Yahoo Finance Why Is Wolverine (WWW) Up 5% Since Last Earnings Report?
A month has gone by since the last earnings report for Wolverine World Wide (WWW). Shares have added about 5% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Wolverine due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Wolverine Q4 Loss Wider Than Expected, Revenues Dip Y/Y
Wolverine reported results for fourth-quarter 2023, wherein its top line beat the Zacks Consensus Estimate and the bottom line missed the same. Both metrics fell year over year.
Q4 Insights
The company posted a fourth-quarter adjusted loss of 30 cents a share, which was wider than the Zacks Consensus Estimate of an adjusted loss of 25 cents. The loss also widened from the adjusted loss of 13 cents reported in the prior-year quarter. At constant currency, the company’s adjusted loss per share was 29 cents.
Revenues of $526.7 million beat the Zacks Consensus Estimate of $521 million but fell 20.8% year over year. The decline was attributable to lower revenues in most of the segments and brands. Revenues dipped 21.3% in constant currency. Direct-to-consumer revenues of $186.9 million were down 17.6% year over year. WWW’s international business dropped 5.1% to $267.2 million.
Coming to segments, Active Group’s revenues dipped 14.2% year over year to $341.3 million. The Zacks Consensus Estimate for Active Group’s revenues was pegged at $356 million for the quarter.
Revenues at the Work Group tumbled 18.9% year over year to $125.3 million. The consensus estimate for Work Group’s revenues was pegged at $130 million.
Revenues of the Other segment fell 46.8% year over year to $60.1 million.
Brand-wise, Merrell revenues slipped 16.6% year over year to $161.8 million, Saucony revenues fell 13.4% to $105.1 million and Wolverine revenues fell 27.9% to $51.8 million. Sweaty Betty generated revenues of $67.3 million, down 7.6% year over year. The consensus estimate for Merrell, Saucony, Wolverine and Sweaty Betty brand’s revenues were pegged at $163 million, $107 million, $55 million and $66 million, respectively.
Margins
Adjusted gross profit was $192.4 million, down 11.3% year over year. However, the adjusted gross margin increased 270 basis points year over year to 36.9%. This resulted from reduced promotional e-commerce sales and fewer inventory markdown provisions, thanks to significantly healthier inventory levels.
Adjusted SG&A expenses moved down 7.7% to $210.5 million. The metric, as a percentage of revenues, increased 570 bps year over year to 40%.
Other Financials
Wolverine ended the quarter with cash and cash equivalents of $179 million, long-term debt of $605.8 million and stockholders' equity of $300 million.
Net debt was $740 million at the end of the fourth quarter. Inventory at the end of the reported quarter was $373.6 million, down nearly 50% from the year-earlier quarter.
Outlook
The 2024 outlook excludes the impacts of Sperry, following its sale in January 2024. The company expects improved profitability in 2024, reflecting the effects of stabilization efforts and profit improvement initiatives over the last six months. These efforts are anticipated to yield $140 million in cost savings, enabling reinvestment in demand creation and technology enhancements.
Wolverine projects 2024 revenues of $1.70-$1.75 billion, which indicates a decrease of 14.7-12.2% from 2023, with a constant currency decline of 14.3-11.8%.
The gross margin is expected to improve significantly to 44.5%, suggesting a rise of 460 basis points from that reported in 2023. The operating margin is forecast to be 5.7%, with an adjusted operating margin of 7%, implying an increase of 310 basis points from the previous year’s actuals.
Adjusted earnings are projected between 65 cents and 85 cents. These figures include an expected negative impact of 10 cents from foreign exchange rate fluctuations. The company delivered adjusted earnings of 5 cents in 2023.
Wolverine aims to reduce its inventory by at least $70 million by 2024 and expects net debt of $575 million at the end of 2024.
This outlook highlights Wolverine's strategic focus on improving profitability, managing costs effectively and strengthening its financial position amid a challenging macroeconomic environment. The company's emphasis on innovation, demand creation and technology upgrades indicates a commitment to driving sustainable growth and enhancing shareholder value.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
The consensus estimate has shifted -76.62% due to these changes.
VGM Scores
At this time, Wolverine has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. However, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Wolverine has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.
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Wolverine World Wide, Inc. (WWW) : Free Stock Analysis Report
