Wolverine World Wide (WWW)
Q4 2012 Earnings Call
February 19, 2013 8:30 am ET
Blake W. Krueger - Chairman, Chief Executive Officer and President
Donald T. Grimes - Chief Financial Officer, Principal Accounting Officer, Senior Vice President and Treasurer
Christian Buss - Crédit Suisse AG, Research Division
Jim Duffy - Stifel, Nicolaus & Co., Inc., Research Division
Kate McShane - Citigroup Inc, Research Division
Edward J. Yruma - KeyBanc Capital Markets Inc., Research Division
Taposh Bari - Goldman Sachs Group Inc., Research Division
Mitchel J. Kummetz - Robert W. Baird & Co. Incorporated, Research Division
Christopher Svezia - Susquehanna Financial Group, LLLP, Research Division
Sam Poser - Sterne Agee & Leach Inc., Research Division
Scott D. Krasik - BB&T Capital Markets, Research Division
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Thank you, Keith. Good morning, everyone, and welcome to our fourth quarter and full year 2012 conference call. On the call today are Blake Krueger, our Chairman, CEO and President; and Don Grimes, our Senior Vice President and CFO.
Earlier this morning, we announced our financial results for both the fourth quarter and full year 2012. And if you did not yet receive a copy of the press release, please call Brad Van Houte at (616) 233 0500 to have one sent to you. The release is also available on many news sites or can also 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 the cash tables within the body of the press release.
Today's comments during the earnings call will also 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 documents, please go to our corporate website, www.wolverineworldwide.com, and click on Investor Relations in the navigation bar, then click on Webcast at the top of the Investor Relations page, and then click on the link to the file called WWW Q4 2012 Conference Call Supplemental Tables below the webcast link.
Before I turn the call over to Blake to comment on our results, I'd like to remind you that the predictions and projections made in today's conference call regarding Wolverine Worldwide and its operations may be considered forward-looking statements by Securities Laws. And 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 also in our press releases.
With all that being said, I would now like to turn the call over to Blake.
Blake W. Krueger
Thanks, Christi. Good morning to everybody, and thanks for joining us today.
I'm pleased to report that we closed fiscal 2012 on a strong note with revenue from our legacy business, representing the 12 brands in our portfolio prior to last year's acquisition of the Performance + Lifestyle Group, reaching record levels during the quarter, driven by increases in all operating groups.
Geographically, our owned U.S. and third party distributor and licensing businesses produced the highest increases, which were partially offset by shortfalls in Europe due to the impact of the double-dip recession that persists in that region.
Earnings leverage was also good as we delivered better-than-expected results from our legacy brand portfolio.
In addition, our 4 newly acquired brands posted revenue in line with our high expectations and generated better-than-anticipated earnings during the stub period, which was from the close of the acquisition in October to fiscal year end. Don will provide some more details on that in a bit.
We're ahead of schedule in realizing the collective benefits from our unparalleled portfolio at 16 brands that are currently distributed in over 200 countries and territories. We reached all genders and age groups and covered most product categories.
We are also very pleased with the strong interest in our 4 new brands from our established international partners.
Let me start with some comments about our 4 new brands, beginning with Sperry Top-Sider. Sperry had a great close to the year, generating an extremely strong double-digit revenue increase during the stub period. This stellar performance was achieved through rigorous execution of the brand's strategic growth plan that is focused on elevating the business to a global dual-gender, multi-category Performance + Lifestyle brand.
For Sperry Top-Sider, nonboat shoe product continues to grow at an even faster pace than boat shoes with especially strong gains in fashion flats and cold-weather boots for women, as well as the Gold Cup collection, a men's premium footwear.
Over the past couple of years, the has brand developed into a powerful dual-gender business with the women's side now accounting for more than half of all sales.
Sperry Top-Sider's flagship boat shoe business also delivered excellent growth in the stub period, maintaining a leading position in this category where it has a dominant share of the U.S. market.
Sperry Top-Sider also expanded its consumer-to-direct platform and entered the year with 25 specialty stores compared to 12 specialty stores at the end of 2011. Overall profit continues to exceed plan.
The evolution of Sperry Top-Sider from a footwear brand to a true lifestyle brand also continues to accelerate with 7 new license programs developed in 2012 to early 2013 launch. Early indicators from retail are very positive with especially good acceptance in the swimwear and sock categories.
I'll now turn to Saucony, which experienced accelerated momentum in the back half of the year. Saucony's business was driven by strong double-digit domestic gains across its focus channels for distribution including the specialty run and sporting good channels. These gains were moderated by planned sales reductions in closed out product and lower tier distribution, resulting in flat sales for the short stub period. Saucony continues to receive accolades as a performance leader and innovator, winning many of the industry's most important awards.
In the quarter, the Guide 5, one of the brand's flagship franchises, received the Editor's Choice Award as Best Shoe of 2012 from the international editors of Runner's World. And the Kinvara 3 was awarded Best Shoe in the Performance Category from the Running Network.
Moving on to Keds. This iconic American brand delivered strong double-digit revenue growth in the stub period with solid increases across all product categories. The repositioning of the brand with younger, fresher product is accelerating on the strength of the multi-year partnership with 7-time Grammy-winning multi-platinum singer/songwriter, Taylor Swift. The Keds' partnership with Taylor Swift coincided with the launch of her latest album, Red, which quickly became the best-selling album of the last decade.
Keds is an official sponsor of the upcoming 45-city Red album tour and fresh product is hitting retail stores to capitalize on this momentum.
Finally, the Stride Rite Children's Group continued to post excellent results. This was the eighth consecutive quarter of strong growth for the group's wholesale business. The Stride Rite consumer direct business all -- also continued its winning streak achieving yet another high teens comp store increase in the quarter.
This strong performance at retail was supported through a higher level of in-store product and marketing story, strategic inventory investment and key styles and increasingly effective loyalty program and an improved retail service model.
Before moving on to our legacy Wolverine brand, I'm excited to report that the PLG integration is going especially well, with the transition plan ahead of schedule and under budget. This could not have been achieved without the cooperation, effort and collaboration of the leadership teams in Michigan and Boston, who have been working for months to meld these 2 businesses into a single cohesive global powerhouse.