Wolverine Worldwide Hits All-Time Highs on 66 Percent Jump in Q3 Profits, Guidance Hike

Andrew Klips  |

Wolverine Worldwide (WWW) is getting a lift in Tuesday trading after reporting a 66-percent surge in third-quarter profits on the back of its 2012 acquisition of Collective Brands.  Additionally, the footwear maker boosted its adjusted earnings guidance for the full year, taking stocks to an all-time high.

Wolverine completed the roughly $2 billion acquisition of Collective Brands last October.  The purchase was a joint effort between Wolverine and investment firms Blum Capital Partners and Golden Gate Capital.  Collective Brands owned the Payless ShoeSource retail chain and the Saucony, Sperry Top-Sider, Stride Rite and Keds shoe brands.  The investment firms got the operations of Payless ShoeSource and Collective’s international licensing business in the deal.  Wolverine got Collective’s shoe brands for a price of $1.24 billion.

The brands were added to Wolverine’s portfolio that includes Merrell, Hush Puppies, Wolverine, Cushe®, Chaco, Bates, HYTEST, and Soft Style.  The company also is the global footwear licensee of popular brands including Cat, Harley-Davidson, and Patagonia.

For the quarter ended September 7, Rockford, Michigan-based Wolverine reported record revenue of $716.7 million, up 9 percent on a pro forma basis and 103.0 percent compared to $353.1 million in the year prior quarter.  Profit for the quarter was $54.4 million, or $1.08 per share, up from $32.7 million, or 66 cents per share, in last year’s quarter.  Excluding acquisition costs and other special items, earnings were $1.16 per share versus 72 cents per share in the third quarter last year.

Wall Street was expecting earnings per share of $1.03 on revenue of $712.9 million.

Subscribe to get our Daily Fix delivered to your inbox 5 days a week

Gross margin increased 70 basis points to 39.9 percent, driven by a favorable channel mix, partially offset by foreign exchange contact losses.

Selling, general and administrative expenses rose from $89.3 million to $192.3 million.

Wolverine also shaved its net debt by $179 million, ending the quarter with net debt of $994.3 million.

Each operating group delivered growth, led by the Lifestyle Group sales jumping 678.4 percent to $295.8 million.  Not counting the newly-added brands, the group’s sales were still higher by 9.6 percent.  Performance Group sales swell 67 percent to $254.1 million.  Excluded the acquisition, sales were up 13 percent.

"Double-digit revenue increases across many of our brands, such as Merrell, Sperry Top-Sider, Saucony, Keds, Chaco and Cushe, helped drive the phenomenal earnings performance.  Additionally, solid single-digit revenue growth in North America and excellent double-digit growth in Latin America, Asia Pacific and EMEA reflect the impressive global momentum of our business," said Blake W. Krueger, chairman and chief executive at Wolverine.

With the stronger-than-expected quarter, the company narrowed its full-year revenue forecast to a range of $2.71 to $2.73 billion, representing growth in the range of 6.4 percent to 7.1 percent compared to prior year pro forma revenue of $2.548 billion.  Previously it guided a range of $2.7 billion to $2.775 billion.

Adjusted earnings per share guidance was raised to a range of $2.73 to $2.83 per share, representing growth in the range of 19.2 percent to 23.6 percent.  Prior guidance was between $2.60 and $2.75 per share in profits.

The new guidance is essentially in line with analyst predictions of EPS of $2.80 on revenue of $2.73 billion.

Shares of WWW are trading off the aforementioned record highs (of $60.37) at $58.70 a little over one hour into the session for gains of 1.5 percent.  Through Monday’s close, shares were up about 41 percent so far in 2013.  

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not necessarily represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer.

Market Movers