Wolverine World Wide, Inc. (WWW)

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Wolverine World Wide, Inc. (WWW)

Q4 2008 Earnings Call

February 4, 2009 8:30 am ET


Blake Krueger – President & CEO

Don Grimes – SVP & CFO

Christi Cowden – IR & C


Jim Duffy – Thomas Weisel

Chris Svezia – Susquehanna Financial

Mitch Kummetz – Robert W. Baird

Todd Slater – Lazard Capital

Jeff Blaeser – Morgan Joseph

Sam Poser – Sterne, Agee

Scott Krasik - CL King



Welcome to the Wolverine World Wide fourth quarter and full year 2008 earnings conference call. (Operator Instructions) I would now like to introduce Christi Cowden, Director of Investor Relations and Communications for Wolverine World Wide.

Christi Cowden

Good morning everyone and welcome to our fourth quarter and full year conference call. On the call today are Blake Krueger, our President and CEO and Don Grimes, our Senior Vice President and CFO. Other members of the Wolverine management team are sitting in as well.

Earlier this morning we announced our fourth quarter and full year 2008 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.

Before I turn the call over to Blake Krueger to comment on our results, I would 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 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

Thanks Christi, good morning to everybody and thanks for joining us today. The 2008 year was a very good year for our company and I am pleased to report another record year of revenue and earnings.

This marks our eighth consecutive year of both record revenue and earnings per share, something we are very proud of given the challenging economic environment. Our consistent performance is a testament to our team’s rigorous execution against our diversified business model which is multi brand, multi country, and multi category in nature.

Three of our four operating groups contributed to our record 2008 revenue led by the outdoor group and the Merrell brand. Our international businesses also had a very strong year. We recently made some tough decisions and announced a number of strategic moves which were centered on improving our operating efficiencies, strengthening our supply chain and enhancing our service levels.

These initiatives which will consolidate and realign our operating infrastructure and global supply chain position us to take advantage of longer-term opportunities but also help us address the shorter-term economic headwinds.

We plan to have our strategic restructuring plan fully implemented by the end of this year. The beneficial impact of these moves has been incorporated into the 2009 revenue and earnings guidance we issued today.

I would like to begin my brand review with Hush Puppies. Overall Hush Puppies experienced a mid single-digit revenue decline for the full year and a low double-digit decline for the fourth quarter. The unprecedented strengthening of the US dollar contributed to the reported revenue decline in Q4. The Hush Puppies international business posted another record year with strong double-digit revenue and earnings increases.

Building controlled global distribution on what is already a very strong base, is a key strategic objectives for Hush Puppies. During the year 99 new concept stores and 221 shop in shops were opened bringing the global year-end total for Hush Puppies to almost 500 stores and 900 shop in shops.

Two new Lifestyle stores featuring Hush Puppies footwear, apparel and accessories were also opened in Tokyo in the quarter. Controlled distribution is playing an increasingly important role in our own operations. During 2008 the company opened two Hush Puppies retail stores in Europe, both of which are performing well.

During 2009 we plan to open two full priced concept stores in Canada and one in the UK. Our strategy to move the Hush Puppies brand up market in the US has seen favorable results in spite of the difficult US retail environment. Sell in and sell through of higher priced products such as our patented bounce comfort technology men’s product has enabled us to open new, better grade distribution.

We are also very excited to add our newest Lifestyle brand Cushe to the Hush Puppies group. While small this European business is precisely the kind of brand that will benefit from our established global infrastructure and brand building expertise. It dovetails perfectly with Hush Puppies.

Cushe is a younger brand with design led relaxed style footwear focused on the energy and optimism of action sports. We look forward to a broader launch of this brand for the spring 2010 season.

Turning to the Heritage brands group, this group which includes Sebago as well as our two largest licensed footwear businesses, Caterpillar and Harley-Davidson, had a solid year with revenue increases for Q4 and the full year. Operationally the group had an excellent year by improving operating margins and posting strong double-digit Q4 and full year earnings increases.

These results were frankly impressive especially in light of the currency headwinds in the back half of the year. Last year, 2008, is the fifth consecutive year of strong profit gains for the Heritage brands group.

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