Wolverine World Wide Inc (WWW) Faces Headwinds as Q4 and Full-Year 2023 Results Show Declines
Revenue: Q4 revenue declined by 20.8% year-over-year; full-year revenue down 16.5%.
Gross Margin: Q4 gross margin improved to 36.6%; full-year gross margin slightly down to 38.9%.
Operating Margin: Reported Q4 operating margin at (35.5)%; full-year operating margin improved to (3.0)%.
Net Loss: Q4 net loss attributable to WWW was $(91.2) million; full-year net loss of $(39.6) million.
Diluted EPS: Q4 diluted loss per share of $(1.15); full-year diluted loss per share of $(0.51).
Balance Sheet: Inventory levels reduced by approximately 50%; net debt down $285 million year-over-year.
2024 Outlook: Revenue expected to decline by 12.2% to 14.7%; gross margin projected to improve to 44.5%.
On February 21, 2024, Wolverine World Wide Inc (NYSE:WWW) released its 8-K filing, detailing its fourth-quarter and full-year 2023 financial results. The company, known for its portfolio of footwear and apparel brands, including Merrell, Saucony, and Sweaty Betty, reported a decline in revenue and a net loss for both the quarter and the year, although gross margins showed some improvement.
Wolverine World Wide Inc is engaged in the design, manufacture, sourcing, marketing, licensing, and distribution of branded footwear, apparel, and accessories. The company's segments include Active Group, Work Group, Lifestyle Group, and Other, with the Active Group being the largest revenue contributor.
Performance and Challenges
The fourth-quarter revenue of $526.7 million represented a 20.8% decrease compared to the previous year, with a similar decline of 21.3% on a constant currency basis. The full-year revenue of $2,242.9 million also declined by 16.5% year-over-year. The company attributed the revenue decline to several divestitures and the transition of its Hush Puppies North America business to a licensing model.
Despite the revenue downturn, WWW saw an improvement in its gross margin for the fourth quarter, rising to 36.6% from 33.7% in the prior year. This was due to less promotional eCommerce sales and healthier inventory levels. However, the full-year gross margin slightly decreased to 38.9% from 39.9% in the previous year.
The company's operating margin for the fourth quarter showed a significant improvement, moving from (68.4)% to (35.5)%, while the full-year operating margin improved from (7.8)% to (3.0)%. The diluted earnings per share (EPS) for the fourth quarter was $(1.15), an improvement from $(4.59) in the prior year. The full-year diluted EPS was $(0.51), compared to $(2.37) in the previous year.
Financial Achievements and Importance
Wolverine World Wide Inc's financial achievements in the fourth quarter and full year 2023 were marked by a strengthened balance sheet and improved cost structure. The company reduced its inventory levels by approximately 50% compared to the prior year, ending the quarter with $373.6 million in inventory. Net debt was reduced by $285 million to $740 million, and the bank-defined leverage ratio stood at 2.9x.
These achievements are particularly important for a company in the Manufacturing - Apparel & Accessories industry, where efficient inventory management and a strong balance sheet are critical for navigating market fluctuations and investing in growth opportunities.
Outlook and Analysis
Looking ahead to 2024, Wolverine World Wide Inc expects revenue from its ongoing business to be between $1.70 billion and $1.75 billion, representing a decline of approximately 12.2% to 14.7%. However, the company anticipates gross margin to improve significantly to approximately 44.5%, up 460 basis points compared to 2023. The operating margin is expected to be around 5.7%, with an adjusted operating margin of approximately 7.0%, up 310 basis points from the previous year.
The company's focus on cost improvement initiatives and inventory reductions is expected to contribute to gross margin benefits and allow for an increased flow of new and innovative product offerings. Despite a challenging macro environment, particularly in the first half of the year, the company believes it is on stronger footing to drive improved profit, cash flow, and growth into the future.
Wolverine World Wide Inc's transformation efforts and strategic investments in brand building and technology are aimed at positioning the company for long-term success. While the 2023 results reflect the challenges faced, the company's proactive measures to improve its financial health and operational efficiency are expected to yield positive outcomes in the coming year.
For more detailed information and financial tables, please refer to the full 8-K filing.
Explore the complete 8-K earnings release (here) from Wolverine World Wide Inc for further details.
This article first appeared on GuruFocus.
