Wolverine Beats, Guides Favorably - Analyst Blog

Wolverine World Wide Inc. (WWW), one of the leading designers, manufacturers and marketers of branded footwear and apparel, recently posted fourth-quarter 2010 results that topped the Zacks expectation on the heels of strong demand witnessed across its brands. The company also provided an impressive outlook for fiscal 2011 on a strong order backlog.

The company's multi-brand portfolio, geographical diversification, and multi-distribution channel strategy remain its key growth drivers.

Quarterly Discussion

The quarterly earnings of 52 cents a share outpaced the Zacks Consensus Estimate of 46 cents and grew 15.6% from 45 cents earned in the prior-year quarter.

Wolverine, the seller of products under Harley-Davidson Footwear, Hush Puppies, Merrell and other brands, said its total revenue for the quarter climbed 23.2% to $385 million from the prior-year quarter, and handily beat Zacks Consensus Estimate of $356 million.

By operating group, year over year revenue increased 22.3% to $134.9 million at Outdoor Group, 27.6% to $97.9 million at Wolverine Footwear Group, 25.8% to $65.1 million at Heritage Brands Group and 16.4% to $38.9 million at Hush Puppies Group. Other business units, which comprise Wolverine retail and leathers, posted a revenue growth of 17.9% to reach $44.1 million.

Gross profit for the quarter jumped 16.3% to $142.7 million, whereas gross margin contracted 220 basis points to 37.1% reflecting a rise in product costs.

Rockford, Michigan-based Wolverine enjoyed increased momentum in fiscal 2010 that will continue into fiscal 2011. Moreover, we believe that the company remains well positioned to increase its market share on the strength of its brand portfolio. The Merrell brand has been the key growth driver for the past decade, and we expect it to catalyze future growth.

Robust Results Reflected in Guidance

Wolverine's healthy fourth-quarter 2010 results and increased order backlog of more than 38%, keeps management optimistic on fiscal 2011. The company now projects total revenue in the range of $1,350 million to $1,390 million, reflecting a year-over-year growth of 8.1% to 11.3%.

Fiscal 2011 earnings are expected between $2.35 and $2.45 per share, representing a year-over-year growth of 8% to 13%. Following an encouraging guidance, a positive sentiment is palpable among the analysts and we witness a rise in Zacks Consensus Estimates. The current Zacks Consensus Estimate for fiscal 2011 is $2.45, which reflects an increase of 18 cents from the prior estimate. 

Other Financial Aspects

Wolverine ended fiscal 2010 with cash and cash equivalents of $150.4 million and shareholders' equity of $543.9 million with negligible debt load. The company repurchased 1,795,147 shares during the year, at an average price of $28.52 aggregating $51.2 million. The company still has $154 million at its disposal under its share repurchase authorization.

Wolverine, which competes with Timberland Co. (TBL), Deckers Outdoor Corporation (DECK) and Skechers USA Inc. (SKX), holds a Zacks #3 Rank, which translates into a short-term ‘Hold' recommendation.