the company implemented an operating model for Merrell and Saucony in Greater China, indicating a strategic shift in handling these brands in a significant market. Together, these transactions amassed approximately $227 million.
Wolverine has been progressing with the exploration of strategic alternatives for the Sperry brand. This effort is part of a broader strategy to optimize its brand portfolio, focusing on growth and profitability.
Wrapping Up
The above-mentioned actions underscore Wolverine’s commitment to restructuring its operations and focusing on efficient asset management. The substantial cash generated from these transactions reflects the company's ability to effectively execute its transformation plan, positioning it for improved financial performance and enhanced shareholder value.
However, the Zacks Rank #5 (Strongly Sell) company has been experiencing significant challenges in the outdoor category, lower demand in the U.S. and European wholesale businesses, and weakness across the Direct-to-Consumer channel. Additionally, its performance has been negatively impacted by increased promotional activities in the U.S. market, rampant gray market sales of its Merrell brand and heightened pricing pressure from private-label brands in the workwear category.
Shares of this company have rallied 15.8% in the past three months compared with the industry’s growth of 2.2%.
Three Solid Picks
Some better-ranked food stocks are G-III Apparel Group, Ltd. GIII, lululemon athletica inc. LULU and Skechers U.S.A., Inc. SKX.
G-III Apparel is a manufacturer, designer and distributor of apparel and accessories under licensed brands, owned brands and private label brands. The company currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for G-III Apparel’s current fiscal-year earnings indicates growth of 39.3% from the previous year’s reported figure. GIII has a trailing four-quarter average earnings surprise of 541.8%.
lululemon athletica designs, manufactures and distributes athletic apparel and accessories for women, men and female youth. The company currently has a Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for lululemon athletica’s current fiscal-year earnings and sales indicates growth of 23.3% and 18.3%, respectively, from the previous year’s reported figures. LULU has a trailing four-quarter average earnings surprise of 9.2%.
Skechers designs, develops, markets and distributes footwear for men, women and children. The company currently carries a Zacks Rank #2. It has a trailing four-quarter earnings surprise of 50.3%, on average.
The Zacks Consensus Estimate for SKX’s current financial-year sales and EPS suggests growth of 8.2% and 44.1%, respectively, from the year-ago reported numbers.
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