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Wolverine World Wide, Inc. (WWW - Free Report) continued with its solid performance in fourth-quarter 2021 despite supply-chain challenges. While the top line beat the Zacks Consensus Estimate, the bottom line met the same. Remarkably, revenues and earnings per share increased meaningfully from the year-ago period. A robust portfolio of iconic brands coupled with operational strategies contributed to the company’s performance. The recently acquired women’s activewear brand Sweaty Betty also fueled growth.
Q4 Insights
Wolverine posted fourth-quarter adjusted earnings of 41 cents a share that increased significantly from 21 cents earned in the year-ago quarter, thanks to higher sales and margin expansion. On a constant-currency basis, adjusted earnings came in at 39 cents a share. Excluding the Sweaty Betty, adjusted earnings were 31 cents a share.
Revenues of $635.6 million surpassed the Zacks Consensus Estimate of $629.4 million and increased 24.7% year over year, courtesy of solid consumer demand. On a constant currency basis, revenues grew 24.6%. Sweaty Betty, the newest addition to the company’s portfolio of brands, contributed more than $75 million of revenues in the quarter under discussion. Excluding Sweaty Betty, revenues increased 9.4% year over year.
We note that Wolverine Michigan Group’s revenues rose 7.9% year over year to $322 million, while Wolverine Boston Group’s revenues grew 10.4% to $218.1 million. Other revenues jumped to $95.5 million from $13.5 million in the year-ago period.
Including Sweaty Betty, direct-to-consumer (DTC) revenues advanced 60% year over year and represented 35% of total revenues. DTC e-commerce revenues surged 58.3%, while DTC store revenues jumped 68%. Excluding Sweaty Betty, DTC revenues increased 12%, reflecting e-commerce growth of 12.7% and store revenue growth of 11%.
Wolverine's Merrell brand registered low single-digit decline in revenues. However, the brand’s lifestyle category grew mid-single-digits and the work category increased by roughly 30%. Merrell’s DTC business rose about 10% compared with the year-ago quarter. Merrell's global business remains fundamentally sound, with a strong order book entering 2022.
The company’s Saucony brand registered revenue growth of approximately 25%. A relatively strong inventory position helped mitigate the impact of Vietnam factory closures. Saucony continues to increase its DTC mix, with e-commerce revenues surging roughly 38% from the prior-year period.
Wolverine World Wide, Inc. Price, Consensus and EPS Surprise
Adjusted gross profit was $273.4 million, up 29.6% year over year. Adjusted gross margin expanded 160 basis points (bps) year over year to 43% despite an 80-bp headwind from higher ocean freight costs. The company incurred total air freight costs of $4.7 million in the quarter.
Adjusted SG&A expenses jumped 26.4% to $224.3 million. Higher variable costs, the addition of Sweaty Betty, higher labor rates in distribution centers and increased marketing investments drove the increase.
Adjusted operating profit surged to $49.1 million from $33.5 million in the prior year, while adjusted operating margin increased 110 bps to 7.7%.
Other Financials
Wolverine, which currently carries a Zacks Rank #3 (Hold), ended the quarter with cash and cash equivalents of $161.7 million, total debt of $966.8 million, and stockholders' equity of $644.4 million. Total debt was $244.3 million more than in the prior year owing to the buyout of Sweaty Betty. Inventory at the end of the quarter was $365.5 million, reflecting an increase of 50.3% year over year. Sweaty Betty contributed 19.4% to the increase. At the end of the quarter, the company had nearly $450 million available under the share repurchase program.
Outlook
Management anticipates the demand for its brands to remain strong in fiscal 2022. It stated that measures undertaken to enhance supply capabilities as well as inventory position should allow the company to meet higher demand. Performance-focused categories like hiking, running and work are expected to do well.
Wolverine’s four largest brands, Merrell, Saucony, Sperry and Sweaty Betty, are estimated to contribute approximately two-thirds of revenues in fiscal 2022. The addition of Sweaty Betty to the portfolio facilitates the expansion of DTC and international businesses. The company expects DTC business to be approximately 30% of global revenues and international markets to be more than 35% of global revenues.
Wolverine envisions fiscal 2022 revenues in the range of $2.775-$2.850 billion, indicating growth of approximately 15-18%. The company guided adjusted earnings between $2.50 and $2.65 per share. This represents an increase of 19.4-26.5% on a year-over-year basis.
Management expects fiscal 2022 gross margin in the range of 43.5% to 44% compared with adjusted gross margin of 44.1% reported in fiscal 2021. It projected operating margin of approximately 10.2% and adjusted operating margin to be about 11%, up approximately 35 bps versus 2021. Adjusted SG&A expenses are expected to be approximately 33% of revenues.
For first-quarter fiscal 2022, Wolverine projected revenues between $595 million and $610 million, suggesting growth of approximately 16.5% to 19.5%. The company expects Merrell and Saucony brands to be approximately flat for the quarter. Management forecast first-quarter adjusted earnings in the band of 37-40 cents a share and adjusted operating margin to be 8%.
Shares of Wolverine have fallen 25.4% in the past three months compared with the industry’s decline of 18.2%.
Capri Holdings, a global fashion luxury group, flaunts a Zacks Rank #1 (Strong Buy). Capri Holdings bottom line has outperformed the Zacks Consensus Estimate by a wide margin in the trailing four quarters. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Capri Holdings’ current financial year sales and EPS suggests growth of 37.1% and 215.8%, respectively, from the year-ago period. CPRI has an expected EPS growth rate of 30.9% for three-five years.
DICK'S Sporting Goods, which operates as a sporting goods retailer, sports a Zacks Rank #2 (Buy). DICK'S Sporting Goods has a trailing four-quarter earnings surprise of 104.2%, on average.
The Zacks Consensus Estimate for DICK'S Sporting Goods’ current financial year sales and EPS suggests growth of 27.6% and 151.6%, respectively, from the year-ago period. DKS has an expected EPS growth rate of 11.7% for three-five years.
Tapestry, owner of Coach, Kate Spade, and Stuart Weitzman brands, carries a Zacks Rank #2. Tapestry has a trailing four-quarter earnings surprise of 28.2%, on average.
The Zacks Consensus Estimate for Tapestry’s current financial year sales and EPS suggests growth of 17.6% and 22.9%, respectively, from the year-ago period. TPR has an expected EPS growth rate of 12.3% for three-five years.
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Wolverine (WWW) Q4 Earnings Meet Estimates, Revenues Rise Y/Y
Wolverine World Wide, Inc. (WWW - Free Report) continued with its solid performance in fourth-quarter 2021 despite supply-chain challenges. While the top line beat the Zacks Consensus Estimate, the bottom line met the same. Remarkably, revenues and earnings per share increased meaningfully from the year-ago period. A robust portfolio of iconic brands coupled with operational strategies contributed to the company’s performance. The recently acquired women’s activewear brand Sweaty Betty also fueled growth.
Q4 Insights
Wolverine posted fourth-quarter adjusted earnings of 41 cents a share that increased significantly from 21 cents earned in the year-ago quarter, thanks to higher sales and margin expansion. On a constant-currency basis, adjusted earnings came in at 39 cents a share. Excluding the Sweaty Betty, adjusted earnings were 31 cents a share.
Revenues of $635.6 million surpassed the Zacks Consensus Estimate of $629.4 million and increased 24.7% year over year, courtesy of solid consumer demand. On a constant currency basis, revenues grew 24.6%. Sweaty Betty, the newest addition to the company’s portfolio of brands, contributed more than $75 million of revenues in the quarter under discussion. Excluding Sweaty Betty, revenues increased 9.4% year over year.
We note that Wolverine Michigan Group’s revenues rose 7.9% year over year to $322 million, while Wolverine Boston Group’s revenues grew 10.4% to $218.1 million. Other revenues jumped to $95.5 million from $13.5 million in the year-ago period.
Including Sweaty Betty, direct-to-consumer (DTC) revenues advanced 60% year over year and represented 35% of total revenues. DTC e-commerce revenues surged 58.3%, while DTC store revenues jumped 68%. Excluding Sweaty Betty, DTC revenues increased 12%, reflecting e-commerce growth of 12.7% and store revenue growth of 11%.
Wolverine's Merrell brand registered low single-digit decline in revenues. However, the brand’s lifestyle category grew mid-single-digits and the work category increased by roughly 30%. Merrell’s DTC business rose about 10% compared with the year-ago quarter. Merrell's global business remains fundamentally sound, with a strong order book entering 2022.
The company’s Saucony brand registered revenue growth of approximately 25%. A relatively strong inventory position helped mitigate the impact of Vietnam factory closures. Saucony continues to increase its DTC mix, with e-commerce revenues surging roughly 38% from the prior-year period.
Wolverine World Wide, Inc. Price, Consensus and EPS Surprise
Wolverine World Wide, Inc. price-consensus-eps-surprise-chart | Wolverine World Wide, Inc. Quote
Margins
Adjusted gross profit was $273.4 million, up 29.6% year over year. Adjusted gross margin expanded 160 basis points (bps) year over year to 43% despite an 80-bp headwind from higher ocean freight costs. The company incurred total air freight costs of $4.7 million in the quarter.
Adjusted SG&A expenses jumped 26.4% to $224.3 million. Higher variable costs, the addition of Sweaty Betty, higher labor rates in distribution centers and increased marketing investments drove the increase.
Adjusted operating profit surged to $49.1 million from $33.5 million in the prior year, while adjusted operating margin increased 110 bps to 7.7%.
Other Financials
Wolverine, which currently carries a Zacks Rank #3 (Hold), ended the quarter with cash and cash equivalents of $161.7 million, total debt of $966.8 million, and stockholders' equity of $644.4 million. Total debt was $244.3 million more than in the prior year owing to the buyout of Sweaty Betty. Inventory at the end of the quarter was $365.5 million, reflecting an increase of 50.3% year over year. Sweaty Betty contributed 19.4% to the increase. At the end of the quarter, the company had nearly $450 million available under the share repurchase program.
Outlook
Management anticipates the demand for its brands to remain strong in fiscal 2022. It stated that measures undertaken to enhance supply capabilities as well as inventory position should allow the company to meet higher demand. Performance-focused categories like hiking, running and work are expected to do well.
Wolverine’s four largest brands, Merrell, Saucony, Sperry and Sweaty Betty, are estimated to contribute approximately two-thirds of revenues in fiscal 2022. The addition of Sweaty Betty to the portfolio facilitates the expansion of DTC and international businesses. The company expects DTC business to be approximately 30% of global revenues and international markets to be more than 35% of global revenues.
Wolverine envisions fiscal 2022 revenues in the range of $2.775-$2.850 billion, indicating growth of approximately 15-18%. The company guided adjusted earnings between $2.50 and $2.65 per share. This represents an increase of 19.4-26.5% on a year-over-year basis.
Management expects fiscal 2022 gross margin in the range of 43.5% to 44% compared with adjusted gross margin of 44.1% reported in fiscal 2021. It projected operating margin of approximately 10.2% and adjusted operating margin to be about 11%, up approximately 35 bps versus 2021. Adjusted SG&A expenses are expected to be approximately 33% of revenues.
For first-quarter fiscal 2022, Wolverine projected revenues between $595 million and $610 million, suggesting growth of approximately 16.5% to 19.5%. The company expects Merrell and Saucony brands to be approximately flat for the quarter. Management forecast first-quarter adjusted earnings in the band of 37-40 cents a share and adjusted operating margin to be 8%.
Shares of Wolverine have fallen 25.4% in the past three months compared with the industry’s decline of 18.2%.
Pick These 3 Stocks
Here are three better-ranked stocks — Capri Holdings (CPRI - Free Report) , DICK'S Sporting Goods (DKS - Free Report) and Tapestry (TPR - Free Report) .
Capri Holdings, a global fashion luxury group, flaunts a Zacks Rank #1 (Strong Buy). Capri Holdings bottom line has outperformed the Zacks Consensus Estimate by a wide margin in the trailing four quarters. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Capri Holdings’ current financial year sales and EPS suggests growth of 37.1% and 215.8%, respectively, from the year-ago period. CPRI has an expected EPS growth rate of 30.9% for three-five years.
DICK'S Sporting Goods, which operates as a sporting goods retailer, sports a Zacks Rank #2 (Buy). DICK'S Sporting Goods has a trailing four-quarter earnings surprise of 104.2%, on average.
The Zacks Consensus Estimate for DICK'S Sporting Goods’ current financial year sales and EPS suggests growth of 27.6% and 151.6%, respectively, from the year-ago period. DKS has an expected EPS growth rate of 11.7% for three-five years.
Tapestry, owner of Coach, Kate Spade, and Stuart Weitzman brands, carries a Zacks Rank #2. Tapestry has a trailing four-quarter earnings surprise of 28.2%, on average.
The Zacks Consensus Estimate for Tapestry’s current financial year sales and EPS suggests growth of 17.6% and 22.9%, respectively, from the year-ago period. TPR has an expected EPS growth rate of 12.3% for three-five years.