8-K: Wolverine World Wide Reports Q4 and Full Year 2023 Results, Provides 2024 Outlook

• Wolverine World Wide's fourth-quarter and full-year 2023 results were in line with previous guidance.
• The company has completed the stabilization phase of its turnaround, focusing on a healthier balance sheet and improved efficiency.
• Revenue for the fourth quarter was $526.7 million, a 20.8% decrease year-over-year, or 18.4% down on an ongoing business constant currency basis.
• Full-year revenue was $2,242.9 million, a 16.5% decrease year-over-year, or 13.0% down on an ongoing business constant currency basis.
• The company's inventory was reduced by approximately 50% year-over-year to $373.6 million.
• Net debt decreased by $285 million year-over-year to $740 million.
• Gross margin for the fourth quarter was 36.6%, a 290 basis point improvement year-over-year.
• The company expects 2024 revenue to be between $1.70 billion and $1.75 billion, a decline of approximately 14.7% to 12.2% compared to 2023.
• Gross margin is expected to be approximately 44.5% in 2024, a 460 basis point increase compared to 2023.
• Adjusted operating margin is expected to be approximately 7.0% in 2024, a 310 basis point increase compared to 2023.
• The company anticipates $140 million in cost benefits from profit improvement initiatives in 2024.
• Net debt is expected to be approximately $575 million by the end of 2024.
• Diluted earnings per share are projected to be between $0.43 and $0.63, and adjusted diluted earnings per share are expected to be between $0.65 and $0.85 for 2024.

Score: 6

Explanation: The sentiment is moderately positive. While the company has faced revenue declines, it has made significant progress in improving its balance sheet, reducing debt, and cutting costs. The 2024 outlook is positive, with expected improvements in gross and operating margins. However, the company still faces challenges in the macro environment and needs to demonstrate sustained growth.

• The company has successfully completed the stabilization phase of its turnaround.
• Wolverine World Wide has significantly improved its balance sheet and cost structure.
• Inventory levels have been substantially reduced, leading to improved gross margins.
• The company has reduced its debt significantly.
• Profit improvement initiatives are expected to yield substantial cost savings in 2024.
• The company is reinvesting in demand creation and technology.
• The company has a clear vision to become global brand builders.
• The company has a focused portfolio of authentic brands.
• The company has a redesigned organizational structure to strengthen brand-building capabilities.

• Revenue declined by 20.8% in the fourth quarter and 16.5% for the full year compared to the prior year.
• The company experienced a decrease in direct-to-consumer revenue.
• Selling, general, and administrative expenses were higher than the prior year.
• The company is still experiencing a loss per share for the fourth quarter and full year.
• The company expects a revenue decline of approximately 14.7% to 12.2% in 2024.

• The company faces challenges in the macro environment, especially in the first half of 2024.
• There are risks associated with changes in consumer spending, competition, and supply chain disruptions.
• The company is exposed to foreign currency exchange rate fluctuations.
• There are risks related to the company's consumer-direct operations and expansion into new markets.
• The company is subject to regulatory and legal proceedings.
• There are risks of breaches to the company's databases or other systems.
• The company faces risks related to strategic actions, including acquisitions and dispositions.
• The company is exposed to the potential effects of outbreaks of COVID-19 or future health crises.
• There is a risk of impairment to goodwill and other intangibles.

The company expects 2024 revenue to be between $1.70 billion and $1.75 billion, with a gross margin of approximately 44.5% and an adjusted operating margin of approximately 7.0%. Diluted earnings per share are expected to be between $0.43 and $0.63, and adjusted diluted earnings per share are expected to be between $0.65 and $0.85. The company also expects inventory to decline by at least $70 million and net debt to be approximately $575 million by year-end.

• Chris Hufnagel, President and Chief Executive Officer, stated that the company is effectively executing its transformation plan and has largely completed the stabilization phase of its turnaround.
• Chris Hufnagel also mentioned that Wolverine Worldwide is a much different company than it was six months ago, with a healthier balance sheet and enhanced efficiency.
• Mike Stornant, Executive Vice President and Chief Financial Officer, noted that the company expects to deliver incremental cost benefits of $140 million from recent profit improvement initiatives.
• Mike Stornant also stated that successful efforts to lower debt are expected to reduce interest expense by approximately $20 million.

This announcement reflects a broader trend in the retail and apparel industry where companies are focusing on streamlining operations, reducing debt, and improving profitability through cost-cutting measures and strategic divestitures. The company's focus on brand building and consumer engagement aligns with the industry's shift towards direct-to-consumer models and personalized experiences.

• Wolverine's revenue decline of 16.5% for the full year is significant, and is worse than some competitors in the footwear and apparel industry, such as Nike and Adidas, who have seen more modest declines or even growth in some segments.
• The company's gross margin of 38.9% for the full year is lower than some of its peers, such as Deckers Outdoor Corporation, which has a gross margin of over 50%.
• The company's adjusted operating margin of 3.1% for the full year is also lower than industry leaders, who often achieve double-digit operating margins.
• The company's inventory reduction of approximately 50% year-over-year is a positive step, as many companies in the industry have struggled with excess inventory.
• The company's debt reduction of $285 million is also a positive development, as many companies in the industry are facing increased debt burdens due to the economic downturn.
• The company's projected 2024 gross margin of 44.5% and adjusted operating margin of 7.0% are improvements, but still lag behind industry leaders.
• The company's focus on divestitures and cost-cutting is similar to strategies employed by other companies in the industry to improve profitability.

• Shareholders can expect improved profitability and potential for long-term growth.
• Employees may experience changes due to organizational restructuring and cost-cutting measures.
• Customers can expect continued focus on product innovation and brand building.
• Suppliers may be impacted by changes in the company's supply chain and sourcing strategies.
• Creditors will benefit from the company's debt reduction efforts.

• The company will continue to execute its transformation plan.
• The company will focus on brand building and consumer engagement.
• The company will continue to work on reducing inventory and debt.
• The company will implement profit improvement initiatives to achieve cost savings.
• The company will invest in demand creation and technology.
• The company will monitor the macro environment and adjust its strategies as needed.

• February 4, 2023: Sale of the global Keds business.
• August 2023: Divestiture of the U.S. Wolverine Leathers business.
• December 2023: Divestiture of the non-U.S. Wolverine Leathers business.
• December 30, 2023: End of the company's fiscal year 2023.
• January 10, 2024: Sale of the global Sperry business.
• February 21, 2024: Date of the earnings release and investor presentation.