U.S. long-distance runners wearing Saucony at Olympics
Wolverine brands in limelight as company keeps close eye on strategy.
The Saucony brand will be well represented in Rio de Janeiro for the 2016 Olympic Games with U.S. long-distance runners Molly Huddle and Jared Ward sporting the shoes, according to Blake W. Krueger, Wolverine Worldwide Inc. chairman, CEO and president.
Saucony isn’t the only Wolverine brand in the spotlight this summer.
Krueger said a partnership with Tough Mudder outdoor obstacle challenge events is garnering a lot of digital and social engagement for the Merrell brand this summer. He said last week during a conference call to discuss Wolverine Worldwide’s second quarter financial results that he expects both brands to continue to do well.
Specifically, Krueger predicts the upcoming release of the Arctic Grip Collection will boost Merrell.
“In the next few weeks, Merrell will launch what is poised to be one of the most talked-about product innovations of the year,” Krueger said.
He said the new Arctic Grip technology provides up to three times the traction on wet, icy surfaces.
Arctic Grip won best in show earlier this year at the Outdoor Retailer Winter Market Tradeshow.
Wolverine Worldwide announced in January that it had signed an exclusive agreement with Vibram, a maker of high-performance soles and developer of Vibram Arctic Grip, for 2016.
As part of the agreement, the technology will appear on six Wolverine Worldwide brands this year: Merrell (which will be the first), Sperry, Hush Puppies, Saucony, Wolverine and Cat Footwear.
Krueger said while the Sperry brand faced headwinds in the first half of this year due to “softness in the boat shoe category” as consumers focused on more athletic-inspired styles, the brand will launch a new line in early 2017 that he expects will attract buyers.
He said the Seven Seas Collection is an “athletic-inspired offering that provides superior fit, comfort and performance.”
“It will be front and center with Oracle Team USA at next year’s America’s Cup,” Krueger said.
Overall, Krueger said Wolverine’s second quarter was better than expected.
The company reported revenue of $583.7 million, declining 7.4 percent from the prior year, which it said was “in line with expectations.”
Underlying revenue — which is reported revenue adjusted for the impact of foreign exchange, retail store closures, and the exit of the Cushe business — declined 5.2 percent from the prior year.
Krueger said Wolverine continues to focus on a handful of strategic initiatives aimed at achieving 12 percent operating margin by the end of 2018.
“We have made considerable progress across a number of fronts, including right-sizing our store fleet, restructuring our operations in Canada and consolidating and reorganizing our apparel and accessory initiative,” he said.
He also discussed additional strategic initiatives that he considers important to company growth.
“We are focused on driving the global growth of the brands through a consumer-centric approach to product innovation and demand creation,” Krueger said. “We’ve doubled down on investments in consumer research, trends and advanced concepts. We’ve added new talent to our consumer insights team along with our brand product and marketing team.
He said construction has also begun on the company’s first consumer and innovation hub, opening this year at the company’s Rockford headquarters.
Krueger said Wolverine is looking closely at its portfolio and noted the company has a “long and successful history of adding and divesting brands,” something he said he expects will continue.
“Our goal is to maximize growth opportunities and shareholder returns,” he said “We’ve made significant progress in reviewing strategic alternatives for our portfolio, which could include the sale of several brands in the portfolio that may not meet our go-forward performance criteria and profit goals.
“We are also strategically reviewing our entire store fleet against the rising tide of challenges impacting domestic retail stores.”
Mike Stornant, senior vice president and chief financial officer of Wolverine Worldwide, said Wolverine’s plan to “responsibly and rationally manage down our inventory over the first three quarters of this year” has been a success.
“We were able to reduce inventory levels ahead of schedule, without accelerated liquidation of product or excessive erosion of gross margin,” he said.
Wolverine reported inventory balances at the end of the second quarter were 2.9 percent lower than the prior year.
Stornant said Wolverine is finalizing a “comprehensive game plan” that examines and leverages all aspects of the business to accomplish its goal of a 12 percent operating margin by the end of 2018.
“We expect supply chain improvements to contribute one half of this operating margin expansion as we begin to fully leverage factory rationalization, more efficient logistics and distribution strategies, and lower product costs; all critical objectives.”
Stornant said Wolverine also plans to put more resources and energy behind higher-margin brand opportunities and to optimize its direct-to-consumer business through sustained investment and addressing underperforming stores.