Wolverine Worldwide Reports Fourth Quarter and Full Year 2023 Results In-Line With Guidance and Provides Outlook for 2024

Company Significantly Strengthens its Balance Sheet and Improves Cost Structure, Enabling an Acceleration of its Transformation to Become Great Global Brand Builders

ROCKFORD, Mich.–(BUSINESS WIRE)–Wolverine World Wide, Inc. (NYSE: WWW) today reported financial results for the fourth-quarter and full-year 2023 ended December 30, 2023.

“We are effectively executing our transformation plan with great pace – having largely completed the stabilization phase of our turnaround,” said Chris Hufnagel, President and Chief Executive Officer of Wolverine Worldwide. “We finished the year with revenue and earnings in-line with guidance, and inventory and debt levels better than expected. Most importantly, Wolverine Worldwide is a much different company than it was just six months ago, with a healthier balance sheet, enhanced efficiency to deliver higher profit and investment, and a redesigned organizational structure to strengthen our brand-building capabilities. Our focused portfolio of authentic brands – supported by powerful central platforms – is focused on helping consumers live better lives through performance-led product innovation and design. Going forward, we are accelerating our transformation of the business to ultimately drive an inflection to growth. Our team is energized by our new vision to become global brand builders, and we are confident in our ability to drive meaningful and sustained shareholder value.”

FINANCIAL HIGHLIGHTS

Financial results for 2023, and comparable results from 2022, in each case, for our ongoing business exclude the impact of Keds, which was sold in February 2023, the U.S. Wolverine Leathers business, which was sold in August 2023, the non-U.S. Wolverine Leathers business, which was sold in December 2023, and reflect an adjustment for the transition of our Hush Puppies North America business to a licensing model in the second half of 2023. Tables have been provided in the back of this release showing the impact of these adjustments on financial results for 2023 and 2022. For visibility regarding this impact on our 2023 operating results, the Company has reported actual results reflecting its ongoing businesses and separately reported results for Keds, which will be limited to the period through February 3, 2023, and Wolverine Leathers to the extent it owned and operated the business.

Prior to the fourth quarter of 2023, Sperry^®, Keds^®, and Hush Puppies^® financial results were reported in the Lifestyle Group. The Lifestyle Group is no longer a reportable segment and the financial results for Sperry^®, Keds^®, and Hush Puppies^® are included in Other. Prior period disclosures have been adjusted.

FOURTH-QUARTER 2023 FINANCIAL HIGHLIGHTS

Revenue of $526.7 million declined 20.8% versus the prior year and declined 21.3% on a constant currency basis. Revenue from the ongoing business was $521.2 million and declined 18.4% on a constant currency basis.

The Company’s international revenue of $267.2 million was down 5.1% compared to the prior year and down 6.2% on a constant currency basis. International revenue from the ongoing business of $261.7 million was down 3.4% compared to the prior year and down 4.6% on a constant currency basis. Direct-to-Consumer revenue of $186.9 million was down 17.6% compared to the prior year and down 15.5% for the ongoing business compared to the prior year.

Gross margin was 36.6% compared to 33.7% in the prior year and improved due to less promotional eCommerce sales and inventory markdown provisions as a result of much healthier inventory levels. Benefits from profit improvement initiatives were offset by the sale of the last tranche of higher-cost inventory containing transitory supply chain costs from 2022.

Selling, General & Administrative expenses were $379.9 million, or 72.1% of revenue. Adjusted SG&A expenses of $210.5 million or 40.4% of adjusted revenue, were 450 basis points higher than the prior year. Refer to table in the back of the release for reconciliation of reported SG&A expenses to adjusted SG&A expenses.

Inventory at the end of the quarter was $373.6 million and was down $371.6 million or approximately 50% compared to the prior year. The Sperry business and China joint venture entities are considered held for sale and not included in the Company’s 2023 total inventory balance.

Net Debt at the end of the quarter was $740 million, down $285 million from the prior year. The Company’s bank-defined leverage ratio was 2.9x.

FULL-YEAR 2023 FINANCIAL HIGHLIGHTS

Revenue of $2,242.9 million represents a decline of 16.5% versus the prior year and a decline of 16.3% on a constant currency basis.

Gross margin was 38.9% versus 39.9% in the prior year and reflects sales of higher-cost inventory due to transitory costs from 2022 and acceleration of end-of-life inventory liquidations.

Selling, General & Administrative expenses were $940.7 million, or 41.9% of revenue. Adjusted SG&A expenses of $797.7 million or 36.3% of adjusted revenue, were 250 basis points higher than the prior year.

FULL-YEAR 2024 OUTLOOK

The outlook for 2024, and comparable results from 2023, in each case, for our ongoing business now also exclude the impact of Sperry, which was sold in January 2024.

“Our expectation of improved Fiscal 2024 profitability reflects the comprehensive stabilization work completed over the last six months,” said Mike Stornant, Executive Vice President and Chief Financial Officer. “We expect to deliver incremental cost benefits of $140 million from recent profit improvement initiatives, allowing reinvestment into demand creation, enhanced technology, among other new capabilities needed to drive sustained growth. Solid inventory reductions already executed will benefit gross margin and allow for an increased flow of new and innovative product offerings. Successful efforts to lower debt are expected to reduce interest expense by approximately $20 million. While we expect the macro environment to remain challenging, especially in the first half of the year, we believe firmly that the business is on much stronger footing and poised to drive improved profit, cash flow and growth into the future.”

Full year 2024 outlook is as follows:

• Revenue from our ongoing business is expected to be approximately $1.70 billion to $1.75 billion, representing a decline compared to 2023 of approximately 14.7% to 12.2% and constant currency decline of approximately 14.3% and 11.8%.
• Gross margin is expected to be approximately 44.5% up 460 basis points compared to 2023.
• Operating margin is expected to be approximately 5.7%, and adjusted operating margin is expected to be approximately 7.0%, up 310 basis points compared to 2023.
• The effective tax rate is expected to be approximately 18%.
• Diluted earnings per share are expected to be between $0.43 and $0.63, and adjusted diluted earnings per share are expected to be between $0.65 and $0.85. These full-year EPS projections include an approximate $0.10 negative impact from foreign currency exchange rate fluctuations.
• Diluted weighted average shares are expected to be approximately 80 million.
• Inventory is expected to decline by at least $70 million by year-end.
• Net Debt at year-end is expected to be approximately $575 million.

NON-GAAP FINANCIAL MEASURES

Measures referred to in this release as “adjusted” financial results and the financial results of the “ongoing business” are non-GAAP measures. Adjusted financial results exclude environmental and other related costs net of recoveries, non-cash impairment of long-lived assets, reorganization costs, debt modification costs, gain on the sale of businesses, trademarks and long-lived assets, costs associated with divestitures, SERP curtailment gain, receivables securitization transaction costs, and costs associated with Sweaty Betty® integration. The financial results of the ongoing business exclude financial results from the Keds business, Wolverine Leathers business and reflect an adjustment for the transition of our Hush Puppies North America business to a licensing model in the second half of 2023. The outlook for 2024, and comparable results from 2023, in each case, for our ongoing business now also exclude the impact of Sperry, which was sold in January 2024. The Company also presents constant currency information, which is a non-GAAP measure that excludes the impact of fluctuations in foreign currency exchange rates. The Company calculates constant currency basis by converting the current-period local currency financial results using the prior period exchange rates and comparing these adjusted amounts to the Company’s current period reported results. The Company believes providing each of these non- GAAP measures provides valuable supplemental information regarding its results of operations, consistent with how the Company evaluates performance.

The Company has provided a reconciliation of each of the above 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 because they increase the comparability of current period results to prior period results by adjusting for certain items that may not be indicative of core operating results and enable better identification of 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. Management does not, nor should investors, consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP.

EARNINGS CALL INFORMATION

The Company will host a conference call today at 8:30 a.m. EST 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 on the Company’s website for a period of approximately 30 days.

ABOUT WOLVERINE WORLDWIDE

Founded in 1883, Wolverine World Wide, Inc. (NYSE:WWW) 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 diverse portfolio of highly recognized brands includes Merrell®, Saucony®, Sweaty Betty®, Hush Puppies®, Wolverine®, Chaco®, Bates®, HYTEST®, and Stride Rite®. Wolverine Worldwide is also the global footwear licensee of the popular brands Cat® and Harley-Davidson®. Based in Rockford, Michigan, for more than 140 years, the Company’s products are carried by leading retailers in the U.S. and globally in approximately 170 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 outlook for 2024 including, among others: reported, adjusted and constant currency revenue; reported and adjusted gross margin; reported and adjusted operating margin; effective tax rate; reported and adjusted diluted earnings per share; diluted weighted average shares; and net debt; as well as statements regarding the Company’s brand performance, strategic investment and improved profitability in 2024, the Company’s expectations regarding the macro environment in 2024, and the Company’s ability to drive sustainable, long-term growth and shareholder returns.. In addition, words such as “estimates,” “anticipates,” “believes,” “forecasts,” “step,” “plans,” “predicts,” “focused,” “projects,” “outlook,” “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, inflationary pressures 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; changes in duties, tariffs, quotas or applicable assessments in countries of import and export; foreign currency exchange rate fluctuations; currency restrictions; supply chain or other capacity constraints, production disruptions, quality issues, price increases or other risks associated with foreign sourcing; the cost, including the effect of inflationary pressures, and availability of raw materials, inventories, services and labor for 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; the impact of seasonality and unpredictable weather conditions; the impact of changes in general economic conditions and/or the credit markets on the Company’s manufacturers, distributors, suppliers, joint venture partners and wholesale customers; changes 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; risks of breach of the Company’s databases or other systems, or those of its vendors, which contain certain personal information, payment card data or proprietary information, due to cyberattack or other similar events; problems affecting the Company’s supply chain and distribution system, including service disruptions 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; risks relating to stockholder activism; the potential effects of outbreaks of COVID-19 or future health crises on the Company’s business, operations, financial results and liquidity; the risk of impairment to goodwill and other intangibles; 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 or other 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 financial measures used by the Company in the presentation of its financial results:

Contacts

Alex Wiseman
(616) 863-3974

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