Direct-to-consumer revenue was up 4.5 per cent to $160 million, the company said in a press release.
US-based Wolverine World Wide, Inc has reported a revenue of $691.4 million in the third quarter (Q3) of fiscal 2022 (FY22) ended October 1, 2022, representing a growth of 8.6 per cent versus the prior year and growth of 12.2 per cent on a constant currency basis. Its international business was especially strong, up 33 per cent to $303 million.
The company’s gross margin was 40.2 per cent in Q3 FY22 versus 43.2 per cent in the prior year and reflects a higher mix of international distributor sales that carry relatively lower gross margin but operating margins on par with overall business. Its selling, general and administrative expenses were $219.0 million. Adjusted SG&A expenses of $216.4 million or 31.3 per cent of revenue, was 130 basis points lower than the prior year.
The company’s inventory at the end of the quarter was $880.9 million, up 113.8 per cent compared to unusually low levels last year. Higher freight, handling, and other inventory costs, represent approximately 15 per cent of the increase. In-transit inventory of $281 million was up from $57 million last year. This heavy in-transit position was caused by inland logistics congestion and limited capacity in distribution centers.
Net Debt at the end of the quarter was $1.35 billion and liquidity was $400 million. Wolverine World Wide’s bank-defined leverage ratio was 3.4x. This leverage position is a peak for this fiscal and relates mostly to the increase in inventory in the quarter. In the first month of the fourth quarter, net debt and liquidity have improved by approximately $100 million. The company expects to generate $250 million to $300 million of operating free cash flow in the fourth quarter, bringing its bank-defined leverage ratio down closer to 3x.
“While we were pleased to deliver third quarter revenue growth of 9 per cent and 12 per cent on a constant currency basis, both revenue and profit came in below our expectations reflecting ongoing supply chain disruption, heightened promotional activity at retail, and deteriorating macro conditions. We are facing congestion in our own US distribution centres and inland transportation networks and many wholesale customers are currently dealing with heavier inventories and warehouse constraints. These headwinds have resulted in certain shipping delays that impacted most of our brands. Sperry’s performance was further impacted by softer-than-expected trends in the boat category and a sluggish start to boot sales due to unusually warm weather,” said Brendan Hoffman, Wolverine Worldwide’s president and chief executive officer.
For full year 2022, the company expects revenue to be in the range of $2.670 billion to $2.695 billion, representing growth of approximately 10.6 per cent to 11.6 per cent. Foreign currency exchange rate fluctuations are expected to have approximately $76 million (or 3.1 per cent) negative impact on full year reported growth. Gross margin is expected to be approximately 41.0 per cent, assuming an increased promotional and markdown cadence and a higher mix of lower-margin international third-party sales in the back half of the year.
Operating margin is expected to be approximately 9 per cent and adjusted operating margin is expected to be approximately 7 per cent for full year 2022, reflecting an increased promotional costs and higher inventory handling costs. The effective tax rate is expected to be approximately 21 per cent.
Wolverine’s diluted earnings per share for full year 2022 are expected to be between $1.90 to $2.00 and adjusted diluted earnings per share are expected to be between $1.41 to $1.51, representing a decline of (24.1 per cent) to (18.7 per cent). Diluted weighted average shares are expected to be approximately 79.9 million, the release added.
For Q4 2022, the revenue is expected to be in the range of $650 million to $675 million, representing growth of approximately 2.3 per cent to 6.2 per cent. Foreign currency exchange rate fluctuations are expected to have approximately $28 million (or 4.4 per cent) negative impact on fourth quarter reported growth.
Fibre2Fashion News Desk (KD)
