It's Better to Stay Away From Wolverine Right Now

Here are a few reasons why investing in Wolverine now might be dangerous.

Mar 17, 2014 at 3:33PM

U.S. consumers increased their spending during the holiday season. However, this increase in spending did not occur in accordance with what retailers had expected. For instance, because of colder weather people bought less casual footwear and more winter-wear items, such as boots. Nonetheless, some footwear retailers came prepared to face the situation and they registered strong performances. Wolverine World Wide (NYSE:WWW), one of the leading lifestyle shoe companies, posted fourth-quarter and fiscal-2013 numbers that came in ahead of the Street's expectations.

Into the numbers
Driven by the benefits of the acquisition of the performance and lifestyle unit from Collective Brands, Wolverine's revenue surged 13.6% to $741 million. However, if we exclude the effect of the acquisition, the company's revenue increased by only 0.6%. This mainly occurred because of factors such as lower footfall at the malls as the harsh winter convinced shoppers to stay home. For fiscal-year 2013, Wolverine's revenue increased by a whopping 64% to $2.67 billion.

Also, adjusted earnings grew to $1.43 per share for an increase of 25.4% over last year as the company managed its costs well. The company also increased its selling prices and expanded its consumer-direct channels, which helped expand its gross margin. The gross margin for the year stood at 39.8%, an improvement of 120 basis points.

Competitive landscape
Peer Crocs (NASDAQ:CROX) also suffered from the problem of low demand. Its colorful and stylish footwear did not resonate with customers as it once did, which resulted in a 1.6% increase in revenue in its fourth quarter. Growth in Internet sales, which increased by 10 %, provided the main driver for this increase. Comparable-store sales, on the other hand, decreased 4%. Moreover, Crocs registered a loss of $0.20 per share for the quarter. The company declared that it will focus on increasing its profits by controlling its costs. Also, Crocs' gross margin shrank by 180 basis points as the company was unable to pass on the increase in product costs to its customers.

However, not every player has found it difficult to stir demand. Skechers USA (NYSE:SKX) posted quarterly numbers recently which beat analysts' expectations. Its revenue surged 14% to $450.7 million as a colder winter led to higher demand for products such as boots. Moreover, its diversified product portfolio, which includes both casual and sports footwear, led to higher sales.

Additionally, Skechers' efficient cost-management techniques enabled its earnings to grow from $0.08 per share to $0.28 per share. Hence, the retailer plans to expand its footprint by opening 60 to 70 new stores during the year. This company might prove to be tough competition for Wolverine.

Points to be considered
Wolverine World Wide made some significant efforts that investors should consider. For instance, it has been continuously trying to innovate and bring in new products for its customers. In fact, it plans to launch a new Sperry apparel collection this year, which should give customers more reason to enter its stores.

The footwear retailer has also partnered with various celebrities in order to attract customers. It collaborated with Taylor Swift, Kate Spade, and Hollister (of Abercrombie & Fitch) to drive the sales of its Keds category. In fact, the company has also eyed an expansion for Keds into the Latin America and Asia-Pacific regions.

Additionally, Wolverine has taken the initiative to expand its consumer-direct segment, which has higher margins. Hence, Wolverine enhanced its overall store layout to improve the customer experience. The company also made efforts to improve its online operations.

The company remains optimistic about its future prospects as its bright outlook shows. The footwear company expects revenue in the range of $2.78 billion-$2.85 billion for an increase of 3%-6%. It expects earnings to increase by 10%-14% in a range of between $1.57-$1.63 per share.

My take
Looking at Wolverine's strategic moves and its decent outlook, the company seems interesting. However, relying on Wolverine's performance appears difficult since the sales from its Heritage brands have not been very impressive. The sales growth for the company mostly occurred as a result of its recent acquisition. However, the company's recent initiatives might prove fruitful. Hence, investors would be prudent to stay on the sidelines and wait for the right time to get into the company.

Or you could start investing asap
Millions of Americans have waited on the sidelines since the market meltdown in 2008 and 2009, too scared to invest and put their money at further risk. Yet those who've stayed out of the market have missed out on huge gains and put their financial futures in jeopardy. In our brand-new special report, "Your Essential Guide to Start Investing Today," The Motley Fool's personal-finance experts show you why investing is so important and what you need to do to get started. Click here to get your copy today -- it's absolutely free.

 

Pratik Thacker has no position in any stocks mentioned. The Motley Fool owns shares of Crocs. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers