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Wolverine World Wide Looks Like a Solid Investment

April 09, 2014 | About:
Rustic Nomad

Rustic Nomad

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Rockford-based footwear manufacturer, Wolverine World Wide (WWW), released not so impressive results for the fourth quarter. As a result, the stock has declined. However, the company looks like a better buy for the long term and its prospects for 2014 look better than its rival Deckers Outdoor (DECK).

Solid Performance

In the recently reported fourth-quarter, Wolverine recorded handsome growth of 13.5% in revenue. Most of the contributions came from its sub-brands such as Sperry, Saucony, Keds and Merrell. The bottom line also experienced an attractive growth of 25.4%. Taking into account the diversity of its business, disciplined management, and strong portfolio of brands, the company looks strong and can deliver solid operational and financial results in 2014.

Wolverine enjoys one of the strongest and widest portfolios in the retail industry. Wolverine is now focusing on capitalizing its diversified-product portfolio to create a global lifestyle brand based on age, gender and market trends. At the same time, Wolverine is concentrating on various segments to improve its profitability, such as e-commerce, to lower cost headwinds and lower traffic for brick and mortar retailers.

Strategic Moves

In addition to this, Wolverine plans to invest strategically in its key brands and sub-brands such as Sperry, Saucony, Keds and Merrell. These delivered positive results in the last quarter in the e-commerce segment. Wolverine expects that the festive season of Easter that falls in the second quarter of fiscal 2014 would lead to better results. Moreover, Wolverine is focusing on growth in the Asia Pacific and Latin America regions through these initiatives. With business stabilizing in Europe and growth expected to resume in the EMEA region, Wolverine forecasts better operational and financial results from these regions going forward.

E-commerce is one of the key growth engines of the company. Wolverine has a wide portfolio of 60 websites and 20 mobile sites. The company further plans to boost sales in this segment by recruiting a vice president for global e-commerce. These moves will help Wolverine bring more customers to its fold as it has a big portfolio of brands. The company recently acquired Collective Brands. With four new brands being added to its portfolio, Wolverine is in a solid position going forward.

Though the company expects a soft start to the first quarter of 2014, it will certainly pick up momentum going forward. Wolverine anticipates double-digit earnings growth due to expansion and the increasing presence of its brands in various markets.

Ahead of Peers

But Wolverine faces tough competition from its peers like Deckers and Skechers in the footwear market. With a diversified product portfolio, it has a competitive edge over its peers. Also, it is one of the cheapest companies in its peer group. Wolverine’s P/E ratio of 26 is lower than both Deckers (28.6) and Skechers (31.7).

While looking at the earnings growth projected by analysts, Wolverine looks solid. Wolverine’s earnings are expected to increase at 14% per year for the next five years, with Skechers being close by at 15%. But as we saw, Skechers is quite expensive. Deckers, meanwhile, is expected to see just 9.4% growth in earnings in the next five years.

Bottom Line

So, even though Wolverine has started off slowly in 2014, its prospects are strong, and better performance can be expected in the future.


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