Wolverine World Wide Inc
), one of the leading designers, manufacturers and marketers of
branded footwear and apparel, recently posted lower-than-expected
second-quarter 2012 results.
Unhurried sales and decline in profitability took a toll on the
company's earnings as Wolverine reported adjusted quarterly
earnings of 41 cents a share, down 14.6% from the prior-year
quarters' earnings of 48 cents and missed the Zacks Consensus
Estimate of 44 cents.
Including one-time items, earnings came in at 42 cents a share,
down 12.5% from the year-ago quarter.
Wolverine, the seller of products under Harley-Davidson
Footwear, Hush Puppies, Merrell and other brands, marked an
increase of 0.8% in its top line to $312.7 million. However, the
reported revenue came below the Zacks Consensus Estimate of $314
Secular headwinds and lingering concerns over the European
market spoiled sales during the quarter. Further, foreign exchange
added fuel to the fire by negatively impacting revenue.
Coming to the operating groups, revenues increased 2.7% year
over year to $130.7 million for Outdoor, while it decreased 3.4% to
$99.4 million for Heritage and 0.5% to $41.3 million for
Lifestyle. Other business units, comprising Wolverine retail
and leathers, posted a revenue growth of 8.5% to reach $37.8
Gross profit decreased 3.4% year over year to $118.1 million
during the quarter, whereas gross margin contracted 160 basis
points to 37.8%. Management stated that increased input costs and
unfavorable sales mix shift pulled down gross margins.
Adjusted operating profit plunged 16.7% to $27.8 million in the
quarter, while adjusted operating margin shrinked 190 basis points
to 8.9%. However, including one-time items, operating profit
decreased 31.5% to $22.8 million, whereas operating profit margin
decreased 350 basis points.
In a separate development, Wolverine announced the acquisition
) Performance + Lifestyle Group (PLG) unit. 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. The company expects to close the
deal during third quarter or early in fourth quarter.
Other Financial Aspects
Wolverine ended second-quarter 2012 with cash and cash
equivalents of $156.6 million with no long-term debt and
shareholders' equity of $627.6 million.
Management Backs Guidance
Despite soft results, management remains optimistic for the
coming quarters and maintained its earnings guidance for the
current fiscal. Wolverine expects fiscal 2012 earnings between
$2.70 and $2.80 a share, representing a growth of 8.9% to 12.9%
from the prior year.
Moreover, Wolverine expects 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%.
For the third quarter of 2012, the company expects revenues to
be in the low-to-mid-single-digit range, while earnings are
expected to remain flat year over year.
Rockford, Michigan-based Wolverine enjoyed increased momentum in
fiscal 2011, which we expect to continue into fiscal 2012.
Moreover, we believe that the company remains well positioned to
increase its market share on the strength of its brand portfolio.
The Merrell brand has been the key growth driver in the past
decade, and we expect it to catalyze future growth.
Currently, we are maintaining a long-term 'Neutral' rating on
the stock. Moreover, Wolverine, which competes with
Deckers Outdoor Corporation
Skechers USA Inc
), has a Zacks #3 Rank that translates into a short-term 'Hold'
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