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Wolverine World Wide, Inc. (WWW - Free Report) reported first-quarter 2024 results, wherein its top line missed the Zacks Consensus Estimate and the bottom line met the same. Both metrics fell year over year.
However, the company is actively working on a turnaround strategy that focuses heavily on its core brands like Merrell and Saucony. This strategy involves a multifaceted approach, including enhancing product offerings, investing in targeted marketing campaigns, and improving global operational efficiencies. By concentrating on these areas, Wolverine aims to build a more robust and resilient business model.
In the past three months, shares of this Zacks Rank #1 (Strong Buy) company have gained 40% against the industry’s 11% decline.
Wolverine World Wide, Inc. Price, Consensus and EPS Surprise
The company posted first-quarter adjusted earnings of 5 cents a share that met the consensus mark. However, the figure declined 54.5% from adjusted earnings of 11 cents in the prior-year quarter. At constant currency, the company’s earnings per share was 9 cents, down 18.2% from earnings of 11 cents in the prior-year quarter.
Revenues of $394.9 million missed the Zacks Consensus Estimate of $401 million and fell 34.1% year over year. The decline was attributable to lower revenues in most segments and brands. Revenues dipped 34.6% in constant currency. Direct-to-consumer revenues of $106.4 million were down 15.9% year over year. WWW’s international business dropped 31.5% to $178.5 million.
Coming to segments, Active Group’s revenues dipped 24.9% year over year to $289.8 million. Revenues at the Work Group tumbled 21.3% year over year to $90.1 million. Revenues of the Other segment fell 84.8% year over year to $15 million.
Brand-wise, Merrell’s revenues slipped 26.2% year over year to $133 million, Saucony's revenues fell 24.5% to $100.1 million and Wolverine's revenues dipped 20.3% to $41.2 million. Sweaty Betty generated revenues of $45.2 million, down 4.8% year over year.
Image Source: Zacks Investment Research
Margins
Adjusted gross profit was $181.6 million, down 14.6% year over year. However, the adjusted gross margin increased 540 basis points year over year to 46.5%. This resulted from reduced supply-chain costs, fewer sales of end-of-life inventory, less promotional activity in e-commerce sales, and a more favorable mix of distribution channels.
Adjusted SG&A expenses moved down 10.3% to $162.2 million. The metric, as a percentage of revenues, increased significantly year over year to 41.1%.
Other Financials
Wolverine ended the quarter with cash and cash equivalents of $169.7 million, long-term debt of $581.9 million and stockholders' equity of $260.1 million.
Net debt was $685 million at the end of the first quarter. Inventory at the end of the reported quarter was $354.3 million, down 51.2% from the year-earlier quarter.
Outlook
Looking ahead, management provided a cautiously optimistic outlook for 2024. The company emphasized that while the first half of the year focused on stabilizing the business and managing costs, the latter half is expected to show an inflection point, with improved revenue growth. This growth is anticipated to be driven by continued margin improvements and the successful execution of strategic initiatives.
Wolverine anticipates revenues from ongoing operations between $1.68 billion and $1.73 billion, adjusted for the newly introduced licensing model for the Merrell and Saucony kids business as of May 1, 2024. This forecast indicates a decline of 15.7-13.2% from that reported in 2023, with a constant-currency decline of 15.5-13%.
The gross margin is expected to improve significantly to 44.5%, suggesting a rise of 460 basis points from that reported in 2023. The operating margin is forecast to be 5.7%, with an adjusted operating margin of 7%, implying an increase of 310 basis points from the previous year’s actuals.
Adjusted earnings are projected between 65 cents and 85 cents. These figures include an expected negative impact of 10 cents from foreign exchange rate fluctuations. The company delivered adjusted earnings of 5 cents in 2023.
Wolverine aims to reduce its inventory by at least $75 million by 2024 and expects a net debt of $565 million at the end of 2024.
Other Stocks Consider
Some other top-ranked stocks in the same space are The Gap, Inc. (GPS - Free Report) , American Eagle Outfitters Inc. (AEO - Free Report) and Abercrombie & Fitch Co. (ANF - Free Report) .
The Gap is a premier international specialty retailer offering a diverse range of clothing, accessories and personal care products. The company sports a Zacks Rank of 1 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for GPS’s current fiscal-year earnings and sales indicates declines of 0.3% and 4.9%, respectively, from the year-ago period’s reported figures. GPS has a trailing four-quarter average earnings surprise of 180.9%.
American Eagle is a specialty retailer of casual apparel, accessories and footwear. The company currently has a Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for American Eagle’s current fiscal-year earnings and sales indicates growth of 12.5% and 3.4%, respectively, from the year-ago period’s reported figures. AEO has a trailing four-quarter average earnings surprise of 22.7%.
Abercrombie is a specialty retailer of premium, high-quality casual apparel. The company currently has a Zacks Rank of 2. ANF has a trailing four-quarter average earnings surprise of 715.6%.
The Zacks Consensus Estimate for Abercrombie’s current fiscal-year earnings and sales indicates growth of 20.1% and 5.7%, respectively, from the year-ago period’s reported figures.
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Wolverine (WWW) Q1 Earnings Meet Estimates, Revenues Dip Y/Y
Wolverine World Wide, Inc. (WWW - Free Report) reported first-quarter 2024 results, wherein its top line missed the Zacks Consensus Estimate and the bottom line met the same. Both metrics fell year over year.
However, the company is actively working on a turnaround strategy that focuses heavily on its core brands like Merrell and Saucony. This strategy involves a multifaceted approach, including enhancing product offerings, investing in targeted marketing campaigns, and improving global operational efficiencies. By concentrating on these areas, Wolverine aims to build a more robust and resilient business model.
In the past three months, shares of this Zacks Rank #1 (Strong Buy) company have gained 40% against the industry’s 11% decline.
Wolverine World Wide, Inc. Price, Consensus and EPS Surprise
Wolverine World Wide, Inc. price-consensus-eps-surprise-chart | Wolverine World Wide, Inc. Quote
Q1 Insights
The company posted first-quarter adjusted earnings of 5 cents a share that met the consensus mark. However, the figure declined 54.5% from adjusted earnings of 11 cents in the prior-year quarter. At constant currency, the company’s earnings per share was 9 cents, down 18.2% from earnings of 11 cents in the prior-year quarter.
Revenues of $394.9 million missed the Zacks Consensus Estimate of $401 million and fell 34.1% year over year. The decline was attributable to lower revenues in most segments and brands. Revenues dipped 34.6% in constant currency. Direct-to-consumer revenues of $106.4 million were down 15.9% year over year. WWW’s international business dropped 31.5% to $178.5 million.
Coming to segments, Active Group’s revenues dipped 24.9% year over year to $289.8 million. Revenues at the Work Group tumbled 21.3% year over year to $90.1 million. Revenues of the Other segment fell 84.8% year over year to $15 million.
Brand-wise, Merrell’s revenues slipped 26.2% year over year to $133 million, Saucony's revenues fell 24.5% to $100.1 million and Wolverine's revenues dipped 20.3% to $41.2 million. Sweaty Betty generated revenues of $45.2 million, down 4.8% year over year.
Image Source: Zacks Investment Research
Margins
Adjusted gross profit was $181.6 million, down 14.6% year over year. However, the adjusted gross margin increased 540 basis points year over year to 46.5%. This resulted from reduced supply-chain costs, fewer sales of end-of-life inventory, less promotional activity in e-commerce sales, and a more favorable mix of distribution channels.
Adjusted SG&A expenses moved down 10.3% to $162.2 million. The metric, as a percentage of revenues, increased significantly year over year to 41.1%.
Other Financials
Wolverine ended the quarter with cash and cash equivalents of $169.7 million, long-term debt of $581.9 million and stockholders' equity of $260.1 million.
Net debt was $685 million at the end of the first quarter. Inventory at the end of the reported quarter was $354.3 million, down 51.2% from the year-earlier quarter.
Outlook
Looking ahead, management provided a cautiously optimistic outlook for 2024. The company emphasized that while the first half of the year focused on stabilizing the business and managing costs, the latter half is expected to show an inflection point, with improved revenue growth. This growth is anticipated to be driven by continued margin improvements and the successful execution of strategic initiatives.
Wolverine anticipates revenues from ongoing operations between $1.68 billion and $1.73 billion, adjusted for the newly introduced licensing model for the Merrell and Saucony kids business as of May 1, 2024. This forecast indicates a decline of 15.7-13.2% from that reported in 2023, with a constant-currency decline of 15.5-13%.
The gross margin is expected to improve significantly to 44.5%, suggesting a rise of 460 basis points from that reported in 2023. The operating margin is forecast to be 5.7%, with an adjusted operating margin of 7%, implying an increase of 310 basis points from the previous year’s actuals.
Adjusted earnings are projected between 65 cents and 85 cents. These figures include an expected negative impact of 10 cents from foreign exchange rate fluctuations. The company delivered adjusted earnings of 5 cents in 2023.
Wolverine aims to reduce its inventory by at least $75 million by 2024 and expects a net debt of $565 million at the end of 2024.
Other Stocks Consider
Some other top-ranked stocks in the same space are The Gap, Inc. (GPS - Free Report) , American Eagle Outfitters Inc. (AEO - Free Report) and Abercrombie & Fitch Co. (ANF - Free Report) .
The Gap is a premier international specialty retailer offering a diverse range of clothing, accessories and personal care products. The company sports a Zacks Rank of 1 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for GPS’s current fiscal-year earnings and sales indicates declines of 0.3% and 4.9%, respectively, from the year-ago period’s reported figures. GPS has a trailing four-quarter average earnings surprise of 180.9%.
American Eagle is a specialty retailer of casual apparel, accessories and footwear. The company currently has a Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for American Eagle’s current fiscal-year earnings and sales indicates growth of 12.5% and 3.4%, respectively, from the year-ago period’s reported figures. AEO has a trailing four-quarter average earnings surprise of 22.7%.
Abercrombie is a specialty retailer of premium, high-quality casual apparel. The company currently has a Zacks Rank of 2. ANF has a trailing four-quarter average earnings surprise of 715.6%.
The Zacks Consensus Estimate for Abercrombie’s current fiscal-year earnings and sales indicates growth of 20.1% and 5.7%, respectively, from the year-ago period’s reported figures.