Wolverine World Wide, Inc.’s WWW shares reached a new 52-week high of $22.60 yesterday before closing at $22.31. So far, WWW stock has rallied 151% against the Zacks Shoes and Retail Apparel industry’s sharp 16.6% decline.
The company’s ongoing strategic approach and product diversification have enabled it to outperform the broader Zacks Consumer Discretionary sector and the S&P 500 index’s growth of 10% and 26.1%, respectively, during the same period.
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Moreover, the company has shown solid upward momentum, currently trading above both its 200-day and 50-day simple moving averages (SMA), key indicators of price stability and long-term bullish trends. In yesterday’s trading session, WWW surpassed its 200-day SMA of $12.70 and 50-day SMA of $16.12. This technical strength, coupled with continued momentum, signals positive market sentiment and growing investor confidence in WWW's financial health and growth potential.
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WWW Revitalizes Growth With Innovation and Efficiency
Wolverine has been rejuvenating its brand portfolio through innovation and market adaptation. Merrell, a key brand, posted a 1.4% year-over-year revenue increase in the third quarter of 2024, fueled by successful product launches such as the Moab Speed 2 and Agility Peak 5. The upcoming Speed Arc Collection, set to be launched in 2025, will feature advanced materials and design, thus further solidifying Merrell's leadership in the hiking and trail footwear market.
Saucony, meanwhile, has been expanding its presence by targeting both performance and lifestyle segments, with the Endorphin Elite 2 set to launch in spring 2025. It plans to increase distribution in 900 new lifestyle-focused retail locations. These initiatives are strengthening brand equity and positioning Wolverine for sustained revenue growth across key markets.
The company's direct-to-consumer (DTC) channels have performed well, with both Merrell and Saucony reporting mid-single-digit growth in the third quarter. This growth can be attributed to Wolverine’s strategic investment in digital capabilities and premium shopping experiences.
Operational efficiencies and inventory optimization have been central to Wolverine's turnaround. Inventory was reduced 49.4% year over year to $285.5 million in the third quarter, thereby improving cash flow and reducing the risk of markdowns on obsolete stock. The company anticipates a further reduction of $85 million in inventory by the end of the year.
Moreover, its streamlined cost structure is reflected in lower SG&A expenses, which are expected to drop to $650 million in 2024 from $716 million in 2023. These efforts have supported gross margin expansion and strengthened Wolverine’s financial health. The adjusted gross margin increased 380 basis points (bps) year over year to 45.3% in the third quarter. This resulted from reduced supply-chain costs and fewer sales of end-of-life inventory.
Also, adjusted operating profit was $34.1 million, up 28.7% year over year. The adjusted operating margin expanded 210 bps year over year to 7.7%, demonstrating WWW’s ability to leverage its revenue growth effectively.
Wolverine’s Strong Outlook for 2024
Wolverine’s strong market position allows it to drive continued growth. For 2024, the company expects a significant boost in the gross margin and aims for an adjusted rate of 44.5%, which indicates a 460 basis points increase from the last year. The adjusted operating margin is projected to reach 7.2%, representing a 330-basis point increase from 2023.
Adjusted earnings per share are forecasted to be between 80 cents and 90 cents, slightly higher than the prior range of 75-85 cents, with a projected 10-cent reduction due to foreign exchange effects. In comparison, adjusted earnings in 2023 were 15 cents per share. Wolverine also expects the fourth-quarter gross margin to rise to 44%, indicating an increase of 700 basis points year over year. The operating margin is anticipated to be 9%, while adjusted earnings per share (EPS) are predicted to be between 31 cents and 41 cents.
Estimate Revisions Favoring WWW Stock
Analysts have responded positively to Wolverine’s prospects, reflected in upward revisions in the Zacks Consensus Estimate for EPS. In the past seven days, analysts have increased their estimates for the current financial year by 4 cents. The consensus estimate for earnings is pegged at 89 cents per share. The consensus estimate for the next financial year has also been raised 7 cents to $1.35 per share.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
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Conclusion
Investors may consider WWW stock due to the company's strong market performance and continued strategic growth. Wolverine stock’s impressive rally reflects investor confidence in its financial health and innovation. With successful brand revitalization efforts, including key product launches from Merrell and Saucony, along with a focus on operational efficiencies and inventory optimization, the company is well-positioned for long-term growth.
The positive technical indicators, such as trading above key moving averages, signal a bullish outlook. Furthermore, Wolverine’s strong financial performance, improved margins and upward earnings revisions indicate robust prospects for 2024, making it an attractive option for investors seeking stability and growth potential. It currently sports a Zacks Rank #1 (Strong Buy).
Other Stocks to Consider
Some other top-ranked stocks are Abercrombie & Fitch Co. ANF, Gildan Activewear Inc. GIL and Steven Madden, Ltd. SHOO.
Abercrombie is a specialty retailer of premium, high-quality casual apparel. It sports a Zacks Rank of 1 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
ANF delivered a 16.8% earnings surprise in the last reported quarter.
The Zacks Consensus Estimate for Abercrombie’s fiscal 2025 earnings and sales indicates growth of 63.4% and 13%, respectively, from the fiscal 2024 levels. ANF has a trailing four-quarter average earnings surprise of 28%.
Gildan is a manufacturer and marketer of premium quality branded basic activewear for sale principally in the wholesale imprinted activewear segment of the North American apparel market. It currently carries a Zacks Rank #2 (Buy).
The consensus estimate for Gildan’s current financial-year earnings and sales indicates growth of 15.6% and 1.5%, respectively, from the 2023 figures. GIL has a trailing four-quarter average earnings surprise of 5.4%.
Steven Madden designs, sources, markets and sells fashion-forward name-brand and private-label footwear. It currently has a Zacks Rank of 2.
The Zacks Consensus Estimate for Steven Madden’s 2024 earnings and sales indicates growth of 8.2% and 12.7%, respectively, from the year-ago actuals. SHOO has a trailing four-quarter average earnings surprise of 9.8%.
5 Stocks Set to Double
Each was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2024. While not all picks can be winners, previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
Today, See These 5 Potential Home Runs >>Abercrombie & Fitch Company (ANF) : Free Stock Analysis Report
Wolverine World Wide, Inc. (WWW) : Free Stock Analysis Report
Gildan Activewear, Inc. (GIL) : Free Stock Analysis Report
Steven Madden, Ltd. (SHOO) : Free Stock Analysis Report
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