Yahoo Finance Wolverine World Wide Inc (WWW) (Q1 2024) Earnings Call Transcript Highlights: Surpassing ...
Revenue: Q1 2024 revenue was $390.8 million, exceeding the outlook of $360 million.
Gross Margin: Achieved a record first quarter gross margin of 46.5%, improving by 540 basis points from the previous year.
Net Income: Adjusted diluted earnings per share for Q1 were $0.05, better than expected.
Operating Margin: Adjusted operating margin reached 5% in Q1, surpassing the outlook.
Inventory Levels: Inventory for ongoing business was $354 million, a 40% decrease from the previous year.
Net Debt: Reduced to $685 million, down approximately $380 million versus last year.
2024 Revenue Outlook: Expected to be between $1.68 billion and $1.73 billion, representing a decline of 14.4% at the midpoint compared to 2023.
2024 Gross Margin Outlook: Anticipated to be around 44.5% at the midpoint, a significant increase from the previous year.
2024 Operating Margin Outlook: Projected to be approximately 7%, showing improvement from 3.9% in 2023.
2024 Earnings Per Share: Forecasted to be between $0.65 and $0.85, including a $0.10 negative impact from foreign currency exchange fluctuations.
Free Cash Flow: Operating free cash flow for 2024 is expected to be between $110 million and $130 million.
Release Date: May 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Wolverine World Wide Inc reported exceeding revenue expectations in Q1 2024, driven by strong performances from Merrell and Saucony brands.
The company achieved an all-time record gross margin in the first quarter, reflecting successful supply chain cost management, pricing strategies, and inventory control.
Wolverine World Wide Inc has made significant progress in reducing debt and inventory levels, surpassing initial expectations for the quarter.
There was notable improvement in average weekly replenishment orders from wholesale partners and owned e-commerce demand, indicating positive market response and operational efficiency.
The company has successfully launched new products and marketing campaigns, such as Saucony's new Ride and Guide 17 franchises and Merrell's Moab Speed 2, which have been well received in the market.
Negative Points
Despite early successes, Wolverine World Wide Inc acknowledges the ongoing challenges in fully realizing the company's transformation and growth potential.
The company is still in the process of restructuring and optimizing operations, indicating that not all strategic initiatives have been fully implemented or yielded results.
Wolverine World Wide Inc faces a competitive and rapidly changing marketplace, requiring continuous adaptation and innovation to maintain and gain market share.
There are ongoing pressures in the outdoor category affecting the Merrell brand, necessitating strategic shifts and innovations to stimulate growth.
The company is still working through pockets of excess inventory, despite overall improvements, indicating that inventory management remains a critical area of focus.
Q & A Highlights
Q: Can you say if there was any pull-forward outside of Europe like in the US? And what really drove the beat, either by brand or by channel? A: Michael Stornant, EVP and CFO, noted that the overperformance was broad, including at the brand and regional levels. He mentioned an $8 million shift due to timing in Europe and possibly an additional $2-3 million across the business, but nothing significant outside of that issue.
Q: Why didn't you raise your outlook for the year based on improving revenue trends and the first quarter beat? A: Christopher Hufnagel, CEO, explained that while encouraged by acceleration in trends, the company's year is predicated on a back-half inflection. They are beginning to chase inventory due to early growth signs but are maintaining a conservative approach. He emphasized that it's still early in the year and the company has work to do.
Q: Are you contemplating any more changes over the next six months, or have you reached a steady state for business growth? A: Christopher Hufnagel responded that while a lot of heavy lifting has been done to stabilize the business, they must remain active and cannot afford to get comfortable. He indicated that the company would continue to optimize and focus on driving growth with a few key brands.
Q: Can you unpack the outlook for Saucony, particularly in terms of the order book and specialty channel performance? A: Christopher Hufnagel highlighted that Saucony is showing strong signs of momentum with new product launches and increased search interest. He noted the strategic shift towards less promotional activity and a focus on higher-margin business, emphasizing the importance of new products in driving brand rejuvenation.
Q: What are the drivers for the expected gross margin expansion and second-half operating margin inflection? A: Michael Stornant detailed that gross margin benefits in Q1 were due to improved supply chain performance and cost structure, with expectations for these trends to continue. For H2, he cited the full impact of profit improvement initiatives and cost reductions, along with expected revenue growth, particularly in Q4.
Q: What is the current state of DTC performance and inventory management? A: Christopher Hufnagel noted improvements in DTC, with growth turning positive in March and April, driven by less promotional activity and compelling product engagement. Michael Stornant added that inventory quality is improving, with further reductions planned, reflecting ongoing progress in inventory management.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
