Wolverine Shines, Beats Estimate

Wolverine World Wide Inc. (WWW - Snapshot Report) recently posted strong second-quarter 2011 results that topped the Zacks Consensus Estimate on the heels of double-digit growth across its brands.

The company, one of the leading designers, manufacturers and marketers of branded footwear and apparel, also reiterated its outlook for fiscal 2011 on the back of better-than-expected results.

The company’s multi-brand portfolio, multi-distribution channel strategy and higher prices remain its key growth drivers.

Quarterly Discussion

Earnings of 48 cents a share outpaced the Zacks Consensus Estimate of 46 cents and grew 23.1% from 39 cents in the prior-year quarter.

Wolverine, the seller of products under Harley-Davidson Footwear, Hush Puppies, Merrell and other brands, declared that its total revenue for the quarter climbed 20.1% to $310.1 million from the prior-year quarter, handily beating the Zacks Consensus Estimate of $294 million.

Among the operating groups, revenues increased 30% year-over-year to $127.3 million for Outdoor, 15% to $102.9 million for Heritage and 17.5% to $41.5 million for Lifestyle. Other business units, which comprise Wolverine retail and leathers, posted revenue growth of 5.5% to $34.9 million.

Gross profit jumped 17.8% to $122.1 million during the quarter, whereas gross margin declined 90 basis points to 39.4% compared with the prior-year quarter, reflecting downbeat manufacturing operations.

Rockford, Michigan-based Wolverine enjoyed increased momentum in fiscal 2010 that continues into fiscal 2011. Moreover, we believe that the company remains well positioned to increase its market share on the strength of its brand portfolio. The Merrell brand has been the key growth driver in the past decade, and we expect it to catalyze future growth.

Other Financial Aspects

Wolverine ended the second-quarter 2011 with cash and cash equivalents of $118.5 million and shareholders’ equity of $594.3 million with negligible debt. The company repurchased 479,000 shares during the quarter at a cost of $18.1 million.

Guidance Reiterated

Wolverine’s healthy second-quarter 2011 results keep management optimistic for fiscal 2011. The company reiterated its revenue and earnings guidance.

Earlier, the company projected total revenue in the range of $1,380 million to $1,420 million, reflecting year-over-year growth of 10.5% to 13.7%. Fiscal 2011 earnings are expected between $2.40 and $2.50 per share, representing growth of 10.6% to 15.2% from the prior year.

Currently, we maintain a long-term ‘Neutral’ rating on the stock. Moreover, Wolverine, which competes with Timberland Co. (TBL), Deckers Outdoor Corporation (DECK - Analyst Report) and Skechers USA Inc. (SKX - Analyst Report), holds a Zacks #2 Rank, which translates into a short-term ‘Buy’ recommendation.

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