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Wolverine's E-commerce Business to Keep Holding the Key

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Wolverine World Wide, Inc. (WWW - Free Report) has been gaining momentum, thanks to a diversified global business model, enhanced digital capabilities and brand strength. Among the company’s sales channels, e-commerce has been the key growth driver. Its Global Growth Agenda initiative also bodes well. A better-than-expected second-quarter 2020 performance is further adding to the appeal of the stock. Impressively, the Rockford, MI-based company’s shares have appreciated 79.4% in the past six months, rallying ahead of the broader S&P 500 Index’s 47.8% gain and the Consumer Discretionary sector’s 49.9% upside. Meanwhile, the industry showcased growth of 78.8%.

A Broader Analysis

Speaking of Wolverine’s e-commerce business, the same excelled in the second quarter of 2020 and surged 96% year over year on accretive margins. Notably, the digital platform accounted for about two-thirds of the overall U.S. sales. Compelling new products in the hiking, outdoor, trail-running and home-casual categories, coupled with robust customer engagement, fueled online demand. Brand-wise, merrell.com surged nearly 140% in the quarter while Wolverine and Cat Footwear brands registered more than 100% online growth. Furthermore, saucony.com revenues almost tripled and sperry.com grew above 30% on gains from new-customer acquisitions. Recently, Wolverine also partnered with First Insight in order to leverage data in the product decision-making process. This will help the company’s portfolio with greater speed-to-market, sell-in, sell-through, and lower markdowns. We believe the company will continue capitalizing on its solid e-commerce platform.


 

Meanwhile, Wolverine has been progressing well with the Global Growth Agenda, which is aimed at three major elements — continuous introduction of products worldwide with creative designs; expansion of digital engagement to enhance the owned e-commerce business; and greater investments in regional resources and systems to drive international growth. Moreover, the company expects to leverage the commercial platforms and optimize demand-creation investments in all (especially the DTC) channels of distribution. In addition, the company is focusing on launches across different brand banners and is also bringing forward a robust pipeline of new products. Innovative products under the Saucony and Merrell banners are likely to drive growth.

The aforementioned factors, coupled with the company’s immediate actions undertaken to adjust to the downturn in the global economy, have aided it to deliver better-than-expected results in the second quarter despite its majority stores being shut for most of the quarter. Although management anticipates third-quarter revenues to decline less than 25% year over year, we note that the rate of decline is likely to decelerate from 38.6% witnessed in the preceding quarter.

Currently, Wolverine displays a Zacks Rank #3 (Hold). Its VGM Score of A for the company speaks of its inherent potentials.

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