Wolverine World Wide Inc. (NYSE: WWW) designs and manufactures footwear and apparel under a diverse portfolio of brands beyond their popular Wolverine boots. The consumer discretionary sector company has been shoring up its finances and trimming down inventory levels as they fell a sizeable 54.1% in its second quarter of 2024.
The turnaround strategy is taking shape, and the market knows it, judging by its 92% year-to-date (YTD) gains. The company expects a stronger second half of 2024 as the cooler climates prevail.
Wolverine’s Diverse Portfolio of Brands Faces Tough Competition
With 11 brands under its umbrella, the competition is tough in every segment of Wolverine’s markets. Here are the rivals to each of Wolverine’s market segments and brands.
Wolverine, Merrell, Harley-Davidson, CAT, HYTEST, and BATES are all the different boot brands serving a wide range of wearers. Wolverine boots are high-quality, rugged, and stylish boots that can be worn with casual wear, hiking, or on the job site. The HYTEST safety footwear brand is ideal for construction workers with its static dissipating feature and being the first athletic safety footwear. BATES is a leading maker of boots and footwear for law enforcement and the military. Competitors include Timberland, owned by V.F. Corp Inc. (NYSE: VFC), Skechers U.S.A. Inc. (NYSE: SKX), and Under Armour Inc. (NYSE: UAA) with its Valsetz RTS 1.5 boot with zipper military and tactical.
Saucony is an iconic running shoe brand that competes with On Holdings AG (NYSE: ONON) and Nike Inc. (NYSE: NKE). Stride Rite is a well-known iconic brand for children and teens that competes with Skechers. Hush Puppies are casual-style loafers, boots, and sneakers that compete with Deckers Outdoor Co. (NYSE: DECK) brands like UGG. Chaco is a sandal brand transitioning from worn-out in the water to year-round use. It competes with Crocs Inc. (NYSE: CROX). Sweaty Betty is a women's activewear brand offering apparel from leggings to sports bras to running jackets and accessories, competing with Under Armour Inc. and Lululemon Athletica Inc. (NASDAQ: LULU).
Improving Bottom Line While Top Line Struggles in Q2
Wolverine reported Q2 2024 earnings per share (EPS) of 15 cents, surpassing consensus estimates by 4 cents. Revenues fell 27.8% year-over-year (YoY) to $425.4 million, which still beat consensus estimates of $411.2 million. The big revenue drop was a result of tough YoY comps since the company sold its Keds, Wolverine Leathers, and Sperry brands in 2023. Inventories dropped 54.1% YoY to $76.5 million. Net debt fell $271 million YoY to $666 million.
Wolverine World Wide issued raised guidance for its full year 2024. The company forecasts EPS of 75 cents to 85 cents, up from the previous estimate of 65 cents to 85 cents, versus 81 cents consensus estimates. Full-year 2024 revenue expectations were revised to $1.71 billion–$1.73 billion, up from $1.68 billion–$1.73 billion, compared to $1.73 billion consensus estimates. Gross margin is expected to improve 460 bps YoY to 44.5%. Adjusted operating margin is expected to rise 350 bps to 7.4%. Further debt reduction of $175 million would leave the company with $565 million in net debt at year's end.
Wolverine World Wide CEO Chris Hufnagel commented, “A year ago, we began to take fast and bold actions to build a new and better Company – focused squarely on our consumer and our new global brand-building model. Our team has executed with tremendous pace and urgency, driving substantial progress across the business. We've significantly lowered our debt and inventory levels while meaningfully expanding our gross margin, and we're beginning to see proof points of an inflection to growth."
WWW Stock Is Triggering a Descending Triangle Breakout
A descending triangle is a bearish pattern comprised of lower highs indicated by the descending trendline resistance and flat-bottom support. The breakdown occurs when the stock crashes under the lower trendline. However, when the stock surges through the upper descending trendline, then a bullish breakout occurs.
WWW triggered a breakout through the descending upper trendline resistance through $16.38 on Oct. 17, 2024. The daily anchored VWAP support is at $16.20. The daily RSI is stalling at the 62-band. Fibonacci (Fib) pullback support levels are at $16.06, $15.60, $15.13, and $14.47.
Wolverine World Wide’s average consensus price target is $17.86, and its highest analyst price target is $22.00. Six analysts have Buy ratings, and three have Hold ratings. The stock trades at 20.18x forward earnings.
Actionable Options Strategies: Bullish investors can consider using cash-secured puts to buy WWW at the Fib pullback support levels for entry and write covered calls to execute a wheel strategy for income in addition to the 2.33% annual dividend yield.
