Tough macro and retail conditions in Europe took a toll on
Wolverine World Wide Inc
) third quarter 2012 earnings, wherein the company reported
adjusted quarterly earnings of 72 cents a share, down 12.2% from
the prior-year quarters' earnings of 82 cents. However, the
reported earnings came in line with the Zacks Consensus Estimate.
Including one time items, earnings came in at 66 cents a share,
down 19.5% from the year-ago quarter.
Wolverine, the seller of products under Harley-Davidson
Footwear, Hush Puppies, Merrell and other brands, reported a
decrease of 2.4% in its top line to $353.1 million. Moreover, the
reported revenue came in below the Zacks Consensus Estimate of $363
Secular headwinds and lingering concerns over the European
market spoiled sales during the quarter. Further, foreign exchange
negatively impacted the revenue by $5.4 million. Amid this gloom,
strength across United States provided some cushion to the
Coming to the operating groups, revenues decreased 7.9% year
over year to $134 million for Outdoor and 5.1% to $52.7 million for
Lifestyle, while it increased 1.3% to $129.6 million for Heritage.
Besides these groups, revenue derived from the company's other
brands fell 46.5% to $2.1 million while business units, comprising
Wolverine retail and leathers, posted a revenue increase of 20.5%
to reach $34.8 million.
Gross profit waned 5.5% year over year to $138.6 million during
the quarter, whereas gross margin contracted 140 basis points to
39.2%. Management stated that increased input costs, higher
closeout sales and unfavorable sales mix shift pulled down gross
Adjusted operating profit decreased 12.6% to $49.3 million in
the quarter, while adjusted operating margin shrinked 160 basis
points to approximately 14%. However, including one time items
(acquisition related costs), operating profit decreased 17.9% to
$46.3 million, whereas operating profit margin decreased 250 basis
In a separate development, Wolverine sealed the previously
announced acquisition of Collective Brands' Performance + Lifestyle
Group (PLG) unit for $1.24 billion. The PLG unit sells footwear and
related products, both wholesale and retail, for children and
adults under popular brands including Stride Rite, Sperry
Top-Sider, Saucony, and Keds.
The deal is expected to provide ample opportunities to Wolverine
to boost its growth prospects while facilitating the company to
enhance its portfolio of brands. Owing to the acquisition, the
company expects earnings dilution in the range of 25 cents to 30
cents a share for the rest of fiscal 2012.
However, Wolverine added that the acquisition will be accretive
to the earnings of fiscal 2013 and 2014 in the range of 35 cents to
50 cents and 60 cents to 80 cents, respectively.
Other Financial Aspects
Wolverine ended the quarter with cash and cash equivalents of
$144.3 million with no long-term debt and shareholders' equity of
Guidance Goes Down
The company stated that lingering macro concerns in Europe will
continue to hamper the results in the near term and now expects
total revenue in the range of $1.425 billion to $1.435 billion for
fiscal 2012, reflecting a year-over-year growth of 1.1% to 1.8%.
However, including the impact of the PLG acquisition, revenue is
expected in the range of $1.645 billion to $1.655 billion.
Earlier, the company forecasted total revenue in the range of
$1.46 billion to $1.50 billion for fiscal 2012, reflecting a
year-over-year growth of 3.6% to 6.4%.
Wolverine expects fiscal 2012 adjusted earnings between $2.26
and $2.31 a share. Including the impact of the acquisition,
earnings are expected to be in the range of $1.96 to $2.06 a
Earlier, the company forecasted earnings between $2.70 and $2.80
a share, representing a growth of 8.9% to 12.9% from the prior
For the fourth quarter of 2012, the company expects revenue to
be approximately $441 million, up 8.6% from the prior-year quarter.
Moreover, it is expected to be in the range of $655 million to $665
million including the impact of the PLG acquisition. Earnings are
expected to be in the range of 42 cents to 47 cents a share
compared with 47 cents in the year-ago quarter.
Moreover, excluding the impact of the acquisition, fourth
quarter gross margin is expected to be marginally down compared
with the prior-year quarter, reflecting negative product mix.
Given the current macroeconomic environment and intense
Deckers Outdoor Corporation
Skechers USA Inc.
), we prefer to have a long-term "Underperform" recommendation on
the stock. However, Wolverine holds a Zacks #3 Rank that translates
into a short-term "Hold" rating.
DECKERS OUTDOOR (DECK): Free Stock Analysis
SKECHERS USA-A (SKX): Free Stock Analysis
(TBL): ETF Research Reports
WOLVERINE WORLD (WWW): Free Stock Analysis
To read this article on Zacks.com click here.