Press Release

ROCKFORD, Mich., Feb. 21, 2018 /PRNewswire/ -- Wolverine World Wide, Inc. (NYSE: WWW) today reported financial results for the fourth quarter and fiscal year ended December 30, 2017, and outlined its 2018 GLOBAL GROWTH AGENDA, which is the next phase of the Company's transformation initiative.

"I am pleased with our fiscal 2017 financial performance and continued momentum in Q4, but I am especially proud of the major accomplishments achieved by our team over the last two years," said Blake W. Krueger, Wolverine Worldwide's Chairman, Chief Executive Officer and President. "These results reflect our ability to accelerate the execution and benefits of recent restructuring and transformation activities, and we are now positioned to invest in our new GLOBAL GROWTH AGENDA in 2018."

FISCAL 2017 REVIEW
The highlights of the Company's fourth quarter and full-year financial performance are summarized below. The fourth quarter revenue and earnings per share amounts reflect the Company's revised quarterly calendar. To provide a better comparison to fiscal 2016, the Company has provided additional information regarding the impact of the calendar change within the reconciliation tables accompanying the earnings release.

Fourth Quarter Results

• Reported revenue of $578.6 million decreased 20.7% during the fourth quarter, or decreased 7.1% after taking into effect the quarterly calendar change. Underlying revenue increased 1.7%, including nearly 18% underlying growth for Merrell.
• Reported gross margin was 38.4%, compared to 36.6% in the prior year. Adjusted gross margin on a constant currency basis was 38.5%, compared to 37.1% in the prior year, reflecting an improvement of 140 basis points despite a 50 basis point negative mix impact from store closures.
• Reported operating margin was -12.7%, compared to 2.1% in the prior year. Adjusted operating margin on a constant currency basis was 10.7% compared to 8.1% in the prior year.
• Reported diluted loss per share was $0.65, compared to a diluted loss per share of $0.02 in the prior year. The reported results include restructuring and transformation costs ($0.24) and other special charges recorded in the quarter for the non-cash impairment of the Sperry indefinite lived trade name ($0.45), environmental and other related costs ($0.28), and the impact of tax reform ($0.09). Adjusted diluted earnings per share were $0.41 compared to $0.34 in the prior year, an increase of 20%.

Full-Year Results

• Reported revenue of $2.35 billion decreased 5.8% vs. the prior year. Underlying revenue grew 0.6%.
• Reported gross margin was 38.9%, compared to 38.5% in the prior year. Adjusted gross margin on a constant currency basis was 40.0%, compared to 38.8% in the prior year, reflecting an improvement of 120 basis points despite a 50 basis point negative mix impact from store closures.
• Reported operating margin was 1.0%, compared to 6.4% in the prior year. Adjusted operating margin on a constant currency basis was 11.2%, a 270 basis points increase versus the prior year.
• Reported diluted earnings per share were $0.00 and include full-year costs directly related to the Company's restructuring and transformation ($0.82) and the special charges recorded in the fourth quarter as noted above ($0.82). Adjusted diluted earnings per share were $1.64, and, on a constant currency basis were $1.71 compared to $1.36 in the prior year, growth of nearly 26%.
• The Company closed 215 stores during 2017 leaving 80 go-forward stores in the fleet.
• Inventory at year end declined 20.6%.
• Cash and cash equivalents on hand at year end were $481 million, up 30% over the prior year, despite nearly $90 million of cash costs to execute restructuring and transformation activities during the year.
• The Company repurchased 1,639,732 shares during fiscal 2017 at an average price of $25.79 per share.
• Total shareholder return of over 45% for 2017.

2018 GLOBAL GROWTH AGENDA

"The WOLVERINE WAY FORWARD has been the most ambitious effort in the Company's nearly 140-year history," stated Mr. Krueger. "While portions of this work will be ongoing, I'm pleased to say that the heavy lifting is behind us and the extra costs required to execute the transformation are complete. We are now ready to implement new tools and capabilities that were developed as part of this work, and pivot our focus and energy to growth."

In 2018, through the realized benefits of its WAY FORWARD transformation initiative, the Company expects to invest $40 million to $45 million in its new GLOBAL GROWTH AGENDA, which 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.

"This new GLOBAL GROWTH AGENDA represents the next phase of our transformation," said Mike Stornant, Senior Vice President and Chief Financial Officer. "We have the financial capacity to invest in key initiatives and capabilities expected to fund our biggest growth opportunities and support accelerated growth beyond 2018. Including these important investments, we expect to achieve our stated 12% adjusted operating margin goal ahead of our original schedule. We are excited about our outlook for 2018, including the expected financial results included below."

2018 OUTLOOK

• Revenue in the range of $2.24 billion to $2.32 billion, a reported decline of 1.3% and underlying growth of nearly 6% at the high-end of the range.
• Gross margin expansion in the range of 40 to 80 basis points, despite a negative mix impact of 20 basis points from 2017 store closures.
• Reported operating margin of 11.6% and adjusted operating margin of 12%, inclusive of incremental investments in the Company's GLOBAL GROWTH AGENDA.
• An effective tax rate in the range of 18% to 21%, reflecting new U.S. tax laws.
• Reported diluted earnings per share in the range of $1.87 to $1.97 and adjusted diluted earnings per share of $1.95 to $2.05, an increase of 25% at the high-end of the range. Foreign currency is expected have a neutral impact on earnings.
• Cash from operations in the range of approximately $230 million to $250 million.
• A 33% increase in the annual dividend.

FISCAL YEAR CALENDAR CHANGE
Prior to fiscal 2017, the Company reported its quarterly results of operations on the basis of 12-week periods for each of the first three fiscal quarters and a 16 or 17-week period for the fiscal fourth quarter. Beginning in fiscal 2017, the Company's fiscal year is comprised of 13-week quarters for each of the first three fiscal quarters and a 13 or 14-week period for the fiscal fourth quarter. There is no change to the Company's fiscal year-end date. References to the "quarter ended" or "fourth quarter" refer to the 13-week period ended December 30, 2017 or the 16-week period ended December 31, 2016.

NON-GAAP FINANCIAL MEASURES
This release contains certain non-GAAP financial measures. References to "underlying" revenue for fiscal 2017 and fiscal 2018 indicate reported revenue adjusted for the impact of foreign exchange, the impact of retail store closures, the transition of Stride Rite^® to a license business model, the impact of the quarterly calendar change, and for 2018 guidance the sale of the Sebago^® brand and the sale of the Department of Defense business. Measures referred to as "adjusted" financial results exclude impairment of intangible assets, 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. In addition, adjusted diluted earnings per share exclude the impact from recent tax reform. The Company evaluates results of operations on both a reported and a constant currency basis. 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 of 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. The Company also discusses total shareholder return as a measure of the performance of the Company's stock over time, which combines share price appreciation and dividends paid to show the total return to the shareholder expressed as an annualized percentage.

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," "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:

WOLVERINE WORLD WIDE, INC.

Q4 2017 RECONCILIATION TABLES

 

 

 

 

 

2017 FULL-YEAR RECONCILIATION TABLES

 

 

 

 

 

2018 GUIDANCE RECONCILIATION TABLES

 

 

 

 

 

 

 

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SOURCE Wolverine World Wide, Inc.

Michael D. Stornant, (616) 866-5728