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Wolverine (WWW) Beats Q1 Earnings Estimates, Updates View

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·5 min read
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Wolverine World Wide, Inc. WWW reported sturdy first-quarter 2021 results. Both revenues and earnings surpassed the Zacks Consensus Estimate and grew year over year. Results reflected strong demand for its brands and wholesale order book. Also, core inventory levels have been supporting the business trends. Its global growth agenda also bodes well. As a result, management updated its 2021 view.

Moreover, e-commerce business was strong in the reported quarter. The company has leveraged higher digital marketing investments to boost traffic and digital content as well as focus on better merchandising to optimize conversion. Over the next few months, management expects integrating and launching various innovation and technologies, including a Merrell mobile app.

Q1 Insights

The company reported first-quarter adjusted earnings of 40 cents per share that outpaced the Zacks Consensus Estimate by a couple of cents. Also, the metric increased 42.9% from 28 cents earned in the year-ago quarter. On a constant-currency (cc) basis, adjusted earnings came in at 40 cents per share.

Wolverine World Wide, Inc. Price, Consensus and EPS Surprise

Wolverine World Wide, Inc. Price, Consensus and EPS Surprise
Wolverine World Wide, Inc. Price, Consensus and EPS Surprise

Wolverine World Wide, Inc. price-consensus-eps-surprise-chart | Wolverine World Wide, Inc. Quote

Moreover, revenues of $510.7 million beat the Zacks Consensus Estimate of $508 million and increased 16.3% year over year. On a cc basis, revenues grew 14.3%. Strength in digital platforms and innovative product offerings aided the top line. Notably, the company’s owned e-commerce business was the key growth driver, up about 83.6%.

Further, the company's international business was up 40%, registering growth of more than 35% in every region.

Margins & Costs

Adjusted gross profit amounted to $226.3 million, up 24.5% year over year. Moreover, adjusted gross margin expanded 290 basis points (bps) year over year to 44.3% on strong e-commerce expansion and favorable wholesale product mix.

Further, adjusted selling, general and administrative expenses rose 15.1% to $174.4 million. This is mostly owing to the higher mix of DTC revenues, including $8 million of increased investment in digital e-commerce marketing as well as normalized incentive compensation costs.

Also, adjusted operating profit surged 71.3% to $51.9 million, with adjusted operating margin contracting 330 bps to 10.2% on strong operating leverage.

Segments & Brands Discussion

Revenues at Wolverine Michigan Group increased 20.1% year over year to $297.7 million. At cc, the segment’s revenues jumped 18.2%.

Wolverine Boston Group’s revenues grew 10.3% to $200.9 million from the year-ago quarter. At cc, the segment’s revenues rose 8.2%.

Coming to this Zacks Rank #3 (Hold) company’s brand performance, we note that Saucony revenues rose nearly 60%, with growth across all regions. Also, saucony.com registered growth of above 150% on compelling digital storytelling and product launches. Merrell brand’s revenues were up about 25%, witnessing growth across all regions led by robust performance in EMEA. Moreover, Merrell.com revenues increased approximately 135%, while Merrell stores comping up 30%.

Further, Sperry brand’s revenues declined 10% in the reported quarter. However, revenues at Sperry.com jumped 40%, while Sperry stores grew above 20%. Moreover, the company’s work business, which represented nearly 20% of its revenues in the first quarter, registered significant increases led by Wolverine up 30% and Cat footwear increasing more than 30%.

Other Financials

The company ended the quarter with cash and cash equivalents of $364.8 million, long-term debt of $710.4 million and stockholders' equity of $625.1 million. Net inventories at the end of the first quarter decreased 20.8% to $320.9 million. Total liquidity was $1.2 billion at the end of the first quarter.

Notably, Wolverine has delivered nearly $26.3 million of cash flow from operating activities in the first quarter.

Outlook

Despite these pandemic challenges, management believes that it is well positioned on the back of the positive business trends and strategic initiatives. In fact, Wolverine’s digital business remains robust, with investments in digital leadership, enhanced content and digital user experiences to increase conversion. Markedly, it is on track to accomplish a revenue goal of $500 million through its brands.com in 2021.

The company will continue experiencing strength in brands, including Saucony and Merrell, and especially in performance, outdoor and work categories. Markedly, the company’s D2C business has been pretty strong. For 2021, management expects revenues in the bracket of $2,240-$2,300 million, signifying growth of 25-28% from last year. Earlier, management forecast the metric at $2,190-$2,250 million, indicating growth of 22-26% year over year.

Reported earnings per share are forecast in the range of $1.70 to $1.85 versus the earlier projection of $1.75-$1.90. Moreover, adjusted earnings per share are anticipated in the band of $1.95 to $2.10, compared to the previous guidance of $1.90-$2.05. We note that the company delivered adjusted diluted earnings per share of 93 cents, and 95 cents at cc in 2020. The Zacks Consensus Estimate for 2021 earnings is currently pegged at $2.03.

Eye These Solid Picks

Crocs CROX has a long-term earnings growth rate of 15% and currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Ralph Lauren RL, also a Zacks Rank #1 stock, has a long-term earnings growth rate of 8.2%.

Under Armour UAA has a long-term earnings growth rate of 32.2% and a Zacks Rank #2 (Buy).

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