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Wolverine World Wide Chairman, CEO and President Blake Krueger said the company has been “very active” in looking for deals to add new brands to its portfolio. Wolverine World Wide Chairman, CEO and President Blake Krueger said the company has been “very active” in looking for deals to add new brands to its portfolio. MiBiz file photo: Jeff Hage

Wolverine World Wide eyes new acquisitions in 2018

BY Wednesday, February 21, 2018 03:06pm

ROCKFORD — With the “heavy lifting” of its restructuring plan mostly completed, shoe and apparel marketer and retailer Wolverine World Wide Inc. plans to turn its attention to growth in 2018.

For the Rockford-based Wolverine (NYSE: WWW), that growth could come through adding new brands to its portfolio for the first time in six years since the transformational deal for Collective Brands Inc., executives said today in a conference call with brokerage analysts to discuss quarterly results.

The company reported today that its restructuring initiative led to improved cash flow from operations, which reached $202.7 million in 2017 despite about $90 million in costs related to the restructuring. Wolverine ended the year “in a strong liquidity position” with $481 million on its balance sheet, according to CFO Mike Stornant.

While Wolverine is evaluating what to do with that cash, including stock buybacks, accelerated debt payments and increases to stock dividends, the company could also leverage its healthy balance sheet to pursue new acquisitions, he said.

That renewed interest in deals comes as the company now has “the tools and capabilities” and the “financial capacity” to invest in organic growth and acquisitions, said Chairman, CEO and President Blake Krueger.

“We have proven skill set. A lot of our growth has been driven by acquisitions over the last 20 to 25 years,” Krueger told analysts, noting the company has been “very active” in looking for deals.

“We’re looking for companies that could fill a white space for us or are in the sweet spot on current consumer trends, high-growth categories, companies that might have some new talent and skill sets we want,” Krueger said.

In discussing the company’s strategy, Krueger said Wolverine typically likes to acquire “heritage brands,” especially ones with which the company can quickly scale up over its international footprint.

Additionally, because of its current scale, Wolverine also would consider a deal for a large brand that would help drive overall revenue growth.

“We’ve been very active and we’ll continue to be very active at looking at certain properties,” Krueger said. “I can’t predict timing, obviously. Sometimes they come when they come, those opportunities. But you have to be active, and we’re certainly active.”

Wolverine’s fourth quarter revenues fell more than 20 percent to $578.6 million, in part because of a change in the company’s fiscal year calendar. Underlying revenues grew 1.7 percent.

The company reported a loss of $60.3 million in the quarter, or a loss of 65 cents per diluted share, because of restructuring and transformation costs, a non-cash impairment charge related to Sperry’s trade name, and the impact of U.S. tax reform.

Wolverine said environmental testing, monitoring and remediation costs resulted in a charge of 28 cents per diluted share in the quarter. The activity results from contamination found in conjunction with Wolverine’s legacy tannery operations and its tannery waste disposal sites in northern Kent County.

For the year, Wolverine generated $2.35 billion in revenue, a decline of 5.8 percent from 2016, while underlying revenues grew at less than 1 percent. The company essentially broke even for the year because of costs related to its restructuring plan and various fourth quarter charges. Adjusted for those charges, the company would have reported earnings of $1.64 per diluted share.

As part of its restructuring plan, Wolverine said it closed 215 stores during 2017, which leaves it with 80 company retail stores going forward.

In announcing its quarterly results, the company also detailed its “Global Growth Agenda” plans, which will have it focusing on product design and taking them to market more quickly, investing in its e-commerce and digital presence to drive additional revenue growth, and accelerating international growth in key markets in China and the Asia Pacific region.

Executives said they expect Wolverine to generate between $2.24 billion to $2.32 billion in revenues for 2018, with a reported earnings target of $1.87 to $1.976 per diluted share.

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