Wolverine Worldwide continued to show solid growth in its 3rd quarter with a 7.0 percent climb in revenue to $279.1 million and a 16.7 percent rise in net income to $54,023,000, reaching record results for the 15th consecutive quarter. Gross margins improved by 130 basis points to 38.9 percent.
The company’s business outside of the USA rose by 17 percent in dollars, contributing significantly to the overall growth. Revenue gains were nearly 20 percent in dollars in Europe, with the Hush Puppies, Merrell, Caterpillar and Sebago brands posting the most notable increases.
The Merrell brand continues to be a significant driver, especially in Europe, where it now has 22 shop-in-shops. There are 158 shop-in-shops in the USA, and well over 100 in other parts of the world. In addition, the first free-standing Merrell store was opened in Frankfurt, Germany a few weeks ago, and the next one is planned for early next year in Long Island, New York – both in cooperation with local retailers. Distribution partners have opened Merrell franchises in markets such as Argentina, Panama, Venezuela, Saudi Arabia and Taiwan.
These stores already offer a limited amount of apparel alongside Merrell’s footwear. As consumers have responded well, Wolverine has decided to expand the line further. It has assigned an international design team to develop a broader apparel line, which it hopes will be available for shipment to selected stores around the world in the Fall of 2007.
Wolverine’s Outdoor Group, which includes Merrell, Sebago - and soon also Patagonia footwear - saw its revenues rise by 15 percent in the latest quarter, with the growth in Europe nearly doubling the U.S. score. Sebago’s revenues were up by more than 20 percent, driven by strong sales in the USA as well as Europe.
There was a 6.2 percent increase in global revenues for the Hush Puppies brand, with a solid boost in profits. The brand has licensing partners in 130 countries, and its licensing revenues outside of the USA grew at a double-digit pace during the quarter. Hush Puppies continues to expand in Federated Department Stores in the US, where it is currently in 252 locations.
Last year’s decision to combine the management teams of the Caterpillar and Harley-Davidson brands, now known as the Heritage Group, seems to be paying off for the company, thanks to a more effective operating model. Revenues for this unit rose by 10 percent and profit was up significantly, surpassing the company’s expectations. Caterpillar had a double-digit increase in revenue and profit, doing well in Europe and in Canada, where it was switched earlier this year from distribution to a fully owned business. The Harley-Davidson brand increased its profitability, despite a decline in revenues primarily due to fewer closeout sales and reduced sales to several volume accounts in the USA. Wolverine is focusing on Europe with this brand, taking greater control over the distribution.
Sales declined by 2.5 percent for the Wolverine Footwear Group, consisting of Wolverine boots and the Bate’s and Stanley brands, due to expected decreases in base military shipments, while its earnings remained flat.
The company’s backlog rose by 19 percent during the quarter, leading to an increase in guidance for the year. Wolverine now projects net income of $83.6 million on sales of $1.05-$1.06 billion, based in part on new growth initiatives that will cost about $1.5 million in the 4th quarter.