WWW - Earnings call transcript Q2 2019 | Wolverine World Wide, Inc.

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Operator

Greetings and welcome to the Wolverine World Wide Second Quarter Fiscal 2019Results Conference Call. [Operator Instructions] As a reminder this conference is being recorded.

It is now my pleasure to introduce to your host Mike Harris, Vice President, Corporate Finance. Thank you, Sir.

You may begin.

Mike Harris

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

President Krueger, call Mike Chief Vice Officer. today the our Stornant, Chief are Senior and On President; Blake Chairman, Financial and Executive our and Officer

this our quarter XXXX. news corporate wolverineworldwide.com. second sites website Earlier for it can on is of we at financial The announced results morning, be the available or release many our viewed from

copy Filandro of directly, If XXX-XXX-XXXX. the release you have would you Francesca prefer sent please a call at to to news

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

are call, costs, expenses providing business foreign related financial changes. adjust for results we the and impact development our During and rate exchange related which of environmental adjusted

during remind predictions you I’d Wide also like to call and today’s projections regarding its are that U.S. forward laws. under securities made operations conference and World Wolverine looking statements

our number that you identified filings must factors These caution press in projection, with a are risk materially. any are as to factors company’s we in that, result, a As releases. SEC cause of important actual differ and or there the could results prediction

Blake to turn Krueger. I’d said, call the being like over that to With

Blake Krueger

thanks and us. Mike. morning, Thanks joining Good for everyone,

while revenue overall retail quarter. of our we our of five basis, $X.XX, morning met second revenue on brands expectation top currency a sluggish per the going share quarter this exceeded reported earnings X.X% increased or Earlier four U.S. constant conditions adjusted despite into

growth. annual on mid single-digit company we delivering focused remained a As organic

performance. news our More on funds are not meet building results. the better recent The is in on half the in year's longer on term goal, topline impact not second expected our a that a in QX the next few business brands tariff much on material for half poised For did minutes. or have momentum to is second

Let of for and me from and quarterly quickly brands. the the of China. an given brand our then results additional key groups update footwear on review provide our key outlook tariffs imports our week's view status announcement investments last XXXX and I'll on

a delivering second strong the is with Wolverine Starting X.X% with Merrell's quarter on the to currency half. expectations results mid-single-digits grew as and in compared the brand the constant several basis poised for grew and Michigan X.X% prior-year Group, brands revenue attractive growth. exceeded a

in by had smaller HYTEST. brands. gains growth offset almost we in Cat XX%, saw The also brands quarter Wolverine partially in some and declines was another and strong growing these of our

Merrell's strength across categories was District] offering. Fiery,[ by by the highlighted and consumer Gridway and Tora, driven acceptance and of growth collection, excellent new Nova most performance

running digital Consumer, brand the at drive hike XX% category. share rates. expanding views, quarter. Merrell attractive market leader This the robust, continue media New trends were DTC product interest with business business. search e-commerce in social strength site and help position grew for the in in Merrell's the Merrell up all and media as to traffic launches for impressions, market trail

second a a momentum, continued single-digits and driven half, We pipeline robust direct-to-consumer to by grow in expect order product backlog. the Merrell favorable high

in site Asia-Pacific brand's business business the strong U.S. its pace. international business, traffic search was single-digit primarily grew e-commerce benefiting from The the the trends region. also Ked in own XX%, by low and growth grew specifically favorable driven the and interest

Wolverine retail to the U.S. of stores, brand a reduction market softer due expected quarter. than perform partially with the in The reorders the wholesale the category key and during in driven e-commerce The was growth customers revenue XX%. decline in primarily brand double-digit U.S. offset a business, by growing by in at to expanding strong continues QX rate well again work this for category share

includes the five Group brands the that Michigan meaningful to company's The experience continues category, work up make momentum. which

U.S. and be overall a our the work company. this significant in market. the revenue XX% growth categories a of represented first opportunity outpacing Our single-digit rate the the The global of during at year, the first category continues increased during high to approximately half half footwear for overall revenue work

the the decrease. after a Boston to the and year, quarter QX,Sperryrebounded for exceeded short Moving Revenue prior Group. expectations Group for a versus flat with QX was Boston the slight

mid declined momentum. gain last and Keds, the for mid-teens exceeded offset largely to the turnaround business single-digits growth second but expectations This was continue from quarter while the to the also year. Saucony was kids by flat decline straight

performed relative business was to sell-through the For rate and high of a QX.Other retail. grew the in areas with double-digit category but including Sperry, the Sperry line category, down the shoe U.S. and expectations strong boat well, casual with lifestyle at single-digit boot in a improvement which significant at range

product the particular e-commerce women’s was Sperry the in success XX% a business season. category. had strong Boots up have and in by QX, in fall early start to gold cup driven The premium

boat rate, Sperry’s expect second reliance the driven that regain to double-digit we the less and quarter offering. very half in and at second a growth pleased business strong shoes boot on by a We’re accelerate during momentum

e-commerce delivered mid-single-digits run EMEA to and in Saucony category exceeded but continues the in related QX the growth see year, growth which Italy, was to U.S. benefit performance challenges the from The a to of addition product Saucony, to down brand e-commerce, technical by region. strong the expectations the half in new strong continue pipeline of introductions and performance. of continued second returning XX%.We driven of during of Saucony the

healthy extending product regions growth international product e-commerce core drive the in only Keds to strong performance. mid-teens performance collaborations champion and category QX U.S. in with reflect XX%.The several and continue

make faster engine creation digital-direct product business. drive create international our on update to a provide growth important to continue we global our expand quick agenda our offense innovative a where me investments and Let

the to with approximately $XX in invest $XX million million the investments expectations the These totaled for full aggregate in year. approximately continued quarter

to addition, still in including distributor the In market investment spend in acquisition quarter open to the growth previously Saucony's capital which stores the approximately closed and global $XX China Italian venture. second we on and of million accelerate joint announced expect

focus to in continue executing brand. across on long-term implementation this model the objective including We our of brand our agenda growth the against

their to resources in product the brand dedicating craveable strength continuous and products global are We of pipeline on consumer. of flow our a bring to our help accelerate trend

e-commerce on strategy our We've in during in currency quarter international the with important business executing global have business made growing investments progress on targeted thus topline the robust our expansion basis. delivered in growth XXXX. owned constant Our also X% a far

the incremental have in short an as strategic Class longer business. which footwear on on from broader and Given I'd of our plan XX% business last minimal tariff ago, includes migrate X impact like to to improve our provide this week’s the a a relatively for five China out diversification the years term. announcement of items on will an sourcing, company of Over China update implemented to part action product plan global

the is from years than percentage strategic U.S. factory our tariff In We sold China the of of footwear substantially the a last couple footwear smaller the given migration XXXX, accelerated over negotiation. whole. in industry initiative our as

XXXX. from only four into the of approximately China during pairs to X.X plan we result, import last the months a U.S. As million

will Our impact imposed. minimize healthy new the inventory position should tariff also they any help of be

our sold XXXX, dramatically the by we than less decline China global the of pairs expect pairs For to for X.X million imports brand. XX% approximately to year entire

We expect to further X.X dramatic approximately million decline XXXX. in pairs to

owned further. We’ve XX% existing We partner. are working even factories on transitioning of been China because amounts moving these sourcing very are able efforts quickly out their move to to reduce of pairs by approximately

short transition footwear an and and excellent strategy aggressive the manage plan multiyear tariffs to put potential both in higher cost longer continuing timeframe. over on impact now Our the of company the

might For a midterm competitive with provide our advantage. actions mitigation us

As of to tariff product which duty industries of compared to policy, opposed remain has categories. one spectrum of the already on rate wide a and import a highest higher footwear matter tariffs we other

largest the be basis reflects to of close revenue XX%. up outlook projected which Our on second This our expected strong growth Saucony three total very Merrell, and combined updated accelerating year includes growth to brand for mid-single to the for are digit. a half Sperry

only to our relating half growth largest new our is second in order performance at brands of offense, international stores impact momentum current the book, e-commerce not the by Saucony. Merrell supported The digital-direct continued strong also accelerated and and but

and the that with Mike I'll Chief Financial Stornant, Senior With over quarter outlook our commentary provide the performance along full-year. President second Mike? Vice will on and Officer QX for an additional turn now updated financial our call to

Mike Stornant

us Thanks Blake. you for And joining today. thank all

Sperry's several significantly performance during well the portfolio solid diversified Our QX. the revenue and second brands as delivered serve growth versus quarter company improved

growth. of and helped to QX. low slightly success cash expectation, that the by the enabled the headwind below The ahead and constant were the brands flow faced offset plan earnings some currency of revenue our for smaller Despite company results delivered to company achieve our our single-digit

were the to direct-to-consumer These XX.X% mostly by down line related but higher offset a margin favorable higher This with year. the in growth factors the Gross for points quarter basis costs. and expectations, of was partially prior margin XX businesses. and from closeout unfavorable was impact strong mix gross

and and and million lower only last discretionary compensation $X discipline million selling, were benefited compared $XXX.X up administrative year Adjusted expenses of spending to costs. incentive general from

was XX.X% rate XX.X% year. the is The contributions due versus discretionary the last made prior second increase pension favorable effective in The tax from primarily impact quarter year. to

of share operations related Reported environmental Second generated and quarter adjusted the diluted earnings from in per $X.XX expectations. and certain or expenses. exceeded earnings $XXX impact million our business quarter. $X.XX included the of cash costs development per during We share

to Our softer deliver reflect and strong discipline environment. in a earnings macro operating model flow line our bottom and our cash performance solid performance even ability

continue made of In capital share we overall year-to-date a average with active drive basis, to On total long-term return. repurchases of strong shareholder we our we approximately per our repurchased bringing our and million to have stock $XXX share capital price $XXX investment to QX, leverage year-to-date been an structure, $XX at million. strategic

program $XXX the year. We share still million earlier under million repurchase have approved approximately was this available that $XXX

versus executed have to growth our other our increased capital venture year accelerated related investments including repurchases million joint of spending. We the mostly our and also initiatives. of acquisition distributors, ended and of million $XX strategic capital quarter China $XXX last meaningful the Italy debt We due funding which net early approximately share with of Saucony

billion significant with flexibility invest and to We company in ended given total the capacity for growth. liquidity the quarter approximately $X.XX

last As lean of discussed this taking XXXX. much levels stronger after our operating during during we call, item core inventory year a position on are with we very

tariff potential the up a projection China our forward inventory with about like-for-like production line in in year anticipation QX end was of of and last XX% at pull to exposure. of Our including compared significant source

inventory our we've of addition, and Saucony the distributor. Italy added In addition $XX million of new for stores

inventory the last Importantly, an relative quality including in year. backlog of remains improvement to aging very coverage and high

be as We ahead up at to approximately continue of to expect XX% August pull we inventory of end in QX forward the implementation. tariff core potential inventories

to and X% strong related line future inventory the of production, Saucony $XX new we we year-end an on sight of by levels of Based XX% Our of including position inventory to expect addition achieving timing a about and increase will moderate stores million Italy. year-end. this to have

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

During especially in our trends few some international experienced order macro-environment and year, At-once soft, market. in the were the a first U.S. consistent of of was in half volatility we the the

earnings of XXXX, performance back we we expect As the to and improve revenue meaningfully half transition to

Ked. Our current new third Merrell, positive order visibility quarter, momentum half start second for a Sperry, a excellent very the good initiatives book, to good stronger to includes product is and and response and Saucony the into

volatility these business in our first at-once ongoing back wholesale to tailwinds, Offsetting Saucony, to we slightly half also e-commerce of more on be and the down continue projecting second We the business half. are demand U.S. newly the experience. perform Italy plan back business additional cautiously with XX%.The the benefit in year stores expect half of our assuming acquired half and to our growth in in nearly will

and basis includes second constant the combined half outlook trends for approximately very X.X%.This constant We approximately our Merrell, and revenue Sperry the second of half three XX% X% a brand. growth strong now for of in reported in currency encouraging and expect currency largest Saucony growth growth on

constant revenue of of $XXX $XXX currency approximately More specifically approximately million of QX expect growth currency we growth X%. constant QX million, And quarter, by revenue X%. of

become Sperry, offerings. Growth strong more our accelerates quarter, in initiatives boot as businesses for QX strengthens, our business store including the especially and deliver e-commerce EMEA Merrell Latin Ked our and in America, prominent and product new international and

expected our to within XXX original $X.XX Our nearly is range. revenue billion net tax approximately year. guidance XX% expected pension full-year adjusted Gross This to approximately much points due margin a higher last over to QX last discretionary basis expense and is be improvement approximately approximately in expected effective operating significant estimate year-over-year is XX.X%,up by and higher and margin be interest is to be year. contributions of made offset XX%, rate

As be the a share are in result, per quarter to third earnings $X.XX. estimated

be expected over approximately to XXX margin rate is be Gross approximately be compared $X.XX, adjusted of improvement margin tax expected effective is in a is expected higher XX%. of operating to to basis This to last year. approximately improvement QX XX%,an offset by points and

estimated $X.XX. share fourth quarter a per to the As result, are adjusted in earnings be

share rate per of of of operating For $X.XX. approximately XX% XX%, of gross XX% adjusted adjusted tax and approximately and approximately the full expect earnings effective approximately year, margin we margin now

to diluted be the million are approximately $X.XX.Diluted timely per Reported expected now executed on shares approximately year. projected share shares to the XX of repurchases weighted in first be are half average earnings already based outstanding

I closing, remains to In initiatives activities that team executing our want incredibly focused growth. emphasize the accelerate that will and and leadership

and and meaningful largest progress success many our DTC brands platform. continue within our more with to We see of

continue execution profit working our the cash We manner and a to of to consistent disciplined in operate our for deliver model the in business in diligent and our will both flow shareholders. management capital of

morning, the operator. over Thanks now for back your call and the will this time we to turn

Operator

[Operator Instructions] Thank you.

with line with question. of question Duffy Stifel. first your comes Our from proceed Please the Jim

Jim Duffy

Couple for me. of questions

as expectations, were business sell-through the more back go of inventories and like of was portfolio obviously on brand what and just you within you on then light then suggest books slow channel specific you softer look does be extent to than can your half the into year, given did the inventories quarter what trends? what what impact second about During have expectations this

Blake Krueger

the retail start level, start I some acquiring seasonal last spring we've and there impacted. product your was work now with the of seasonal Jim. say would and build-up at here the of U.S., slow I’ll products. retailers to that other Obviously, of we in Yes, part question, had a at weather something are sandal a seen

as certainly in we've more improved and into with And pattern were so things demand. that gotten July consumer normalized June then into weather

First part your question? of

Mike Stornant

the with for by both delivered Saucony say Ked would growth clarify to mentioned in that We I prepared surprises and by major remarks the of just brand. on and no Merrell performance the quarter, Sperry over actually in that plan quarter. XX% the kind XX% on delivered or almost

Blake that even reverse decent our and talked on saw The sort a had impact bigger through things seasonal that it's they quarter of midway in got Chaco, to inventory about, after quarter start certainly one QX we that though the a off fall the brands off. issues of impacted smaller

of through continue was having of and on little more brand demand as to so impact a originally the and Wolverine had that of know, at-once other with quarter half just the than work some that business more in short shoes trends well little their bit the the the bit they quarter, transition the we an had year a came to of brand back you expectations in out do expected.

some So but small on the I just inventory the say are point. our brands to changes in frankly, quarter channel smaller issues those other the would add in big Jim,

little the gross year of half first under in our that You'll margins bit see of were a the pressure.

ours being our to retail did job sure nice make monitoring think cleaned inventories out. brands inventories that was I that that pipeline of a both and

promotional sure retail force that that second some intended year. the give back spend didn't in of seasonal us kind clean dollars were the a to and for markdown in cleared through make the really certainly product runway our in to of particular product in pipeline, quarter We into half of the

and we I So the approach have about quality think feel of forward. that going good we inventory the that about

Jim Duffy

And then just the on if may I question a tariffs.

and should amount an millions terms still terms P&L? in China the the of number of seem of you You improvement in recognize tariffs that and guys that's about I insignificant dollar in in we the actual product terms. coming in in the timing coming terms from Can tariffs. how volume spoken of in doesn't think speak tariffs of sit sourcing,

Mike Stornant

FOB price we say of China I take, expect The factory, $X.X current and concessions million any estimate. are of in from or number multiplied without we if pair we actions Yes. months the the XX% action growth maybe the four it in any from respect the of the these would additional with could that $X year, see we our - to and U.S. to used the multiplied, - hit last something the area in million. remedial times increases

Blake Krueger

a obviously, production we merchandising pulling production, we as lot and if pretty fourth inventory going its is but mitigation coming our could tariffs will - only merchandise of quarter forward not knowing And obviously imposed taking Jim pretty queue spring as be about by or exactly activities and when aggressively. the that moving these specifically that in spoke in not fast

for year year the this in and And our have didn't that specific impact this the product the The the nothing been year, position timing has so for will late reflect put next weeks. year change on could in inventory something of because and just even we want necessarily to anything which very though next coming its we sales. is based don't in be impact the particular the mostly minimal couple imposed yet guidance we and

I think we've been decrease again last numbers the XX, months. And the XX Blake that where quoted as over even it next significant to from relates year, a it’s

tariffs product that specific I have and in might to fact be now there improvement the think we future. to exposed the do fast visibility the that

to things impact. mitigation and around pricing a strategy mitigate do we other can have the will We that more specific much

what it year. to have suggest cost impact any year, Blake's like to have impact in kind - difficult we would mitigate next well of and accordingly next feel even and to of but plenty it think act I really based on we for about time not So how be the to we comments feel and hand premature

Blake Krueger

is there Jim, another point Yes of reference.

period expected was to Our it back year just XXXX. just next XX% period as than less look about or we will be what

you of effort. our some mitigation gives that So some idea

Operator

from Svezia with Our next question. Chris question Please line your proceed of the with comes Wedbush.

Chris Svezia

of they you the given implying guess revenues want back counting for I has and the guidance on one little short so are played if moment so half and sort first the half out for just step I the to about first think a back for how growth. X% you’ve or

what guess. of I in confidence level of a Just through maybe specifically little terms walk that that hitting more

More talk for backlog for numbers Saucony Sperry revenue or give could to Merrell expectations growth your specifically exceedingly. or a to for backlog you or number relative or

of the greater that be will least have that what revenue we So the any half the that first on around giving you're at happened helpful? confidence start year to just achievable based guidance in is color

Blake Krueger

backlog I we've I brand. say that that we - quite can detail, numbers mean - don't level by looked brand that but usually give at detailed in at of

the second it’s been backlog five the is strongest half in Our present probably years time. or more at

fundamentally So a the and half. backlog to deliver our in confidence we of lot it’s in going have second what

tied it strong view when comes of taken but boot the Again, to a backlog particular in good Merrell's at-once at a to a trends order a portfolio bit pretty the we're across has of is time. some strong. trend. seeing it its conservative And diverse little we've offering, also Sperry backlog very lot

So trends experienced, to in are half we strong sometimes to month month apparent numbers the one half a be but actually slightly were we first than for approach at-once volatile U.S. it industry reason was and half. once first back half volatile conservative no we the the frankly at trend sell-through the flat take second in worse the down our you modeling in in to a as month, were up overall it the trends from see could and and looked another first at-once given

Mike Stornant

Chris solid each our at the the that's projected. right The and I we visibility think think half first I good. day weren’t end for aggressive quarter most while came necessarily into where obviously was was of our business the from at-once of the the outcome at-once was backlog worst of expectations shortfall than

sound. is So that I think approach

in backlog of total I Blake the the think we numbers to about other things in will year talked the in half - the stores. addition have XX back that new

$XX back addition a of in have is about year. half the or stock million $XX Italy lift will the We which million of in the

e-commerce continues. Our growth

in And still the the XX% comps taper back up so in all growth half year, we about the back against the as at in because bit half. first we're going stronger will talked down along XX% but much that a in reflecting up obviously least backlog, little that half the prior but in

emphasize So fact in I important would and and rough think had America those especially into we and really Latin for are other areas opportunity QX the of EMEA some growth result that really also I XXXX.

QX QX. for comparisons see high in international the business a are in the So we’ll international growth business quite teens and in bit easier

back So way we thinking there. half level the and confidence of just some about at growth of we’re that have out high accelerated level round should the

Chris Svezia

follow And have I just that backlog wrong the but are and taking in And more about I thinking perspective you something on that if you talk how to how cancellation you are and thinking conservative just in about up revenue you I'm a the me reorders number Sperry for correct you backlog if look given from relative guidance excess to the our guess one. and view, you about like revenue guess backlog example outlook? that

Blake Krueger

at-once what we cancellation maybe to we there cancellation of talk about kind our is experience. about we will think when to it replenishment a experience include think Yes, level be and way broader and would at-once combining in assumptions

being that our what the businesses. those some we cloudy in in More of half weather more when seasonal all impacted half. a conservative back was here way saw of conservative than reflected are the so in the and And stuff kind both other first even that

brand, the if it. backlog prioritize confidence the we in by So but of Again, level was - demand the including way think to I have growing I boots to that's we business I of level high. our men's this year don’t have boot boots, is the categories very think Sperry on of for we kind give lifestyle about think various

Chris Svezia

Okay.

Mike Stornant

the The although to few early all we have have I early the would all respect the sale marketplace for Sperry, north also very very we the indications with from strong are cetera. Chris boot et category Sperry positive. from in

Chris Svezia

me you lot from capital curios you stock to on one have I are buyback know back share buyback as additional count Final just the to price how here given you I but? allocation ability bought thinking am had of no for stock stock the the relative year in just guidance about factor additional

Mike Stornant

and We’ve to active capacity first obviously there half in and back half proven the of more than the have the pretty to do year. be flexibility

guidance but certainly and intend reflect we Our to your share approach. that, doesn’t count don't change

Operator

comes from question Baird. Komp line with question. of next Please the Our your Jonathan proceed with

Jonathan Komp

the like I three last you you at XX% Wanted kind to some how curious the the at look factors unique guiding just it’s big low inventories I had. that projection. you think follow-up when half of of when is of about How much year revenue comments or second whether first guess up international just cycling look the projection. brands on sustainability am you the

optimization big three the of your of relatedly do I as that And at your kind view of look of you so change And with second how current sustainable is all much brands? strong in terms portfolio guess the it up of beyond half.

Blake Krueger

into as future a would growth. achieve we’re growth that still a I tools firmly and organic level mid-single try digit of brand these take of that the at skills initiative. fixed say adopters that we our view brands on through that at processes Certainly, and minimum Yes, early and we would model were would were that transformation and expect on other some and growth our the for the largest developed the the we brand Jonathan

the smaller what some and a We’re Sperry, a regard. of was in brands of tools the they And lap Merrell, those to that and question? Ked Saucony skill taking part but in of half our your process are behind second clearly set

Jonathan Komp

[indiscernible]?

Blake Krueger

growth to When we to for look future, deliver better. brands we next would or forward the mid-single-digit look year these

Jonathan Komp

think rate that. of are Okay. like added growth in And the are maybe half so the half, you second of underlying factors the do kind second and some mid-single-digit into then you unique at

Blake Krueger

half. Brexit, about feel we second responding We global very outside of challenges as things nimble currency arise. We at been confident understand those like but challenges, to like pretty those and those have there. feel few our the we’re challenges, We they control other

So we back year, we’re all terms think think the year growth. of going half to the in - the regions going in for are we positive world be in the

little bright to is ahead our that now in going right Asia-Pacific QX the pretty be confident some feel in know of We a future we as look is challenged bit very for but most because and bankruptcies brands. Korea, we of larger

Mike Stornant

way a it I and that have have think it's regions some and the the portfolio especially some with portfolio XX don't is some that mix, the quarter. different them challenges brands and every year, to that we're just going we win had you there brand every -

first the categories. that Sperry categories So business had a of other we've transitioned not into think kind year, the the merchandise, around strengthening next fact boot in in just negative surprises some half I seasonal where of we some going but out

as frankly accelerating really Merrell obviously, next as move we And well. into year

see So I how think think business you the of half know, getting second of us I forward. from results reflective going the is we more half behind the kind first

Blake Krueger

portfolio. plans brands. near-term very would our and to we I now wouldn't say have our portfolio trim The lastly with of happy right configuration any brand our we’re

Operator

Please of from Yruma your comes Ed question. KeyBanc. with the Our with next question line proceed

Ed Yruma

the kind the How for cycle? boots And Thanks great that from job you. how the you nice I saltwater cost impacts the first of guess of a I complaints cost We've book trying diversifying that just in to higher question. started see move Thank away about obviously life know in is China. how to boot, and see the much big others you side, but that, uptick heard taking been driven order as is you does you again. story to that, second, opportunity? by where have then understand from gross its of margin product just on change, the good away that's think is medium-term other the particularly portfolio on

Blake Krueger

Yes.

with respect the saltwater than saltwater going this Sperry’s substantially expanded offering boot, to boot all just very collection. of to larger First fall be the this is

here, having - three it a roaring success last been outfall obviously the said that seasons. Given probably

is success put Sperry to expanded overall the lifestyle We continue. other Merrill continues going as that - business. overall was I’d brands. and But two-third, business, of expand figure to boot category to say rough our If the for and Sperry it does performance I is going boot several the on the saltwater business, think approximately a salt its of

actually maybe China With China, here China, lower in into uptick little fact from the we quoted any out migrated significant but been we've change right been not respect seen we the away have were frankly prices some than to as getting now prices, FOB migration we that'll what of it's have of on. the a bit been future a from steady little in

an some for in to so us of migration has at other remember you do of also factory that gone though in that in have much outside groups that then respect folks think industry. were have the China a it's using the been China, maybe I easier that transition to least already factories

Operator

of line question. your next the Susquehanna. with with Please Sam comes from Our question Poser proceed

Unidentified Analyst

This is Will on for Sam.

correct? $XX an $XX left line the million you mentioned Saucony, XXXX, top to acquisition FY Italy So to be million going that’s guys that's a

Mike Stornant

in the half guidance. back that’s Yes,

Unidentified Analyst

Okay.

Mike Stornant

other drag acquisition. we our a QX, of have the a did quarter We bit little in

Unidentified Analyst

perspective? that margin is accretive is operating Okay. margin that from And business, an

Mike Stornant

It margin, operating is a and standpoint profit from both in margin. gross gross

Blake Krueger

subsidiary as margin operating operated and on now's full obviously business margin top line Remember, this with healthy a lean a the very a operating distributor is a we margin. in that in basis fairly past

Unidentified Analyst

guys you performance discuss know stores a the stores? you’re little general sample new some I opened bit, you can stores, in for And just can just your comps those just opening discuss newly and of

Blake Krueger

the concerned, that are back the As performance are stores far guidance half not referencing as the yet. in we many is of open

stores those would in we stores very reads early stores that locations second nine open been quarter, but brand, did we the Sperry have very were outlet the outlet felt I good. in So right on for say strategic mostly

to we And way Merrell call it's bit of Sperry outlet you little the for a we’ve the similar year. a back the taken both - stores approach like like in and but and early too start half we to

openings are Our nine early store we're excited we’ve opened. about as modest the relates on already to it the expectations there pretty stores reads but

Operator

line Our with Jaffray. comes Piper question. of with proceed next from question your the Erinn Murphy Please

Eric Johnson

this This morning. for taking Thanks question. Erinn is on Eric for the

be this was at-once half or or business you curious quantify second I year is your can? if average planning there to an is is let’s way year First, a you're what in to and say just

Blake Krueger

much and brand you give QX is don’t ebb so bit detail. that for parts dynamic, oriented obviously, quite is But grow you orders. if quarter of demand our international the level of as It’s so Every flow the a different We a there selling more of business more and that around kind us changes. right. different know will and future futures

at-once is are around the on you if which about impacts talked are more reliant cautious we will when being reorders. really demand. more It more quarter fourth And conservative,

So necessarily seasonal sell-through not weather but increase more else. impacted or implications trends, QX, a in by anything around certainly significant

So conservatism the for that's where more of bit year. we our outlook back half put the little the a in

Eric Johnson

compared its were of promotion, Chaco, seeing I softer on And context assume can how to know digital days ago? I then business just there you you then extremely curious on QX, fairly be more for we’re aggressive full some any on planning going that say the year what's provide getting and you're XX late. how in little here may was

Blake Krueger

brand premium moment of sandal start year. to slow first It trading the our price primarily the year, pressure some had weather certainly a off Chaco, at seen a is of is the challenging given sandal price this the stock as a half bit brand, and and cleared. excess

have and QX are They corrective Chaco for big business. quarters big some for QX next taken year, really the the - recall the actions that

smooth more coming seen of business they've several better, of good, had. $XXX.And year. will they’re best going out to that next ever under a think we’ve they've that the volatility new year So product going than certainly this have are be got priced offering collections market to We in some to the

Mike Stornant

or to of they the say year, points challenges would some did strong. sell-in, online very product obviously offerings to the price but new in was the did sandal do they enough those the has product offset success this and with have where that I are sell-through

the categories that's year. good So of indication category that or different expansion a for next of opportunity that into

Operator

Ross question comes line Our the of from next Advisory. with proceed your Licero with Please Telsey question.

Ross Licero

Just driving gross the the wanted guide to for get back a the half outlook? of lower color What's little year. on more bit the margin

Blake Krueger

going in a more - think think kind our of of half I overall bit and right nicely in are worse year. the the the where think I overall brings half year. us to year in expand the flattish gross The margins difficult last in first the the line for back year little guide last Well, with of for pressure I margin kind was that's

Sperry nice in we’re QX. sort for back have momentum back in strong expansion to still and the improve to in see half got promotional year the risk high-margin the going boot the all much good and with of growth in partly half. and first and inventory the profitable, QX we’re very is So see going see. half that we’re the reserve that the both gross year margin we business of experience of in of see We've the to that's or their there

first of headwinds about back respect of talked and for overall year. gross the half become really isolated wholesale in half stores our the with business frankly year. part Chaco margin The obviously are than the that Our the bigger we our that that in Chaco business and will higher all e-commerce a margins of to of just the

about for to to through based the half expected being with pressures now at-once factors. drive talked see behind of to on that results move of some move through and make take some some promotional, clean. to gross approaches that sure saw margin things we HX in So was We aggressive channel the we some did inventory, try inventory. those back us and but year the the demand, We and projected stronger also some

Ross Licero

margin no in the really So perspective from environment? a terms back the change of to half gross promotional

Mike Stornant

being replenishment cautious we're in at-once Yes, just Right. there we there like were demand. still

cautious somewhat business. of on side being We’re the that

reduction if on will a expectations of on our you bit fill-ins. little mix a So

are orders get inventory because get we out of the wholesale the highest highest orders to there. our margin fill-in always it's tend merchandise Our and margin coming we

that in drive still already As very percentage is as a impact mix, down has we slight that reflected but our outlook those the of a on strong. are gross margins which

Operator

from with next proceed Our Davidson. with line question Michael Please your of Kawamoto D.A. comes question. the

Michael Kawamoto

maybe you the take brand overstepping you online on an call about protection through? actions. Have and talked think last been some retailer issues I those work

Blake Krueger

word they a retailer. back that In expected yes and we’re relationships have, business with so particular on and practices

Michael Kawamoto

enter little retail coming just retailer ago, were partners are there we your your takeaways out its here? half your the back then over from what of expectation around product or And the month as from

Blake Krueger

say the Yes, reaction the was positive lifestyle. across I very and range both would performance

offerings all continues get product new trail Gridway the light running category, to lifestyle where the were So on category, Merrell shelf then positive. range, to gain side, share the the space. category high the high in product continues frankly sustainable And

across positive the quite was whole really So range.

Operator

your Laurent Our comes proceed question. Vasilescu from Please next with of with question line Macquarie.

Laurent Vasilescu

then leverage fourth half. and about is metrics given, for see about and which looks $XX nice the the second Based million think for investments questions that. the quarter equally for around color SG&A what's that it margin driving some Should remaining all XQ on $XX we and million around gross Good the on the my and morning, I think for third margin agenda taking guidance. Mike should thank spread And operating XQ? we quarter global thanks growth like between the you

Mike Stornant

yes, straight the that back line half it's of last Yes, essentially and of the through your well pretty part question year.

our we spending we the important business are where at looking I right, adjusting can. think it’s I obviously mean discretionary every month

that a obviously eye year. gives that, be our half corporate to a here, a close to we've think team in the we some on do and spending opportunity of lot I of back keeping As made because and it proactive adjustments very we’re us the

a But our portion back leverage growth improves, being ability organic half our of a X% comes revenue in to is obviously of a and stronger be the large of as SG&A what the overall growth the fixed year percent to spend essentially leverage there going basis. on the really of

an like to be So planning SG&A think adjustment And any our in our revenue in around the we and of see part half and we year model this. back risk the of fundamentally ability to it’s sensitive that I proactive growth business. trying is operating when to the have leverage it our

Laurent Vasilescu

the growth compares, is forgive especially pretty bit quarter, rates think I this. we've maybe the my about then question if we they and would me quarter fourth in in quarter. the by expect - level little great? But single-digit the XH Merrell, And be XXXX tougher between fourth high get think I third on just we high when growth with How growth and that missed on should seen a different

Mike Stornant

Yes, QX. other we’re growth single-digit we're I high at mean QX, look balance and high a growth the for Merrell in right looking few factors, we at at in also single-digit and order now looking when book

Merrell quarter. growth for digit high the So isn’t - there a big swing single between quarters

Laurent Vasilescu

quarter quarter and out increase shake wholesale, that. numbers showed thank full the the the a the DTC. My but think I last for for XX% second in about think did those very in first much the Group Okay, third How XX-Q question year? XX% those in we decline should numbers you quarter Boston how an and

Blake Krueger

business Yes, forward. growth those growth our we I going but DTC our contributor all Group bigger had to we’re the continue whole seeing we XX% DTC the stores of into adding be our overall for to year back We for brands not growth at That's just businesses. as think obviously half a growth, go the continue levels in will right. Boston the to for Laurent accelerated that

growth the And from Boston of the just not and of the portfolio new kind business addition for year in coming e-commerce our stores. of in guidance revenue incremental back our XX% reflects the some half

Operator

Thank you.

have We would now the I for session. reached Mr. the like to the over Harris to closing turn of floor question-and-answer you comments. back end

Mike Harris

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

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

Operator

teleconference. today's gentlemen, does conclude Ladies and this

a And this at your lines your disconnect for Thank time. you may day. wonderful You participation. have

Wolverine World Wide (WWW) 7 Aug 192019 Q2 Earnings call transcript