A month has gone by since the last earnings report for Wolverine World Wide (WWW). Shares have lost about 1.9% 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 the most recent earnings report in order to get a better handle on the important drivers.

Wolverine Q1 Earnings Meet Estimates, Revenues Dip Y/Y

Wolverine World Wide reported first-quarter 2024 results, wherein its top line missed the Zacks Consensus Estimate and the bottom line met the same. Both metrics fell year over year.

However, the company is actively working on a turnaround strategy that focuses heavily on its core brands like Merrell and Saucony. This strategy involves a multifaceted approach, including enhancing product offerings, investing in targeted marketing campaigns, and improving global operational efficiencies. By concentrating on these areas, Wolverine aims to build a more robust and resilient business model.

Q1 Insights

The company posted first-quarter adjusted earnings of 5 cents a share that met the consensus mark. However, the figure declined 54.5% from adjusted earnings of 11 cents in the prior-year quarter. At constant currency, the company’s earnings per share was 9 cents, down 18.2% from earnings of 11 cents in the prior-year quarter.

Revenues of $394.9 million missed the Zacks Consensus Estimate of $401 million and fell 34.1% year over year. The decline was attributable to lower revenues in most segments and brands. Revenues dipped 34.6% in constant currency. Direct-to-consumer revenues of $106.4 million were down 15.9% year over year. WWW’s international business dropped 31.5% to $178.5 million.

Coming to segments, Active Group’s revenues dipped 24.9% year over year to $289.8 million. Revenues at the Work Group tumbled 21.3% year over year to $90.1 million. Revenues of the Other segment fell 84.8% year over year to $15 million.

Brand-wise, Merrell’s revenues slipped 26.2% year over year to $133 million, Saucony's revenues fell 24.5% to $100.1 million and Wolverine's revenues dipped 20.3% to $41.2 million. Sweaty Betty generated revenues of $45.2 million, down 4.8% year over year.

Margins

Adjusted gross profit was $181.6 million, down 14.6% year over year. However, the adjusted gross margin increased 540 basis points year over year to 46.5%. This resulted from reduced supply-chain costs, fewer sales of end-of-life inventory, less promotional activity in e-commerce sales, and a more favorable mix of distribution channels.

Adjusted SG&A expenses moved down 10.3% to $162.2 million. The metric, as a percentage of revenues, increased significantly year over year to 41.1%.

Other Financials

Wolverine ended the quarter with cash and cash equivalents of $169.7 million, long-term debt of $581.9 million and stockholders' equity of $260.1 million. Net debt was $685 million at the end of the first quarter. Inventory at the end of the reported quarter was $354.3 million, down 51.2% from the year-earlier quarter.

Outlook

Looking ahead, management provided a cautiously optimistic outlook for 2024. The company emphasized that while the first half of the year focused on stabilizing the business and managing costs, the latter half is expected to show an inflection point, with improved revenue growth. This growth is anticipated to be driven by continued margin improvements and the successful execution of strategic initiatives.

Wolverine anticipates revenues from ongoing operations between $1.68 billion and $1.73 billion, adjusted for the newly introduced licensing model for the Merrell and Saucony kids business as of May 1, 2024. This forecast indicates a decline of 15.7-13.2% from that reported in 2023, with a constant-currency decline of 15.5-13%.

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 $75 million by 2024 and expects a net debt of $565 million at the end of 2024.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review.

The consensus estimate has shifted -58.87% due to these changes.

VGM Scores

Currently, Wolverine has a poor Growth Score of F, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% 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.

Outlook

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 #1 (Strong Buy). We expect an above average return from the stock in the next few months.

Performance of an Industry Player

Wolverine belongs to the Zacks Shoes and Retail Apparel industry. Another stock from the same industry, Steven Madden (SHOO), has gained 8.9% over the past month. More than a month has passed since the company reported results for the quarter ended March 2024.

Steven Madden reported revenues of $552.38 million in the last reported quarter, representing a year-over-year change of +19.1%. EPS of $0.65 for the same period compares with $0.50 a year ago.

Steven Madden is expected to post earnings of $0.51 per share for the current quarter, representing a year-over-year change of +8.5%. Over the last 30 days, the Zacks Consensus Estimate has changed -1%.

Steven Madden has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.

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