Although this year hasn’t been great for Wolverine World Wide (WWW, Financial), with the stock losing more than 15% of its value in 2014, the company’s prospects look great. The company’s management has taken some smart steps in order to increase profitability, and this should benefit Wolverine in the long run. Let’s take a look at the company’s prospects, along with its recent quarterly earnings report.
Mixed quarter
After the results of second from last quarter earnings, shares of Wolverine expanded 3.2% as the jump of 63 pennies in the non-GAAP was better than the consensus target of 59 cents per share. This denoted a year-over-year change of just about 9%.
Wolverine's revenues of $ 711.1 confronted negligible decrease of 0.8% on year-over-year premise and missed the consensus evaluation of $720 million. Lifestyle group maintained nice runs by its execution at the legacy and execution bunches. Revenues of Lifestyle group tumbled down 6.7% to $277.9 million although sales of Heritage gathering and Performance gathering were up 4.6% and 22%, individually.
The company’s gross margin expanded 10 basis points (bps) to 40%; its gross profit fell by 0.5% to $284.7 million in third quarter. Favorable product mix and selected price hikes led to the increase in gross margin. The company’s adjusted operating margin expanded by 70bps to 13.8%.
Looking ahead
Third quarter ending results mean the company must make some big decisions concerning its realignment plan. The plan says closure of around 140 stores in next 16 months, resulting in increase of its productivity and fuel development to increase the profit. Approximately $11 million yearly is expected. With the realignment plan, the consumer-direct business is proposed to optimize the fleet of retail locations, supporting infrastructure, a fundamental shift in consumer shopping behavior is to be addressed and focus on omni channel initiatives.
Wolverine Chief Executive Officer Blake Krueger said, "We remain strategically focused on leveraging our diversified portfolio of the global lifestyle brand which cover all ages, genders and most product categories; to drive growth by maintaining a fanatical focus on innovation especially product creation, expanding our already extensive global distribution footprint; focusing on forging stronger connections with our consumer with a continued emphasis on consumer direct initiatives."
Sperry Top-Sider, Gold Cup collection for men has shown terrific results and so the company has planned to launch the Gold Cup collection for women. Collection of CarbonMAX Nanotel is to be introduced which acquires leading tech like Contour Welt and DuraShocks to provide comfort. Sperry is to be Wolverine’s first billion-dollar brand. With the development in China and Latin America, it is expected to open around 800 stores to catch greater amount of business.
Also, Wolverine has made several key leadership improvements in the Sperry brand, such as enrolling new senior executives to head the advertising and sales teams. Also, Sperry has kept up its No. 1 position in the aggressive casual footwear market. Wolverine aims to make Sperry its first billion-dollar brand going ahead so it is making moves consistent with this target to enhance its execution.
Conclusion
Given the recent initiatives, it's only a matter of time before Wolverine starts moving up. The stock’s torrid performance in 2014 is a great chance for opportunistic investors as it is too cheap to ignore. So, all in all, Wolverine World Wide is a great buy at present valuations.
Ă‚
