Wolverine Worldwide, parent company of Merrell, Saucony, Chaco, and other brands, is still trying to execute a turnaround as the company struggles with inventory challenges and other macroeconomic factors.
Wolverine Worldwide revenue totaled $526.7 million in the fourth quarter of 2023, down 18.4% in constant currency. For the full year 2023, the company’s total revenue was $2.24 billion, a slide of 16.3% in constant currency compared to last year.
In a conference call with investors, Wolverine Worldwide executives provided many details about the performance and go-forward strategies for Merrell and Saucony.
Turnaround on Track
CEO Chris Hufnagel said Wolverine Worldwide is “a much different company than it was just six months ago.” He mentioned that the restructuring last year was the biggest in the company’s history.
In November, Wolverine announced layoffs and other cost saving measures to save up to $215 million as sales dropped by double digits.
Hufnagel said the company is working on being more efficient and growing its brands by adding new talent.
“Our business is poised to be much more profitable with an outlook to meaningfully expand operating margins as a result of significant gross margin improvements and our restructuring efforts late last year,” he added.
However, gross margin for the year fell to 38.9% versus 39.9% in the prior year on sales of higher-cost inventory and more inventory liquidations.
Hufnagel said Wolverine has the financial capacity to reinvest back into the business, with $30 million of incremental investments planned this year for brand growth initiatives.
“We’ve largely stabilized the company in just a few short months,” he added.
Lighter, Faster Merrell
Hiking footwear brand Merrell’s sales were $161.8 million in the quarter, down 17% in constant currency. For 2023, the brand’s sales amounted to $675.8 million, a drop of 11.3% year-over-year.
Hufnagel mentioned how Merrell has been an industry leader with a “long history of product innovation.” He called out the Merrell MTL line, which won an ISPO award in 2023 and was recognized by other outdoor magazines.
Merrell continues to produce “faster, more trend-right design” that consumers demand, Hufnagel said.
He also mentioned the success of the Agility Peak 5 and that Merrell plans to scale up storytelling to drive greater momentum with that line.
The brand’s new Moab Speed 2 is also selling through strongly.
According to Hufnagel, Merrell captured market share gains throughout the year despite the outdoor category being “one of the worst performing categories in the market in the past 12 months.”
Hufnagel said Merrell gained 30 basis points in hiking and 60 basis points in trail running in market share in Q4. For the full year, the brand is up 100 basis points in hiking and 70 basis points in trail running.
“The future of the outdoor category is lighter and faster and more athletic and more versatile,” he said. “Certainly, predicated on not just function but also style. Where we can work harder is really hitting that style piece and designing great-looking shoes that are versatile, that not only can be worn on the trail, but also can be worn for everyday wear.”
Hufnagel said the company is encouraged by the gains in market share in trail running.
“We’re paying very close attention to our own direct-to-consumer business and what’s happening in our 46 Merrell outlet stores,” he added. “Where is the traffic? What are they buying? What are they responding to? We’re also working to be less promotional on Merrell.com.”
In addition, Hufnagel sees more lifestyle opportunities and pointed out the new Wrapt collection as a hot seller.
“The newness is trending well,” Hufnagel said. “And with recent improvements to our supply chain, the brand can now replenish fast-moving styles in a matter of weeks.”
He went on to mention that new Merrell categories, including outerwear, mid-layers, and accessories, posted double-digit growth in Q4, driven by parka and coat styles.
Opportunities for Saucony
Road and trail running footwear brand Saucony’s Q4 revenue tallied $105.1 million, down 13.7% in constant currency. For 2023, the brand’s sales totaled $495.8 million, a decline of 1.2% in constant currency.
Hufnagel said Saucony has a proven formula for driving industry-leading innovation, pointing to the brand’s Endorphin Elite collection as “one of the most innovative shoes on the market.” For instance, it was recognized by Runner’s World in its Gear of the Year awards.
“We now have the opportunity to capitalize on the tip of the spear success by democratizing the brand’s innovations for the larger casual running market and elevating the style to encourage adoption for the significantly larger lifestyle wearing occasions,” he added.
The Ride, Guide, Triumph, and Hurricane lines were all called out by Hufnagel as highlights for the brand.
“I think the Saucony pipeline is much stronger this year than it was last year,” he said.
Hufnagel said the company is also moving away from Saucony’s low-margin value product that wasn’t helping build brand equity and wasn’t accretive to Saucony’s bottom line.
“We’re making the tough decision to move past those (value) businesses,” he added.
Hufnagel believes Saucony has some of the greatest potential in all of Wolverine’s portfolio. He sees the opportunity for innovation as well as new styles.
“There’s frankly just a broader lifestyle opportunity beyond that core runner,” he said. “We’ve worked hard on colors and materials to make our shoes more approachable. And we’re opening the aperture as we think about distribution.”
Looking Ahead
Wolverine is in the “late innings” of stabilizing the company’s turnaround, according to Michael Stornant, Wolverine’s CFO and vice president.
“We are ahead of schedule in many key areas including portfolio optimization, gross margin expansion, operating cost improvements, healthier inventories, and much lower net debt,” he added. “Importantly, we expect to deliver at least $140 million of incremental profit improvement in 2024.”
Wolverine’s revenue for 2024 is expected to range from $1.7 billion to $1.75 billion, representing a decline compared to 2023 of approximately 14.3% to 11.8% in constant currency.
Hufnagel said that the business is starting the year in a challenging position, which will weigh on full-year revenue results, most meaningfully for Saucony, followed by Merrell and Wolverine.
“But we anticipate a potential improvement in top-line performance as the year progresses,” he added.
Hufnagel said Wolverine has its lowest debt level in more than two years and is carrying about 40% less inventory than it had a year ago, down about $374 million in inventory. The company expects net debt to improve by nearly $165 million to $575 million at year end.
“We reduced our year-end inventories by $30 million more than we anticipated,” he added. “Today, we’re in a much better position to accelerate the transformation of the company.”
Bart Schaneman can be reached at bart@ordaily.outdoorretailer.com.
