Release Date: August 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Wolverine World Wide Inc (WWW, Financial) exceeded revenue and earnings expectations for the second quarter.
- The company saw sequential revenue improvement and meaningful gross margin expansion year-on-year.
- Inventory and debt levels were further reduced, contributing to a stronger financial position.
- The company is raising the midpoint of its revenue and earnings guidance for the year.
- Strong performance from brands like Saucony, which saw a 21% increase in e-commerce sales year-over-year.
Negative Points
- The macroeconomic environment remains dynamic and challenging, posing potential risks.
- The U.S. wholesale market is facing significant challenges, which could impact future performance.
- Inventory levels, while reduced, still require further optimization in certain areas.
- Supply chain disruptions, including issues in Bangladesh and the Red Sea, could impact future operations.
- The company is still in the early stages of its turnaround plan, indicating that more work is needed to achieve long-term goals.
Q & A Highlights
Q: Is the marketplace reset complete, and can you give an update on the dialogue with channel partners?
A: The reset is not fully complete; we are still in the transformation phase. We have made significant progress in re-engaging wholesale partners and managing inventory levels. Feedback from key partners on product pipelines and demand creation is positive, especially for Saucony and Merrell. However, challenges remain, and we continue to work on improving our strategies.
Q: Can you discuss the DTC trends by brand and help bridge the EPS implications for the second half?
A: We saw a positive inflection in e-commerce, with Saucony's e-commerce business up over 20% in the quarter. For EPS, the higher revenue expected in the second half, along with supply chain cost savings and SG&A reductions, will drive the increase. We are executing our plan and seeing momentum in our brands.
Q: Any preliminary views on the spring 2025 order books?
A: It is still early, but we are encouraged by the product pipelines and the positive reactions from wholesale partners. We will have a clearer picture in the coming months and will provide more details in November.
Q: Can you break down the wholesale channel performance domestically and internationally?
A: The U.S. wholesale market is challenging, but we are seeing positive reactions where we deliver innovative products. Internationally, brands like Merrell and Saucony are performing well, with strong reactions in key markets like the UK.
Q: How are you managing supply chain disruptions, and what is the impact on revenue shifts between quarters?
A: We are closely monitoring supply chain dynamics and working to mitigate disruptions. Currently, we do not expect material shifts in revenue between Q3 and Q4 due to these disruptions, but we remain vigilant.
Q: Can you quantify the exposure to Bangladesh and China in your supply chain?
A: Bangladesh accounts for about 19% of our sourcing, and China is less than that. We are monitoring the situation closely and adjusting our strategies as needed.
Q: What are the longer-term gross margin targets for the business?
A: We are targeting a gross margin range of 45% to 47% based on current expectations and ongoing supply chain and SG&A cost savings.
Q: How are the new product collaborations performing, and what are the early learnings?
A: We are encouraged by the progress in collaborations, such as Saucony's Jacobs collaboration and Merrell's Grayson collaboration. These initiatives are building brand heat and driving consumer interest, and we plan to continue leveraging them.
Q: Can you provide more color on the channel assumptions for the fourth quarter inflection to growth?
A: There are no material changes in channel assumptions. We are executing our plan and seeing positive momentum in our brands, which supports our expectations for growth in the fourth quarter.
Q: Any early reads on back-to-school performance for Saucony?
A: We are seeing strong search interest and positive reactions to Saucony's products, particularly in the UK. However, it is too early to provide specific back-to-school performance data.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
