Wolverine World Wide sees growth potential for its Saucony and Merrell businesses as it presses the gas on divesting slower-growing brands such as Keds.
Christopher Hufnagel, who was named global brand president of the company’s active group in November, pointed to the potential for strategy sharing among the division’s brands. The active group includes Merrell, Saucony, and Chaco.
“I give a lot of credit to how we’ve come to segment the business,” Hufnagel said at ICR. “I think there are tremendous synergies that we can learn within the active group. We’re already talking about how we can share innovation, materials, color trend information from a product standpoint. For marketing, I think there’s a lot we can learn from demand creation. There are some things that Saucony does tremendously well, that I’ll take to the Merrell business. And there’s things that I think we do in Merrell today that we can help inform the Saucony business.”
Strong Product Pipeline at Merrell
Hufnagel, who previously served as president of the Merrell brand, along with the kid’s group and global licensing, highlighted the Merrell brand in particular at ICR.
The hiking shoe brand has “had a good run,” Hufnagel said.
“I think Merrell has the strongest product pipeline it’s ever had, and I think in 2023 we’ll have some of our best introductions we’ve ever had,” he said.
12 Different Brands, 12 Different Directions
The insights from the executive team during the recent ICR conference come as parent Wolverine World Wide continues to refine the business under President and CEO Brendan Hoffman, who took on chief executive duties at the end of 2021.
“When I joined and started to work inside the company, I realized that it’s both a strength and a weakness the way we were organized because we had 12 different businesses, often moving in 12 different directions,” Hoffman said at ICR. “And it was really becoming complicated and we weren’t very agile. So, as I was thinking about moving into the corner office, it was with an eye towards, how could we organize the business differently?”
The CEO reorganized the divisions with the active segment now including businesses such as Merrell, Sweaty Betty, and Saucony. Other divisions include the work boot group and turnaround group, the latter of which includes Keds and Sperry.
The Decision to Shed Keds
Wolverine World Wide disclosed in December plans to sell or license Keds and Wolverine Leathers as it seeks to remove “low-profit contributors” from its portfolio. That announcement also came with confirmation the company was laying off an undisclosed number of employees in a move it said would help generate some $30 million in savings this year.
Executive Vice President and CFO Mike Stornant said earlier this month those sales efforts for Keds and Wolverine Leathers are now in “very active processes with potential strategic buyers.”
The Keds business generates less than $100 million in sales, with low profit margins.
Hoffman described conversations internally about the future of Keds and its growth potential before the decision was made to place it on the selling block, a move he said was “long overdue.”
“Part of the conversation we had to have as a senior team was, ‘What’s it going to take to double this business? What investment would we have to make to get this to be a $200 million business? And, is that really worth it, considering the opportunities we have in Saucony and Merrell and Sweaty Betty where we can grow $85, $90 million with far less of a lift?’ And, so, I think that was, in the end, what triggered the decision,” the CEO said.
He pointed to the current operating environment and competitive set when further adding, “We can’t afford to invest in all these businesses we have.”
Wolverine World Wide provided preliminary results for its fourth quarter, including $2.7 billion in revenue, up 11% from a year ago.
The company expects to release final results for its fourth quarter and full year in February.