Wolverine World Wide Inc. (WWW) posted better-than-expected fourth-quarter 2013 bottom-line results, driven by the consistently strong performance of its newly acquired brands. The company’s quarterly earnings per share of 22 cents beat the Zacks Consensus Estimate by couple of cents but fell 8.3% year over year.
Including one-time items, Wolverine reported loss per share of 2 cents as against loss of 4 cents in the year-ago quarter.
For 2013, adjusted earnings came in at $1.43 per share, a penny ahead of the Zacks Consensus Estimate and up 25.4% year over year. Including one-time items, earnings came in at 99 cents for the year, up 22.2% year over year.
Benefiting largely from the acquisition of three branded operating groups, Wolverine reported consolidated revenue of $740.8 million for the fourth quarter that grew 13.6% on a year-over-year basis but fell below the Zacks Consensus Estimate of $752 million. Moreover, on a pro-forma basis, revenues increased 0.6% in the quarter.
For the full year, revenues came in at $2,691.1 million, up 64% on a year-over-year basis but missed the Zacks Consensus Estimate of $2,700 million. On a pro-forma basis, revenues rose 5.6% in 2013.
Wolverine acquired the PLG unit for $1.25 billion. The PLG unit sells footwear and related products, both wholesale and retail, for children and adults under popular brands such as Stride Rite, Sperry Top-Sider, Saucony and Keds.
As regards the company’s operating groups, fourth-quarter revenues at its Lifestyle group came in at $265.3 million, a 25.9% rise from the year-ago quarter. The Performance group’s revenues rose 13.8% to $251.3 million, while Heritage group’s revenues increased 4.1% to $193.7 million. However, revenues derived from the company’s other brands dropped 1.6% to $30.5 million in the quarter.
On account of top-line improvement, the company’s adjusted gross profit rose 18.2% to $283.0 million in the quarter, while gross margin expanded 150 basis points (bps) to 38.2%. The improvement in both these cases reflected from an encouraging channel mix, partly offset by higher product costs and foreign exchange contract losses.
Operating profit came in at $18.0 million for the quarter, marking an impressive 137% year-over-year increase and operating margin expanded 120 bps to 2.4%.
Other Financial Aspects
Wolverine, which competes with Deckers Outdoor Corporation (DECK), ended the year with cash and cash equivalents of $214.2 million, net debt of $935.8 million and shareholders’ equity of $841.4 million. Operating free cash flow came in at $157.6 million for the quarter.
Guidance
Looking ahead, the company expects adjusted earnings per share in the range of $1.57–1.63, reflecting year-over-year growth of 10%–14%. Reported diluted earnings are expected to be in the range of $1.52 to $1.58 per share.
Revenues are projects in the range of $2.775–$2.85 billion, up 3% to 6% year over year. Moreover, the company expects a marginal rise in gross margin in 2014.
Tax rate is anticipated to be around 28%, while interest expenses will be about $47 million.
Other Stocks to Consider
Wolverine currently has a Zacks Rank #5 (Strong Sell). Apart from Wolverine, other better-ranked stocks in the consumer discretionary sector worth a look include Francesca's Holdings Corporation (FRAN) and Skechers USA Inc. (SKX). Both of these carry a Zacks Rank #2 (Buy).
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