- Revenue: $440 million for the third quarter, $20 million above the outlook of $420 million.
- Revenue Decline: 7% decline versus the prior year.
- Adjusted Gross Margin: 45.3%, increased by 380 basis points versus last year.
- Adjusted Operating Margin: 7.7%, exceeded the outlook for the quarter.
- Adjusted Diluted Earnings Per Share: Improved to 29¢ in the third quarter.
- Inventory: $286 million at quarter end, down approximately 40% from last year.
- Net Debt: $563 million, down approximately $100 million versus the second quarter and $370 million versus last year.
- Full Year Revenue Guidance: Expected to be in the range of $1.73 billion to $1.745 billion.
- Adjusted Gross Margin Guidance: Approximately 44.5% for the full year.
- Adjusted SG&A Expenses: Expected to be approximately $650 million for the full year.
- Net Interest and Other Expenses: Projected to be approximately $36 million for the full year.
- Effective Tax Rate: Projected to be approximately 16.5%.
- Adjusted Diluted EPS Guidance: Expected to be in the range of 80¢ to 90¢ for the full year.
- Operating Free Cash Flow: Expected to be in the range of $120 million to $130 million for the full year.
- Fourth Quarter Revenue Guidance: Expected to be in the range of $475 million to $490 million.
- Fourth Quarter Gross Margin: Expected to be approximately 44%.
- Fourth Quarter Adjusted Operating Margin: Expected to be approximately 9%.
- Fourth Quarter Adjusted Diluted EPS: Expected to be in the range of 31¢ to 41¢.
Release Date: November 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Wolverine World Wide Inc (WWW, Financial) reported third-quarter revenue of $440 million, exceeding expectations by $20 million.
- The company achieved a record gross margin of 45.3%, an increase of 380 basis points from the previous year.
- Merrill brand saw significant market share gains, particularly in the US, and plans to launch innovative products in 2025.
- Socking brand experienced strong growth internationally, with plans to expand store count significantly in the US by 2025.
- Wolverine World Wide Inc (WWW) successfully reduced net debt by $370 million compared to the previous year.
Negative Points
- Revenue for the ongoing business declined by 7% compared to the prior year.
- The work group segment experienced an 11% decline in the quarter, falling short of expectations due to supply chain disruptions.
- The company faced delayed product deliveries, impacting shipments for the Wolverine brand.
- Despite improvements, the company still has work to do in optimizing inventory levels.
- The outdoor footwear category, particularly Merrill, continues to face pressure despite market share gains.
Q & A Highlights
Q: Can you provide more details on the momentum for key brands, Merrill and Saucony, heading into 2025, especially regarding new key accounts?
A: Christopher Hufnagel, CEO, explained that the company has focused on product innovation and distribution strategy for Merrill and Saucony. They have new leadership and sales teams, and have expanded into new accounts with thoughtful distribution and proper segmentation. This strategy is expected to drive growth in 2025.
Q: Is there an opportunity to achieve 10% operating margins, and what is the current sourcing exposure to China?
A: Taryn Miller, CFO, stated that the company is seeing improvements in gross and operating margins, with Q4 operating margins expected to be around 9%. The company has reduced its sourcing exposure from China to the mid-teens percentage, down from over 40% a few years ago, and has diversified its sourcing footprint.
Q: How is the work group expected to perform in Q4, considering shipment delays?
A: Christopher Hufnagel, CEO, noted that the work group is expected to grow in Q4 due to recovering from Q3 delays, easier year-over-year comparisons, and pulling ahead some demand from Q1 next year. These factors support the revenue growth assumption for the work group.
Q: What are the expectations for Saucony's brand growth and awareness in 2025?
A: Christopher Hufnagel, CEO, highlighted that Saucony is experiencing growth in both performance and lifestyle categories. The brand is leveraging its deep product archive and collaborations to drive brand heat. The company is also focusing on key city strategies and opening new stores to enhance brand presence.
Q: How is Wolverine planning for potential new tariffs next year, and is there any change in pricing strategy?
A: Christopher Hufnagel, CEO, mentioned that the company is building a resilient business model to weather changes like tariffs. They have significantly reduced their exposure to China and are not currently contemplating changes to their international model or pricing strategy due to potential tariffs.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
