Back to top

Image: Bigstock

Wolverine's (WWW) Shares Exhibit Strength As Economy Reopens

Read MoreHide Full Article

In the wake of coronavirus jitters, consumers’ shopping patterns have largely shifted from fashion to essentials. Consequently, apparel and related accessories companies’ performance has dampened. Nonetheless, some green shoots are being noticed in the industry as business activities have resumed following the coronavirus-induced lockdown.

With the global economy reopening gradually, Wolverine World Wide, Inc. (WWW - Free Report) is showing encouraging signs. Recently, management issued updates on business trends for the first nine weeks of the second quarter of 2020. Notably, the company registered better-than-expected sales performance during the aforementioned period.

The Rockford, MI-based company’s shares have surged 57.6% in the past three months, rallying ahead of the Consumer Discretionary sector’s 37.8% growth and the broader S&P 500’s 37.7% upside. Meanwhile, the industry saw a rise of 51.7%. Let’s explore this Zacks Rank #3 (Hold) stock.


Robust Business Trends

During the first nine weeks of second-quarter 2020, total revenues surpassed management’s expectations despite COVID-19 limiting its worldwide wholesale business. A diversified global business model, enhanced digital capabilities, brand strength and promising at-once order demand contributed to better-than-expected sales. Total revenues declined less than 50% year over year in spite of global store closures during April and May. As the economy gradually normalizes, the company plans to open roughly 70 of its more than 90 stores by mid-June. Re-order demand from retailers who remained opened during the pandemic contributed to the company’s work and outdoor performance businesses.

Speaking of e-commerce, Wolverine’s owned e-commerce increased more than 90% year over year, generating more than 40% of the company’s overall revenue through the first nine weeks of the quarter. This is driven by sturdy growth of performance brands Merrell and Saucony, as well as work brands Wolverine and Cat Footwear. The sturdy-owned e-commerce business has helped offset the loss of revenues on account of store closures.  Moreover, online sell-through of its U.S. wholesale customers improved double-digits during the nine-week period. Management envisioned a similar year-over-year trend in the remaining four weeks of the second quarter. It anticipates generating more than $20 million of operating cash flow in the quarter.

Other Initiatives

While aforesaid factors signal a robust quarter ahead, Wolverine’s Global Growth Agenda initiative also bodes well. This initiative is aimed at three major elements — continuous introduction of products worldwide with creative designs, expansion of digital engagement to enhance the owned e-commerce business and stronger investments in regional resources and systems to drive international growth. Wolverine intends to accelerate the execution of Global Growth Agenda as the economy revives from the ongoing pandemic. Although the company is battling margin woes and stiff competition, we expect its robust efforts to overcome such challenges in the future.

Better-Ranked Stocks

Activision Blizzard (ATVI - Free Report) has an expected long-term earnings growth rate of 18.8% and currently has a Zacks Rank #1 (Strong Buy). You can seethe complete list of today’s Zacks #1 Rank stocks here.

BJ's Wholesale Club (BJ - Free Report) , also a Zacks Rank #1 stock, which has a long-term earnings growth rate of 13.5%.

lululemon athletica (LULU - Free Report) has a long-term earnings growth rate of 18.3% and a Zacks Rank #2 (Buy).

Zacks Top 10 Stocks for 2020

In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2020?

Last year's 2019 Zacks Top 10 Stocks portfolio returned gains as high as +102.7%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.

Access Zacks Top 10 Stocks for 2020 today >>