ROCKFORD — At the end of 2004, Wolverine World Wide Inc. CEO Timothy J. O’Donovan made about as strong a forward-looking statement as federal law allows: The company in 2005 would see its first $1 billion sales year. With the results from the third quarter of this year just in, the company is on track to not only meet but to surpass that goal.
Revenues for the quarter were up 7 percent from the third quarter of 2004, reaching a record level of $279.1 million. Earnings were up sharply as well. The 42-cents-per-share earnings increased 13.5 percent from last year’s third-quarter performance.
This quarter adds to the successes of the first half of 2005. Revenues are just shy of $740 million, up 8 percent from the first three quarters of 2004. Net earnings have risen more dramatically, up 19 percent to just over $54 million.
“This quarter’s record performance reflects our successful global strategy, which is focused on a strong portfolio of consumer brands,” said O’Donovan. “Our international businesses contributed significantly to the quarter’s revenue growth, reporting nearly a 17-percent increase.”
That is consistent with the international performance over the past several quarters. O’Donovan also stated that three of the company’s operating groups — the Hush Puppies group, the Heritage group and the Outdoor group — contributed double-digit earnings gains to the record quarterly performance.
Expecting a strong fourth quarter, the company revised its earnings and revenue expectations for the remainder of the year. O’Donovan said that the revised EPS expectation will fall in the $1.26 to $1.28 range. He estimated that gross revenues for the year will be between $1.05 billion to $1.06 billion, an increase of around 6 percent from 2004.
O’Donovan also gave a sneak preview of the company’s 2006 plans. He said that the company expects around 7 percent revenue growth, offering a 2006 estimate of $1.10 billion to $1.13 billion. Despite plans to spend $4.5 million on new growth initiatives, the company is forecasting EPS growth of 8 percent to 14 percent, to around $1.40 per share.
Key among those growth initiatives is Wolverine’s plan to add a complementary line of apparel to its Merrell brand. This outdoor brand has been among the most successful for Wolverine since the company acquired it in 1997. The clothing line will be introduced in the fall of 2007.
Despite the strong performance and suggestions of more to come, the stock’s price has fallen by more than 20 percent from its 52-week high of $25.60 in June. Although the company is still growing, it’s not moving along at the double-digit pace seen in 2004. That perceived sluggishness was enough to scare away some investors.
O’Donovan said that the revenue and earnings growth are consistent with the company’s expectations. The same can be said of next year’s forecast.
“These 2006 estimates are in line with our stated long-term financial objectives of annually growing revenue in the mid to upper single-digit range and generating double-digit earnings per share growth.”
The stock is now hovering around the $20 mark.