Shares of Wolverine World Wide, Inc. WWW have lost 40.6% in the past three months due to several headwinds for a while now. Macroeconomic issues, including inflationary pressures, along with higher costs and other headwinds have been weighing on the company’s performance. On its last reported quarter'searnings call management highlighted that the trading background is challenging, mainly in the global wholesale channels, and thus, it has lowered its revenue and earnings view for the back half of 2023. Meanwhile, the industry have fallen 12.4% in the same time frame.
Wolverine reported soft results for second-quarter 2023, wherein sales and earnings fell year over year. The company posted second-quarter adjusted earnings of 19 cents a share, missing the Zacks Consensus Estimate of earnings of 20 cents per share. At constant currency, adjusted earnings per share came in at 21 cents. Although revenues came ahead of the consensus estimate, the metric fell 17.4% year over year, driven by lower revenues at most of the segments and brands.
Further, the company’s direct-to-consumer (DTC) unit remains sluggish. DTC revenues were down 20.3% year over year and International revenues decreased 6.2% in constant currency. Coming to segments, Active Group’s revenues dipped 10.5% year over year, while the metric at Work Group tumbled 15.6% to $117.8 million. Revenues at Lifestyle Group and Other fell 38.2% and 47%, respectively.
For 2023, revenues from the ongoing business are now projected to be in the range of $2.26 billion to $2.28 billion, showing a decline of about 10-10.7% year over year. Earnings per share are now envisioned to be between 43 cents and 53 cents and adjusted earnings per share are projected to be in the bracket of 45-55 cents. The company earned $1.41 per share in 2022. For the third quarter of 2023, management projects revenues to be nearly $515 million, which reflects a year-over-year decline of nearly 21%.
Recently, Wolverine stated additional steps for the ongoing transformation of its brand portfolio. This comprises the sale of the Hush Puppies intellectual property in China, Hong Kong and Macau, as well as the sale of the Wolverine Leathers business in the United States. These actions are expected to reshape the company’s portfolio and streamline the organization, thus allowing it to grab meaningful opportunities.
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The company has inked a deal to sell the Hush Puppies trademarks, patents, copyrights and domains in China, Hong Kong and Macau to the present sublicensee, Beijing Jiaman Dress Co., Ltd., for roughly $58.8 million. Per the transaction, these parties have entered into a License and Cooperation agreement for mutual engagement and brand stewardship of the Hush Puppies brand across the region. This will allow the company to own and operate the Hush Puppies brand in the rest of the world. We note that Wolverine has concluded the sale of the U.S. Wolverine Leathers business to its long-time customer, New Balance, for $6 million. The aforesaid moves follow the recently completed sale of Keds to Designer Brands, Inc., as well as the strategic alternatives process for its Sperry brand.
All the aforesaid moves are expected to reshape Wolverine’s portfolio and drive growth in the future. However, we remain cautious about the Zacks Rank #4 (Sell) company.
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