Wolverine Worldwide, parent company of Merrell, Saucony, Chaco, and Sweaty Betty, announced layoffs and other cost saving measures to save up to $215 million as the company grapples with inventory and wholesale challenges.
The measures are part of Wolverine’s transformation strategy to help stabilize business and enhance financial performance.
“We are taking decisive steps to stabilize the business by divesting non-core assets, paying down debt, reducing inventory, and right-sizing our cost structure,” said Chris Hufnagel, president and chief executive officer of Wolverine, in a conference call with investors.
Other Major Changes
Wolverine’s revenue for the third quarter ended Sept. 30 was $527.7 million, down 24.7% in constant currency compared to the prior-year quarter.
Aside from the layoffs, Wolverine also announced several key changes in connection with the organizational redesign.
Wolverine is adding a “strategic center of excellence” called The Collective that includes an innovation, insights, and trends team, an internal creative and public relations team, and an in-house creative production studio.
“We’re not firing on all cylinders as an organization,” Hufnagel said. The center of excellence is intended to help the company design “comfortable, amazing, awesome products,” he added.
In addition, a new global licensing function is intended to oversee and manage the company’s licensed business.
Wolverine will also add a global planning function to improve integrated demand, inventory, and supply chain management, while enhancing the company’s ability to respond to shifts in consumer and market dynamics.
On top of that, a new set of advanced digital product management, design, and development tools is intended to further enhance the company’s product capabilities and efficiencies.
Finally, the company is consolidating its North American commercial structure to align its Canadian operations with those in the United States.
The “global workforce restructuring” the company announced Thursday comes after announcing in September it will sell its Hush Puppies intellectual property in China, Hong Kong, and Macau as well as its Wolverine Leathers business. Wolverine is also “pursuing strategic alternatives’ for the Sperry brand.
In August, Wolverine announced it would close its Boston headquarters by the end of the year.
This followed Wolverine selling the Keds brand to Designer Brands earlier this year.
Merrell Down 25.5%
Footwear brand Merrell posted revenue of $157 million for the quarter, down 25.2% in constant currency compared to the same quarter last year.
Hufnagel said that the company’s biggest brand is coming off the best year in the brand’s history in 2022. He pointed to Merrell’s Moab 3 hiking boot as a key product for the company that’s “seeing some good sell-throughs at our key partners.”
“But in total, we are certainly underperforming,” he added. “Some of the Merrell challenges are self-inflicted. We did not manage the Moab 2 to Moab 3 transition well.”
Hufnagel cited supply chain issues as one factor.
“But that transition of the No. 1 hiking boot in the world has certainly been problematic,” he added.
Hufnagel went on to cite the outdoor category overall as experiencing “headwinds.”
“At the same time, from a brand standpoint, I think the brand is very healthy,” he said.
Hufnagel also pointed to the Merrell test lab as a “fantastic product innovation incubator,” citing the Agility Peak 5 trail running shoe as an example of a strong product that resulted from that.
“Our ability to move beyond the Moab, move beyond core outdoor is going to be critical to Merrell’s success in the long term,” he added.
Wolverine expects Merrell to post a high-teens percentage decline for the fourth quarter of 2023, and to end the year with a decline in the low teens.
Saucony Down 14.6%
Footwear brand Saucony’s revenue was $116.4 million for the quarter, down 14.6% in constant currency compared to the prior-year quarter.
Hufnagel acknowledged that there are some “very hot players” in the same category as Saucony and that it’s “ultra-competitive.”
Hoka is one brand that is very hot. Hoka’s Q2 sales increased to $424 million, up 27.3% compared to the prior-year period.
“Saucony arguably competes in the most competitive market of all our brands,” he said. Hufnagel added that he’s encouraged by the product pipeline he’s seen for 2024, including the Ride 17, the Triumph 22, and the Hurricane 24 shoes.
“You’re going to see our investments behind those core product programs for next year,” he said. “There’s a much bigger market opportunity for Saucony.”
Wolverine expects Saucony to post a mid-teens percentage decline for the fourth quarter of 2023, and to end the year with a low-single digit decline.
Active Group Down
In the company’s active group, which includes Merrell, Saucony, Sweaty Betty, and Chaco, revenue for the quarter was $328.6 million, down 19% in constant currency compared to the prior-year quarter.
Sweaty Betty posted revenue of $45 million for the quarter, up 11.1% in constant currency compared to the same quarter last year.
“The Saucony and Sweaty Betty businesses have stabilized and are showing signs of improvement,” said Mike Stornant, executive vice president and chief financial officer of Wolverine. “However, Merrell continues to operate in a challenged outdoor category.”
Wolverine Q3 Results
Wolverine’s companywide revenue for the third quarter ended Sept. 30 was $527.7 million, down 24.7% in constant currency compared to the prior-year quarter.
Gross margin was 40.8% compared to 40.2% in the prior year, with the increase coming from profit improvement initiatives and channel mix, partially offset by the sale of higher-cost inventory due to transitory supply chain costs from 2022 and a higher mix of closeout sales in the quarter.
Wolverine reduced its full year outlook to $2.19 billion to $2.20 billion, a decline of about 13% versus the prior year. That’s down from the prior guidance the company issued in August of $2.26 billion to $2.28 billion.
Wolverine also reduced its fourth quarter revenue outlook to $515 million -$525 million.
Bart Schaneman can be reached at firstname.lastname@example.org.