Net sales and other operating income increased to $177.3 million, or by 12 percent over the same quarter a year ago.
Net earnings increased 7 percent to $6.4 million, or 15 cents per share, versus $6 million, or 14 cents per share, reported for the first quarter of 2001. Earnings exceeded consensus estimates.
Sales for the quarter were better than anticipated due to demand for Wolverine products, said Timothy O’Donovan, president and CEO. He said there are untapped opportunities for all the company’s brands in Europe, which remains the world’s largest market for better grade, branded footwear.
Wolverine’s recently acquired CAT and Merrell European operations added approximately 10 percent to first-quarter sales volume.
CAT Europe operations, acquired Jan. 16, is the larger of the two businesses and the company’s largest-ever acquisition.
“With the addition of our CAT Europe business, we are moving more quickly to translate European product successes to the U.S. market,” O’Donovan said. “This will give our U.S. CAT business a continuing flow of fresh and exciting new products.”
While fewer than 10 weeks of sales for CAT Europe were reported, the integration process is moving ahead rapidly.
“With our combined U.S. and U.K management teams we are laying the groundwork this year in systems logistics, warehousing and distribution to improve our service level for our CAT Europe business,” he said.
Those services will support the company’s Hush Puppies U.K. and European Merrell growth initiatives as well.
Excluding the new CAT Europe operation, the CAT boot business was down during the quarter as reorders were generally soft.
The Merrell brand experienced significant increases in spring deliveries of new products and reorders of core merchandise, with sales of Merrell Jungle Mocs and Slides continuing an upward trend.
“Nearly every Merrell major account is experiencing results that are running ahead of their planned sales levels,” he said.
“For example, Merrell’s business with one of its largest accounts, REI, was up 28 percent in the first quarter.” Merrell’s business with department stores is up dramatically, particularly with women’s footwear, he added.
“We feel very good about our ability to meet or beat our 20 percent planned Merrell sales growth for the year.”
In addition to the Merrell brand, the Harley-Davidson brand and Wolverine’s Hush Puppies international wholesale and licensee operations posted strong double-digit sales increases for the quarter, said CFO Stephen Gulis Jr.
But Gulis noted that the increases were offset by softness in the U.S. Hush Puppies and Caterpillar businesses. Additionally, the company’s slipper and leather operations sales slipped.
Harley-Davidson sales were up in the quarter. Harley-Davidson continues to have success in expanding women’s product offerings and diversifying the product line beyond boots.
During the spring season, sales of Harley’s women’s sandals increased threefold from 2001 levels. Harley also is expanding distribution to include more regional department stores and better grade specialty stores.
O’Donovan pointed out that in 1999 the company’s Merrell, Harley-Davidson and Caterpillar businesses constituted about 21 percent of sales volume. This year those brands will make up about 40 percent of the company’s sales volume and an even larger percentage of profits due to their higher gross margins, he said.
Wolverine footwear group sales for the quarter were about even with year-ago levels. Stanley boot sales and overall Hush Puppies sales were down. Wolverine is, however, seeing positive sales results on a new women’s Hush Puppies product launched last fall, he noted.
With consumer loyalty to the Wolverine Boot brand, the company is beginning to make progress in expanding the brand beyond its core work and sport goods to rugged casual footwear, as well as rugged casual and work apparel, O’Donovan said.
“While these line extensions are still in a very early stage of development, we believe they both have significant long-term potential.”
Compared to last year’s first quarter, total debt has been reduced by $5.5 million while cash on hand increased $4.5 million, Gulis said.
Wolverine is generating large amounts of cash and should continue to do so, O’Donovan added.
Over the past three years, the business has produced more than $170 million in cash from operating activities. He said Wolverine likely will produce more than $60 million in cash from operating activities this year.
The company expects that full-year sales and earnings will meet ranges of $820 million to $830 million and $1.12 to $1.15 per share, respectively.