The challenge of Europe
Wolverine Worldwide has been recovering well from the Great Recession and is expanding business with newly announced joint ventures in India and in Colombia, but the European economy is still posing a problem.
“This year, we’ve frankly got the challenge of Europe staring us down,” said Wolverine chairman/CEO Blake Krueger last week in a conference call with industry analysts. “I guess it’s not just us in Europe. I think Kellogg announced this morning that they took their revenue and earnings guidance down for the entire year, primarily because of Europe. So it’s a challenge that everyone’s going to be facing in many different product categories.”
For the first quarter ended March 24, Wolverine reported revenue at $322.8 million, a decrease of 2.4 percent compared to the same quarter last year, when revenue grew approximately 16 percent. The current year revenue is “tempered by macroeconomic and financial uncertainty in Europe, which has contributed to a soft retail environment in that important market,” according to a company announcement.
Krueger described Wolverine’s first quarter sales as “slightly below our internal plan.” He said most of their expected growth will be in the second half of the year.
At the same time, Wolverine announced the formation of a joint venture with Tata International to market footwear and apparel in India. The joint venture will initially be responsible for the wholesale distribution of Wolverine Worldwide’s Merrell and Caterpillar Footwear brands there, and is a direct result of the efforts of the company’s International Group, which formed in January 2011.
The joint venture provides the company with “a more meaningful ownership stake and near-term brand impact” than its traditional licensee or distributor business model, according to a press release, and “reflects the importance of this fast-growing market.”
Wolverine Worldwide and Tata International will each hold a 50 percent stake.
Tata International has 30 years of experience in manufacturing footwear specifically for the Indian market. The joint venture includes an agreement with TRENT, another Tata Group company, which operates more than 50 department stores in India.
Tata International Ltd. is a diversified conglomerate with $83.3 billion in annual sales in more than 80 countries. Tata was established in 1962 and is India’s major manufacturer, exporter and supply chain integrator of leather and leather products working with the world's largest brands. It also retails footwear and leather articles in India under the brand TASHI. Other key global businesses include trading and distribution of vehicles, steel, chemicals, minerals, engineering products and solar energy solutions.
On April 19, Wolverine and Forus SA announced the formation of another joint venture, Lifestyle Brands of Colombia, to market footwear in Colombia, South America. It will have the long-term distribution rights to market some of Wolverine’s most significant brands — Merrell and Caterpillar Footwear — in Colombia, along with Forus’ well-established outdoor brand RKF. Wolverine will own 51 percent of the new joint venture, according to the announcement.
Wolverine is also buying a 49 percent stake in Forus’ existing Colombian business, Forus SA Colombia, which currently has the rights to sell Wolverine’s Hush Puppies and Cushe brands in Colombia. Forus SA Colombia owns and operates 23 retail stores and also sells directly to Colombia’s major department stores and specialty footwear retailers.
Forus SA is Wolverine’s largest distributor and licensee partner in Latin America, representing Wolverine brands in Chile, Uruguay and Peru, in addition to Colombia.
“As Forus, we are proud to announce this new relationship with Wolverine Worldwide, one that already spans more than 30 years,” said Alfonso Swett, chairman and founder of Forus SA.
In 2006, the market in Chile was opened to Forus SA. It now has more than 300 stores within Chile, Uruguay, Peru and Colombia.