In consumer markets, brands are taking on a much more significant role. Therefore, a company that boasts the names Keds, Merrell, Saucony, and Stride Rite has a lead coming out of the starting gate, particularly when entering American brand-coveting Asian markets. Big names, capital, and inroads to China make Wolverine World Wide (NYSE:WWW) an odds-on favorite for the retail Triple Crown.

Here's what's going on with Wolverine financially and how the company plans to tackle the next few years: confidently.

Share buybacks to prove the market wrong

Nothing emanates confidence like a share buyback, and Wolverine has announced two buybacks since the beginning of this year. On Sept. 11, Wolverine World Wide announced a buyback of $400 million in shares over four years, which was in addition to the same level of buyback announced in February. Clearly, the company feels slighted by a market that is undervaluing its worth, and who can blame it?

At the same time that the buyback was announced, Mike Stornant, Wolverine's senior vice president and chief financial officer, boldly pronounced that the company had "significant capacity to allocate capital" and increase shareholder value. But just how significant is that capital?

Close-up of two feet in athletic shoes walking an outdoor trail.

Image source: Getty Images.

Second-quarter earnings on track

At the latest earnings announcement in August for the second quarter, ending June 2019, earnings exceeded expectations. Second-quarter revenue increased by 1.1% and 0.3% compared to the prior year, "despite spring weather" and what the company described as "sluggish retail conditions." Wolverine's e-commerce business, however, grew by more than 25%, with four of the five top brands meeting or exceeding expectations.

Inventories increased 38.4% compared to the prior year, including $10 million from new stores and the acquisition of a distributor in Italy. The second-quarter inventory position reflects a significant pull-forward of China-sourced production in anticipation of potential China tariff exposure.

As far as capital is concerned, management said in its most recent earnings call that it had "approximately $1.25 billion in total liquidity, giving the company significant flexibility and capacity to invest for growth." Supporting that statement, in July, Moody's Investors Service had upgraded theWolverine World Wide Probability of Default Rating. This decision was based on the company's moderate financial leverage and improved interest coverage over the past two years. Someone has been doing something right. 

Impressive leadership changes

There have been some executive changes at Wolverine. In May, the company announced the retirement of Joseph R. Gromek and the appointment of David W. McCreight to the board. McCreight found great success as president of URBN and CEO of its Anthropologie Group, a popular women's apparel, accessories, and home-decor brand. McCreight also brings experience as president of Under Armour and Lands' End.

On September 12, the company announced that its leading brand, Merrell, would now be under the auspices of a new president, Chris Hufnagel. Hufnagel has been head of the Wolverine subsidiary CAT Footwear for 10 years. Before that, he held leadership roles at Under Armour, the Gap, and Abercrombie & Fitch.

Movement in Asia markets

Wolverine is breaking into Asia markets. In March, Wolverine World Wide announced a partnership with Xtep International Holdings Limited, a leading Chinese sportswear retailer. Wolverine plans to grow Merrell and Saucony in Mainland China, Hong Kong, and Macau. The joint venture will open new stores in large city shopping malls, where there is persistent demand for U.S. running and outdoor brands, under the Merrell and Saucony banners.

Little can be said about Wolverine's downside. Perhaps one pertinent insight by Moody's is that Wolverine's credit might be hampered by a narrow product focus in the footwear segment and fashion concerns with brands such as Sperry. A divestiture might be in the cards there. Still, overall, the company has capacity for growth, talent combined with experience at the helm, and strategic assets in the Chinese market. Not much to criticize here.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.