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Wolverine (WWW) Benefits From E-commerce & Brand Strength

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Wolverine World Wide, Inc. (WWW - Free Report) is tracking up the charts, thanks to its enhanced digital capabilities and strength in brands. Among the company’s sales channels, e-commerce has been the key growth driver. Hence, it has been utilizing its digital capabilities to enhance speed of information and product flow alongside strengthening its distribution centers in order to support growth in the digital arena.

Impressively, the Rockford, MI-based company’s shares have appreciated 38.1% in the past six months, rallying ahead of the broader S&P 500 Index’s 18.6% gain and the Consumer Discretionary sector’s 19.1% upside. Meanwhile, the industry showcased a rise of 4.8%. The VGM Score of A further adds gleam to this Zacks Rank #3 (Hold) company.

A Broader Analysis

Speaking of Wolverine’s owned e-commerce business, the same excelled in 2020 and surged 50% year over year. During the fourth quarter of 2020, the company’s owned e-commerce business was impressive, registering growth of 31.7% year over year. Brandwise, merrell.com surged nearly 60% in the reported quarter, owing to above 70% improvement in new consumer count. Furthermore, saucony.com registered growth of above 65% and the brand’s operating margin in this channel expanded more than 800 basis points (bps). Meanwhile, the company is focused on mobile via the launch of mobile apps for brands, starting with Merrell later this spring. Management targets accomplishing $500 million in digital revenues in 2021.

Moving on, Wolverine focuses on developing brands on the back of advanced technologies and proper market insights. Also, the company focuses on new launches across different brand banners. Encouragingly, Saucony revenues rose mid-single digits in the fourth quarter, with growth in all key product categories. Looking at 2021, management plans to launch products across Saucony brands at most of its biggest franchises like Kinvara, Guide, Peregrine and Ride franchises, as well as expand the Endorphins series in the first half of the year. This brand is likely to continue its momentum throughout 2021, projecting growth of about 50% in the first quarter. Further, the Merrell brand generated high single-digit growth in North America and anticipated to grow about 20% in the first quarter and even greater in the second quarter and beyond.

The Wolverine brand continues benefiting from the U.S. work boot category and the work boot portfolio captured more than 30% market share in 2020. This brand is projected to grow 20% in the first quarter on advanced technology as well as product launches and collaborations. Although the Sperry brand has been soft owing to impacts of the pandemic on consumer soft goods, including the casual footwear market, management expects this brand to revert to double-digit growth in 2021. Going ahead, management will continue seeing strength in brands, including Saucony and Merrell, and especially in performance, athletic, outdoor and work categories.

Moving along, Wolverine’s international business looks appealing. Notably, the Saucony brand will continue advancing integration of its speed roll, design geometry and power-run midsole-supporting technology. The brand is expected to further leverage the Italian product design and marketing hub for its Originals business, thus developing a key position and success in Italy. Also, the trend-right product will expand into significant markets, including China, the United States and Greater Europe.

Outlook

Despite pandemic-induced challenges, management believes business trends will improve in 2021. For 2021, management expects revenues in the bracket of $2,190-$2,250 million, suggesting growth of 22-26% year over year. Further, gross margin is likely to be at least 43%, representing growth of 150 bps year over year. Notably, adjusted earnings per share are anticipated in the band of $1.90-$2.05 for the full year. The earnings guidance suggests growth from 2020 adjusted earnings per share of 93 cents, and 95 cents at constant currency.

Stocks to Watch

Rocky Brands (RCKY - Free Report) has delivered an average earnings surprise of 120.9% in the trailing four quarters. It sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Deckers (DECK - Free Report) has a long-term earnings growth rate of 21.5% and a Zacks Rank #2 (Buy).

Crocs (CROX - Free Report) , also a Zacks Rank #2 stock with a long-term earnings growth rate of 15%.

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