Wolverine Worldwide Announces Record Revenue for Second Quarter 2012; Acquisition of Performance + Lifestyle Group From Collective Brands Remains on Track

ROCKFORD, Mich., July 10, 2012 /PRNewswire/ -- Wolverine Worldwide (NYSE: WWW) today reported financial results for the second quarter ended June 16, 2012. 

Revenue for the quarter was a record $312.7 million, an increase of 0.8% compared to the prior year's second quarter when revenue grew over 20%.  Foreign exchange negatively impacted revenue by $3.8 million.  As expected, sales growth in the quarter was also hampered by continued macroeconomic uncertainty in Europe, which created challenging trading conditions in that market.

Reported diluted earnings per share in the quarter were $0.42, compared to prior year's earnings per share of $0.48.  Earnings in the quarter were negatively impacted by $0.06 per share due to non-recurring expenses related to the pending acquisition of the Performance + Lifestyle Group of Collective Brands ("PLG acquisition") that the Company announced on May 1, 2012.  Reported earnings benefitted $0.07 per share from a tax benefit recorded in the quarter. 

"We are pleased that despite the softness in certain global markets, most notably Europe, we remain on track to deliver another year of record financial results," said Blake W. Krueger, Chairman and Chief Executive Officer.  "Our diverse brand portfolio and a business model that spans geographies and distribution channels help to mitigate risk and smooth out a choppy global retail environment.  Our U.S. business had a solid quarter, and the Company's consumer direct business was also a bright spot, posting a strong double-digit revenue increase from both brick and mortar locations and the eCommerce channel. Our Outdoor Group, consisting of Merrell, Chaco and Patagonia Footwear, delivered a solid revenue increase in the quarter." 

Additional details:

• Gross margin in the quarter decreased 160 basis points to 37.8%, compared to prior-year gross margin of 39.4%, as higher product costs and unfavorable sales mix (including increased closeout sales of excess fall/winter product as a result of the unseasonably warm winter season) were only partially offset by selling price increases and foreign exchange contract gains.
• Reported operating expenses were $95.2 million, compared to $88.8 million in the prior year.  The quarter's increase was attributable to $4.9 million of expenses related to the PLG acquisition (primarily third-party advisory fees) and $2.4 million of incremental non-cash pension expense.  The Company continued to demonstrate significant spending discipline, as each branded operating group and Wolverine Retail delivered operating expense leverage in the quarter.
• The effective tax rate in the quarter benefitted from a favorable court decision in a foreign tax jurisdiction supporting the Company's long-term tax planning strategies that lowered tax expense by $3.3 million, or $0.07 per share.
• Inventory at the end of the second quarter was down 1.3% compared to the prior year, reflecting aggressive actions taken to manage working capital.  The Company is focused on a "narrow and deep" inventory philosophy as it navigates through the current cycle of retailers being more reliant on wholesalers to supply products on an at-once basis.
• Continued disciplined working capital management in the quarter contributed to a $38.2 million increase in year-to-date operating free cash flow compared to the prior year.

Based on expectations of strong at-once orders in the second half of the fiscal year, primarily the fourth quarter, the Company is reaffirming its full-year revenue guidance in a range of $1.46 billion to $1.50 billion, representing full-year growth of 3.6% to 6.4% compared to the prior year.  The Company is also maintaining its full-year earnings per share guidance in a range of $2.70 to $2.80, representing growth of 8.9% to 12.9%.  The Company's guidance reflects its expectations prior to any costs or benefits relating to the pending PLG acquisition and, as such, does not include the $4.9 million of non-recurring expenses recorded in the second quarter.  On a reported basis, the Company expects full-year earnings per share to range from $2.64 to $2.74 (6.5% to 10.5% growth over the prior year), which includes the year-to-date impact of the PLG acquisition-related expenses.

Krueger concluded, "Recent feedback from key retailers reinforces our positive outlook for the remainder of 2012, and we fully expect to deliver another year of record financial performance.  We are tremendously excited about adding the Sperry Top-Sider, Saucony, Stride Rite and Keds brands and team members to our already powerful portfolio of global lifestyle brands.  We remain on track to close the transaction in late summer to early fall."    

The Company will host a conference call at 8:30 a.m. EDT today to discuss these results and current business trends.  To listen to the call at the Company's website, go to
www.wolverineworldwide.com, click on "Investor Relations" in the navigation bar, and then click on "Webcasts & Presentations" from the side navigation bar of the "Investor Relations" page.  To listen to the webcast, your computer must have a streaming media player, which can be downloaded for free at www.wolverineworldwide.com.  In addition, the conference call can be heard at www.streetevents.com. A replay of the call will be available at the Company's website through September 18, 2012.

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 and uniform footwear and apparel.  The Company's portfolio of highly recognized brands includes: Bates^®, Chaco^®, Cushe^®, Hush Puppies^®, HYTEST^®, Merrell^®, Sebago^®, Soft Style^® and Wolverine^®.  The Company also is the footwear licensee of popular brands including CAT^®, Harley-Davidson^® and Patagonia^®. The Company's products are carried by leading retailers in the U.S. and globally in more than 190 countries and territories. For additional information, please visit our website, www.wolverineworldwide.com.

This press release contains forward-looking statements. In addition, words such as "estimates," "anticipates," "believes," "forecasts," "plans," "predicts," "projects," "is likely," "expects," "intends," "should," "will," variations of such words and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions ("Risk Factors") that are difficult to predict with regard to timing, extent, likelihood and degree of occurrence. Therefore, actual results and outcomes may materially differ from what may be expressed or forecasted in such forward-looking statements.  Risk Factors include, among others:  the possibility that the PLG acquisition does not close; the Company's ability to realize the benefits of the PLG acquisition on a timely basis or at all; the Company's ability to combine its businesses and PLG successfully or in a timely and cost-efficient manner; failure to obtain any required financing on favorable terms; the degree of business disruption relating to the PLG acquisition; the Company's ability to successfully develop its brands and businesses; changes in duty structures in countries of import and export including anti-dumping measures and trade defense actions; changes in consumer preferences or spending patterns; cancellation of orders for future delivery, or the failure of the Department of Defense to exercise future purchase options, award new contracts or the cancellation of existing contracts by the Department of Defense or other military purchasers; changes in planned customer demand, re-orders or at-once orders; the availability and pricing of footwear manufacturing capacity; reliance on foreign sourcing; failure of international licensees and distributors to meet sales goals or to make timely payments on amounts owed; disruption of technology systems; regulatory or other changes affecting the supply or price of materials used in manufacturing; the availability of power, labor and resources in key foreign sourcing countries, including China; the impact of competition and pricing; the impact of changes in the value of foreign currencies; the development of new initiatives; the risks of doing business in developing countries, and politically or economically volatile areas; retail buying patterns; consolidation in the retail sector; changes in economic and market conditions; acts and effects of war and terrorism; weather; and additional factors discussed in the Company's reports filed with the Securities and Exchange Commission and exhibits thereto.  Other Risk Factors exist, and new Risk Factors emerge from time to time that may cause actual results to differ materially from those contained in any forward-looking statements. Given these risks and uncertainties, investors should not place undue reliance on forward-looking statements as a prediction of actual results.  Furthermore, the Company undertakes no obligation to update, amend or clarify forward-looking statements.

SOURCE Wolverine Worldwide