It has been about a month since the last earnings report for Wolverine World Wide (
WWW Quick Quote WWW - Free Report) . Shares have lost about 14.2% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Wolverine due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Wolverine Q3 Earnings Miss Estimates, Revenues Rise Y/Y
Wolverine reported lower-than-expected results for third-quarter 2022, wherein the top and the bottom line missed the Zacks Consensus Estimate, and the latter fell year over year. However, the top line increased year over year.
Wolverine posted third-quarter adjusted earnings of 48 cents a share, plunging 14.3% from the year-ago quarter’s level and lagging the Zacks Consensus Estimate of 57 cents.
Revenues of $691.4 million missed the Zacks Consensus Estimate of $715 million but increased 8.6% year over year, courtesy of healthy international sales and higher Merrell revenues. Revenues increased 12.2% in constant currency. Direct-to-consumer revenues climbed 4.5% year over year to $160 million. WWW’s international business was robust in the reported quarter and improved 33% to $303 million. Wolverine Michigan Group’s revenues rose 20.1% year over year to $390.2 million, while Wolverine Boston Group’s revenues dipped 4.3% to $247.7 million. Other revenues inched up 0.8% to $53.5 million year over year. Most of the brands’ revenues fell on a year-over-year basis. In the reported quarter, Merrell revenues surged 33.6% year over year to $198.6 million, Saucony revenues slipped 0.6% to $129.7 million, Sperry revenues decreased 12.4% to $70 million and Wolverine revenues dipped 1.2% to $59.1 million. Sweaty Betty generated revenues of $37.8 million, down 3.3% year over year. Margins
Adjusted gross profit was $278.5 million, up 0.5% year over year. However, adjusted gross margin contracted 320 basis points (bps) year over year to 40.3%.
Adjusted SG&A expenses increased 4.2% to $216.4 million. SG&A as a rate of revenues fell 130 basis points to 31.3%. Adjusted operating profit declined 10.4% year over year to $62.1 million. Adjusted operating margin also contracted 190 bps to 9%. Other Financials
Wolverine ended the quarter with cash and cash equivalents of $136.4 million, long-term debt of $725.2 million and stockholders' equity of $674.2 million. Net debt was $1.35 billion at the end of the reported quarter. WWW had total liquidity of nearly $400 million. During the first month of the fourth quarter, net debt and liquidity increased about $100 million each. Inventory at the end of the reported quarter was $880.9 million, reflecting an increase of 113.8% year over year.
In the year-to-date period, Wolverine has paid out cash dividends of $24.7 million. Outlook
For the fourth quarter, revenues are likely to come in the band of $650-$675 million, representing an increase of about 2.3-6.2%. Foreign currency fluctuations are anticipated to hurt revenues by approximately $28 million or 4.4%. Loss per share is expected between 9cents and 19 cents, while adjusted loss per share is envisioned to be 5-15 cents. Foreign currency fluctuations are likely to hurt to the tune of 3 cents per share. Management expects to generate $250-$300 million of operating free cash flow in the fourth quarter.
For 2022, revenues are now projected in the range of $2.670-$2.695 billion, representing growth of nearly 10.6-11.6%. Foreign currency exchange rate fluctuations are expected to hurt revenues to the tune of $76 million or 3.1%. Earlier, management guided revenues of $2.740-$2.790 billion, representing growth of nearly 14-16%. Earnings per share are expected between $1.90 and $2.00 compared with the earlier forecast of $2.62-$2.72. Adjusted earnings per share are likely to come in the bracket of $1.41-$1.51, suggesting a decline of 18.7-24.1% from the year-ago reported figure’s level. Earlier, adjusted earnings per share were predicted to be $2.10-$2.20. Currency is likely to hurt the metric 13 cents a share. The effective tax rate is likely to be 21%. How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
The consensus estimate has shifted -123.62% due to these changes.
Currently, Wolverine has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Wolverine has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.
Performance of an Industry Player
Wolverine belongs to the Zacks Shoes and Retail Apparel industry. Another stock from the same industry, Steven Madden (
SHOO Quick Quote SHOO - Free Report) , has gained 4.4% over the past month. More than a month has passed since the company reported results for the quarter ended September 2022.
Steven Madden reported revenues of $556.64 million in the last reported quarter, representing a year-over-year change of +5.3%. EPS of $0.79 for the same period compares with $0.82 a year ago.
Steven Madden is expected to post earnings of $0.45 per share for the current quarter, representing a year-over-year change of -48.3%. Over the last 30 days, the Zacks Consensus Estimate remained unchanged.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #4 (Sell) for Steven Madden. Also, the stock has a VGM Score of C.