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.
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.
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