Summary

• Wolverine World Wide, Inc. markets a variety of footwear and apparel styles under recognizable brands like Bates, Cat, Chaco, Harley-Davidson, Hush Puppies, HYTEST, Merrell, Saucony, Sperry, Sweaty Betty, and Wolverine.
• The company was established in 1883 by G.A. Krause and Fredrick Hirth, currently headquartered in Rockford, Michigan, USA.
• The company operates in three reportable segments Active Group, Work Group, and Lifestyle Group.
• The 52-week price range of Wolverine is 7.21 to 17.85, and the trailing PE ratio is 77.90. The earnings per share of the company are 0.11 for the quarter that ended on 30 September 2023; the gross margin is 40.82%, the operating margin is 5.17%, the net margin is 1.71% and the return on assets is 2.48% as of 30 September 2023.
• The company's net revenues for the year ended 31 December 2022 increased by 11.18% from the previous year, reaching $2,415 million, resulting in a net revenue increase of $270 million.

Brief Company Overview

Wolverine World Wide, Inc. (NYSE: WWW) is a leading designer, marketer, and licensor of various types of footwear and apparel, including casual, performance, kids', industrial, and uniform shoes. The company markets a variety of footwear and apparel styles under recognizable brands like Bates, Cat, Chaco, Harley-Davidson, Hush Puppies, HYTEST, Merrell, Saucony, Sperry, Sweaty Betty, and Wolverine. Wolverine World Wide was established in 1883 by G.A. Krause and Fredrick Hirth currently headquartered in Rockford, Michigan, USA.¹ Wolverine Shoe and Tanning Corporation, originally a leather shop in Grand Rapids, Michigan, expanded into a shoe factory and tannery. In 1964, it changed its name to Wolverine World Wide, Inc. and became publicly traded on the New York Stock Exchange. As of 2023, the company markets its products in 170 countries and territories, with some regions relying on third-party distributors, licensees, and joint ventures.

The company’s portfolio of brands was organized into the following three reportable segments Active Group, Work Group, and Lifestyle Group. Wolverine has a diverse portfolio of brands that cater to different segments of customers, such as casual, active lifestyle, work, outdoor sport, athletic, children’s, and uniform footwear and apparel.

As of December 31, 2022, the Company had approximately 4,300 domestic and foreign production, office, and sales employees. The current CEO and president of Wolverine is Christopher Hufnage. As of September 30, 2023, the company had 112,939,664 shares outstanding and during the year ended on September 30, 2023, the company paid cash dividend amounting to $24.5 million. The company has 272 institutional shareholders, and Blackrock Inc. is the largest shareholder with 15.04% shareholding. The 52-week price range of Wolverine is 7.21 to 17.85, and the trailing PE ratio is 77.90. The earnings per share of the company are 0.11 for the quarter that ended on 30 September 2023; the gross margin is 40.82%, the operating margin is 5.17%, the net margin is 1.71% and the return on assets is 2.48% as of 30 September 2023.

Recent Business Developments

• On March 15, 2023, Wolverine continued its partnership with Halo for a second year in a row, and the limited-edition drop was available on March 16 in Spartan-inspired colorways: Wild Kovan, Foxwood Seal, Scorpion Horvath, and Midnight Frost.²
• On August 1, 2023, Wolverine announced a name, image, and likeness (NIL) agreement with 13 University of Michigan football players.³
• On Nov. 21, 2023, Wolverine made the strategic decision to license their sock business exclusively to Renfro Brands.⁴
• On August 31, 2023, Wolverine agreed to sell the Hush Puppies intellectual property in China, Hong Kong, and Macau and completed the sale of the U.S. Wolverine Leathers business.⁵
• On July 01, 2022, Wolverine’s subsidiary, Keds LLC, sold Champion trademarks for footwear in the U.S. and Canada to its longtime licensee, HanesBrands Inc (NYSE: HBI), for $90 million in cash.⁶

Recent Financing Activities

• For the nine months ended on 30 September 2023, under the Revolving Facility, the company paid $7.5 million in principal payments associated with its financing arrangements.⁷
• For the nine months ended on 30 September 2023, the company paid $5.8 million in connection with shares or units withheld to pay employee taxes related to awards under stock incentive plans.⁸

Financial Performance Highlights

Q3 Performance Highlights

Net revenues for the third quarter as of 30 September 2023, were $528 million, declined by 24% compared with the prior year's third quarter revenue, which amounted to $691 million. In Q3 2023, revenue decreased by $163 million compared to Q3 2022, with a 17.5% decline from the Active Group, a 22.1% decline from the Work Group, and a 46.6% decline from the Lifestyle Group. The Active Group's revenue decrease was primarily due to a decrease from Merrell, Saucony, and Chaco, while the Work Group's revenue decreased by Cat, Harley-Davidson, and Wolverine. The Lifestyle Group's revenue decline was mainly due to a decrease from Sperry and Keds. Foreign exchange rate changes increased revenue by $6.9 million, while direct-to-consumer revenue decreased by 14.5% compared to Q3 2022.

Gross Profit for the third quarter as of 30 September 2023, was $215 million, which declined by 22% compared with the prior year's third quarter gross profit, which amounted to $278 million, resulting in a decline in gross profit by $63 million. Gross margin for the third quarter as of 30 September 2023, was 40.82%,  improved by 0.64% compared with the prior year's third quarter gross margin, which amounted to 40.18%, resulting in an improvement in profitability.

Operating margin for the third quarter as of 30 September 2023, was 5.17%, improved by 1.2% compared with the prior year's third quarter operating margin, which amounted to 3.95%, resulting in an improvement in profitability. Earnings Per Share (EPS) for the third quarter as of 30 September 2023, was 0.11, a decline of 78% compared with the prior year's third quarter EPS, which amounted to 0.49, resulting in a decline in profitability from investment. During the year ended on September 30, 2023, the company paid a cash dividend amounting to $24.5 million.

Annual Performance Highlights

Net revenues for the year ended on 31 December 2022 were $2,685 million, increased by 11.18% compared with the prior year's revenue ended on 31 December 2021, which amounted to $2,415 million, resulting in an increase in the net revenue by $270 million. The Active Group experienced a 19.0% increase in revenue, while the Work Group experienced a 7.6% increase. The Lifestyle Group experienced a 6.2% decline. The Active Group's revenue was boosted by Merrell, Sweaty Betty, Saucony, and Chaco. The Work Group's revenue was boosted by Cat and Wolverine. International revenue accounted for 41.8% and 34.8% of total revenues, respectively.

Gross Profit for the year ended on 31 December 2022 was $1,070 million, increased by 4% compared with the prior year's gross profit ended on 31 December 2021, which amounted to $1,030 million, resulting in an increase in the gross profit by $40 million. The Gross Margin for the year ended on 31 December 2022 was 39.87%, which declined by 2.78% compared with the prior year's gross margin that ended on 31 December 2021, which amounted to 42.65%, resulting in a decline in profitability. The gross margin decrease was attributed to an unfavorable product mix, increased promotional activity in the direct-to-consumer channel, increased closeout sales and reserves, and higher promotional activity across the brands.

Net Loss for the year ended on 31 December 2022 was $189 million. However, the company experienced a net profit for the year ended on 31 December 2021, which amounted to $67 million. The Net Margin for the year ended on 31 December 2022  was -7.04%, which declined by 382% compared with the prior year's net margin that ended on 31 December 2021, which amounted to 2.77%, resulting in a significant decline in profitability. Earnings Per Share (EPS) for the year ended on 31 December 2022 was -$2.37, a decline of 389% compared with the prior year's EPS ended on 31 December 2021, which amounted to $0.82 resulting in a decline in the EPS by $3.19. The company paid cash dividends amounting to $32.8 million for the year ended 31 December 2022 which is lower than the prior year’s cash dividends amounting to $33.5 million for the year ended 31 December 2021. The net cash used in operating activities was $178.9 million and the net cash generated was $86.8 million in 2022 and 2021, respectively. The net cash received from investing activities was $54.6 million and the net cash used was $437.3 million in 2022 and 2021, respectively. The net cash received from financing activities was $107.1 million and $169.3 million in 2022 and 2021, respectively.

The company’s portfolio of brands was organized into the following three reportable segments Active Group, Work Group, and Lifestyle Group. The Active Group's revenue increased by 19.0% in 2022, driven by Merrell, Sweaty Betty, Saucony, and Chaco. However, operating profit decreased by 13.6% due to a 320 basis point decrease in gross margin and a $97.0 million increase in selling, general, and administrative costs, partially offset by revenue increases. The Work Group's revenue increased by 7.6% in 2022, driven by increased revenue from Cat and Wolverine, and a decrease from Bates. However, operating profit decreased by 1.3% due to a decrease in gross margin and an increase in costs, partially offset by revenue increases. The Lifestyle Group's revenue decreased by 6.2% in 2022, primarily due to a decrease in revenue from Sperry and Keds, a 28.7% decrease in operating profit, primarily due to a 1.5% decrease in gross margin and revenue, and a $0.4 million decrease in selling, general, and administrative costs.

Business Overview

Wolverine World Wide, Inc. is a top designer, marketer, and licensor of a wide range of clothing and footwear, including kids', uniform, performance, casual, and industrial shoes. Under well-known brands like Bates, Cat, Chaco, Harley-Davidson, Hush Puppies, HYTEST, Merrell, Saucony, Sperry, Sweaty Betty, and Wolverine, the corporation sells a wide range of footwear and clothing designs.  The corporation sells its goods in 170 countries and territories as of 2023, while certain areas rely on independent distributors, licensees, and joint ventures. The Active Group, Work Group, and Lifestyle Group were the three reportable groups that comprised the company's portfolio of brands.

Active Group

The Active Group segment is the largest business segment of Wolverine World Wide, accounting for nearly 60% of the company’s total revenue. The segment sells Merrell footwear and apparel, Saucony footwear and apparel, Sweaty Betty activewear, and Chaco footwear. With a persistent focus on innovation, thoughtful design, and rigorous testing, Merrell has become a global leader in hiking footwear, with a rapidly growing following in trail running and lifestyle.

The Active Group’s revenue increased $250.6 million, or 19.0%, in 2022 compared to 2021. The revenue increase was driven by an increase of $116.9 million from Merrell, $94.3 million from Sweaty Betty, $29.1 million from Saucony, and $10.3 million from Chaco. This segment has invested $18.9 million in fixed assets during 2022 compared to $5.0 million in 2021.

Work Group

The Work Group segment is the second largest business segment of Wolverine World Wide, accounting for nearly 25% of the company’s total revenue. This segment sells Wolverine footwear and apparel, Cat footwear, Bates uniform footwear, Harley-Davidson footwear, and HYTEST safety footwear. Wolverine designs and creates footwear, apparel, and accessories across three strategic territories: Work, Outdoor, and Casual. The brand is best known for DuraShocks and Ultraspring comfort technology. The Work Group segment has been recognized for its quality and durability, such as offering 1000-mile boots, DuraShocks technology, and CarbonMAX safety toe. For example, Wolverine partnered with Ford to create a recycled work boot made from repurposed vehicle materials in 2021.

The Work Group’s revenue increased $41.7 million, or 7.6%, in 2022 compared to 2021. The revenue increase was driven by an increase of $32.1 million from Cat and $20.1 million from Wolverine, partially offset by a decrease of $9.2 million from Bates. This segment has invested $0.4 million in fixed assets during 2022 compared to $0.4 million in 2021.

Lifestyle Group

Lifestyle Group segment is the smallest business segment of Wolverine World Wide, accounting for nearly 15% of the company’s total revenue. This segment sells Sperry footwear, Keds footwear, and Hush Puppies footwear and apparel. The Lifestyle Group segment has been recognized for its style and comfort, such as offering boat shoes, slip-ons, and activewear. For example, Sperry launched its Saltwater Duck Boot collection and Hush Puppies introduced its BounceMax technology in 2021.

The Lifestyle Group’s revenue decreased $29.5 million, or 6.2%, in 2022 compared to 2021. The revenue decrease was driven by a decrease of $33.4 million from Sperry and $7.8 million from Keds, partially offset by an increase of $11.7 million from Hush Puppies. This segment has invested $0.4 million in fixed assets during 2022 compared to $0.4 million in 2021. This segment has invested $2.0 million in fixed assets during 2022 compared to $0.1 million in 2021.

Other Segments

The Company also reports Other and Corporate segments. The Other segment is involved in leather marketing operations, sourcing operations that include third-party commission revenues, multi-branded direct-to-consumer retail stores, and the Stride Rite licensed business. The Corporate category consists of the gain on the sale of the Champion trademarks in fiscal 2022 and unallocated corporate expenses, such as corporate employee costs, costs related to the COVID-19 pandemic, impairment of intangible assets and goodwill, reorganization activities, and environmental and other related costs.

The Other segment's revenue increased $7.1 million, or 10.2%, in 2022 compared to 2021. The revenue increase was primarily driven by an increase of $6.0 million from the performance leather business. In 2022, The Corporate segment expenses increased by $316.0 million due to impairment of intangible assets, reorganization, and higher employee costs. However, gains from footwear sales, lower environmental and related costs, and lower incentive compensation costs offset these increases.

Other Information

The Company experiences moderate sales volume fluctuations, with seasonal sales patterns expected in future years. Working capital levels fluctuate, with increased requirements near the end of fiscal quarters. Cash provided by operating activities is higher in the second half.

The Company markets its footwear and apparel lines in a competitive, fragmented market, facing numerous domestic and international designers. Key elements include product performance, quality, technological improvements, competitive pricing, cost control, and adaptability to style changes. To maintain competitiveness, the Company uses promotions to increase brand awareness and product value. Wolverine World Wide competes with Foot Locker, Lululemon, and Nike in the footwear and apparel markets.

The company employs various methods to support sales to various domestic distribution channels, including a dedicated sales force, third-party sales representatives, and point-of-purchase materials. It maintains core in-stock inventories for various retailers and uses volume-direct programs to ship products to retail customers at competitive prices. The company also operates physical retail stores and e-commerce sites.

Company History

Fredrick Hirth and G. A. Krause founded the company in 1883. Hirth and Krause bought a small leather shop in Grand Rapids, Michigan, starting with a capital investment of $2,900. In 1901, they built a plant in Rockford Michigan, just north of Grand Rapids. They purchased and expanded the Rogue River Electric Light and Power Company to power their new plant and the city of Rockford. In 1903, Krause and his sons built a shoe factory in Rockford, Michigan. It made 300 pairs of shoes daily and in 1908, a tannery followed. The company thus processed its raw materials and manufactured its shoes sold through the Hirth-Krause Company. In 1914, the Wolverine brand name was chosen for shoes made of Wolverine horsehide leather. Because of their durability, they're called "1,000 Mile Shoes." In 1919, Wolverine work shoes were sold by one of the earliest national sales forces and became a household name. In 1921, the company changed its name to Wolverine Shoe and Tanning Corporation. During the period 1916-1923, its earnings increased 700%. In 1928, the company began selling shares to its employees, becoming one of the nation's first profit-sharing plans. In 1931, The Great Depression arrived. Although sales were down, factory lines were kept running and shoes were warehoused for brighter times. In 1941, during World War II, the Wolverine Shoe and Tanning Company began to work for the U.S. Navy, developing pigskin gloves and inventing what later became known as pigskin suede.

In 1958, the casual brand shoe, Hush Puppies, was born, having gotten its name from the treats Southerners used to quiet barking dogs and in 1959, Wolverine launched the Hush Puppies brand with a heavy marketing and advertising campaign. In 1964, the company changed its name to Wolverine World Wide, Inc., and in 1965 became a publicly traded company listed on the New York Stock Exchange.⁹ In 1994, Wolverine World Wide introduced Cat Footwear, a licensed brand of shoes using the Caterpillar Inc. name. In 1995, the Council of Fashion Designers of America voted Hush Puppies as Fashion Accessory of the Year. In 1997, the company continued expanding by purchasing the Merrell brand. In 1998, Wolverine World Wide acquired the global license for footwear from the Harley-Davidson Motor Company.¹⁰

Among the acquisitions made by Wolverine World Wide in the 2000s were the purchases of Chaco and the UK-based brand Cushe in 2009, as well as Sebago in 2003. But in 2015, the business dropped the Cushe brand, and in 2017, it sold Sebago to BasicNet, an Italian publicly traded corporation. Patagonia and Wolverine World Wide signed a worldwide footwear licensing agreement in 2006. In 2014, the firm discontinued making Patagonia shoes.

Following its 2012 acquisition of the Performance Lifestyle Group of Collective Brands, which expanded its brand portfolio to include Saucony, Keds, Stride Rite, and Sperry Top-Sider, Wolverine World Wide almost doubled in size. Original Footwear, a Tennessee-based footwear maker, purchased the company's United States Department of Defense footwear business in 2017 along with a Big Rapids, Michigan factory. The same year, Vida Shoes International, based in New York City, was granted license to operate the Stride Rite brand, which was formerly owned by Wolverine World Wide. Corporate headquarters for the business are located in Waltham, Massachusetts, and Rockford, Michigan. Three distribution locations in the US, one in Canada, and one in the Netherlands are also run by Wolverine World Wide. Wolverine World Wide ran 42 consumer-direct eCommerce sites and 80 retail shops in the United States and Canada as of December 29, 2018. The company's 2018 annual report states that "the majority of the units the company sources are obtained from multiple third-party manufacturers in the Asia Pacific region." For the purpose of creating and facilitating sourcing strategies, the company keeps offices throughout the Asia Pacific area.

Residents' drinking water was poisoned by PFAS dumpsites run by Wolverine World Wide in Belmont and Rockford. For hundreds of residents, the water was tainted by these locations. The chemicals in question have been connected to a number of harmful health outcomes, including cancer. In order to provide affected residents with drinking water supplied by the town, Wolverine agreed to pay $69.5 million as part of the settlement of a federal court action in Grand Rapids in February 2020. Wolverine World Wide split into two business sectors in 2019: Wolverine Boston Group, whose brands include Keds, Saucony, Sperry Top-Sider, the Stride Rite licensed business, and the kid's footwear businesses of Cat, Hush Puppies, Keds, Merrell, Saucony, and Sperry; Wolverine Michigan Group, whose brands include Bates, Cat Footwear, Chaco, Harley-Davidson Footwear, Hush Puppies, HyTest, Merrell, and Wolverine. But in 2023, the three reportable groups that made up the company's brand portfolio were The Active Group, Work Group, and Lifestyle Group. In 2021, the business bought the British athletic shop Sweaty Betty, and in 2023, it sold off its Keds brand.

References

1. ^ https://www.globaldata.com/company-profile/wolverine-world-wide-inc/
2. ^ https://www.prnewswire.com/news-releases/wolverine-and-halo-launch-spartan-inspired-boot-collection-301772204.html
3. ^ https://www.prnewswire.com/news-releases/wolverine-boots-inks-nil-deal-with-university-of-michigan-football-players-301890395.html
4. ^ https://www.prnewswire.com/news-releases/wolverine-boots-and-apparel-licenses-sock-business-to-renfro-brands-301994961.html
5. ^ https://markets.businessinsider.com/news/stocks/wolverine-world-wide-to-sell-hush-puppies-intellectual-property-in-china-hong-kong-and-macau-1032597996
6. ^ https://markets.businessinsider.com/news/stocks/wolverine-worldwide-sells-champion-trademarks-to-hanesbrands-for-90m-cash-1031562849
7. ^ https://wolverineworldwide.gcs-web.com/node/26531/html
8. ^ https://wolverineworldwide.gcs-web.com/node/26531/html
9. ^ https://www.wolverineworldwide.com/about-us/history/
10. ^ https://www.wolverineworldwide.com/about-us/history/