Wolverine World Wide, Inc. (WWW)

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Wolverine World Wide, Inc. (WWW)

F1Q09 Earnings Call

April 22, 2009 8:30 am ET


Christi Cowden – Director, Investor Relations and Communications

Blake Krueger – Chief Executive Officer and President

Don Grimes - Senior Vice President and Chief Financial Officer


Mitch Kummetz – Robert Baird

Jim Duffy – Thomas Weisel Partners

Kate McShane – Citi

Chris Svezia – Susquehanna

Sam Poser – Sterne Agee

Elizabeth Montgomery – Longbow Research



(Operator Instructions) Welcome to the Wolverine World Wide first quarter 2009 earnings conference call. I would like to introduce Ms. Christi Cowden, Director of Investor Relations and Communications for Wolverine World Wide.

Christi Cowden

Welcome to our first quarter conference call. On the call today are Blake Krueger our CEO and President, and Don Grimes our Senior Vice President and CFO.

Earlier this morning we announced record first quarter 2009 results. If you did not yet receive a copy of the press release please call Amanda Passage at 616-233-0500 to have one sent to you. The release is also available on many news sites or it can be viewed from our corporate website at www.WolverineWorldWide.com.

This morning’s press release included non-GAAP disclosures and these disclosures were reconciled with an attached table within the body of the release. Today’s comments during the earnings call will include some additional non-GAAP disclosures. There was a posting at our corporate website that will reconcile these non-GAAP disclosures to GAAP. To view the document please go to our Corporate website www.WolverineWorldWide.com click on Investors in the navigation bar, click on webcasts from the top navigation bar of the Investors page and then click on the file called WWW Q1 Conference Call GAAP versus non-GAAP disclosures.

Before I turn the call over to Blake Krueger to comment on our results, I’d like to remind you that the predictions and projections made in today’s conference call regarding Wolverine World Wide and its operations may be considered forward looking statements by securities laws. As a result, we must caution you that as with any prediction or projection there are a number of factors that could cause results to differ materially. These important risk factors are identified in the company’s SEC filings and in our press releases.

With that being said I would now like to turn the call over to Blake.

Blake Krueger

This morning we reported very good results for the first quarter of 2009 despite the difficult retail and macro economic environment. Revenue in the quarter exceeded our internal plan and our earnings leverage was very strong. Our ability to consistently deliver strong profit is a testament to our team’s excellent execution against our multi-brand, multi-country, and multi-category business model.

We currently have the advantage of serving a wide array of consumer groups in about 180 countries around the world. In these uncertain economic times we are especially focused on protecting and increasing our brand equity and integrity around the world, and maintaining the full price nature of our brands at retail.

We continue to take share in a declining market and redoubled our efforts to deliver innovative, cutting edge product. We feel very good about our product offerings across our brands as we begin the second quarter. The current global retail environment is extremely promotional but we have not participated in the promotional fray. Maintain full price status for our brands may cost us some sales in the short term but as our first quarter results reflect the integrity of our brands has not been impaired and we are better positioned for long term growth in sales and profits.

I would like to begin my brand review with the Hush Puppies group which now includes our newly acquired Cushe brand. In spite of the challenging global economy and stronger U.S. dollar, our Hush Puppies international and Canadian businesses posted solid revenue increases in the quarter. These increases were offset by lower sales in the U.S. and Europe. These decreases were primarily the result of retail bankruptcies and consolidations caused by weaker consumer spending in both markets.

Our European results were also negatively impacted by a stronger U.S. dollar compared to the British Pound and the Euro. Overall, our Hush Puppies business in the quarter experienced a revenue decline in the mid single digit range on a constant dollar basis. Gross margin for the quarter improved 170 basis points over last year due to our continuing focus on better grade product and compelling design.

The Hush Puppies brand is now marketed in over 140 countries worldwide and making our already strong controlled distribution base even larger, is a key strategic objective for the brand. During the first quarter six new concept stores and 19 new shop in shops were open bringing the quarter end total to 505 Hush Puppies brand concept stores and around 900 shop in shops.

Product innovation is central to our Hush Puppies brand building strategy and is critical to our plans to move the brand up market in the U.S.. As a result of new product offerings including the [Orbs] collection which features our light weight ZeroG technology, Hush Puppies successfully increased the average wholesale selling price in the U.S. by about a little more than $2.00 per pair during the quarter. Very good performance in the current promotional environment.

Early retailer interest in Cushe, our new design led younger active lifestyle brand has been overwhelmingly strong. We have already opened some of the best specialty store distribution in our domestic markets and have signed distribution agreements for 12 new international markets, confirming the significant potential of this exciting new brand. We will be launching the Cushe brand to our entire international distribution network at our May sales conference.

Let’s turn to the Heritage Brands Group which includes Sebago as well as our two largest licensed footwear businesses, Caterpillar and Harley Davidson. For Cat, sales performance in the quarter was adversely impacted by the international nature of the business, where over 80% of all pairs are sold outside the US, as well as the impact of a much stronger U.S. dollar. On a very positive note the U.S. business posted a single digit sales increase during the quarter based on the continuing strength of the Super Duty Work Program as well as strong sales to their top 30 accounts.

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