Wolverine Worldwide's consolidated revenues grew by 2.7 percent to $630.1 million for the second quarter ended June 20, with a 4.9 percent increase on a currency-neutral basis. They actually went up by 6.9 percent without including the discontinued line of Patagonia footwear and sales at the corporate stores that have been closed, indicating an acceleration of the group's turnover that came ahead of the management's expectations.

Performing better than analysts had expected Wolverine also reported an 8.4 percent drop in net earnings to $25.2 million on an adjusted basis. The gross margin fell by one percentage point to 39.1 percent, in line with company expectations. The operating margin declined by 0.4 percentage points to 7.6 percent, but on an adjusted basis it fell by 0.9 percentage points to 8.1 percent of revenues.

In geographical terms, the group's wholesale business went up by a mid-single digit in the U.S. On a constant-currency basis, revenues showed double-digit growth in Europe, the Middle East and Africa and an increase of more than 50 percent in the Asia-Pacific region, due in part to some shipments to international customers that were expected to be delivered during the third quarter.

Looking at the various segments, the management noted that two of them were rather buoyant. Growth of 12.2 percent was achieved in the Heritage Group, reaching 14.6 percent in constant currencies. The Cat Footwear, Sebago, Wolverine and HyTest lines went up at a double-digit rate. The Performance Group, which includes brands such as Merrell and Saucony, generated increases of 5.7 percent in dollars and 9.4 percent in local currencies, with Merrell recovering from a flat first quarter.

Wolverine Worldwide Consolidated Income Statement

(Million US$, Second Quarter ended June 14)

 

2015

2014

% Change

REVENUES

630.1

613.5

2.7

Cost of Sales

383.7

367.7

4.4

SG & A*

195.1

190.8

2.3

Integration Costs

0.0

2.5

-100.0

Interest Expense

9.0

18.5

-51.4

Other Expense

-

-

-

Pre-Tax

36.8

38.5

-4.4

Tax

11.6

10.9

6.4

Minority Interest

(0.1)

0.1

-

NET INCOME

25.3

27.5

-8.0

Earnings/Share (Diluted)

0.24

0.27

-11.1

* Selling, General and Administrative Expenses.

The Lifestyle Group's sales fell by 4.1 percent in dollars and by 3.1 percent in local currencies, as the strong progress of Keds, especially in Latin America and Asia-Pacific, was offset by a drop of less than one percent for Sperry and higher rates of decline at Stride Rite and Hush Puppies.

As part of its Strategic Realignment Plan, which was announced one year ago, Wolverine plans to close a total of about 120 stores during the present financial year, down from a previous target of 140 doors. Another 55 stores are due to be shut down over the next five years.

Confirming a recent rumor, Wolverine said it plans to wind down the operations of its smallest brand, Cushe, which generated sales of only $17.5 million last year. In connection with the move, the company will take restructuring and impairment charges of $3.5 million in 2015, $2.9 million of which were charged against the second quarter.

Wolverine Worldwide GAAP Revenues by Operating Group

(Million US$, Second Quarter ended June 14)

 

2015

2014

% Change

Lifestyle Group*

253.4

264.1

-4.1

Performance Group**

223.3

211.2

5.7

Heritage Group***

127.4

113.5

12.2

Other

26.0

24.7

5.3

Total Revenues

630.1

613.5

2.7

* Sperry Top-Sider, Stride Rite, Hush Puppies, Keds, Soft Style ** Merrell, Chaco, Patagonia Footwear, Cushe, Saucony *** Wolverine, Cat Footwear, Harley-Davidson Footwear, HyTest, Bates, Sebago

Total extraordinary charges for the year are expected to amount to between $48 million and $51 million before taxes. Consolidated revenues are forecast at between $2.82 billion and $2.85 billion for the year, implying an increase of 2 to 3 percent in dollars or 5 to 6 percent in local currencies. The outlook is less favorable than before, due in particular to challenges in some distributor markets.