Wolverine Worldwide, the parent company of footwear brands Saucony and Merrell, has appointed new leadership to correct course on a double-digit revenue decline for the second quarter of 2023.

The company attributes the drop to a challenging wholesale market, with an inventory glut leading to accelerated cancellations and decreased new order activity.

On an earnings call with investors, Wolverine Worldwide Chairman Tom Long said, “The board recognizes that Wolverine Worldwide needs to deliver improved financial performance, and the company must evolve to build brands that ignite consumer desire.”

CEO Change

In response to the company’s current struggles, Wolverine also announced today it appointed Chris Hufnagel as CEO to replace Brendan Hoffman.

“While I’m excited about the future, our financial update this morning is well short of expectations,” Hufnagel said. “Our second half outlook, as reflected in our updated annual guidance, is disappointing but we are confident that the work we are undertaking will drive significant profit improvement in 2024 and quickly set a strong growth foundation for the company.”

Hufnagel was promoted after serving as global brand president of the company’s active group, which includes Merrell and Saucony.

During the call, Hufnagel said the company needs to focus on being “great brand builders.”

“Right now we haven’t done that across the portfolio,” he added. “For a long time we’ve been very good operators. The world changed and we need to quickly catch up to that.”

He listed promotional pricing, a consumer slowdown, and inventory glut as all factoring into the company’s struggles.

Hufnagel said the company walked itself into a “pretty significant inventory issue.”

“We’re working to extricate ourselves from that,” he added. “We’re caught in that maelstrom right now.”

Merrell Revenue Down

Major outdoor footwear brand Merrell posted a 16% decline to $177 million for the quarter ended July 1.

The company expects the third quarter of 2023 to look worse, with a mid-20% decline. The full-year revenue outlook for Merrell is a high single-digit percentage decline.

According to the company, new forays into hiking and trail running have seen positive “traction.” Hufnagel said Merrell has been gaining market share in the hiking category for 10 consecutive months.

“The challenge there, though, is that we have a hiking category that’s currently contracting,” he added.

Saucony Sales Slightly Up

Running footwear brand Saucony, on the other hand, is losing market share, according to Hufnagel.

For Saucony, which also has a trail running component, second quarter revenue was up 2% to $142 million compared to the prior-year quarter.

The company expects third quarter revenue to decline in the high-teen percentage for the brand. The full-year revenue outlook for Saucony is low single-digit percentage decline.

Hufnagel added that he sees Merrell and Saucony as leaders in their respective categories.

“They’re authentic, they’re original, they’re heritage brands with great tradition,” he said. “It comes down to our ability to as an organization to make a very, very fast pivot to becoming better brand builders.”

Active Group Down

For Wolverine’s total active group, which includes Merrell, Saucony, Chaco, and Sweaty Betty, second quarter revenue is down 10.5% compared to the prior year quarter, to $383.3 million.

Sweaty Betty posted a 7.3% decline for the quarter to $44 million.

Wolverine Q2 Results

Overall, Wolverine posted a 17.3% revenue decline to $589.1 million for the quarter.

Revenue from the ongoing business was $578.2 million and declined 13.8% in constant currency.

Direct-to-consumer revenue of $132.4 million was down 20.3% compared to the prior year.

International revenue was down 6.2% in constant currency to $260.9 million.

Gross margin was 38.7% compared to 43% in the prior year, reflecting the sale of higher-cost inventory due to transitory supply chain costs from 2022, the acceleration of end-of-life inventory liquidation, and increased promotions.

Inventory at the end of the quarter was $647.9 million and was down approximately $97.3 million from the fourth quarter of fiscal 2022.

Looking Ahead

The company expects revenue of $2.26 billion to $2.28 billion for the full year, down 10.7% to 10%.

“The trading environment is challenging, especially in global wholesale channels where order demand has slowed as retailers manage their businesses more cautiously,” said Mike Stornant, executive vice president and chief financial officer.

Bart Schaneman can be reached at [email protected].