Favorable currency exchange rates, the conversion of Merrell in Scandinavia from distribution to wholesale and the transition of Sebago to a more competitive wholesale model in Europe are all factors that contributed to a 15 percent increase in Wolverine World Wide’s turnover in the continent to just under $200 million in 2005. Tim O’Donovan, the company’s chief executive, believes there is room for further improvement in 2006, albeit nothing dramatic, in a European market that is much tougher than North America.

An inventory reduction program caused a 2 percent drop in the group’s net income to $20,444,000 in the 4th quarter of 2005 from 4 percent revenue growth to $321,002,000. Sales of the Wolverine and Stanley brands were higher and Bates was flat. The Wolverine brand raised its market share in the core boot and outdoor sport markets during the quarter, and its average selling prices went up.

For the full year, WWW reported an increase in net income of 13 percent to $74,467,000. Revenues grew by 7 percent to $1,060,999,000. The gross margin grew by 50 basis points to 38.2 percent. Also for the full year, Merrell’s sales grew by 18 percent to an implied level of $400 million with more than 10 million pairs sold in 140 countries. The brand had more than 300 shop-in-shops and concept stores in place at year-end.

WWW’s business is now 32 percent from the outdoor group, which includes Merrell and Sebago, plus the soon-to-come footwear range for Patagonia. Another 25 percent comes from Wolverine footwear group, which includes Stanley and Bates; 16 percent from the Heritage Group, which is composed of Harley Davidson and Caterpillar footwear; 15 percent Hush Puppies and 12 percent other brands.

The company’s outdoor group had once again a solid performance in 2005, as Merrell had its 7th straight year of double-digit revenue and profit growth. Revenues declined for the Wolverine footwear group because of a decrease in military shipments, a trend that is expected to continue in 2006.

Caterpillar, which generates 80 percent of its business outside of the USA, saw double-digit increases at many key retail locations in Europe. Going forward, WWW plans to use the Heritage Brands’ infrastructure to introduce the Harley Davidson line to the European market more widely. Overall, the Heritage Group fell by 2.1 percent in the 4th quarter.

With orders up by 11 percent, the management outlines an objective of net earnings of $79.4 million for 2006 on revenues of $1.11-1.13 billion. Operating profit should increase at a double-digit rate, excluding expenses for executive stock options and major investments planned to prepare the launch of Patagonia footwear for Spring 2007 and Merrell performance apparel for Fall 2007 at retail.