Wolverine World Wide (WWW, Financial) is the parent company of 15 lifestyle brands for producing footwear, apparel and accessories around the world. The company also manufactures footwear for other companies, such as Caterpillar (CAT, Financial), Harley-Davidson (HOG, Financial) and Patagonia (PGD, Financial), as well as shoes and boots for the military. After having a disappointing 2014, the company has finally started to reward investors with the stock picking up 20% in the last three months. However, given the moves that the company is making, it is highly likely that it can continue its upward trajectory in the coming months.
Looking at the last quarter
On behalf of the quarter Q4 FY 2014, revenue was up 9.2% to record $808.9 million with earnings per share growing over 36% to $0.30 per share. For the entire year, there was 2.6% growth in record revenue to $2.69 billion, compared to previous quarter. Adjusted diluted earnings per share for the full year were $1.62, representing growth of 13.3% and excellent earnings leverage. Full-year revenue growth was affected approximately 20 basis points due to foreign exchange.
For the full year, adapted operating expenses were $815.2, a decrease of 1.8% compared to the previous year, which resulted in a decrease of 130 basis points for adjusted operating expenses to 29.5% compared to 30.8% in the previous year as a percentage of revenue. The company’s adjusted gross margin for the full year was 39.4%, a reduction of 40 basis points compared to the prior year. The decline in gross margin was mainly because of a higher mix of lower margin top line international revenue, incremental LIFO expenditure and the impact of inventory insolvency related to the strategic realignment plan.
Performance group and heritage group delivered revenue of $273.6 million and $221.5 million in the fourth quarter, an upsurge of 8.9% and 14.4% respectively and with the full year, group delivered revenue of $990.7 and $607, representing growth of 4.8% and 7% compared to previous year.
Growth plans
The company has mainly concentrated on cash investment for their brands to drive organic growth, maintaining their cash dividend, paying down debt. The company sanctioned a $200M share repurchase plan in February 2014, of which there have been no purchases to date. The company predicted net interest outflow of approximately $40 million for fiscal 2015. Based on the predictable negative foreign exchange environment, incremental pension expense and the incremental brand investment initiatives are now predicting fiscal 2015 adjusted diluted earnings in the range of $1.53 to $1.60 per share
Wolverine drives in trade, a highly economic situation with a huge number of competitors in the run. The company expanded their previously widespread international footprint, particularly for their latest brands Sperry, Saucony and Keds. They implemented approximately 70 agreements for these three brands and announced a multiyear investment plan to drive growth through initiatives attentive on customer demand manufacture, Omni channel transformation, and international growths. For the 9 out of their 16 brands, they were pleased to deliver double-digit growth.
Cutting costs
Wolverine management has decided to close around 140 stores in the next eighteen months, and will consolidate its store operations to improve profitability. This realignment should benefit the company to the tune of around $11 million annually, which can be used to fuel growth in its wholesale operations.
Conclusion
Taking a look at the organization's realignment technique, alongside the normal change in the economy, there is a good chance that it can perform better going ahead. The company’s growth plans, along with cost-cutting initiatives will prove to be beneficial in the long run. Investors should buy Wolverine World Wide.
