Wolverine World Wide, Inc. (WWW)

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Wolverine World Wide, Inc. (WWW)

Q3 2009 Earnings Call

October 7, 2009 8:30 am ET


Christi Cowden – Director, Investor Relations and Communications

Blake Krueger - CEO and President

Don Grimes - Senior Vice President and CFO


Mitch Kummetz – Robert Baird

Jim Duffy – Thomas Weisel Partners

Chris Svezia – Susquehanna

Sam Poser – Sterne Agee

Diana Katz – Lazard Capital

Elizabeth Montgomery – Longbow Research

Tom Shaw – Stifel Nicolaus



(Operator Instructions) Welcome to Wolverine World Wide’s Third 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 third 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 our third quarter 2009 results. If you did not yet receive a copy of the press release please call Abby Brandt 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 attached tables 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 Q3 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

A somewhat sad day here at Michigan given the Tigers lost late last night but we’ll proceed with the call. This morning we reported very good results for the third quarter behind strong earnings leverage. Our multi-brand, multi-country, and multi-category business model continues to deliver solid results even in this challenging retail and macro economic environment.

While retailers are cautious and continue to be very conservative with their inventory levels our brands are selling through nicely on a full price, non-promotional basis. We remain focused on delivering innovative, cutting edge product, protecting and increasing our brand equity and integrity and positioning the company for accelerated growth once we cycle out of the current recessionary environment.

During the quarter our revenue results reflected the tough environment and unfavorable currency comparisons. However, consumers actually vote with their wallet and the strength of our brands is clearly evidenced by the strong consumer response to our product offering. To this end, for Q3 our 94 company owned stores reported a strong double digit revenue increase on a comp store increase of over 4%. In addition, we’ve seen our 2010 order backlog build to a solid increase. Overall we are very pleased with our performance throughout the year and third quarter and have increased our 2009 earnings per share guidance for the year. Don will share some more details on that in a few minutes.

I would like to begin my brand review with the Hush Puppies group. Overall, Hush Puppies group revenue in the third quarter exceeded our internal forecast but was down upper single digits on a constant currency basis. The majority of the decrease was centered in our international licensing business and in our UK wholesale business, both of which felt the impact of the stronger US dollar. The Hush Puppies business in North America was down only 1% in constant dollars as we are making progress in our efforts to move the brand up market.

During the quarter we opened our first company owned, full priced Hush Puppies concept store in Montreal, Canada. This store is performing exceptionally well and has exceeded our internal sales plans by a substantial margin. Our second Montreal store opened just last week and is also performing well above our plan. These concept stores will help us showcase the brand and present a broad product offering to the consumer. With an average unit selling price of over $110 US we are seeing positive results from our efforts to add style, content, and trade the brand up in North America.

Our consumer direct business in the UK also continues to outperform the market. Our back to school business was especially strong as our proprietary children’s measuring and fitting proposition, “Fit Left, Fit Right” drove strong back to school sales in the quarter. We plan to open our fifth Hush Puppies value store in the UK in November. The Hush Puppies brand also continues to perform well with better tier retailers in the UK.

Building controlled distribution continues to be a key strategic objective for Hush Puppies. In addition to the company’s direct retail investments in the quarter our international distributors opened concept stores in Dubai, India, Indonesia, Singapore, Costa Rica, Portugal, Spain, Shanghai, China and the Philippines. This brings our global store count to 513 concept stores and over 900 shop in shop.

Cushe our new design led active lifestyle brand targeting younger consumers is generating positive buzz in many footwear markets. Retailers at both the outdoor retailer and surf shows were very enthusiastic about the Cushe brand and products. We had several shoes stolen off our booth at the outdoor retailer show so that’s probably the ultimate compliment for design and innovation.

Early sell through in the US, Canada, and Europe for Cushe has been very encouraging. To date we have signed distribution agreements covering 25 countries for Cushe and our first pop up store recently opened in Manila. While Cushe is very early in its growth cycle our fast paced international expansion and placement in several key US influencer accounts reinforces our belief that Cushe represents a significant mid term growth opportunity.

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