Wolverine Worldwide Plunges On Weak Outlook
Shares of Wolverine Worldwide (NYSE: WWW) plunged more than 10% this week but, for those of you turning to the insider selling data, it is not insider selling that is the problem. While insiders have shed nearly $3.0 million worth of their shares in 20 transactions over the past year it is the results and outlook that are weighing on shares. The company reported Q3 results and confirmed what the market had already begun to suspect. Supply chain challenges are cutting into both the top and bottom line and having a profound effect on the guidance. The good news is that insiders and institutional money still view the stock as a buy. Insiders hold nearly 5% of shares while institutions control another 91.5%.
“The Company delivered strong double-digit revenue growth and exceptional earnings leverage, despite the increased supply chain disruption caused by Vietnam factory closures and global logistics delays” said Blake W. Krueger, Wolverine Worldwide’s Chairman and Chief Executive Officer.
Wolverine Worldwide Hit By Supply Chain Woes
Wolverine had a very strong quarter in which revenue grew more than 29% over last year but there is a problem. The revenue missed the consensus by 250 basis points due to supply chain disruptions that shaved an estimated $60 million from the top line. Including the lost revenue, the company would have produced a net $696.7 million or enough to have beaten the consensus by 650 basis points.
“The unplanned supply chain disruptions resulted in at least a $60 million negative revenue impact in Q3. Demand for our brands remains very strong as evidenced by continued strength in sell-through trends at retail and a robust order book that extends into Q3 2022.”
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Moving down into the details, the report does get better. eCommerce, a driving force of the company’s growth, grew 45% YOY and nearly 130% versus 2019 to drive solid gains in the margin. The company’s gross margin improved by 220 basis pints GAAP and 330 basis points on an adjusted basis to produce better than expected earnings despite the weakness in revenue. The company’s GAAP EPS fell short of consensus due to the recent acquisition of Sweaty Betty and investment in inventory but the adjusted earnings were strong. On an adjusted basis, EPS came in at $0.62 to beat by a penny and nearly double from the previous year. Inventory is up 26.5% from last year.
Looking forward, the company is expecting strength to continue but also for supply chain headwinds to remain steady. The bad news is that revenue guidance is only in-line with the consensus estimate and EPS is light.
The Technical Outlook: Wolverine Worldwide Is Range-Bound
Shares of Wolverine Worldwide tanked in the wake of the Q3 earnings report but we don’t think much more decline is in store. The stock has been range-bound for several quarters and is still within that range. If price action continues to fall it will probably find support at the bottom ofo the range near $30. Regardless of the near-term direction in price action, shares of Wolverine Worldwide are likely to remain rangebound for the foreseeable future because of results and outlook. On the one hand, the results are good and strength should continue but on the other, the upside in growth is capped by supply chain challenges that have not yet eased.
Companies in This Article:
| Company | Current Price | Price Change | Dividend Yield | P/E Ratio | Consensus Rating | Consensus Price Target |
|---|
| Wolverine World Wide (WWW) | $15.36 | -0.2% | 2.60% | -14.49 | Moderate Buy | $18.00 |
Experience
Thomas Hughes has been a contributing writer for InsiderTrades.com since 2019.
Areas of Expertise
Technical analysis, the S&P 500; retail, consumer, consumer staples, dividends, high-yield, small caps, technology, economic data, oil, cryptocurrencies
Education
Associate of Arts in Culinary Technology
Past Experience
Market watcher, trader and investor for numerous websites. Founded Passive Market Intelligence LLC to provide market research insights.
