Wolverine Worldwide Reports Record First-Quarter Earnings And Raises Full-Year Earnings Outlook

ROCKFORD, Mich., May 9, 2018 /PRNewswire/ -- Wolverine World Wide, Inc. (NYSE: WWW) today reported financial results and record earnings for the first quarter ended March 31, 2018, and provided an update on its 2018 GLOBAL GROWTH AGENDA, which is in the next phase of the Company's transformation initiative.  The Company also raised full-year earnings guidance and updated its full-year outlook.

"Our first quarter was very strong and an excellent start to the year," said Blake W. Krueger, Wolverine Worldwide's Chairman, Chief Executive Officer and President. "The Company had record earnings per share performance, much better than expected entering the year.  This reflects our ability to harvest the benefits of our recent transformation initiatives."

FIRST-QUARTER 2018 REVIEW

• Reported revenue of $534.1 million decreased 9.7% during the first quarter. Underlying revenue increased 1.8% and further adjusting for currency, increased 0.3%.
• Reported gross margin was 42.7%, compared to 39.7% in the prior year. Adjusted gross margin in the prior year was 41.2%.
• Reported operating margin was 11.5%, compared to 5.8% in the prior year. Adjusted operating margin was 12.0%, up 110 basis points compared to the prior year.
• Reported diluted earnings per share was $0.48, compared to $0.17 in the prior year. Adjusted diluted earnings per share were $0.50 compared to $0.37 in the prior year, an increase of 35%.
• Inventory declined $66.0 million or 18.5% compared to the prior year.
• The Company made a voluntary debt principal payment of $100 million during the quarter.
• The Company executed nearly $45 million in share repurchases during the quarter, comprised of 1,509,664 shares at an average price of $29.56 per share.

2018 GLOBAL GROWTH AGENDA

"The Company is currently implementing key investments and activating critical initiatives as part of our new GLOBAL GROWTH AGENDA, the next phase of our holistic transformation," stated Mr. Krueger. "The recent restructuring and related operational activities are substantially complete and we are now utilizing the new tools and capabilities that were developed as part of this work to focus on growth.  During the first quarter, Merrell, Sperry and our international business exceeded our revenue expectations and our owned eCommerce business delivered mid-twenties underlying growth. These results were driven in large part by executing against our new and more profitable operating model focused on speed, innovation and growth."

The Company's GLOBAL GROWTH AGENDA is comprised of three key elements:

• Powerful Product Creation Engine - Relentless and frequent introduction of craveable product that resonates around the world - taking full advantage of new creative design capabilities, stronger consumer insights and a faster supply chain.
• Digital-Direct Offense - Seamless interaction with our consumers through more effective digital engagement to drive our owned eCommerce growth beyond 20%, improve the on-line businesses of our retail customers and enhance our brand positioning in the digital marketplace.
• International Expansion - Greater investment in regional resources and systems to accelerate international growth, with a specific focus on China and the Asia Pacific region.

"We are proceeding with our enhanced investment strategy related to the GLOBAL GROWTH AGENDA and still anticipate achieving our stated 12% adjusted operating margin goal well ahead of our original schedule," said Mike Stornant, Senior Vice President and Chief Financial Officer. "Gross margin performance in the first quarter was especially noteworthy, driven mostly by lower product costs and less markdown exposure due to much cleaner inventory levels."

UPDATED 2018 OUTLOOK

The strong first quarter earnings results were better than expected. The Company is now raising its earnings projection for the year. The full year outlook is summarized below.

• Revenue in the range of $2.24 billion to $2.32 billion.
• Gross margin expansion in the range of 50 to 90 basis points, despite a negative mix impact of 20 basis points from 2017 store closures.
• Reported operating margin of 11.6% to 11.9% and adjusted operating margin of 12.0% to 12.3%, inclusive of $40 to $45 million of incremental investments to support the Company's GLOBAL GROWTH AGENDA.
• An effective tax rate in the range of 18% to 21%.
• Reported diluted earnings per share in the range of $1.92 to $2.02 and adjusted diluted earnings per share of $2.00 to $2.10.

NON-GAAP FINANCIAL MEASURES

This release contains certain non-GAAP financial measures. References to "underlying" revenue indicate reported revenue adjusted for the impact of retail store closures, the transition of Stride Rite^® to a license business model, the sale of the Sebago^® brand and the sale of the Department of Defense business. Measures referred to as "adjusted" financial results exclude environmental and other related costs, organizational transformation costs which include gains or losses from divestitures, restructuring and other related costs and incremental store inventory mark-downs.

Beginning in Q1 2018, the Company has separately provided the impact of changes in foreign currency exchange rates on revenue, rather than including it as a part of underlying revenue, to better isolate this variable. The constant currency presentation, which is a non-GAAP measure, excludes the impact of fluctuations in foreign currency exchange rates. The Company believes providing constant currency information provides valuable supplemental information regarding results of operations, consistent with how the Company evaluates performance. The Company calculates constant currency by converting the current-period local currency financial results using the prior period exchange rates and comparing these adjusted amounts to our current period reported results.

The Company has provided a reconciliation of the above non-GAAP financial measures to the most directly comparable GAAP financial measure. The Company believes these non-GAAP measures provide useful information to both management and investors to increase comparability to the prior period by adjusting for certain items that may not be indicative of core operating measures and to better identify trends in our business. The adjusted financial results are used by management to, and allow investors to, evaluate the operating performance of the Company on a comparable basis.

EARNINGS CALL INFORMATION

The Company will host a conference call today at 8:30 a.m. Eastern Time to discuss these results and current business trends. The conference call will be broadcast live and accessible under the "Investor Relations" tab at www.wolverineworldwide.com. A replay of the conference call will be available at the Company's website for a period of approximately 30 days.

ABOUT WOLVERINE WORLDWIDE

With a commitment to service and product excellence, Wolverine World Wide, Inc. is one of the world's leading marketers and licensors 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^®, 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, including statements regarding: the Company's ability to invest in growth, successfully execute key strategic initiatives, elevate brands with consumers, and deliver product innovation, organic and global growth and operational efficiencies; and the Company's fiscal 2018 outlook and guidance. In addition, words such as "guidance," "estimates," "anticipates," "believes," "forecasts," "step," "plans," "predicts," "focused," "projects," "outlook," "is likely," "expects," "intends," "should," "will," "confident," 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.  Risk Factors include, among others: 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; foreign currency exchange rate 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; risks related to the significant investment in, and performance of, the Company's consumer-direct operations; risks related to expansion 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, including compliance with federal, state and local laws and regulations relating to the protection of the environment, environmental remediation and other related costs, and litigation or other legal proceedings relating to the protection of the environment or environmental effects on human health; 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; and additional factors discussed in the Company's reports filed with the Securities and Exchange Commission and exhibits thereto. The foregoing Risk Factors, as well as other existing Risk Factors and new Risk Factors that emerge from time to time, 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.

The following tables contain information regarding the non-GAAP adjustments used by the Company in the presentation of its financial results:

SOURCE Wolverine Worldwide