Wolverine Reports 4th-Quarter Declines, but Beats Expectations

Wolverine World Wide Inc., impacted by COVID-19 and noncash trade name impairment, lost money in the fourth quarter amid a sales decline, though the footwear giant said the outcome beat its expectations.

The loss was $171.2 million in the quarter ended Jan. 2, including the impact of a $222.2 million impairment charge. That compared to a $500,000 loss in the year-ago period.

Reported diluted loss per share was $2.10, including the impairment charge of $2.07 per share, compared to a loss per share of 1 cent in the prior year.

Adjusted diluted earnings per share were 21 cents, and, on a constant currency basis, were 22 cents, compared to 59 cents in the prior year.

With performances mixed across Wolverine‘s broad portfolio of brands, revenues fell 16.1 percent to $509.6 million compared to $607.4 million in the year-ago period. On a constant currency basis, revenue was down 16.4 percent versus the prior year. Owned e-commerce reported revenue grew 31.7 percent versus the prior year.

“The company delivered better-than-expected results for the fourth quarter and is poised to drive an accelerated recovery over the next 12 to 18 months,” said Blake W. Krueger, Wolverine Worldwide’s chairman and chief executive officer.

“During a year of unprecedented challenges, we took action focused on the rapidly changing consumer landscape,” said Krueger. “Our owned e-commerce revenue grew 50 percent in 2020, and we have planned further investment in this area to enable growth of 40 percent in 2021, significantly outpacing broader industry expectations. Our balance sheet is healthy, and our brands are well positioned in winning product categories with strong momentum. Merrell, Saucony, Sperry and Wolverine all plan to launch compelling new products behind some of their biggest franchises, and we anticipate meaningful growth for the company in 2021, resulting in revenue approaching 2019 levels for the year.”

Cash flow from operating activities in the quarter was $173.6 million, compared to $206.6 million in the prior year. Cash on hand at the end of the quarter was $347.4 million, compared to $180.6 million in the prior.

For all of 2020, revenues reached $1.79 billion, down 21.2 percent versus the prior year on a reported and constant currency basis. Owned e-commerce reported revenue grew 49.9 percent versus 2019.

Reported diluted loss per share was $1.70, including the impact of the impairment charge of $2.07 per share, compared to EPS of $1.44 in the prior year. Adjusted diluted EPS were 93 cents, and, on a constant currency basis, were 95 cents, compared to $2.25 in the prior year.

“Our team executed on key profit and liquidity priorities that were identified at the onset of the pandemic, resulting in annual operating cash flow of $309 million and $1.1 billion of total liquidity at year-end,” said Mike Stornant, senior vice president and chief financial officer. In 2019, operating cash flow was $222.6 million.

“We are now able to increase our investment behind several key growth priorities supported by good visibility to robust demand and an e-commerce platform that continues to outperform. The company is in an enviable position to drive profitable and accelerated growth in 2021.”

For 2021, the company expects revenues in the range of $2.19 billion to $2.25 billion, representing growth of 22 percent to 26 percent from 2020. If the company meets the high side of its forecast, it would be close to its 2019 volume level.

In its statement, Wolverine said it’s focused on delivering its “aspirational target of $500 million in owned e-commerce revenue, more than double 2019 owned e-commerce revenue.”

Reported diluted EPS is expected to be in the range of $1.75 to $1.90, and adjusted diluted EPS is expected to be in the range of $1.90 to $2.05.

The projections assume “no meaningful deterioration of current market conditions related to the COVID-19 pandemic during the remainder of 2021,” the company said.

Wolverine has a diverse portfolio of  brands including Merrell, Sperry, Hush Puppies, Saucony, Wolverine, Keds, Stride Rite, Chaco, Bates and Hytest. Wolverine Worldwide is also the global footwear licensee of the Cat and Harley-Davidson brands.

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