Wolverine (WWW) Sells Sperry, Strategic transformation on Track
Wolverine World Wide, Inc. WWW remains on track with its strategic transformation. Proceeding on these lines, it concluded the sale of the Sperry brand to Authentic Brands Group, Inc., and the ALDO Group. This transaction, which officially closed on Jan 10, 2024, is expected to yield proceeds of around $130 million in the first quarter.
Management’s decision to sell Sperry was largely influenced by its strategic focus on business transformation aimed at concentrating on growth driving brands and platforms. Incidentally, revenues from The Lifestyle Group (which houses the Sperry brand) slumped 46.6% year over year in third-quarter 2023, mainly due to a $32.7 million reduction in sales from the Sperry brand.
Revenues and operating profit from the Sperry brand have been deteriorating sequentially. Sperry revenues were $57.4 million in the second quarter of 2023, which came down to $46.2 million in the third quarter and is estimated to be $40.7 million in the fourth quarter.
The brand witnessed adjusted operating profit of $4.6 million in the second quarter. It swung to an adjusted operating loss of $0.5 million in the third quarter and is estimated to deliver a loss of $1.1 million in the final quarter of fiscal 2023.
Focus on Strategic Transformation
Wolverine’s sale of its Sperry brand marks another step in the company’s turnaround process. In this regard, management is focused on streamlining portfolio, lowering debt, and restructuring the organization to boost performance and profitability. These initiatives have bolstered WWW’s capacity to invest in its brands and platforms.
The above-mentioned sale comes after the company’s previously announced asset monetization transactions, which generated cash worth roughly $250 million in fiscal 2023. As part of these transactions, Wolverine finalized the divestiture of its Kentucky distribution centre on Dec 28, 2023.
Other previously disclosed transactions encompassed assets such as Keds, Hush Puppies intellectual property in China, Wolverine Leathers, and the revamped operating model for Merrell and Saucony in Greater China. Apart from this, the company was looking for strategic options for the Sperry brand. This effort is part of a broader strategy to optimize its brand portfolio, focusing on growth and profitability.
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What’s More?
The Zacks Rank #3 (Hold) company recently unveiled its preliminary results for fiscal 2023. Wolverine expects to report fiscal 2023 and fourth-quarter revenues of $2.24 billion and $527 million, respectively.
Wolverine anticipates 2023 and fourth quarter adjusted gross margins to be above 39% and 36%, respectively. Adjusted pre-tax earnings for these periods are expected to meet the company's previous expectations. It earlier anticipated adjusted loss per share of 25-30 cents for the fourth quarter. For fiscal 2023, it earlier envisioned adjusted earnings per share of 5-10 cents.
Nonetheless, the sale of the Sperry brand and WWW’s other restructuring actions underscore its dedication toward prioritizing efficient asset management. This, in turn, places it for an enhanced financial performance. Shares of Wolverine have rallied 13.3% in the past three months compared with the industry’s growth of 5.5%.
3 Better Ranked Picks.
Some better-ranked stocks are G-III Apparel Group, Ltd. GIII, Carter’s CRI 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. It 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 figure. GIII has a trailing four-quarter average earnings surprise of 541.8%.
Carter’s designs, sources and markets branded childrenswear in the United States and internationally. The company currently has a Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for Carter’s current fiscal-year earnings and sales indicates a decline of 7.9% and 13.4%, respectively, from the prior-year levels. CRI has a trailing four-quarter negative earnings surprise of 3.2%, on average.
Skechers designs, develops, markets, and distributes footwear for men, women, and children. It 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 fiscal-year sales and earnings suggests growth of 8.1% and 44.1%, respectively, from the year-ago numbers.
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