Wolverine Worldwide Reports Second-Quarter Results And Raises Full-Year Revenue And Earnings Guidance

ROCKFORD, Mich., Aug. 9, 2017 /PRNewswire/ -- Wolverine World Wide, Inc. (NYSE: WWW) today reported financial results for the second quarter ended July 1, 2017.

"We had a strong quarter, highlighted by second-quarter revenue and earnings that surpassed expectations and reflected progress toward our holistic, enterprise-wide strategic transformation, the WOLVERINE WAY FORWARD," said Blake W. Krueger, Wolverine Worldwide's Chairman, Chief Executive Officer and President. "This transformation of our business is focused on elevating our most powerful brands with consumers, delivering continuous product innovation and sustained organic growth, and unlocking incremental operational efficiencies, all with an emphasis on pace and speed. We believe that the WOLVERINE WAY FORWARD will put us in the best position to win in the "new normal" fast-changing global consumer retail environment."

SECOND-QUARTER 2017 REVIEW

The highlights of the Company's second quarter financial performance are summarized below. The second quarter revenue and earnings per share amounts reflect the impact of the calendar change. To provide a better comparison to fiscal 2016, the Company has provided additional information regarding the impact of the calendar change within the reconciliation tables to this earnings release.

• Reported revenue of $598.8 million increased 2.6% during the second quarter, but adjusted revenue decreased 3.3% after taking effect for the calendar change noted above. Underlying revenue increased 1.4%.
• Reported gross margin was 37.9%, compared to 38.8% in the prior year. Adjusted gross margin on a constant currency basis was 39.1%, up 60 basis points versus the prior year, and includes a negative 210 basis points impact of store closures.
• Reported operating margin was 4.9%, compared to 7.2% in the prior year. Adjusted operating margin on a constant currency basis was 11.0%, up 380 basis points versus the prior year and excludes $3.0 million of incremental inventory markdowns related to the accelerated store closings.
• Reported diluted earnings per share were $0.21, compared to earnings per share of $0.24 in the prior year. Adjusted diluted earnings per share were $0.43, a record second quarter performance for the Company. On a constant currency basis, adjusted earnings per share were $0.44, compared to $0.26 in the prior year.
• Inventory at the end of the quarter was down 24.1% versus the prior year.
• The Company generated $138.4 million of cash from operations during the second quarter.

"We are pleased to have delivered better-than-expected results for the second quarter, demonstrating the effectiveness of key initiatives focused on operational excellence, growth and speed," stated Mike Stornant, Senior Vice President and Chief Financial Officer. "Our proactive efforts, which have been gaining momentum over the last eighteen months, paid off in Q2, with most brands exceeding our revenue expectations for the quarter, while also over-delivering on our operating profit goals. We made tremendous progress on our store realignment plan, and have line-of-sight to our go-forward store-fleet. We managed our working capital well in the quarter, with inventory down over 24% and DSOs improving by 1.7 days. We believe the strength of our global brands combined with the continued operational discipline and implementation of the WOLVERINE WAY FORWARD leaves us well positioned to achieve our near-term growth and stated operating margin goal of 12% by the end of 2018.

WOLVERINE WAY FORWARD TRANSFORMATION UPDATE

• Under the previously-announced Store Restructuring Plan, the Company has closed 180 stores since the beginning of 2017 including 76 closures during the second quarter of fiscal 2017. The Company expects an additional 33 store closings before the end of fiscal 2017, leaving a remaining retail store fleet of approximately 80 stores. The Company incurred approximately $5.3 million of operating losses in the second quarter for stores closed, and these losses will not reoccur next year. The losses include $3.0 million of inventory mark-downs related to accelerated store closures. These store closures allowed the Company to liquidate inventory totaling approximately $8.4 million during the quarter.
• Effective July 2, 2017, subsequent to end of the quarter, the Company entered into an agreement to license the Stride Rite^® brand to Vida Shoes International, a leader in the children's footwear and fashion industry, currently marketing children's shoes under Carter's, OshKosh, Hanna Andersson and other brands.
• Effective July 31, 2017, subsequent to end of the quarter, the Company entered into an agreement to sell the intellectual property and certain other assets related to the Sebago^® brand for $14.3 million. The agreement permits the Company to sell-off its remaining inventory through the end of fiscal 2017.

FISCAL 2017 OUTLOOK

A strong second quarter, coupled with some improving trends in the business, have resulted in the following improvement to the Company's full-year 2017 outlook:

• Reported revenue in the range of $2.320 billion to $2.370 billion, which includes a $40.0 million reduction in revenue from the conversion of the Stride Rite^® business to a license model. This is a reported decline of approximately 7.0% to 5.0%, but underlying revenue is now expected to increase and be within the range of flat to growth of 2.0%, reflecting approximately $175.0 million impact from retail store closures, the Stride Rite change noted above and currency.
• Reported operating margin in the range of 5.2% to 5.8% and adjusted operating margin in the range of 10.4% to 10.9%, resulting from operational excellence initiatives focused on supply chain optimization, omnichannel transformation, and operational efficiencies. Fiscal 2016 adjusted operating margin was 8.5%.
• Reported diluted earnings per share in the range of $0.82 to $0.92 compared to $0.89 in fiscal 2016. Adjusted diluted earnings per share are now expected in the range of $1.55 to $1.65 compared to $1.36 in fiscal 2016 adjusted on the same basis. On a constant currency basis, adjusted earnings per share in the range of $1.62 to $1.72.

FISCAL YEAR CALENDAR CHANGE
Prior to fiscal 2017, the Company reported its quarterly results of operations on the basis of 12-week periods for each of the first three fiscal quarters and a 16 or 17-week period for the fiscal fourth quarter. Beginning in fiscal 2017, the Company's fiscal year is comprised of 13-week quarters for each of the first three fiscal quarters and a 13 or 14-week period for the fiscal fourth quarter. There is no change to the Company's fiscal year-end date. References to the "quarter ended" or "second quarter" refer to the 13-week period ended July 1, 2017 or the 12-week period ended June 18, 2016.

NON-GAAP FINANCIAL MEASURES
This earnings release contains certain non-GAAP financial measures. References to "underlying" revenue indicate reported revenue adjusted for the impact of foreign exchange, closed retail stores, the transition of Stride Rite^® to a license business model and the impact of the additional week of operations. Measures referred to as "adjusted" financial results exclude restructuring and impairment costs, organizational transformation costs, debt extinguishment and other costs, and the impact of the additional week of operations.  In addition to these adjustments of the type the Company has made in recent periods, adjusted gross profit, adjusted operating income and adjusted earnings per share in this release are further adjusted to exclude incremental inventory markdowns related to 180 stores that are now closed under management's previously announced Store Restructure Plan.  In light of the large scale of closures in a compressed time frame, management believes this treatment gives investors a better view of continuing operations. The company has provided a reconciliation of the above of non-GAAP financial measures to the most directly comparable GAAP financial measure.

EARNINGS CALL INFORMATION
The Company will host a conference call today at 8:30 a.m. Eastern Time to discuss these results and current business trends.  The conference call will be broadcast live and accessible under the "Investor Relations" tab at wolverineworldwide.com.  A replay of the conference call will be available at the Company's website for a period of approximately 30 days.

ABOUT WOLVERINE WORLDWIDE
With a commitment to service and product excellence, Wolverine World Wide, Inc. is one of the world's leading marketers and licensors of branded casual, active lifestyle, work, outdoor sport, athletic, children's and uniform footwear and apparel.  The Company's portfolio of highly recognized brands includes: Merrell^®, Sperry^®, Hush Puppies^®, Saucony^®, Wolverine^®, Keds^®, Stride Rite^®, Chaco^®, Bates^®, and HYTEST^®.  The Company also is the global footwear licensee of the popular brands Cat^® and Harley-Davidson^®.  The Company's products are carried by leading retailers in the U.S. and globally in approximately 200 countries and territories.  For additional information, please visit our website, wolverineworldwide.com.

FORWARD-LOOKING STATEMENTS
This press release contains forward-looking statements, including statements regarding: the Company's ability to successfully execute key strategic initiatives, elevate brands with consumers, and deliver product innovation, organic growth and operational efficiencies; the Company's ability to compete and win in the current environment; and the Company's fiscal 2017 outlook and guidance. In addition, words such as "guidance," "estimates," "anticipates," "believes," "forecasts," "step," "plans," "predicts," "projects," "is likely," "expects," "intends," "should," "will," "confident," variations of such words, and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties, and assumptions ("Risk Factors") that are difficult to predict with regard to timing, extent, likelihood, and degree of occurrence.  Risk Factors include, among others: changes in general economic conditions, employment rates, business conditions, interest rates, tax policies and other factors affecting consumer spending in the markets and regions in which the Company's products are sold; the inability for any reason to effectively compete in global footwear, apparel and consumer-direct markets; the inability to maintain positive brand images and anticipate, understand and respond to changing footwear and apparel trends and consumer preferences; the inability to effectively manage inventory levels; increases or changes in duties, tariffs, quotas or applicable assessments in countries of import and export; foreign currency exchange rate fluctuations; currency restrictions; capacity constraints, production disruptions, quality issues, price increases or other risks associated with foreign sourcing; the cost and availability of raw materials, inventories, services and labor for owned and contract manufacturers; labor disruptions; changes in relationships with, including the loss of, significant wholesale customers; the failure of the U.S. Department of Defense to exercise future purchase options or award new contracts, or the cancellation or modification of existing contracts by the Department of Defense or other military purchasers; risks related to the significant investment in, and performance of, the Company's consumer-direct operations; risks related to expansion into new markets and complementary product categories  as well as consumer-direct operations; the impact of seasonality and unpredictable weather conditions; changes in general economic conditions and/or the credit markets on the Company's distributors, suppliers and customers; increase in the Company's effective tax rates; failure of licensees or distributors to meet planned annual sales goals or to make timely payments to the Company; the risks of doing business in developing countries, and politically or economically volatile areas; the ability to secure and protect owned intellectual property or use licensed intellectual property; the impact of regulation, regulatory and legal proceedings and legal compliance risks; the potential breach of the Company's databases, or those of its vendors, which contain certain personal information or payment card data; problems affecting the Company's distribution system, including service interruptions at shipping and receiving ports; strategic actions, including new initiatives and ventures, acquisitions and dispositions, and the Company's success in integrating acquired businesses, and implementing new initiatives and ventures; the risk of impairment to goodwill and other acquired intangibles; the success of the Company's consumer-direct realignment initiatives; changes in future pension funding requirements and pension expenses; and additional factors discussed in the Company's reports filed with the Securities and Exchange Commission and exhibits thereto. The foregoing Risk Factors, as well as other existing Risk Factors and new Risk Factors that emerge from time to time, may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results.  Furthermore, the Company undertakes no obligation to update, amend, or clarify forward-looking statements.

The following tables contain information regarding the non-GAAP adjustments used by the Company in the presentation of its financial results:

SOURCE Wolverine World Wide, Inc.

Related Links

http://www.wolverineworldwide.com