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Wolverine (WWW) Beats on Q2 Earnings, Lifts 2021 Guidance

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Wolverine World Wide, Inc. WWW reported sturdy second-quarter 2021 results. Both revenues and earnings surpassed the Zacks Consensus Estimate and grew year over year.

Quarterly performance benefited from strength on the direct-to-consumer platforms and strong owned stores revenues. Results were also ahead of the 2019 levels with broad-based contributions at the brands and regions. The company’s owned e-commerce revenues more than doubled in the first half of 2021 from the same-period reading in 2019. As a result, management raised 2021 view.

Over the past six months, shares of this currently Zacks Rank #2 (Buy) company have gained 20.5% compared with its industry’s 11.1% growth.

Q2 Insights

The company posted second-quarter adjusted earnings of 67 cents per share that outpaced the Zacks Consensus Estimate of 47 cents. Also, the metric increased significantly from 8 cents earned in the year-ago quarter. On a constant-currency (cc) basis, adjusted earnings came in at 65 cents per share. Higher sales and margins fueled the bottom-line performance.

Revenues came in at $631.9 million that surpassed the Zacks Consensus Estimate of $566.9 million and surged 81% year over year. At cc, revenues grew 77.7%. Strength on the direct-to-consumer platforms and solid owned stores revenues aided the top line.

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

The company’s total direct-to-consumer revenues jumped 17.5% year over year and 68.8% from the 2019 level. Owned e-commerce revenues dipped 2.7% year over year but increased 90.7% from the 2019 tally. Its owned stores revenues surged 380.5% from the prior-year period’s number and rose 19.2% from the same-quarter level in 2019.

Wolverine’s two major brands, namely Merrell and Saucony posted all-time record revenues in the quarter and their combined revenues grew above 40% from the 2019 figure.

Margins & Costs

Adjusted gross profit amounted to $281.4 million, up 91% year over year. Moreover, adjusted gross margin expanded 230 basis points (bps) year over year to 44.5%.

Adjusted selling, general and administrative expenses jumped 55.7% to $201.8 million. Adjusted operating profit significantly surged to $79.6 million from $17.7 million seen in the prior year with adjusted operating margin increasing 750 bps to 12.6%.

Segmental Performances

Revenues at Wolverine Michigan Group increased 63% year over year to $354.4 million. At cc, the segment’s revenues jumped 59.8%.

Wolverine Boston Group’s revenues surged 110.6% to $258 million from the year-ago quarter’s number. At cc, the segment’s revenues skyrocketed 106.9%.

Other Financials

The company ended the quarter with cash and cash equivalents of $345.8 million, long-term debt of $708.4 million and stockholders' equity of $649.1 million. Net inventories at the end of the second quarter decreased 14.2% year over year to $331.7 million.

Wolverine delivered $51.7 million of cash flow from operating activities at the end of the second quarter. Net interest expenses declined 7.6% to $9.7 million.

Outlook

Management anticipates delivering significant growth in 2021 in comparison to 2020 and 2019 levels, driven by accelerating demand for its brands. Positive trends like robust sell-through at retail, an impressive future order book and improving inventory levels helped Wolverine hike guidance for the current year.

For 2021, the company now projects revenues in the band of $2,340-$2,400 million, up $150 million from its initial view in February. The latest revenue projection suggests growth of 31-34% from the 2020 reading and 5.6% from the 2019 actuals at the upper end of the range.

Reported earnings per share are now forecast to be $1.85-to $1.95, up from the $1.70-$1.85 band guided earlier. Adjusted earnings per share are envisioned in the bracket of $2.20-$2.30 compared with the previous guidance of $1.95 to $2.10. We note that the company delivered adjusted earnings per share of 93 cents and 95 cents at cc in 2020. The Zacks Consensus Estimate for 2021 earnings is currently pegged at $2.12, which is likely to witness upward revisions in the coming days.

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