It has been about a month since the last earnings report for Wolverine World Wide (WWW). Shares have lost about 8% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Wolverine due for a breakout? 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 drivers.
Wolverine’s Q1 Earnings Beat, Revenues Down Y/Y
Wolverine reported better-than-expected results during first-quarter 2023. However, both the metrics fell year over year. The company posted first-quarter adjusted earnings of 9 cents a share, surpassing the Zacks Consensus Estimate of 5 cents. At constant currency, adjusted earnings per share came in at 12 cents. The company reported earnings of 38 cents per share.
Revenues of $599.4 million came ahead of the Zacks Consensus Estimate of $581 million but fell 2.5% year over year, driven by lower revenues at most of the segments and brands. Revenues dipped 0.5% in constant currency. Direct-to-consumer revenues of $124.9 million were down 7.7% year over year. WWW’s international business was robust in the reported quarter and improved 12.6% to $249.7 million. International revenues increased 18% in constant currency.
Coming to segments, Active Group’s revenues rose 11.5% year over year to $385.9 million, while the metric at Work Group tumbled 17.3% to $114.5 million. Revenues at Lifestyle Group and Other fell 21.1% and 38%, respectively, to $85.3 million and $13.7 million.
Brand wise, Merrell revenues jumped 17.6% year over year to $180.3 million, Saucony revenues increased 21.2% to $132.6 million, Sperry revenues decreased 13% to $62.9 million and Wolverine revenues fell 12.1% to $51.7 million. Sweaty Betty generated revenues of $47.5 million, down 11.4% year over year.
Adjusted gross profit was $232.2 million, down 7.4% year over year. Also, adjusted gross margin contracted 350 basis points (bps) year over year to 40%.
Adjusted SG&A expenses inched up 0.5% to $202.7 million. Adjusted operating income came in at $29.5 million, down from adjusted operating income of $47.1 million.
Wolverine ended the quarter with cash and cash equivalents of $116.2 million, long-term debt of $720.8 million and stockholders' equity of $344.5 million. Net debt was $1.06 billion and total liquidity of nearly $670 million at the end of the first quarter. Inventory at the end of the reported quarter was $725.9 million, up 50.2% from the previous quarter.
During first-quarter 2023, Wolverine has paid out cash dividends of $8.4 million.
Management saw supply-chain and working capital improvements in the first quarter. For 2023, revenues from the ongoing business are still projected in the range of $2.53-$2.58 billion, representing an increase of 0-2% and constant currency growth of 1-3%. Further, gross margin is likely to be at 41.3% and adjusted gross margin is anticipated to be 42% for the year.
Operating margin is estimated to be nearly 8.7% and adjusted operating margin is expected to be 8.5%. Inventory is likely to improve by nearly $225 million by the end of the year.
Earnings per share are envisioned to be between $1.50 and $1.70 and adjusted earnings per share in the bracket of $1.40-$1.60. This guidance includes nearly 14 cents adverse impact of foreign currency exchange rate fluctuations.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
The consensus estimate has shifted -48.72% due to these changes.
At this time, Wolverine has a poor Growth Score of F, a grade with the same score on the momentum front. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Wolverine has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Wolverine is part of the Zacks Shoes and Retail Apparel industry. Over the past month, Steven Madden (SHOO), a stock from the same industry, has gained 1.4%. The company reported its results for the quarter ended March 2023 more than a month ago.
Steven Madden reported revenues of $463.83 million in the last reported quarter, representing a year-over-year change of -17.1%. EPS of $0.50 for the same period compares with $0.92 a year ago.
For the current quarter, Steven Madden is expected to post earnings of $0.48 per share, indicating a change of -23.8% from the year-ago quarter. The Zacks Consensus Estimate has changed -3.6% over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Steven Madden. Also, the stock has a VGM Score of C.
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