Wolverine World Wide, Inc. WWW reported third-quarter 2024 results, wherein the top and bottom lines surpassed the Zacks Consensus Estimate. Earnings grew year over year, while revenues dipped.
Wolverine posted better-than-expected revenues and earnings in the third quarter, led by the Merrell and Saucony brands coupled with gains from its turnaround plans. The company is focused on becoming more consumer-centric and adopting a global brand-building model. WWW registered another quarter of strong gross margin and more than doubled earnings year over year.
In the past six months, shares of this Zacks Rank #3 (Hold) company have gained 74.1% compared with the industry’s 4.6% growth.
An Insight Into WWW’s Q3 Performance
The company posted adjusted earnings of 29 cents a share, which beat the Zacks Consensus Estimate of 21 cents. The figure increased sharply from 11 cents in the prior-year quarter. At constant currency, the company’s earnings per share were 28 cents, up from 11 cents recorded in the prior-year quarter.
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Total revenues were $440.2 million, down 16.6% on a reported basis and 16.9% on a constant-currency basis. Ongoing revenues of $440.1 million dipped 7% on a reported basis and 7.4% on a constant-currency basis. The top line surpassed the Zacks Consensus Estimate of $422 million. The decline was attributable to lower revenues in most segments and brands. Direct-to-consumer revenues on an ongoing basis were $112.3 million, down 1.5% year over year. WWW’s international business’ revenues on an ongoing basis dropped 2% to $213.8 million.
Regarding segments, Active Group’s revenues dipped 3% year over year to $318.7 million. However, the segment’s revenues beat the Zacks Consensus Estimate of $281.6 million. Revenues at Work Group tumbled 11.3% year over year to $109.1 million but surpassed the consensus estimate of $84.8 million. Revenues of the Other segment plunged 83.7% year over year to $12.4 million. However, the metric comfortably topped the consensus estimate of $3 million.
Wolverine World Wide, Inc. Price, Consensus and EPS Surprise
Wolverine World Wide, Inc. price-consensus-eps-surprise-chart | Wolverine World Wide, Inc. Quote
Brand-wise, Merrell’s revenues rose 1.4% year over year to $159.2 million, while Saucony's revenues fell 10% to $104.8 million and Wolverine's revenues dipped 12.3% to $49.4 million. Sweaty Betty generated revenues of $46.3 million, up 3% year over year. The Zacks Consensus Estimate for the brands’ revenues was pegged at $144.2 million, $81.1 million, $56.3 million and $45.5 million, respectively.
Wolverine’s Margins & Costs
Adjusted gross profit was $199.2 million, up 1.4% year over year. The adjusted gross margin increased 380 basis points (bps) year over year to 45.3%. This resulted from reduced supply-chain costs and fewer sales of end-of-life inventory.
Adjusted operating expenses dipped 2.8% to $165.1 million. However, the metric, as a percentage of revenues, increased 160 bps year over year to 37.5%.
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%.
Wolverine’s Other Financials
Wolverine ended the quarter with cash and cash equivalents of $140.2 million, long-term debt of $567.8 million and stockholders' equity of $296.7 million.
Net debt was $563 million at the end of the quarter, down $373 million from the previous year. Inventory at the end of the quarter was $285.5 million, down 49.4% from the year-earlier quarter.
WWW Outlook for Q4 & 2024
For the fourth quarter, management anticipates revenues for Active Group to decline low single digit year over year, while Work Group revenues are expected to rise low double digits. Brandwise, revenues for Merrell are likely to grow low single digit year over year, Saucony to decrease low double digits, Wolverine to rise low double digits and Sweaty Betty to decline low single digit.
For 2024, the company expects revenues from its ongoing business to be in the range of $1.730-$1.745 billion compared with the previous guidance of $1.71-$1.73 billion. This implies a year-over-year decline in the band of 12.4-13.1%, with a constant-currency decline of 12.6-13.3%. WWW has raised the mid-point of its guidance by $18 million from the view issued in August. The higher demand in Active Group and favorable foreign currency translations will boost sales.
Management anticipates revenues for Active Group to decrease mid-teens year over year and Work Group to drop high single digit. Brandwise, revenues for Merrell are likely to decrease low double digits year over year, Saucony to decrease high teens, Wolverine to decline mid-single digits and Sweaty Betty to remain flat year over year.
Further, the gross margin is still anticipated to expand 460 bps from 2023 to 44.5%, while the operating margin is likely to be roughly 5.8%. The adjusted operating margin is expected at 7.2%, up 330 bps from 2023. Earlier, the company predicted an operating margin of about 6% and adjusted operating margin of 7.4%. Management expects solid margin expansions on supply-chain efforts, product-cost savings, gains from the inventory levels, better mix of full-price sales and brand-protection moves.
For 2024, WWW forecasts the effective tax rate to be around 16.5% compared with the previous outlook of 18.5%. Wolverine envisions earnings per share (EPS) to be in the band of 56-66 cents and adjusted EPS of 80-90 cents. EPS was earlier expected to be in the bracket of 53-63 cents, while adjusted EPS was predicted to be 75-85 cents. The company delivered adjusted earnings of 15 cents per share in 2023. The EPS expectations reflect an approximate 10 cents of negative impact from foreign currency exchange rate translations.
Management expects inventory to decrease by roughly $85 million at the end of the year from the previous year end. The earlier view called for a decrease of at least $75 million. Net Debt at the end of 2024 is likely to be around $545 million, a decline of $195 million from the last-year end and the previous outlook of $565 million. WWW is focused on working-capital and cash-flow optimization. Operating free cash flow is likely to be in the band of $120-$130 million, with roughly $30 million of capital expenditures.
Key Picks
Some better-ranked companies are G-III Apparel Group GIII, Gildan Activewear GIL and lululemon athletica LULU.
G-III Apparel sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
GIII Apparel has a trailing four-quarter earnings surprise of 118.2%, on average. The Zacks Consensus Estimate for GIII’s fiscal 2024 sales indicates an increase of 3.3% from the year-ago period’s level.
Gildan Activewear carries a Zacks Rank #2 (Buy) at present. GIL has a trailing four-quarter earnings surprise of 5.5%, on average.
The consensus estimate for Gildan Activewear’s current financial-year sales and EPS indicates growth of 1.5% and 14%, respectively, from the year-ago levels.
lululemon athletica is a yoga-inspired athletic apparel company. LULU carries a Zacks Rank of 2 at present.
The Zacks Consensus Estimate for lululemon athletica’s current financial-year sales and EPS indicates growth of 9.2% and 9.8%, respectively, from the year-ago figures. LULU has a trailing four-quarter earnings surprise of 7.9%, on average.
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