Reporting an increase of only 0.8 percent in its total sales to $312.7 million for the second quarter ended June 16, Wolverine Worldwide blamed especially the macroeconomic uncertainty in Europe. In Canada as well as in the Europe, Middle East and Africa region, the group's sales fell by a low-middle single-digit rate.
However, the management pointed out that the second quarter of last year had shown a revenue increase of 20 percent and that forward orders are currently up at a strong double-digit pace. It noted, among other things, an extremely positive response to the planned introduction in September of Merrell' new M-Connect line of products. Company officials stick to their forecast of a growth of more than 6 percent, assuming strong reorders by retailers and because the weather cannot be worse than last year next autumn.
Sales of Merrell, Chaco and Patagonia Footwear, which comprise the company's Outdoor Group, jointly posted a 2.7 percent increase in turnover to $130.7 million in the second quarter. They grew especially in the U.S., offsetting “challenges” in Canada. The roll-out of the Barefoot line allowed Merrell to reach a low single-digit increase in Europe. In the U.S., Merrell's sales grew at a high single-digit rate, with a double-digit increase for the Barefoot collection. Merrell's apparel line continued to expand in the outdoor specialty channel.
Chaco recorded a strong double-digit increase in the U.S. during the quarter, partly because of the warm weather in the region and the success of a customization problem offered through its online store. This recently acquired brand of sandals is expanding its collection by adding closed-toe shoes and boots.
Sales declines for Hush Puppies and Sebago in Europe led to a 0.5 percent drop to $41.3 million in the quarter for the Lifestyle Group of Wolverine, which also includes Cushe. Hush Puppies still enjoyed low single-digit growth on a global basis, and Sebago grew by a double digit in the U.S. Cushe slippers had a strong sell-through at major American retail chains, with higher demand among female customers.
Weak sales of CAT Footwear in Europe and a more selective U.S. distribution policy for Harley-Davidson Footwear caused the Heritage Group to post a sales decline of 3.4 percent to $99.4 million. The segment also includes the Wolverine brand, Bates and HyTest.
The bottom line showed a decline in net profit for the group to $20.3 million from $23.9 million in the same period a year ago. The gross margin decreased by 1.6 percentage points to 37.8 percent because of higher closeout sales of excess fall/winter products and higher product costs, which offset higher selling price increases and foreign exchange gains. Despite cuts in discretional spending, the operating margin dropped to 7.3 percent from 10.8 percent.
The management is still expecting record profitability for the full financial year, excluding acquisition expenses. Wolverine is still in line to add the four Collective footwear brands – Sperry Top-Sider, Sebago, Keds and Saucony – to its portfolio in late September. Synergies are expected in Europe as a result of their takeover, contributing to the cost discipline that Wolverine's organization has observed in the region. Company officials have an internal joke going on about whether Merrell or Sperry will be the first brand within the enlarged group to reach an annual turnover of $1 billion.