Everything is status quo for the time being as analysts work to digest the news of Wolverine Worldwide’s sale of the Sperry brand on Thursday.
According to a note from Baird analyst Jonathan Komp, his firm is not changing its outlook on the footwear company as of now, calling the move “anticipated” based on recent commentary.
“[The sale] brings financial and strategic benefits to Wolverine Worldwide even though the sale price looks low relative to the brand’s historical revenue and profit performance,” Komp wrote on Thursday. “Key benefits from the sale include further progress on transforming to a simpler, faster organization (with greater resource allocation to the big brands) and on stabilizing the balancing sheet.”
Komp added in his note that this sale of Sperry could help “strategically unlock” increased focus and investment behind the company’s key brands in its portfolio.
Reached by phone on Thursday, Williams Trading analyst Sam Poser also noted that nothing has changed in regards to his guidance on Wolverine, adding that it may take some time for the market to understand the real impact of the Sperry divesture.
For Poser, the question now becomes: How can Wolverine bolster its star Merrell and Saucony brands moving forward? In his FFANY takeaways note issued on Dec. 5, Poser wrote about the “egregious promotional activity” taking place at Merrell that he witnessed during the long Thanksgiving holiday weekend.
“Core Jungle Mocs and Moabs, which never go on sale were 30 percent off,” Poser wrote at the time. “According to a retailer, who was not happy about the promotions, his Merrell rep told him that Merrell’s DTC promotional activity managed separately of wholesale business, and there was nothing he could do. We understand that the Merrell business is tough, but where is a brand strategy?”
Looking further back to Poser’s Nov. 10 note, he downgraded Wolverine Worldwide from “hold” to “sell” following the company’s most recent earnings release that reflected a lower fiscal 2023 guidance, and the likelihood of much weaker than expected fiscal 2024 revenue. “At this time, Wolverine Worldwide does not have a product in the market or in pipeline from Merrell, Saucony, or Wolverine to compel retailers to plan their fiscal 2024 businesses up,” Poser wrote in November.
Wolverine has been looking for a buyer for Sperry for months now. Back in May, the company announced it was “exploring strategic alternatives for Sperry” while continuing “the foundational work needed to position the brand for long-term success.” Brendan Hoffman, who was CEO of Wolverine Worldwide at the time of the announcement, told analysts that the main problem for Sperry was that the brand focused too much on the wrong products, failing to realize when consumer trends were shifting until it was too late.
The Rockford, Mich.-based company acquired Sperry in 2012 as part of a portfolio of brands that also included Saucony, Stride Rite and Keds in a deal valued at $1.23 billion. According to Komp, Sperry reached a peak near $500 million of revenue in the mid-2010s before facing headwinds from the boat shoe category decline and unsuccessful diversification efforts, resulting in revenue falling to $312 million in 2021 and $207.2 million in 2023, down 30 percent.
On Thursday, Wolverine finally found a buyer for Sperry. Brand management firm Authentic Brands Group snapped up Sperry in a deal that is expected to generate $130 million for Wolverine in the first quarter. The company said it would use the proceeds to pay down debt.
“The sale of the Sperry brand is the next step in our turnaround and strategic transformation,” Chris Hufnagel, Wolverine Worldwide’s president and CEO, said in a statement. “We conducted a rigorous process that considered a comprehensive set of strategic alternatives for the brand, and we believe this is the best outcome for the company and our vision for the future.”
Thursday’s announcement builds on the company’s previously announced asset monetization transactions that collectively generated nearly $250 million in cash in 2023.
“In a very short time, we have meaningfully reshaped Wolverine Worldwide – simplifying the portfolio, reducing our debt, and redesigning the organization to drive improved performance and profitability,” Hufnagel added. “These efforts have enhanced the company’s capacity to invest in our brands and platforms, and I am excited about the next chapter in our turnaround – focused squarely on building consumer-obsessed global brands and delivering greater value for our shareholders.”
