Softness in Europe Pushes Wolverine Q3 Profit Down 19%

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Sales at Wolverine Worldwide’s lifestyle group, which includes Hush Puppies, were down slightly, too.

Rockford, MI—When it announced the completion of the $2 billion acquisition of Collective Brands with two private equity firms, Wolverine Worldwide said the addition would add to its earnings by next year.

Meanwhile, the footwear and apparel company is suffering from lagging sales especially in Europe and increased costs. On Tuesday, the company reported a 19% drop in its third quarter profit, and lowered its full year forecast.

For the quarter ended Sept. 8, the maker of Hush Puppies and Merrell posted a net profit of $32.7 million, or 66 cents a share, down from $40.4 million, or 82 cents a share, a year ago. Excluding 6 cents a share related to its buyout of Collective Brands, earnings were 72 cents a share. That’s below analysts’ average estimate for earnings of 73 cents a share (which exclude special items).

Total sales for the quarter were down 2.4% to $353.07 million, compared with $361.59 million in the same quarter last year. Foreign currency exchange had a negative impact of $5.4 million on revenue. Analysts’ average estimate expected sales of $362.46 million.

By division, the outdoor segment, which includes Merrell, fell 7.9% to $134 million. Sales at the heritage group, which includes Wolverine, Caterpillar and Harley-Davidson footwear, were up 1.3%. The lifestyle group, including Hush Puppies and Sebago, saw a 5.1% sales decline.

Full Year Earnings Forecast Reduced

Gross margin decreased 140 basis points to 39.2 percent, hurt by higher product costs, partially offset by selling price increases and foreign exchange contract gains.

Wolverine said its revenue and adjusted earnings per share were in line with its expectations since the company expected difficult macroeconomic and retail conditions in Europe despite strength in the United States.

While Wolverine expects its newly acquired wholesale and retail operations for Sperry Top-Sider, Saucony, Stride Rite and Keds brands to boost earnings in coming months and turnaround what has been four straight quarters of earnings declines.

In September, the company warned that due to the softness in Europe it wouldn’t meet its third quarter estimates. Now Wolverine has lowered its full year earnings forecast, too.

The company now expects adjusted earnings of $2.26 to $2.31 a share on revenue in a range of $1.43 billion to $1.44 billion. Factoring in its Collective Brands acquisitions, revenue would be between $1.65 billion and $1.66 billion.

Previously, Wolverine’s full year earnings forecast was for $2.70 to $2.80 a share on revenue of $1.46 billion to $1.5 billion. Accounting for its acquisition-related expenses for the year to date, the company previously forecast earnings of $2.64 to $2.74 a share.

Analysts’ consensus expects Wolverine to hit earnings of $2.41 a share on revenue of $1.58 billion.