Footwear company Wolverine World Wide (NYSE: WWW) proved for yet another quarter that international exposure pays these days. Diversification played a key role, as management said assorted trends and its exposure in many locations helped generate a strong performance in the first quarter despite a weak economy.
Sales of its eight lifestyle brands, including Merrell, Sebago, and Hush Puppies, in close to 200 countries resulted in a modest 2.6% increase in first-quarter sales and a 6.3% rise in earnings. Share buybacks led to an impressive 17.9% jump in earnings. Management also upped its 2008 earnings guidance, though it kept sales projections the same.
The stock is trading down slightly since the earnings release on Wednesday because sales came in slightly below what analysts were expecting, though earnings beat expectations by $0.03. Wolverine's results should eventually put a spring in the step of investors, especially considering the dismal results that peers such as Crocs (Nasdaq: CROX), K-Swiss (Nasdaq: KSWS), and Timberland (NYSE: TBL) have been posting.
Its diversity helped Wolverine shake off languishing consumer spending in the United States. Management cited particular strength in its outdoor group (which includes the Merrell and Patagonia brand names), with profitability holding up in the U.S. and in Europe. There were also solid trends in the international royalty and distribution businesses, where the company either grants license or distribution rights for its brands to outside parties. Last year, total international sales accounted for 40% of total sales, and recent trends suggest this percentage will continue to grow.
Wolverine's goal is to deliver "double-digit earnings per share growth while investing in growth initiatives for the future." There are three more quarters to go in 2008, but the company looks well on its way to achieving its targets for the year, and is trading at less than 16 times management's higher earnings guidance.
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