Wolverine Sees European Potential

    ROCKFORD — Wolverine World Wide Inc. has established a three-year growth plan that includes expanded distribution of the company’s footwear lines in the European market, the company announced recently at an analysts’ conference in New York.

    President and CEO Timothy O’Donovan said the vision for Wolverine is to become the premier company in the non-athletic sector of the footwear market. A few very large companies, he said, control the athletic footwear sector of the market, whereas the non-athletic sector is a highly fragmented part of the market.

    “We think that presents an opportunity for a company like ours to really emerge as the leader and the premier company in that segment,” O’Donovan remarked.

    The footwear market is not a rapidly growing industry. In the U.S. footwear market retail dollars have flattened out to the $40 million to $41 million range. About 65 percent of company sales in 2002 came from its U.S. wholesale business.

    The company has to take share away from other footwear makers, O’Donovan said, and the company believes that with the brands and programs it has in place it can grow its core U.S. businesses at a rate of about 5 percent to 6 percent a year — which would be several times faster than the overall growth rate in the industry.

    The company would do it with an innovative product like the Merrell brand, by rolling out successful Merrell Shop-In-Shop and increasing other kinds of marketing for the brand, he said.

    The company expects its recent acquisition of Sebago Inc. will boost sales as well. Together, the Merrell and Sebago brands allow Wolverine to compete at the top end of the market, O’Donovan added.

    With the Caterpillar brand, Wolverine intends to aggressively pursue the youth-oriented retailer who appeals to the 18-to-25-year-old core consumer.

    “We’re taking advantage now of our connection with Europe and the very strong product direction that we’re exercising in that market and bringing those ideas to the U.S. market,” he said. “We think that’s a formula to drive success in this market.”

    The Hush Puppies business is making some headway with new products and brand positioning that is gaining traction in the U.S. market, he said.

    The company continues to gain share over the long term in its Wolverine Shoe and Boot business. The Harley-Davidson business continues to expand into other retail venues, but O’Donovan said the company has a long way to go to realize the potential of that brand.

    The Bates Uniform business, he pointed out, dominates the military uniform business.

    “We’re going to take that expertise we’ve developed and translate that into the civilian uniform market, and we think that creates another growth opportunity for the company.”

    The acquisition of the Merrell and Caterpillar businesses in Europe 20 months ago really gave Wolverine critical mass in the European market, but there is still a great deal of untapped potential there, he said. More than 15 percent of Wolverine 2002 sales came from Europe.

    The Merrell brand is in “startup mode” in continental Europe. The European Merrell business doubled in the first three quarters of this year compared with last year.

    The Caterpillar business is fairly well developed in Europe. About half of the 5 million pairs of Caterpillar boots sold annually are sold in Europe.

    As for Hush Puppies, the goal is to develop “a European centric product line.”

    Retail value of the European footwear market is about $51 billion, or about 25 percent larger than the U.S. footwear market, O’Donovan pointed out. He said Wolverine’s focus in Europe would be to go after five key markets that account for about 40 percent of the population.

    Wolverine World Wide sales have compounded at a rate of 10.5 percent over the past decade, he observed. Growth in gross margin, net income and earnings per share have compounded “at some pretty high rates” over that period, as well.

    O’Donovan said one way to measure success is to look at how retailers view the company.

    He noted that last year Merrell was voted the best outdoor brand, as well as the best brand. Furthermore, retailers have voted Wolverine Shoes and Boots brand No. 1 in terms of design excellence for four consecutive years.

    O’Donovan said Wolverine would like to see a sales volume of $1.1 billion in 2006.    

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