Can Growth Endeavors Aid Wolverine's (WWW) Revival In 2019?
Zacks Investment Research | Jan 02, 2019 02:49AM ET
Shares of Wolverine World Wide, Inc. (NYSE:WWW) have not only declined but also underperformed the industry in the past six months. This Zacks Rank #3 (Hold) company has lost 7.8% in the said time frame compared with the industry’s decline of 5.1%. This can be attributable to the company’s sluggish sales trend for the past few quarters.
Notably, Wolverine has been witnessing dismal sales trends over the last five quarters, mainly due to change in quarterly calendars, negative impacts of store closures and portfolio changes made in early 2017. Some of these factors also led to a drop in revenues during the third quarter of 2018.
The top line declined 3.9% to $558.6 million in the quarter, owing to decline in all three segments. Moreover, sales at the company’s Boston Group and Heritage Group have declined in all the three quarters of 2018.
Further, the company is exposed to significant currency headwinds. Additionally, stiff competition is a concern.
Efforts to Revive the Stock
Wolverine boasts a wide portfolio of owned and licensed brands of casual as well as athletic footwear and apparel. We note that two of the company’s biggest brands, namely Merrell and Wolverine, have been gaining traction lately. Further, the company plans to strengthen its brand portfolio through innovation and expansion of its brands to newer geographies and platforms.
Moreover, the company is riding well on its strong international presence. Going ahead, the company plans to add strategic resources to strengthen its regional teams, especially in the emerging regions of Asia-Pacific such as China. These efforts are likely to help achieve high-single-digit growth in revenues from its international business in 2018.
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Apart from these, Wolverine has been progressing well with its Way Forward transformation initiative, a strategic platform aimed at driving growth and profitability amid a competitive market scenario. In fact, a significant portion of gross margin growth during the first, second and third quarters of 2018 was driven by this initiative.
We note that during the first quarter, the company stepped into the next phase of the Way Forward initiative — Global Growth Agenda. The agenda encompasses three key strategies, namely Powerful Product Creation Engine, Digital-Direct Offense and International Expansion. Incremental investments toward such growth initiatives are expected to be $40-$45 million for 2018. Out of this, approximately 45% will be directed toward the creation of powerful product development.
Moreover, the company focuses on its fast growing e-commerce space. Efforts in this respect include enhancing social presence, better digital advertisement manoeuvres, and better implementation and management of consumer database. Further, the company has allocated approximately $15 million of incremental investments from the Global Growth Agenda toward digital advancements. In fact, Wolverine is witnessing solid e-commerce growth, with 25% improvement in this business in the third quarter.
All said, we expect these above-mentioned strategies to offset the challenges faced by the company and get it back on track in the near future.
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