It could have been worse, or at least worse than expected. Wolverine Worldwide’s third quarter revenue declined 14 percent but exceeded internal expectations. In step with the pandemic’s impact on consumer buying behavior, the performance running and outdoor brands Saucony and Chaco saw double-digit revenue growth. In addition, Merrell and the company’s stable of work brands saw improved revenue growth over the second quarter.
“The company’s third quarter results significantly exceeded our expectations, reaffirming the inherent strength of our portfolio and strong brand positioning in winning product categories and distribution channels,” states Blake W. Krueger, chairman and CEO. “Innovative, fresh product paired with compelling storytelling continued to fuel demand, as evidenced by our owned ecommerce business, which grew over 56 percent compared to last year. Our relentless focus on product design and development of digital capabilities has served the business well and will remain central to our multi-year investment strategy. I am encouraged by our growing momentum in the face of the headwinds created by the global pandemic and excited about the growth opportunities in front of the company for 2021 and beyond. Our strong digital strategy and improved visibility to wholesale demand should enable us to return to meaningful growth in Q1 of 2021.”
Third Quarter Highlights
Reported revenue was $493.1 million, down 14.1% versus the prior year. On a constant currency basis, revenue was down 14.6% versus the prior year. Owned eCommerce revenue grew 56.4% versus the prior year.
- Reported gross margin was 41.0%, compared to 42.4% in the prior year.
- Reported operating margin was 8.6%, compared to 11.9% in the prior year. Adjusted operating margin was 10.6%, compared to 14.1% in the prior year.
- Reported diluted earnings per share were $0.27, compared to earnings per share of $0.57 in the prior year. Adjusted diluted earnings per share were $0.35, and, on a constant currency basis, were $0.34, compared to $0.68 in the prior year.
- Inventory at the end of the quarter was down 22.0% versus the prior year and down 22.8% when excluding the impact of new stores and the incremental cost of new tariffs.
- Cash flow from operating activities in the quarter was $96.5 million, compared to $12.1 million in the prior year.
- Cash on hand at the end of the quarter was $342.0 million, compared to $125.2 million in the prior year.
“The Company continued to deliver quality results by executing on the key priorities we outlined earlier this year, which included a heightened focus on positive cash flow, a healthy balance sheet, profitability, and setting the Company up for growth in 2021,” states Mike Stornant, senior vice president and CFO. “During the last two quarters, which were significantly impacted by the global pandemic, the company delivered solid earnings and exceptional cash from operations of over $210 million. While consumer demand exceeded our expectations during this time, we have been able to service the business at a high level and manage our inventory levels down by 22 percent compared to last year at quarter-end. We expect that headwinds caused by the pandemic will persist in the near-term and that fourth quarter revenue will be down no more than 25 percent year-over-year, including the effects of a partial shift in revenue from our international business into the first quarter of 2021. We will continue to invest behind the ongoing momentum of our key brands to enable accelerated growth in the first quarter of 2021.”