WWW - Earnings call transcript Q2 2018 | Wolverine World Wide, Inc.

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Operator

Good morning, and welcome to the Wolverine World Wide earnings conference call. All participants will be in a listen-only mode until the question-and-answer session of the conference call. This call is being recorded at the request of Wolverine World Wide. If anyone has objections, you may disconnect at this time. I would now like to introduce Mr. World Wolverine for Harris Wide. Mike Mr. begin. Harris, you may

Michael W. Harris

quarter Good call. second morning, welcome to and XXXX conference our

at call our are our many available the morning, second and can and On quarter today it Financial news we President, corporate Executive Chairman, Chief viewed WolverineWorldWide.com. The results be and sites Officer announced Chief of our or Mike for Earlier XXXX. on Stornant, Officer. Senior website financial President Blake Vice from this Krueger, the our is release

If a Tyler would a press call will of XXX-XXX-XXXX. Comments WWW titled you wolverineworldwide.com, tables and to prefer Relations' will GAAP. copy on is additional of webcast the attached the accessible corporate There some you include morning's with disclosures Tables QX the within by the these have under XXXX release. document to during sent the The non-GAAP top body these today's directly, news posted at reconciled the our non-GAAP disclosures that corporate release This Call Deur earnings link website, disclosures release included at non-GAAP please were to our call Supplemental at of is reconcile to website page. the clicking disclosures. document tab Conference Investor

in best performing that we currency this the in on We to Defense isolate variable. to of brand Sebago global marketplace. Also, Before changes the adjusts businesses speaking closures, business Stride store which wanted revenue, call on model, revenue impact revenue, Blake to primarily XXXX, foreign believe transition I are comment of Mike to and over the a and in I underlying When turn and and the Rite our the sale our licensed our of QX provide context the disclosed results, to to of growth underlying how of impact Blake better information. some business. refer reflects separately beginning for recall additional to retail will Department the

costs, incremental In costs. World and providing markdowns call foreign its and the to divestitures related which other forward financial for of U.S. I'd and organizational adjusted be and made we'll like results, adjusts inventory impact operations restructuring remind environmental exchange, closures, Wolverine addition, looking transformation other conference regarding related during projections securities you that today's Wide statements and are predictions also laws. to under and store

could must caution over to any we result, These differ prediction a that, With are materially. to turn the company's results Blake? are a said, with filings in risk our there important like As and that in being press or the identified as cause you number Krueger. SEC of to releases. call projection, actual factors factors I'd Blake that

Blake W. Krueger

joining Thanks, growth million, of for constant X.X%. on Mike. underlying morning, this a quarter Earlier X.X% Good representing thanks us. second $XXX everyone, revenue basis. reported currency we morning, and of

and We largely $X.XX, first for over XX% our increase compared with last also expectations, year, line was reported Revenue in growth record diluted earnings adjusted quarter. a second a quarter. per the represented the share to and accelerated of

at strong and Merrell earnings especially we're quarter, excellent rate. by and with Merrell, performance that and with from leverage. the impressive pleased was growth Our highlighted gross the Heritage the to margin and a exceeded broad significantly Group, growing for expectations based margin contributed expansion Sperry our Earnings high-teens operating

first the raising year full of We a performance. are again for half our as our result earnings outlook

This the but from further review consumer global me in growth Puppies. first, driven digit Jungle towards a TERRAIN, underlying robust MQM product up Chameleon, brands. offset at rate, compared I'll an quarter, of to by we growing revenue executing key X.X% results partially groups Merrell's quarterly rate, single and minute, and quickly quarterly of plan, impressive Moab, territories, increases Cat was progress territory categories its The growth details all Siren Underlying prior the broad the quarter. Hush low currency. was based by Hike, refreshed largest progress the impressive Group. in a Lifestyle made and strong constant Chaco for across at collections. driven revenue flat representing agenda. by sales & by our Merrell's Encore let several and on and driven saw high-teens With highest During share Outdoor the the Moc, in growth Life regions, grew X.X% collections. growth Outdoor years. Starting growth, year, ahead our the with declines here also grew direct-to-consumer. our for was brand Merrell the essentially rate

growth including the our higher developed QX, Merrell the territories, impressive some pace, which initiative, a to mix For FORWARD Editor's is the XX sales our exceptional in Shape all Jungle and Footwear Trade Rouge, low digit introducing of Shoes global New Moc drive strong Show Choice gross received product significant Backpacker new (XX:XX), sell-through recognition Merrell well the revenue through at Top WAY Magazine transformation first from of adopt with was for Best Show, helped Wayfarer News. trends. by excellent, Merrell deliver full Best brand in a and the for being the new priced including Magazine's consumer for driven growth accelerated to Five brand This margin. was to the Award from momentum to recent XXXX. Outdoor growth quality retail model, for at improvement is double an Thermo and high single across is Award positioned Retailer of

will investments, Merrell and accelerated the the supported for digital now focused quarter. of late This media stories remainder the trend by brand quarter, more in half. impacted the introductions which of marketing fresh of season, an as quarter, drive of in to weeks spring social especially by in in second was cadence the back the areas; its sandal a was online below half start the second is all help compelling its and driving of growth the a revenue delivering increased several be in half. weakness will the this product expectations Chaco's improved new strong brand concentrated For product year, to business flow on and and during of the frequent with first the

trends rate for high at quarter in by our just and growth Group strong a year. Underlying the Moving down currency low declined offset U.S. the Group. brand, to decline These growth along and business. gains. women's in single second performance prior digit driven the the digit collections. categories X% Kids delivered consecutive at Asia-Pacific in X.X%, positive the revenue the rate for a casual with growth Saucony sandal Sperry the Lounge Boston also Boston its accelerated Keds very over growth of led Sperry's the by good in at And quarter, digit our expectations. constant growth, versus XX%. This Sneakers business. of growth were and single the and Crest, II represents and regions, during e-commerce by double quarter experienced Striper U.S. exceeded grew with strong

important Runner's the trend and Ride XX% recently We're grew declined Health continue second the and the performance challenges share. gaining featured single line. its half improved Although to growth e-commerce, first us. Trail are category Saucony XX%. market the our Sperry future attractive more in forward the the core our performance growth the the drive and the high-single the from very over performance magazine be into we World Award was growth group boat also high a U.S. continued EMEA including and Shoe And driven expect in look by by and magazine. be Keds' the boat digit quarter. the from will The within was growth results were Saucony EMEA e-commerce by for digit region. region, in continue in with to product Champion nearly Saucony half. expectations underlying much Editor's driven their in and issue. better quality to last Kids These Women's received growth than The expected, from category. line issues In We the Award revenue in Best business Choice was by introduced impacted September/October referenced received stable largely growth to behind QX, primarily ISO encouraged business in Sperry's quarter, with now delivery impressive

year-over-year new brands see our we're innovative collections. the in were strong tools, I'll the and from up Wolverine, for revenue meaningful rate the several the In at take mid-teens successful AGENDA, market launch better driven our The in In achieved across second agenda all to experienced and HYTEST WAY apparel brands continues number especially Heritage the Group. including to line compared Up progress portfolio, advantage as We second We've We're as constant brand key in rate. trends year, and our helping The in Work a international on its relevant multiple Bates. new making capabilities. Wolverine revenue drive was in up year-over-year across revenue and more top expect is fast of GROWTH by Merrell digital-direct Ranchero, provide accelerated GLOBAL sold to the growth the The and quarter. for engine, new strong and of to recent was was a also group U.S. channels. growth is digits, with growth. FORWARD improving half Wolverine of Wolverine tools that product one grew a digit where for closing grew and introductions was of well Cat, this the our transformation of initiative the to against Bates investments quarter. it in the including three to these benefits growth position update the now double to category single elements across already and the Anne perform excited our the high quarter X%. full growth. announce HYTEST been a an and having product the President, new collections, Underlying creation Saucony related all and Saucony prior grew focused the share a the on category mid-single pleased general, first processes in digits, source performance. year Harley-Davidson on brand well offense which capabilities the joined Work Floorhand of I-XX, Merrell, hid impact brands X.X% which a at both group brand currency Cavassa business. the

these to million XXXX. be continue approximately investments for the full incremental We $XX year to expect

our areas pool model. to to a a product investments drive of QX development and on drive element GROWTH helping focused with a first deeper talent AGENDA more creation growth The in new process engine is GLOBAL more product the streamlined powerful

pipeline. product in new product faster resources to create development, more line areas product added marketing robust we've innovative, and Specifically, the management a and

brought commit investments content, ability expect with growth incremental two XX% focused consumers years, this XX% our e-commerce on to digital-direct our half more market To compelling through connect our prospecting new social efforts area. We to about basis. to of business during the fastest reflected over growing last investments the XXXX of a owned to improving in channel advance optimizing our been offense, which capabilities, to are has our in frequent our on while first are These nearly XXXX. with accelerating

We are and spent XXXX a retail positive our sell driving investment on of our to planned overall XX% fresh on also digital-direct is business content and offense. our our enhanced seeing partners. be through Approximately brand is incremental at as interest impact

company's as products attacking are nearly our international international with Lastly, accelerated by significantly XX% deliver to We the our we nearly and a XXXX anticipate of key incremental our The help investments spending GROWTH brands international have gross operational very the anticipate during revenue first half where revenue our significant China. opportunities in first company more GLOBAL and earnings increase drive in strategic to resources key our AGENDA. normal growth the global the relevant The to made expansion the half the and two pleased over our the of business and with We digit to retail line operating and of I'm support million to outlook remain earnings the directly of and added single teams, half transform into margin drive XXXX this back to expectations strategy make accelerated exceeding XXXX. last to landscape. leverage to international in new the regional, efforts and incremental performance, year our investment markets high especially year. this in in growth we growth enhanced committed entering margin to investments global team in support years growth, $XX part year. with reflects

We who'll are to our I'll now and of performance to over Senior further portfolio. brands With invest XXXX add remainder into call drive now turn Officer, Stornant, Financial commentary Mike in our additional and our organic an the provide enviable the for the XXXX. the that, and future, position President financial new expectations to Chief QX Vice insight on for Mike? growth,

Michael D. Stornant

for Thanks, all Blake, and joining you us thank today.

We of pleased quarter better accelerated leverage. our which quarter revenue very another with earnings results, growth and are second than expected reflect

Our from momentum introduced underpinned initiatives, tools developed brands recently gaining growth are the as transformation. which part capabilities new our are and of by

We are revenue early growth leverage. impact earnings certainly the on encouraged of initiatives by and these

over During achieved our half margin of first the of delivered operating and revenue we and adjusted well expectations. XXXX, our plan XX% ahead

and Reported X.X%, changes basis. In delivered revenue underlying X.X% exceeded revenue expectations due to growth closures teens X.X% the quarter on quarter, million, delivered Merrell company for the our versus year growth Merrell and single-digit XXXX. earnings. constant the in growth. prior and in made impact Sperry second portfolio delivered high the the Sperry revenue declined a in and of revenue $XXX.X QX, store currency low growth the growth of both resulting During from underlying

implementation and fueled performance portfolio. has brand acceleration the the of our our in two beginning of impact growth rest the model to growth of largest brands of expected, As our is

FX earnings in in prior share benefited transformation XXX year. $X.XX year. loan Gross a the early margin over an portfolio points of leverage margin our quarter. XXX point was basis the made XX.X% mix and intercompany was quarter a per expected related and closeout basis XXXX, share in ahead last compared of growth points from improved $X.XX QX initiatives. quarter. saw to the included business the changes a portfolio from from our well earnings XX to the impact XXXX in Adjusted provided remeasurement was investments very our per adjusted mix and to and related store XX.X% from strong meaningful prior diluted represents closures. Reported year, of Second the strong operating general of excellent product over compared of $XX prior growth gain Most expectations basis better margin in expansion benefits and XXX to initiatives, in the year. despite which sales QX. basis margin negative Adjusted Gross about was points of $X.X quarter benefited brands gross selling, cost compared than administrative lower improved in the million the higher gross decreased and million margin XX.X% e-commerce certain and to $XXX.X in expenses to expansion million incremental compared growth from The from one-time

in to We higher to of million third track on spend expect quarter remain the initiatives. incremental slightly growth investment XXXX to in spend a level fuel $XX up and

items. second from The effective quarter other impact and XX.X%, was contributions tax includes discrete the rate which favorable pension voluntary

remains our and as rate the range continued this improving inventory with to of executed intently we accelerate progress year. XX% closures recent the QX, to have to initiatives, growth. year down expect last expect We XX%. efficiently $XX in to to million, and rate decrease end capital. second in balance in even The on revenue the on company or speed were be made At improvements working Transitioning sheet, now the along portfolio of store tax to of normalize SKU full XX%, nearly market inventories managing majority with changes attributed productivity, we half position, further focused our our the driven the

improvement and $XX flow, $X.X drive as operating at shareholder stock, improved and Moody's million repurchased in upgrade year-to-date of cash slightly million capacity billion growth. the in ongoing $XX.XX. actions the $XXX our future debt of a invest inventory quarter support and intended $XXX average bringing metrics in to recently with company ended levels $X.X brands and to Total We performance. total our million response cash of expect from increase QX, received an sheet million to over execute price total in QX In balance ratings return. our QX We to we to to

for our of remainder cover outlook the me updated XXXX. let Now,

ongoing fiscal in expect quarter. to to to of original the XXX gross year initiatives now expand Full billion of revenue part in We implemented basis The range approximately in reported points, growth up $X.XX cost from gross is XXX chain be expected third margin our pricing result improvement transformation. of outlook. margin the the is a other $X.XX product direct reductions, expected expected margin introductions, successful, with and product underlying to higher XXXX billion supply by as of discipline, X%

incremental more matter. of than the We in of to portfolio growth. challenging We margin million lower expect recognized moderation are underlying comparisons initiatives were the growth at to activation in other the is in from manage new on $XX the last HX $X.XX XX.X% XX.X% of are to to of up deliver The certain cost $XX making our our $X brand share the half half earnings QX approximately of remain to legacy range expect $X.XX, remediation range. benefits and and growth be net per in committed $X.XX operating We changes accelerated adjusted we is now high environmental to expected XXXX interest of million. expansion range mid-single unchanged approximately expense million of margin operating estimates the expected of FORWARD increase XXXX. remain to pace due model investments and range XX% WAY to other to in diluted an Including second million be working, to XX.X%, impact XXXX Full digit expected in to of future margin that are remain gross These activities XX.X%. fiscal XXXX. per transformation cost now to to $X.XX. drive to assessment. Reported the second company's year XXXX now be including XXXX to from million of expected the and share $XX adjusted these investments, year end $XX earnings of including over Reported diluted

operator. for XX% time our the over adjusted stated and expect of the exceed will will stronger we shaping to the fiscal operating for expect well nicely that We Thanks even we up goal your margin stage morning, is it set and this call ahead XXXX XXXX. schedule. turn to now an

Operator

session. King [C.L. now will answer (sic) & from go the Steve We Associate Please comes King Associates]. ahead. C.L. and question Marotta begin from question our And first

Steven L. Marotta

Do Good congratulations on the and second morning, Blake, you your per last expect mean little guidance. and margin you Can expect my great that Can also line comment, talk you bit? just an a growth? little Do a you bit on expand why top earnings would you you on stronger a Mike, growth, mean quarter stronger even XXXX? expansion? an XXXX. about even updated

Michael D. Stornant

look you mean, transformation the gain we I year portfolio. improvements early think well been and FORWARD when the work, the benefits expect that innings still across model as Sure. the at many improving quarter. from that each we've as of the progressively implementing of performance this I to WAY Steve, We're had brand the growth it's in we're new

model So the earnings performance business to ongoing invested both bear we revenue on we'll and that in just sort to time contribute have in this well momentum of XXXX. And out would new the and the we're seeing think expect that will performance. I in

Steven L. Marotta

helpful. that's you, Thank

growth can Merrell now? the setting the to portfolio's a on, bit on similar a growth talk model, for relates when when on bit about is just in it they new brands others others this little to the you went gone and the first performing little stage when on what other is As brand go and will Merrell, have one

Blake W. Krueger

later, may XXXX. Merrell in that. though our other probably to our brands an in had followed Steve. Merrell even brand quarter, of go of of model started after number Yeah, brands model. of attributes on and excellent some adoption be lagging are A quarter a lagging the all the or they growth two this Sperry

of kind still it's early said, Mike innings. as So

brands these think in to I same and capabilities. in Merrell adoption we're skill is sets seeing of rest processes accelerating success of also and some their and of our the the discipline encouraging

Steven L. Marotta

expected both of fourth Okay. Is you to third quarter? growth again Sperry's delineate quarter? Sperry Can Merrell in in half And is in maybe be, Merrell fourth you continued between third if that and and the year? growth and brands. the as obviously, be helpful. back digit could the there's evenly You And going more the mid-single that'd well, split delineate mentioned

Blake W. Krueger

detail QX-weighted. think QX and half we Yeah, I even I fact second you Merrell recall, obvious don't great a Even last bit maybe good out Merrell given as good well. for mean, of Merrell, that of harder reasons, second though, a normally by expecting as kind year. we're little more half give a that expecting we're out but had a that comparison, Sperry of very And brand

see to top accelerated in continue Sperry. We anticipate line growth, line top – growth

for a QX, As of you We going that half Sperry. until growth year. got momentum continue couple of quarters, know, earlier expect frankly, we really to to from hit year the didn't back expected growth but this I than we the is think

Michael D. Stornant

then media that's their these growth, Sperry, quarter. of women's to of be And great to strong especially demand year and business going in introduced very only market product the would collections as said, creation for think our the as number spend really Merrell and the you kind a are source of into back little They've for both for well that shifted new half for so Merrell of ahead and introductions. is later new the lot some the know, towards into of But encouraging, the year that of being a Blake I Merrell the QX here Yeah. schedule. I as strong. global for performance of is and with very Sperry, fourth is a boot for add align

the those both brands. there this product where for of and year, our in so big for are this later the initiatives new brands on year performance the investment tap and So behind between initiatives, and that see both momentum and we the continued we've far that's seen support

Blake W. Krueger

and not but both news we're encouraging growth performance's we Gym, side, and the Merrell Work, Lifestyle saw we the to for strong just on Hike, Nature's those continue. QX is on side, of performance seeing in really The expect

Steven L. Marotta

One last... Great.

Blake W. Krueger

Thanks, Steve.

Steven L. Marotta

...follow yeah, the expectations the the The year? follow in total for quarter sales one up second – last penetration digital up. in and

Michael D. Stornant

to e-com accelerate. our Yeah, business continues

as were XX% recall, So you we approaching last year.

our up half business almost the about XX%, to far the is So continuing the XX%, back of and see year first eCom we into that through half. accelerate

Steven L. Marotta

you. Thank

Operator

next our Jim from comes And question ahead. from go Duffy Please Stifel.

James Vincent Duffy

Thank you. Good morning, guys.

Blake W. Krueger

morning. Good

James Vincent Duffy

Question XQ. and hear you digital the rates quarter, the growth in also specific give second to I didn't international growth rates?

Blake W. Krueger

Yeah, I mean...

James Vincent Duffy

you the would, talk would growth if in And you about brands each? leading

Blake W. Krueger

was mean, overall, brands – XXs. I growth Yeah, the I think our e-commerce our in low

Michael D. Stornant

XX%. Yeah.

Blake W. Krueger

our in Maybe Merrell, About brands businesses, XX% in smaller investments on bit QX. QX. Sperry, but had Yeah, strong as their our a growth. frankly planned to second Certainly, with eCom the in double growth that digit delivered accelerate direct we same the especially. half. We Keds, Sperry from little expect great and biggest base

especially business, of e-commerce we're a on benefiting own segment retention, content, retail look our of is partners drive but their online our Because least also to some a lot the creating business. doing partners. things at we for the across the So, focusing landscape, on growth our domestic is fastest retail when lot continuous

benefiting investments are the So, a bigger of product steady content, consumers and business. more to also really continuous is lot on tell money a flow, the and their story

James Vincent Duffy

for of well. very content Great. to Can been an you you that maybe spoke example And content. remarks enthusiastically Blake, successful about that's as you? in of ask the some prepared the wanted give I you your about

Blake W. Krueger

It world, the Yeah, brand. less revenue sandals, around it something the I but the Tie-Dye of out top New Chaco you it it creates the line In sold some for week. interim Shop line Print mean, than like covers range. on could interest. creation Yes, the and really today's brand which excitement an Chaco, drives in have wide a creates product growth,

much example the must probably was, impressions, reached collab good news, online. with that Dunkin' than would and this chosen collab that the important Donuts. frankly, The actual admit I Saucony driven have sales the Another that the one myself wouldn't I consumers more be, were personally,

has just today's that's of of samples So real generation, couple to content almost in in which, a time. be world,

staffing. You have the have to

real You to respond have something to almost ability have happens. in the time when

James Vincent Duffy

the International? And Cool. then

Blake W. Krueger

the We on were balanced our There in up. international aspects Asia-Pacific. quarter timing Yeah, really some quarter a regions. was had across pretty

decrease was surprised in Interestingly So core bit U.S. slight there of a by the Asia-Pacific. we business. a enough, strength the were

goods our channel couple general, in of you U.S. been, lagging years now, of a has wholesale and know, As for soft consumer a region. across industry, kind in

For us includes this our business, e-commerce quarter, our leading past most which our U.S. was business, generator. owned growth of

of we're bringing So, pipeline reflective product a and stories to the of think I a just little bit and the market. surprise,

Michael D. Stornant

brand the good. the up so mean, in our seen Merrell's growth by driven And digit I our region was a like time. performance Mid-single strongest businesses. U.S. the in being having and for just that's it certainly wholesale growth U.S. was from we've long Sperry a that in DTC business wasn't too, But strong performance

Our digits, were high single U.S. overall, comments, Boot very much centric. which in Blake was his mentioned that business up business as Work

little though there performance, encouraging. too, Jim, was bit, even a say, So, unplanned. would much pretty Asia-Pac the And I was the down performance

and category Leather the hurt But us kind top that little right just Leather given in the low us. a pressure at the Our of in the in line industry, bit bit QX. quarter of the there the there some of Leathers for business demands, business for little margin softer business pressures was was now a a pricing in

James Vincent Duffy

brands? going couple there and the those on to Okay, of and just larger international down. with Hush then out brands. were Puppies Anything call a Cat

Blake W. Krueger

improved with the of And remains would We international shipments Puppies timing half, performance profitable, business second Hush on side. expect very the really, a in on business. much brands else. distributor as some Cat those International Not revenue much front, annuity-type really. The as business as the issue the that from anything both was

James Vincent Duffy

guys. Okay. Thank you,

Michael D. Stornant

you, Thank Jim.

Operator

Jonathan ahead. next from Robert comes our from go Baird. And Please question Komp W.

Jonathan R. Komp

to QX, growth a off, X%. pretty I think clarifications. close reported a Wanted said you basis? of imply you. Mike, flattish thank underlying of revenue couple on start hi, Yeah, to just about Does that

Michael D. Stornant

half and first we back does. reported we obviously, were And, to stores, as the operating it a basis, of of yeah, were operating the On cycle year, we where Getting that. out Rite that numbers the year. and reported and closer much last business, year, Sebago we'll underlying of mid-year the our back business consistent the the in being half transitioned get Stride to

Jonathan R. Komp

Okay, on the great. third And then sticking earnings. on quarter, the

shifted earnings, Just XX any pretty like out QX this different and looked be QX last you've that would year, had quarters call year? there's to similar moving parts since cause I'm major that wondering if week it to to and

Michael D. Stornant

other of gross quarter, good and a little strong our expect levels some expansion XXXX, a year, because We the as had in both and comments, mentioned really. in Maybe we of in then gross business structural and QX. changes the to started the margin the and we transformation our in off early product from to from We cost strong good the expansion And late this some last standpoint would as of see year-over-year, QX. margin quarter, were much Not QX. in stronger we performance it making some divestitures benefits benefits words, on. again so as work category. of margin fourth quite that In in not in

going consistency won't think I So, between QX's be expansion is but nicely. QX that quite hold up QX to as and good,

Jonathan R. Komp

the visibility the the bigger of growth, end of balance highlighted kind year, a you think higher on fourth implies just just also, Okay, midpoint big the then, for thought the And additional picture wanted and the for clarify just quarter, the I as growth today. great. And the underlying drivers, of mid-single guidance the digits quarter, think and obviously Merrell of then the any you kind to as of maybe the revenue better here that. sit a maybe drivers to driver fourth you about as

Blake W. Krueger

said the we've playing out expect our year. beginning throughout year, That for we from revenue of certainly the to is Yeah, build Jon, us. as this

that look to I that expect tougher We out very QX in when they would revenue to have kind of and product feel comfortable. play a we increases going in and have the are at regard. But pipelines comp. their say of initiatives some Keds place, Merrell we

to, going Saucony, a compare. frankly, Wolverine, think Puppies, easier a and Bates, have quarter to Hush remember have Keds, more of year QX, that bit last they lackluster an in I are of had you

of portfolio. we down So, the up kind brand have and confidence

Michael D. Stornant

and to see all talking see that that our for seeing going the pretty the this the in global to too. to Merrell, strong It's on we're that retailers fourth maybe And programs quarter. distributors start launch those new domestic demand on obviously programs, later our last from year. are mostly It's is is good month, the Blake early base new but the good from very to to demand about incremental

business around for these quarter. definitely The dependent be the very wintry So, the And to seeing Sperry both deliberate our have to lot consumer time, been important successful. are lines real thing seasons same product many not bringing needs about as more marketplace on and a weather as or and cold the products brands, as in They're mentioned responding before, with And cold Blake to encouraging. blurred, are we've consumer faster, mentioned. we're thing, those seeing fourth Boot I of of weather-specific that's for heavily we're same the not products. demand

And half instance, sort future. products good in see Merrell, the that so here, business to just weather year, to overly in business, the cold their across considered up good certainly cold back be to Gym the seeing the product, widespread, the category. for not dependent on based we're Nature's and dramatically going of that is So, in certainly on of the demand be demand diversified that they're referencing isn't weather for any

Jonathan R. Komp

perspective. Okay, great. I appreciate the

Michael D. Stornant

Jon. Thanks,

Blake W. Krueger

Thanks.

Operator

Murphy our Please comes from next Piper And question from ahead. Jaffray. Erinn go

Erinn E. Murphy

morning. good thanks, Great,

Blake W. Krueger

morning. Good

Erinn E. Murphy

your And little bit it North fall into and little about one a kind far bit, you inventory thinking an retailers you anything go question vis-à-vis products brand. can as you're some to Blake, the earlier, are of the but sitting? how your back-to-school how perspective, then, from any had or responses more thus of know on from on a speak American comment to there, environment Sale? Anniversary on the displayed retail about You hit season, Nordstrom Sperry we holiday just season, I Jim's tidbits

Blake W. Krueger

on with to the operate retail in the hasn't are States, closer us faster, some are of Consumers brand as macro on That changed, right? requires first environment United and buying retailers be to kind Yeah, speed. agile, owners really convenience, more environment normal the I mean, focused need. experiences. new Consumers

ups of compelling it that got trumps initiative, store one continue. of region kind downs great our is kind thing focus. And believe things, traffic, and it with but to throughout starts you've retail There's of to product if that the a brand been it the product, some store continue trumps our we a all in traffic, to U.S. environment. right? been be and was focus brick-and-mortar going be challenged. reiterated going QX against number We kind of And transformation overperform that's to stories. continues It our and that's again year, as It is lot think lets our great of and competitors, business a

I of as XX to important seen least Kids our that back-to-school, Group, the back-to-school Kids footwear really would the important peak, but a it's business, brands it's far years, say really, flattening brands. at that or in over the XX in our As not we've for out our last market.

Erinn E. Murphy

half? grow that had will maybe relationship the just on a about of Okay. those unpack it challenges shelf the some you more with you the it's think if I'm some second pull they to little then Saucony grow, can kind – issues your challenges. I said Fair And business, of brand bit delivery impacted the is now given enough. some retailers issues? have us, need had or that of And on, on with then quality curious the in the And back of will you've just but those behind space the assumption

Blake W. Krueger

the think this few quality some was Yeah, out half. position low we've I said very kind We wasn't in we're introduction, all on now Shoe. or QX, the QX now. in We expect a mean, Kinvara earn Saucony response with you that run certainly coming of like A this issues, of introduction, second been And to certainly represents issues issues. back of point, self-inflicted, a much in and issues momentum – lot and revenue the to got the QX last Ride Trail perceptive a Saucony's Switchback since responsible. fit few crowd. some I've the be of we're Running When – specialty of and and the Best the better past, Women's performance has where ISO, bowl a year of that's to third-party especially fix have the these question. this

Michael D. Stornant

have a other has our to been the global to in those Erinn, nice thing it's Year-to-date, remember Blake nice about And QX. be Saucony pretty in is too, solid. especially business, EMEA international very Lifestyle think brand. in markets. growth I strong performance mentioned a They international grown here,

But, reset few help So says, we've growth. over has that was this half, starting is other the challenges the second of see It quarter, we diversification a helpful to in that I in rebound the but to think that brand I up last that some more or to would e-commerce seen to levers, we're recover second from that. here that'll kind Blake of it We think Saucony the it's including XX% quarters. as see expect quickly. for help in know have

Erinn E. Murphy

talked is just then about digital. last my you and Okay, question

the you performance in I quarter. just your you saw own – online split? of think Merrell.com, show what split with does you pure-play it there your XX% Sperry.com, versus was kind the can out that dot-com, said up Is

Michael D. Stornant

control. how it just retail around the always owned get actually, deep, for XX% direct-to-consumer we're refer the It's online about was – and online to businesses. our little partners that's When we quarter, was hard specifically That's talking exactly a trending. XX% from right up our business. businesses are – their That Yeah. or our all over that that our to component of we just

would our rates good insight Some, a others higher the we we have say little industry. don't. are industry against in very to, I some general, growth than the

I they're retail in too. would experiencing, line our of with probably that's say some partners, For what

Erinn E. Murphy

thank Great, guys so much. you Okay.

Blake W. Krueger

Erinn. you, Thank

Michael D. Stornant

Thanks.

Operator

Edward And question our go Yruma Markets. Please Capital from comes ahead. next from KeyBanc

Edward J. Yruma

have from still I know opportunity follow-up, a the And have given about indicating Hey, inventory mix? product? as for then very of the of you're going some more inventory carryover forward? back product, obviously still is put in you us inventory have can a guys How difficult Do of gross that sales, commentary about longer sales? taking grow maybe compares. to assume good morning, up will Is I guess a margin questions. term this first you you gross Thanks quarter, you'll we half, color the should changes that new the it excess Thanks much. think in in And give the gains. composition? or fourth little nice on as on in gross so leverage you'll inventory, guys. percent build fair bit

Michael D. Stornant

Sure.

out. a we're the but than continuing important inventory quarter about there. question on call because little I improvement see in X%. were think second the an expected, to core inventories were it's we business, better our results our down Appreciate Frankly,

don't a was that or store we closures improvement anymore. So from lot and own of brands that operate

and better in QX got – growth they'll a half, and about will our When speed our inventories. brands. we also We've in rates be has implemented across comparison. much which right manage we've certainly below to our be inventory the the business it's us still growth brands, back the been different being now. rates a So in which just expected many more for inventory normal helped the think us manage management management able and initiatives place, put around the lead really And SKU times, the that helped are have discipline

ability we're fact half much stronger inventory. So retail and been when has our I our despite less think back to e-commerce the market the with demand service about here, the own never operating that

initiatives SKU that of and sure a bet some not new make but Test-and-React for successful. big to on those having those pretty we're to our as So productivity, our focus SKU strategy our on initiatives, making been around these reduction, new has new room make on our programs,

also to say some We gross we on see that are or the in we harvest to out half that to that increases, programs year. as position core as gross far some the are challenges are it's we've that other margin more important kind back cases expansion I'd in of where want into And and/or product, there new momentum performance we there, really implement. but deep and FORWARD in WAY margin the completely of going new the fully to lean have more gaining to programs, would So marketplace there's always expect take going in said the control. now a don't initiatives future, be time

any guidance give to kind we're good on in next would margin, year's early little position. gross very a it's of but I So say

maybe costs, about next those Spring least XXXX a right product and You exposure the of now. don't first lot at pretty there. stable think around have We of year portion are

factors good other I next into of out there lot we being control, a that, about margins feel are don't our overall able year. there like we but maintain going So said, to

Edward J. Yruma

so Thanks much.

Operator

next go question Davidson. Please comes from D.A. Michael our ahead. from And Kawamoto

Michael Kawamoto

Thanks taking my hey, questions. for guys. Yeah,

like maybe you the mentioned Dunkin' a partnership Do you'll think Kinvara. with you some brand for do this special generate collaborations edition Saucony going more Donuts there? heat additional So forward and

Blake W. Krueger

in Absolutely. It's Saucony our not certainly all brand, just focus, brands. our but in a of

Michael Kawamoto

resonated show? maybe of outdoor the well can some your Awesome, just a little with coming the this retailer, and out season, about of thanks. discussions share bit learned And what then you based products on you at that retailers

Blake W. Krueger

say Yeah, of it reconfirmation just was I all would we what know.

and you take have fresh you're to show. If enthusiastic going dazzling and at consumer some our that get customers, from we certainly retail a product, experienced up an – the to response going and you're new, have

both the I some of offerings retailers. surprised the think, on of and Lifestyle the the of the breadth performance the side think side I new in product quality Merrell, case were, the and offerings of

there's But to but a Yes, strict to again, transitional sandal great introductions. very is There's and we, robust had So weather brand, There's first see, Merrell business example, as for more a transitional the the had, out pipeline. there as would the than more positive we response has second footwear. movement those be a company cold especially continue probably footwear. to pipeline sandals. I a footwear. say half half towards

dad's the We're the overbuilt over, a trend XX's even flow faster. little Certainly, lighter, in outdoor color. into seeing this space So, outdoor more seeing we're a bit bit, of even category. little

certainly was show it for So, us. encouraging, an great

Michael Kawamoto

Thanks for of time rest Great and the the year. for hear. to your good luck

Blake W. Krueger

Thanks. Okay.

Michael D. Stornant

Michael. Thanks,

Operator

Wedbush. And Chris Svezia from the ahead. Please question from comes next go

Christopher Svezia

nice and job questions, on my taking quarter. for the Thanks

Blake W. Krueger

Thanks.

Christopher Svezia

QX, second with guess, I roughly to the underlying regard the X% X% quarter. in growth for you first, did

to implies of just accelerated launch the X%? – about QX. talked that be clear any growth want You've Is for that Similarly some timing your Why brands. just underlying Merrell? high about Just product to Sperry? for that. single for Because relates of

Michael D. Stornant

certainly captures later think a of of the lot nutshell, strong in our kind There's trajectory I year for business well. as in a it. a international Yeah, that,

partners as for There's – in and that'll our So, quarter pipeline our distributors. the our international launched of new broader November conference. fourth stronger, have we becomes products product the spring global be

QX is QX. just to XXXX in in them. And brands a comparison business easier biggest in some growth in in as grow that at Boot that seeing Blake not XXXX certainly our are the would QX, did performance be said, of product supporting grow the you of some business. nicely an international driven look So, the expected in of being pipeline an brands for by when But there, our and we're of stronger acceleration our two other

of business, I combination in the to itself, it's think really the and last the acceleration then So the comparisons year. pipeline a

Christopher Svezia

gross you margin, earlier. on what Mike, I said back want circle And to to

year-over-year it a flat for reference in I'm if that. call You relative a which made improvement Correct in me year-over-year QX, to to wrong QX. would imply, QX similar

Michael D. Stornant

not improvement quarters seen but flat, in for we've exactly year. Not near other the the in QX the that

Christopher Svezia

Okay.

Michael D. Stornant

will started QX, we little things that just a that the in little year had us last WAY to tougher. We performance QX very cleaner year. of were that than the and gross benefits fact those where a a comparison And business margin. had with make stores comping our good we a some that our We against some behind again, closed had, last we're earlier expected other FORWARD materialize

Christopher Svezia

for up clear be about want close somewhere QX, basis points. could but you just XXX to Okay, to that. I be

Michael D. Stornant

but points up QX. it'll in it'll – a were have We yeah, good performance be strong, we'll basis strong, It'll be be a very don't in expansion. almost that XXX frankly, quite think I QX.

Christopher Svezia

Okay.

the color dollars. a any dollars that. that business of of Just Just investments expense you the QX, expect you're some Is the from to declines seen we comparison? total in see increases in time inflection making would an for in about any perspective, QX, SG&A have expense long because year-over-year and

Blake W. Krueger

look amount When the XX% $XX the second about particular, was that made of our expect the of and make that spend, at of half, XXXX XX% incremental first you of other year. half spend, in million in in the we to

Michael D. Stornant

changes I half, terms think will of this in the Chris, there, more made timing investments, think the the so spend. – other we incremental just of how run the to Not about impact thing business. the the some the to of but fundamental year, that is that seeing overall SG&A about structural we're far and rate back that

up first would half compared based a that expect SG&A I back in significant. So to but the on ramp just bit nothing to half, the

Christopher Svezia

is, Okay. (XX:XX:XX) on us an the perspective, and here what a Final corporate just structure, that where from business thing from relative e-commerce percentage to average? EBIT working Remind remind stands e-commerce. of us the

Blake W. Krueger

e-commerce of I mean, really owned remains channels. side, our on the our business one profitable most profitable

has that So impact also great line, the line. when the on a we grow an our e-commerce it has top bottom business, not on only impact

Michael D. Stornant

but somewhere rate that is X% business, the channel the about and outpacing our of channels. our in growth grow other eCom X% that's because total owned It's obviously between continuing revenues to in

much to percentage have revenue for larger total a of global our We of future. that midterm the sort be in a goal

Christopher Svezia

Okay.

Blake W. Krueger

part and When was of the online. last year. over growing brands of like or the our about some have got footwear you where certainly in all it's but XX% We've of don't America average look add of information that we a at there, significantly XX%, insight customers year sold perfect the And retail been e-commerce it's business last in, Sperry, business.

Christopher Svezia

the Okay. All right. Thanks very much best. and all

Blake W. Krueger

Thanks.

Michael D. Stornant

Thanks, Chris.

Operator

and Laurent Vasilescu Mike, thanks did morning, Capital to basis the for be benefit gross second for much points? the Macquarie. taking basis next Laurent from Inc. benefit how and was Good questions. our quarter XXX from how ahead. comes everyone, - Macquarie a to points much XXX currency full of question year Vasilescu currency curious should And Please go margin, (USA), my I margin know, gross

Michael D. Stornant

the first the impact the same. year small, currency the and for relatively in from the full Yeah, half year, of was

the just pretty side. and the flow product of hedge would cost position and on from consistent timing where both So, earnings those standpoint. are contracts a against we we and the last And long-term the had come, that's of have majority earnings again, year the the margins contracts, impact

Inc. Macquarie Capital So, Less XX Laurent basis than (USA), very - small. Vasilescu points.

then Okay, very helpful. SG&A. shifting And to

incremental can through then, you million half? should regarding much two through $XX investments of the that incremental flow for flow in the the half, $XX million full how expense first And the parse quarters? Regarding the in the out much for first how in year, SG&A SG&A back

Michael D. Stornant

the of half first Yeah, flow is spend and In - almost (USA), all Capital the the Inc. SG&A half. Macquarie SG&A. Laurent or back of incremental Vasilescu – all the both

helpful. on do marketing year? your was maybe will year Very X.X% out then, you Okay. marketing, think or $XXX Where I shake that XX-K, think of this million, for like And in last revenues.

Michael D. Stornant

dedicated business, prospecting percentage. e-commerce higher social other here the a higher investment be things to mean, supporting will a It and creation, related our is to demand media a I and certainly the specifically portion incremental of and meaningful that going towards growth percentage there. are

lot and the into the year. So, XXXX, the to think a Merrell we of that overall and media spend shift half overall advertising even shifting going will the And I for company's spend of of increase. in that the that back kind mentioned

And back last than so Vasilescu probably there, you'll spend year for of half category to in doubling Macquarie doubling, the increase the see almost - compared Capital doubling an Inc. in Merrell, (USA), their that Laurent year. media more

on about number some have question, degree, this my expressed think well EMEA And softening I last Okay, Europe. of talked then A vendors that's you great. doing Saucony quarter. caution, to

European to Just of your hear the the curious consumer. take state on

Blake W. Krueger

now, was EMEA. We a Yeah, right on. look businesses throughout and I good mean, party much businesses across increases our third home at just it QX, pretty steady had taking

be product, side dazzling may tougher everything. but apparel again some bit if categories a now, great that it have So of right trumps product, on little and kind the other consumer you new

Michael D. Stornant

And That's Merrell - Capital strongest Vasilescu there great. in so Inc. Saucony us for were Thanks the Laurent Macquarie and two much. that (USA), brands region.

Operator

ahead from Telsey Please Westura from And go our comes Advisory Group. next question Kristina

Ross Licero

Great is hi. on guys. Kristina. Oh, Licero This Ross quarter, for

Blake W. Krueger

you. Thank

Michael D. Stornant

Thanks.

Ross Licero

to Just prepared the remarks to you're your – add position mentioned a now. brands portfolio new that in you in

any Where that? to could color Just and looking on provide on wanted you the if know potential that? timing you're

Blake W. Krueger

brands yeah, yet. not Well, that way. are are some very it at We're looking then some mean, put that active, at we're and that properties publicly right that maybe at stage I we're available, looking let's also

of a our good We that at have integration. as two Acquisitions we're the we future has of changed mindset regard. We for profit well. and over proven it's growth and really decades, a haven't to think a last skill company going set, been growth major driver driver the be in

So we're focused compared the ticked here but have of maybe right making half on up XXXX, first year, in multiples strategic half to second of this the acquisition. the

like brands some we for something. with stand that So heritage

bags, company, as the not packs well. appeal direct-to-consumer opportunity, a probably right and brand little at in space the footwear a the apparel and us. would As we're we're we on bit to skew looking women's more space. We're so side, men's have looking gender-wise some footwear, just a in But looking or

Ross Licero

that a initiatives any the couple Do updates on international last have And the thanks. you call, great, works. Okay, there? partner were mentioned significant you in

Blake W. Krueger

I about progress. about today, talk can can the something Nothing made We've in hopefully that future. but near great I talk

Ross Licero

question, very any are the there? you maybe any seeing, last one certainly give looks that stocks then, table out color leaving clean, And on and on Okay. could you're you but the it revenue inventory, of

Michael D. Stornant

been very across of – more really on as where the expansion a good. the performance been unproductive there a – expectations. sites. gross portfolio to half rates we from has good because those overall our sales think eliminate we're been fulfillment been. of really, probably something had But fewer have to maybe first a here on ever year, but and I unproductive performs wish that little is We're little keeping inventory and that a sell. that, We're really. as you less beyond of the I driver and hits And, much occasions seeing eye of always been our we closeout has our mean, have really us they've Not promotional for We we the margin close have as improvement SKUs. strong, our closeouts this have know,

now with And orders. benefit this same and fulfilling our so, right time, a the way been at position the the think position but, we're has great, in overall, inventory we're I of smart our

Blake W. Krueger

I that here. helped speed really would initiatives I our also think say have

you are on two-thirds. to time not that a middle the the working idea certainly makes to inventory our big now. speed brands it's initiatives of So think market, in more And we're when product cutting of focused kind or We're whole all much a traditional, and seasons implement three our to our to just our out profitable. of it collection bring that situation half portfolio, starting but new in efficient brand across

we're In just the addition, some cut initiatives that we something, lead our times have to we into beginning, to back frankly, to have half. really order in initiatives implement portfolio. get those in And across

Ross Licero

Okay. Thanks a lot.

Michael D. Stornant

Thank you.

Operator

Kummetz more time Pivotal ahead. And question. Mitch we from Research. question Please have for one from And go the last comes

Mitch Kummetz

just guess I've some got my questions. Yeah, for ones. taking thanks housekeeping I

full you singles, year growth and singles. on were those Sperry, think low up I also changed? to low earnings the Have call, Mike, guiding So, last Saucony for up

Michael D. Stornant

kind for a in Saucony. for a and the bigger XX% say the accelerate challenge solid started We QX but I is to of similar of think into little bit. little QX that Yeah, bit for full But that continue the there, probably still pace, down range expect first would back stronger, year momentum think and in to for hole that the was, the I a us challenge same in Sperry half accelerating the a I is a faster. a at year. a performance Saucony half in it's

achieve in improvement the really for but in for is will improvements year. not growth the strong half cards half the of strong we expect Whether the the brand, the back maybe Saucony. We for in back full there year

Mitch Kummetz

last Okay. hasn't I'm And say I revenue on expecting your changed, little your year? then, has assumption you bit the provided a you underlying your on FX guidance? I guidance you mean, tailwind? changed. if in FX, since the FX can are sales wondering changed that of an of guidance kind what's know for embedded Has but still

Michael D. Stornant

half us, quarters. that the There's the year. slight year out for the reverse tailwind but A calls full actually two for basically a in to that in but the certainly unchanged. in release, table a earnings first the it's that was tailwind It we expect last

Mitch Kummetz

reported, forma the remeasurement you Okay. that this gain. then, earnings And excludes guys that... pro foreign currency that Is

Michael D. Stornant

Yes.

Mitch Kummetz

and you was? income, other can ...in say how much that

Michael D. Stornant

a It foreign was related less that repatriation outstanding cash $X an our all – million. did we all than had was of kind of the to from entities. Yeah. little it We

loan And so had an we intercompany there.

It's in all of in timing other the results. in reported include million resulted balance that didn't a the gain. related income on Just change almost $X obviously adjusted and P&L, we to it rates our the our remeasurement that and in

Mitch Kummetz

out, you I there to but... I number? but give a we're if nit-picky, way $X be us the pulling guess, million, little less is it exact can any than hate

Michael D. Stornant

Like like or something that. $X.X million

Mitch Kummetz

$X.X million.

are Okay. And guidance? count the then, on share guys lastly, earnings share for that using you count, what's the

Michael D. Stornant

XX range. XX.X something million, in little million XX.X I that or million, over A think

Mitch Kummetz

all Thank Okay. needed. I you. That's

Michael D. Stornant

Mitch. Thanks,

Blake W. Krueger

Mitch. Thanks,

Operator

Harris. And call now I over turn like to ended. the session the has to Mike question-and-answer back would

You may proceed.

Michael W. Harris

On like I'd Wolverine you Wide, joining us behalf to today. World for of thank

at website September until be As and is Thank on XXXX. day. wolverineworldwide.com. a reminder, available will you conference The good replay X, available our replay our call

Operator

and Thank has good concluded. now day. conference The you

disconnect. You now may

Wolverine World Wide (WWW) 8 Aug 182018 Q2 Earnings call transcript