Wolverine (WWW) Q3 Earnings Match Estimates, Guidance Lowered
Wolverine World Wide, Inc. WWW reported results for third-quarter 2023, wherein its earnings came in line with the Zacks Consensus Estimate and revenues beat the same. Both metrics fell year over year.
Q3 Insights
The company posted third-quarter adjusted earnings of 7 cents a share, which came in line with the Zacks Consensus Estimate. The metric declined 85.1% from 47 cents reported in the prior-year quarter. At constant currency, the company’s adjusted earnings per share came in at 11 cents.
Revenues of $527.7 million came ahead of the Zacks Consensus Estimate of $515 million but fell 23.7% year over year. The decline was attributable to lower revenues in most of the segments and brands. Revenues dipped 24.7% in constant currency. Direct-to-consumer revenues of $136.6 million were down 14.5% year over year. WWW’s international business dropped 24.4% to $229 million.
Coming to segments, Active Group’s revenues dipped 17.5% year over year to $328.6 million. The Zacks Consensus Estimate for the Active Group’s revenues was pegged at $324 million for the quarter.
Revenues at the Work Group tumbled 22.1% year over year to $123 million. The consensus estimate for Work Group’s revenues was pegged at $139 million.
Revenues of the Lifestyle Group segment fell 46.6% year over year to $62.8 million, faring better than the Zacks Consensus Estimate of $51 million. Other segment’s revenues fell 24.9% to $13.3 million.
Brand-wise, Merrell revenues slipped 24.3% year over year to $157 million, Saucony revenues fell 14% to $116.4 million, Sperry revenues decreased 41.4% to $46.2 million and Wolverine revenues fell 4.7% to $56.3 million. Sweaty Betty generated revenues of $45 million, up 19% year over year.
Wolverine World Wide, Inc. Price, Consensus and EPS Surprise
Wolverine World Wide, Inc. price-consensus-eps-surprise-chart | Wolverine World Wide, Inc. Quote
Margins
Adjusted gross profit was $214.2 million, down 19.9% year over year. The adjusted gross margin remained stable year over year at 41.2%.
Adjusted SG&A expenses edged down 7.1% to $191.7 million. The metric, as a percentage of revenues, increased 640 bps year over year to 36.3%.
Adjusted operating income came in at $22.5 million, down from adjusted operating income of $61.1 million.
Other Financials
Wolverine ended the quarter with cash and cash equivalents of $160.4 million, long-term debt of $716.3 million and stockholders' equity of $362.7 million.
Net debt was $930 million and total liquidity was nearly $400 million at the end of the third quarter. Inventory at the end of the reported quarter was $563.8 million, down 33% from the year-earlier quarter.
During the first nine months of 2023, Wolverine has paid out cash dividends of $24.5 million.
Outlook
Management highlighted that it has been experiencing challenges in the outdoor category and lower demand in the wholesale channels. Thus, it has lowered its revenue and earnings view for 2023.
The company expects the Profit Improvement Office to generate a minimum of $215 million in savings for 2023. It remains on track to deliver the year-end inventory goal of $490 million. It also has plans to sell non-core assets in the fourth quarter. Net debt is likely to be roughly $850 million by the end of the year.
For 2023, revenues from the ongoing business are now projected in the range of $2.19-$2.20 billion, indicating a decline of about 13% year over year. This is down from $2.26-$2.28 billion guided earlier.
The gross margin is likely to be 38.7% and the adjusted gross margin is anticipated to be 39.1% for the year. It had earlier expected the gross margin to be 39.4% and the adjusted gross margin to be 40% for the year.
Operating margin is estimated to be nearly 4.8% and adjusted operating margin is expected to be 3.4%. Earlier, it projected the operating margin to be the same, but the adjusted operating margin was envisioned to be 5%. The effective tax rate is likely to be 25%.
Earnings per share are now envisioned to be between 35 cents and 40 cents and adjusted earnings per share are projected to be in the bracket of 5-10 cents. This guidance includes nearly 18 cents adverse impact of foreign currency exchange rate fluctuations. Previously, management had guided earnings per share of 43-53 cents and adjusted earnings per share of 45-55 cents.
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In the past three months, shares of this Zacks Rank #4 (Sell) company have lost 1.5% compared with the industry’s 5.2% decline.
Zacks Rank & Stocks to Consider
Wolverine currently carries a Zacks Rank #4 (Sell).
Some better-ranked stocks in the broader Consumer Discretionary sector are GIII Apparel Group GIII, lululemon athletica LULU and Skechers SKX.
GIII Apparel has a significant trailing four-quarter earnings surprise of 526.6%, on average. GIII 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 GIII Apparel’s current financial-year sales and earnings suggests growth of 2.4% and 14.7%, respectively, from the year-ago quarter’s reported numbers.
lululemon currently carries a Zacks Rank #2 (Buy). LULU has a trailing four-quarter earnings surprise of 6.8%, on average.
The Zacks Consensus Estimate for lululemon’s current financial-year sales and earnings suggests growth of 18.1% and 20.5%, respectively, from the prior-year quarter’s reported numbers.
Skechers currently carries a Zacks Rank #2. SKX has a trailing four-quarter earnings surprise of 50.3%, on average.
The Zacks Consensus Estimate for Skechers’ current financial-year sales and earnings suggests growth of 8.2% and 44.1%, respectively, from the year-ago quarter’s reported figures.
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