Wolverine World Wide has been just that for decades

May 11, 2009
| By Pete Daly |
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When Wolverine World Wide was named World Trader of the Year last week by the West Michigan World Trade Association, it probably didn't come as a great surprise to those who are familiar with the famous West Michigan footwear maker and marketer.

Perhaps what's more surprising is that it wasn't named World Trader of the Year long before this.

"Even though we're headquartered here in West Michigan, we've really taken a global perspective since 1959," said Blake W. Krueger, president and CEO of the 125-year-old company.

Almost each year since 1977, the WMWTA has been recognizing a West Michigan business, organization or individual who has demonstrated a serious commitment to fostering international trade. As the WMWTA is quick to note, more than 96 percent of the world's consumers live outside of the United States, so exports mean new customers and new markets.

Wolverine World Wide Inc., a $1.2 billion publicly held corporation headquartered in Rockford, is one of the world's major marketers and manufacturers of footwear, with 48 million pairs of its products sold around the world. Wolverine brands include Bates, Chaco, Cushe, Hush Puppies, HYTEST, Merrell, Sebago and Wolverine. The company also is licensed to produce footwear under popular brand names including CAT, Harley-Davidson and Patagonia.

The World Trader of the Year award was presented last week at a Grand Rapids Economic Club luncheon, with about 500 people in attendance. Krueger noted at the luncheon that Victor Krause, the son of company founder G.A. Krause, made Wolverine an international company in 1959 with exports of Hush Puppies to Europe. That same year, the company's first licensee was signed: Greb Shoes Ltd. of Canada.

In 1986, Wolverine formed the International Design Center in Montecatini, Italy, and in 1989, the total value of the company's wholesale sales abroad surpassed the level of wholesale business in the U.S.

In 1993, Wolverine was marketing three brands in about 60 countries. Today, the company owns operations in the U.S., Canada and Europe, and markets 10 brands in more than 180 countries.

Last year, Wolverine applied for what Krueger termed a "prized" Free Trade Zone designation, which was awarded by the U.S. Department of Commerce and took effect in March. He said that will enable Wolverine to consolidate its North American warehouse and distribution operations in West Michigan, adding jobs in Cedar Springs, Howard City and Rockford.

Krueger said the status will allow a warehouse in West Michigan to be treated as if it were in Canada, for duty and import/export purposes, when the footwear from that warehouse is shipped to Canada. He said the designation is "recognition of the global presence and strength of your company, the strength of your internal systems and controls." Wolverine products in the Free Trade Zone are easier and less expensive to ship over the border.

Of course, the current economic recession is worldwide, and Wolverine has not been immune to the slowdown. In January, the company announced a restructuring plan, which included the closing of the leather tannery in Rockford. Then in February, the company reported that while the fiscal year that ended Jan. 3 was the eighth in a row for record revenue and earnings per share, the fourth quarter of 2008 had marked the first in 26 consecutive quarters in which there was not record revenue and earnings per share, compared to the same quarters in previous years.

In April, there was more negative news, although it was not a surprise. For the first quarter of 2009, Wolverine reported revenue of $255.3 million, a decrease of 11.4 percent compared to the prior year’s first quarter. Company officials were quick to point out that much of that was a reflection of changes in world currency values.

Truly global companies like Wolverine, with business on-going all over the world, are always impacted by currency fluctuations. Although the reported first quarter decline was 11.4 percent, "we were really down only 5 percent, in constant currency," noted Krueger, because the previously weak America dollar had suddenly regained a lot of its strength in the last half of 2008.

"The world is focused on (financial) security and safety, and there's been a flight back to the U.S. dollar," said Krueger.

"In just the last four months, I think (the dollar) strengthened 25 percent against the British pound and the Euro, and it strengthened over 30 percent against many other currencies in the world," he added.

"It seems to have stabilized over the last month or so," he said, "but we're still seeing volatility up and down in the currency markets, which is almost unprecedented," said Krueger.

He said one of the biggest changes he has seen in his business career over the last 30 years is the shift to a truly global marketplace. He said that individual country economies are so intertwined now that "something that's happening in one significant economy is really going to have a ripple effect on the entire world."

Those ripples over the last nine or 10 months, he said, have become "an unprecedented economic tsunami."

But Wolverine is in a good industry for uncertain economic times, because footwear is less volatile than many other consumer product groups, said Krueger.

"When you compare it to automobiles or commercial furniture, or various categories of apparel, we're much less affected," he said.

Then there is the near-bulletproof Wolverine business model, which Krueger likes to mention in conversation about the company.

"Our global business model really mitigates risk. It's unique: It's multi-brand, multi-country, multi-distribution channels, multi-consumer groups. … It reduces our (risk) exposure to any single country, region, fashion trend or consumer group."

"Compared to our competitors in the apparel and footwear sectors, we had a very good first quarter," he added.

Krueger said Wolverine is one of the largest “brown shoe" (non-athletic shoe) companies in the world. Athletic shoemakers such as Nike and Adidas are larger.

Although only one-half of one percent of footwear consumed in America is made in America, part of that production is Wolverine, which is still making boots for the U.S. military in Big Rapids and Arkansas.

One impact of the recession is that shoe retailers are cutting back on the number of brands they carry, he said.

"They want to do business with a bigger company that they know has the wherewithal and infrastructure to perform in this environment," he said. "It's an environment where the bigger and stronger are probably going to come out of it a little bigger and a little stronger."

Although the capital markets may be a little less frozen than they were four or five months ago, he said it's still a very difficult environment for credit.

Krueger said one of the keys to an economic recovery is more liquidity at the bank level. “Businesses have to be able to borrow money so they can create new plants, invest in people and create new jobs," he said.

Large companies like Wolverine, he said, which have generally consistent cash flow, do have access to credit lines.

"Unfortunately, for smaller companies or companies that aren't performing at the same financial level we are, it can be much more difficult," he said.

Wolverine World Wide stock (WWW) was trading for $20.15 May 1, compared to $29.50 May 1, 2008. The low between those dates was $13.22 on March 9 of this year.

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