Wolverine Worldwide Claws Its Way Up
Eric is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Wolverine Worldwide's (NYSE: WWW) name illustrates its competitive strategy. This shoe company has a plan for the Indian market that could bring in more international shoe sales, and this plan also makes a major construction company look better.
Wolverine Worldwide also expanded its brand lineup recently, obtaining four shoe brands from Collective Brands in a major 2012 acquisition. Wolverine Worldwide does face competition from online shoe sellers, and clothing and shoe powerhouse VF Corp. (NYSE: VFC) has rolled out similar expansion plans.
Shoe Brands Acquisition
The Collective Brands deal didn't just transfer control of four shoe brands to Wolverine Worldwide, it basically split up Collective Brands the company. An Associated Press article explains that Blum Capital and Golden Gate Capital got Collective Brands' Payless shoe stores as part of a deal that cost around $2 billion. Wolverine Worldwide paid $1.25 billion of this sum, according to its 4Q 2012 financial report.
With shoes widely available at online shops, Wolverine Worldwide may have made the right decision by picking the shoe brands and passing up the retail stores in the Collective Brands deal. Wolverine Worldwide does have 435 retail stores of its own, so this shoe seller could have gone for Collective Brands' retail business. Payless' bargain pricing allows it to undercut other mall shoe stores, while retaining the convenience benefits that mall stores provide. This advantage could become less important if more discount stores show up in malls, because these stores also sell inexpensive shoes.
Wolverine Worldwide has demonstrated that it can work with Amazon in the shoe business. Keds sneakers, socks, and other products show up on Amazon's Keds page, and Amazon also sells Wolverine work boots as well as other Wolverine product lines. The other three brands Wolverine Worldwide gained from the Collective Brands acquisition -- Sperry, Saucony, and Stride Rite -- also appear on Amazon's site. These pages make Wolverine Worldwide's competitive position look better, because Amazon could capture more sales from physical shoe stores.
Wolverine Worldwide's fourth quarter 2012 report explains that the company expects good results from Asia and Latin America in 2013, but the European market could remain difficult. With these expectations in place, additional expansion in India makes sense.
Wolverine Worldwide announced a plan to sell its shoes in India last year. Shandra Martinez, at Michigan Live, reported that Wolverine Worldwide announced a joint venture with the Tata Group back in April 2012. Now, Wolverine Worldwide has released more information about its strategy for the Indian market. Rachit Vats, at the Hindustan Times, reported that Wolverine Worldwide planned to roll out its CAT shoe brand in India first, because Indians respected the construction company Caterpillar (NYSE: CAT), which licenses its brand to Wolverine Worldwide.
Caterpillar might also come out ahead here. Caterpillar set up a page about its Indian operations where the construction company discusses mining trucks, ship engines, and locomotive engines that it sells to Indian customers. Wolverine Worldwide has shown that Caterpillar owns a strong brand in a growing market, which looks bullish for Caterpillar itself, and Wolverine's effectively helping market the Caterpillar brand in India.
The Hindustan Times article notes that Timberland also sells goods in India through a joint venture with the Reliance Group. VF Corp. bought Timberland back in 2011, and the company also sells Vans, North Face, and other well known product lines around the world. VF Corp. listed international sales figures with Timberland excluded in its 4Q 2012 financial results, which gives investors a better picture of its organic growth. Without including Timberland, VF Corp. reported 10% overall sales growth in Europe and 19% overall sales growth in Asia during 2012. With Timberland, VF Corp. achieved 42% higher Asia sales and 28% higher Europe sales. The Timberland acquisition definitely made a difference, but expanding into Asia provided respectable growth by itself for VF Corp.
Wolverine Worldwide looks like it's on the right track at the moment, especially after VF Corp. demonstrated success with its own major acquisition and expansion into Asian markets. Although Wolverine Worldwide does sell shoes to retail shoe stores that could lose customers to Amazon, Wolverine Worldwide can also attract shoe buyers through Amazon as well. Wolverine Worldwide's also licensed well known brand names like Caterpillar that could help the shoe company maintain a decent moat. Wolverine Worldwide also has a four star CAPS rating, which shows that other Fools have confidence in this shoe company's strategy. This shoe company still looks like a decent investment.
Eric Novinson has no position in any stocks mentioned. The Motley Fool recommends Amazon.com. The Motley Fool owns shares of Amazon.com. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!