Lower Product Costs, Price Increases Will Help Wolverine Offset Headwinds

Wolverine Worldwide, the Rockford, MI-based parent of Merrell, Saucony and Sperry, is facing $30 million dollars in higher costs in the first half of 2020, the company told analysts during its Q4 results call. Broken out, the costs can be attributed to $15 million from higher tariffs and China mitigation costs, $10 million related to foreign currency exchange and approximately $5 million for a significant increase in ocean freight surcharges. Wolverine Worldwide, which is aiming to generate at least $100 million in incremental revenues over the next two fiscal years via its fast-growing direct-to-consumer segment, intends to offset the increased expenses through lower negotiated product costs and strategic product price increases beginning in June.

“We will probably be having our fifth or sixth season of price decreases from our factory partners, and that's something I really haven't seen in my career,” WWW CFO Mike Stornant told analysts yesterday.

In reviewing its Q4 and FY19 results and presenting its FY20 outlook, Wolverine senior executives confirmed the company is also facing a $30 million negative impact on first half results this year from the effects of the coronavirus and continued softness in the U.S. wholesale channel. Overall, Wolverine is forecasting FY20 total revenues of $2.29 to $2.34 billion, bolstered by 20 percent growth from its global DTC business, a 5 to 10 percent increase in international sales and 4 to 8 percent combined growth for its Merrell, Sperry and Saucony businesses, buoyed by “a strong global recovery” for Saucony.

Collectively, the trio of brands generated 10 percent topline growth in the second half of 2019, and CEO Blake Krueger thinks Saucony, which suffered a low-double-digit drop in Q4 sales due to “significantly lower” closeout sales, has turned the corner and will deliver stellar 2020 results. Merrell, meanwhile, generated mid-teens revenue expansion in the final period on growth across all regions and performance and lifestyle products. The brand’s work business was up approximately 50 percent in Q4.

In personnel matters, Wolverine has installed Joelle Grunberg, most recently President and CEO of Lacoste for North and Central America, as President of Sperry, and shifted Tom Kennedy to global President of the Wolverine brand in Rockford, where he will also oversee the company’s Licensing Group and join its acquisition team. He has led Sperry from Waltham, MA for the past three years.