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Wolverine (WWW) Rides High on Growth Strategies: Apt to Hold

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Wolverine World Wide, Inc. (WWW - Free Report) appears encouraging, thanks to its robust business strategies. The company continues to focus on strengthening its direct-to-consumer (DTC) business. Speed-to-market initiatives, deployment of digital product development tools, expansion of e-commerce platforms and frequent introduction of products are steadily contributing to its performance. WWW has been reinforcing its footprint across international markets.

Apparently, shares of this current Zacks Rank #3 (Hold) stock have increased 52.1% in the past three months compared with the industry’s 3.5% gain.

Let’s Delve Deep

Wolverine focuses on developing brands that suit consumer needs aptly on the back of advanced technologies and accurate market insights. It remains committed to new launches across different brand banners. As part of long-term business growth strategies, the company is also striving to develop an efficient sourcing structure and diversify its global business. In the fourth quarter of 2022, the Merrell brand continued its momentum, generating 27% revenue growth and 31% on a constant currency basis and benefiting from global brand strength across categories. Merrell’s DTC business increased 16% in the quarter and accounted for above 40% of the brand’s sales in the United States. Wolverine forecasts Merrell's revenues to increase in the mid-single digits in 2023 with a high-teens rise in the first quarter.

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Saucony revenues also increased 24.8% to $121.3 million in the reported quarter. Saucony's performance was aided by the updated core franchises and its e-commerce revenues grew 31%. This brand will continue to drive innovation and Saucony's China JV had an outstanding quarter, as sales tripled in 2022. The company’s multichannel strategy is progressing well, with the addition of eight stores during the fourth quarter. Management projects revenues from the China JV to double in 2023. It predicts Saucony revenues to increase mid-single digits in 2023 with high-single digits growth in the first quarter. Further, it predicts Sweaty Betty revenues to increase in the low single digits in 2023. With respect to Sweaty Betty, it introduced one pop-up in China and intends to open 10 stores in 2023 mainly in the U.K. and Ireland.
The international business remains one of the key revenue drivers. WWW’s international business was robust in the fourth quarter and improved 22.2% to $281.5 million. International revenues increased 31.9% in constant currency. We note that the company’s EMEA business is a major contributor to international growth, with revenue increase of 21%. The performance was further boosted by the top three brands, which represented more than 50% of the international revenues. Wolverine plans to invest in key growth markets and continue to invest in the international regions, with joint ventures for Merrell and Saucony, and expand e-commerce capabilities globally.

What Else?

Management expects the profitability to grow significantly in the second half of 2023 as supply-chain costs and inventory levels normalize, and also gain from the Profit Improvement Office efforts. For 2023, revenues from the ongoing business are projected in the range of $2.53-$2.58 billion, representing an increase of 0-2% and constant currency growth of 1-3%. It anticipates sturdy performance from the Active Group with mid-single-digit growth, while the Work Group is likely to generate consistent low-single-digit performance. Earnings per share (EPS) is envisioned to be between $1.50 and $1.70 and adjusted EPS is in the bracket of $1.40-$1.60 for the year. In 2021, Wolverine generated revenues of $2.53 billion and earnings of $1.37 per share from the ongoing business. Further, the gross margin is likely to be at 41.2% and the adjusted gross margin is anticipated to be 42% for the year, versus 39.9% in 2022. Nearly $20 million of product and logistics cost savings is likely to drive the gross margin in the second half.

Wolverine anticipates profit and cash flow performance to grow sequentially throughout the year. We note that cash from divestitures and disciplined expense control will generate operating free cash flow in the bracket of $200-$250 million.

Eye These Solid Picks

Here we have highlighted three top-ranked stocks, namely, Ralph Lauren (RL - Free Report) , Oxford Industries (OXM - Free Report) and Deckers (DECK - Free Report) .

Ralph Lauren, a footwear and accessories dealer, has a Zacks Rank #1 (Strong Buy) at present. RL has a trailing four-quarter earnings surprise of 23.6%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Ralph Lauren’s current financial-year sales and EPS suggests growth of 5.5% and 14%, respectively, from the year-ago corresponding figures.

Oxford Industries, which designs, sources, markets and distributes lifestyle products and other brands, carries a Zacks Rank #2 (Buy). Oxford Industries has a trailing four-quarter earnings surprise of 18.9%, on average.

The Zacks Consensus Estimate for OXM’s current financial-year sales and EPS suggests growth of 13.7% and 10.4% from the year-ago reported numbers.

Deckers, a footwear dealer, has a Zacks Rank of 2 at present. DECK has a trailing four-quarter earnings surprise of 31%, on average.

The Zacks Consensus Estimate for Deckers’ current financial-year sales and EPS suggests growth of 11% and 17.1%, respectively, from the year-ago corresponding figures.

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