This Company Has Made its Future Bright
Himanshu is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Weakness in the European economy has been affecting companies for a long time now. No industry could escape the unfavorable effects of an uncertain environment, and the footwear industry is no exception. Recently, footwear retailer Nike (NYSE: NKE) had posted its first quarter results, which met analysts’ expectations. Though its quarter was quite impressive, investors were worried about its future. Weakness in Europe and China had a negative impact on its future orders, which fell 1% and 5%, respectively, making investors quite cautious about the company’s future.
Even Wolverine World Wide (NYSE: WWW) couldn’t escape the situation. Its posted third quarter results last week that were quite disheartening. Nevertheless, the company is up for some great moves that might be fruitful for us to know about. Let's take a look at them.
The Quarter and Its Obstacles
Weak sales in the European market led to a decline of 2.4% in revenue, bringing in $353.1 million. Also, unfavorable foreign exchange rates pulled down the top line. However, strong sales in the United States offset the declines in the European segment to some extent. Among the three segments, the Heritage Group registered growth of 1.3%, generating revenue of $29.6 million.
Moreover, Wolverine witnessed growth in its key brands such as Hush Puppies, Sebago, and Merrell. New products with all new colors brought increased revenue to the footwear retailer. Some other segments within the company that performed well were e-commerce and leather.
Even though Europe, which comprises 20% of Wolverine's total market, dragged the company down, there are various aspects of Wolverine that investors can look to for future returns.
Expectations…
Firstly, Wolverine World Wide has recently closed its acquisition of the Performance and Lifestyle business from Collective Brands. This buyout is expected to be very beneficial for the company, adding 4 brands to Wolverine’s portfolio. The addition of the new business is expected to add $0.25 to $0.40 to the acquirer’s earnings per share.
The company is planning for a number of new collections, including M-Connect, which is expected to be rolled out in the beginning of 2013. Customers are quite excited for the M-Connect collection and even want an early delivery of the product. In fact, Wolverine has been quite active on the product innovation front with new product offerings, focusing on the female segment. The retailer has recently signed a celebrity, Taylor Swift, for its Keds’ brand promotion.
However, Wolverine’s strategies are not limited to only expanding its product offerings. It is improving its geographical footprint as well, with new stores opened in the emerging markets such as China, India, Pakistan and Malaysia. Going forward, these initiatives can prove to be quite fruitful for the company.
Some Numbers…
Wolverine World Wide has a trailing P/E of 19.94, whereas Nike and Crocs (NASDAQ: CROX) have trailing P/E multiples of 21.05 and 11.93, respectively. Though Wolverine might look like an expensive company, it is worth an investment.
Analysts expect immense growth from Wolverine, which is evident from its forward multiple of 15.08. Nike and Crocs have forward multiples of 16.32 and 9.48, respectively. Going forward, though all three of them are expected to grow, Wolverine is expected to see the most growth.
The Takeaway
Though Wolverine posted a lackluster quarter, the company seems to be making the right moves for a great future. Its international and online businesses are also growing. Also, it has new product offerings for its customers, along with a wider brand portfolio with its recent buyout. All these factors taken together indicate a growing business in the months to come. Investors should definitely not ignore this stock.
justhimanshu has no positions in the stocks mentioned above. The Motley Fool owns shares of Crocs and Nike. Motley Fool newsletter services recommend Nike. 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.If you have questions about this post or the Fool’s blog network, click here for information.
