Wolverine Worldwide Announces Progress On Strategic Initiatives

News provided by

Dec 21, 2016, 08:30 ET

ROCKFORD, Mich., Dec. 21, 2016 /PRNewswire/ -- Wolverine Worldwide (NYSE: WWW) today announced an update on the progress of its ongoing strategic initiatives, which includes the divestiture of its Robeez brand.

Highlights of the update on strategic initiatives include:

Announcement of the WOLVERINE WAY FORWARD, a comprehensive strategic platform designed to drive growth and expand profitability in today's global marketplace
Progress on expanding adjusted operating margin to a mid-term target of 12% through a healthier supply chain, omnichannel transformation, portfolio management, and operational efficiencies
Strengthening of the capital structure and improvement of working capital management, expected to result in a larger year-over-year reduction in year-end inventory and better cash flow than previously anticipated

"We've made tremendous progress against our key initiatives in 2016, and I am excited to provide an update as we transition into the year ahead," said Blake W. Krueger, Wolverine Worldwide's Chairman, Chief Executive Officer and President. "As we enter 2017, we have formalized our most important strategic initiatives into the next evolution of our strategic platform – the WOLVERINE WAY FORWARD. We are intent on protecting our brands through responsible brand stewardship and delivering growth by leveraging our focus on our consumers, product innovation and speed, all while driving operational excellence and expanding operating margin. To help drive this, we will open a new, 14,000-square-foot consumer and innovation hub next month, co-locating consumer insights, strategy, advanced concepts, and product development teams in a modern, collaborative environment." Mr. Krueger added, "At the same time, our work to position the Company for improved profitability through our operational excellence initiatives continues, and we remain on track to deliver against our 2018 adjusted operating margin goal. We believe we have the right strategies in place, and I am enthused by the opportunity ahead of us."

The Company has previously outlined the primary components of its operational excellence initiatives, which are intended to achieve 12% adjusted operating margin by the end of 2018. Below is an update on the meaningful progress on these initiatives to date and current expectations:

Healthier Supply Chain. During 2016, an assessment of third-party manufacturing was finalized and resulted in a tightening of the factory base by nearly one-third. This rationalization strengthens the Company's position with key manufacturing partners around the world. While consolidating manufacturing partners, the geographic sourcing base has been diversified, with more than half of the Company's products expected to be produced outside of China by the end of 2017. Many of these actions have helped drive lower product costs, which are anticipated to improve by two to three percent across the portfolio in 2017.

Speed and agility are key elements of the Company's new strategic platform, with our brands keenly focused on streamlining the innovation pipeline to allow new products to reach the consumer in an accelerated timeline. The new consumer and innovation hub aims to facilitate this, while the supply chain team enables faster production lead times for core product initiatives. In addition, the Company plans to open its first distribution center on the West Coast by mid-2017, which is expected to reduce time to market and provide logistics cost savings in 2018.
Omnichannel Transformation. In order to proactively address changing consumer behaviors, the Company has increased investment in ecommerce, while addressing unprofitable brick-and-mortar stores through closures, rent relief negotiations, and performance improvement initiatives. Based on timing, store closures are expected to reduce 2017 revenue by $125 million to $175 million. Once completed, the Company's store rationalization efforts are expected to improve operating profit by $20 million on an annualized basis.
Portfolio Management. An evaluation of the brand portfolio was completed this fall to allow the Company to focus on the biggest opportunities. Strategic alternatives for several brands were considered, including divestiture. Harris Williams & Co. has been exclusively retained and is currently assisting with the process. Robeez was the first brand to reach resolution with the completion of a sale transaction on December 16, 2016. Additional progress on divestitures and other changes is anticipated in the first quarter of 2017.
Operational Efficiencies. Efforts began last year to streamline the organization, including the restructuring of the Direct-to-Consumer, Apparel and Accessories, EMEA, and Canadian operations. Additional initiatives intended to drive greater efficiency, speed and agility are ongoing.
Capital Structure and Working Capital Management. The Company took actions to improve its capital structure in the third quarter of 2016, which included refinancing its debt and securing 5.000% Senior Notes due 2026. The new structure has added capacity, is expected to deliver estimated interest savings of $30 million through 2020, and provides more flexibility for use of cash. A new $300-million share repurchase program was recently approved, and over two million shares have been repurchased for over $47 million in 2016. Strong management of working capital has been a key priority as well. Year-end inventory is now expected to be down high teens, compared to the previous expectations of a low-teens decline, and cash flow generation is anticipated to be better than expected. As a result of a more flexible debt structure and very strong cash generation, the Company is well positioned for additional share repurchases and potential future acquisitions.

"We have made significant progress against our plan to position the organization for improved growth and profitability," said Mike Stornant, Senior Vice President and Chief Financial Officer. "Our continued rationalization of stores and strategic portfolio review are important steps down this path. Looking ahead, we believe the strong focus of our team will allow us to deliver at least 150 basis points of adjusted operating margin expansion in 2017. While the macro environment remains challenging, we are focused on controlling what we can control, encouraged by the progress we've made, and excited about the initiatives we have underway."

ABOUT WOLVERINE WORLDWIDE
With a commitment to service and product excellence, Wolverine World Wide, Inc. is one of the world's leading marketers of branded casual, active lifestyle, work, outdoor sport, athletic, children's and uniform footwear and apparel. The Company's portfolio of highly recognized brands includes: Merrell^®, Sperry^®, Hush Puppies^®, Saucony^®, Wolverine^®, Keds^®, Stride Rite^®, Sebago^®, Chaco^®, Bates^®, HYTEST^®, and Soft Style^®. The Company also is the global footwear licensee of the popular brands Cat^® and Harley-Davidson^®. The Company's products are carried by leading retailers in the U.S. and globally in approximately 200 countries and territories. For additional information, please visit our website, www.wolverineworldwide.com.

FORWARD-LOOKING STATEMENTS
This press release contains forward-looking statements, which are statements relating to future, not past, events. In this context, forward-looking statements often address management's current beliefs, assumptions, expectations, estimates and projections about future business and financial performance, national, regional or global political, economic and market conditions, and the Company itself. Such statements often contain words such as words such as "guidance," "estimates," "anticipates," "believes," "forecasts," "step," "plans," "predicts," "projects," "is likely," "expects," "intends," "should," "will," "confident," variations of such words, and similar expressions. Forward-looking statements include all matters that are not historical facts, and by their nature, address matters that are, to varying degrees, uncertain. They appear in a number of places throughout this press release and include statements regarding the Company's intentions, beliefs or current expectations concerning, among other things, the success of operational excellence initiatives, store closures, our results of operations, including operating margin, financial condition, liquidity, prospects, growth, profitability, strategies and the industry in which we operate. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. Important factors that could cause actual results to differ materially from those in forward-looking statements include, but are not limited to, the following: changes in general economic conditions, employment rates, business conditions, interest rates, tax policies and other factors affecting consumer spending in the markets and regions in which the Company's products are sold; the inability for any reason to effectively compete in global footwear, apparel and consumer-direct markets; the inability to maintain positive brand images and anticipate, understand and respond to changing footwear and apparel trends and consumer preferences; the inability to effectively manage inventory levels; increases or changes in duties, tariffs, quotas or applicable assessments in countries of import and export; currency fluctuations; currency restrictions; capacity constraints, production disruptions, quality issues, price increases or other risks associated with foreign sourcing; the cost and availability of raw materials, inventories, services and labor for owned and contract manufacturers; labor disruptions; changes in relationships with, including the loss of, significant wholesale customers; the failure of the U.S. Department of Defense to exercise future purchase options or award new contracts, or the cancellation or modification of existing contracts by the Department of Defense or other military purchasers; risks related to the significant investment in, and performance of, the Company's consumer-direct operations; risks related to the expanding into new markets and complementary product categories as well as consumer-direct operations; the impact of seasonality and unpredictable weather conditions; changes in general economic conditions and/or the credit markets on the Company's distributors, suppliers and customers; increase in the Company's effective tax rates; failure of licensees or distributors to meet planned annual sales goals or to make timely payments to the Company; the risks of doing business in developing countries, and politically or economically volatile areas; the ability to secure and protect owned intellectual property or use licensed intellectual property; the impact of regulation, regulatory and legal proceedings and legal compliance risks; the inability to attract and retain executive managers and other key employees; the potential breach of the Company's databases, or those of its vendors, which contain certain personal information or payment card data; problems affecting the Company's distribution system, including service interruptions at shipping and receiving ports; strategic actions, including new initiatives and ventures, acquisitions and dispositions, and the Company's success in integrating acquired businesses, and implementing new initiatives and ventures; the risk of impairment to goodwill and other acquired intangibles; the success of the Company's consumer-direct realignment initiatives; changes in future pension funding requirements and pension expenses; risks related to our substantial indebtedness; and additional factors discussed in the Company's reports filed with the Securities and Exchange Commission and exhibits thereto.

Although we base these forward-looking statements on assumptions that we believe are reasonable when made, we caution investors that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity and the development of the industry in which we operate may differ materially from those made in or suggested by the forward-looking statements contained or incorporated by reference in this press release. In addition, even if our results of operations, financial condition and liquidity, and the development of the industry in which we operate are consistent with the forward-looking statements contained in this press release, those results or developments may not be indicative of results or developments in subsequent periods. Given these risks and uncertainties, investors are cautioned not to place undue reliance on these forward-looking statements. Any forward-looking statements that we make in this press release speak only as of the date of such forward-looking statements, and we undertake no obligation to update, amend or clarify those statements, whether as a result of new information, future events or otherwise. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless expressed as such, and should only be viewed as historical data.

SOURCE Wolverine Worldwide