2018 Annual Report
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156324CVR_r4_2018AR.V10.indd 1-3 3/13/19 7:41 PM SHAREHOLDER INFORMATION CORPORATE INFORMATION 2018 FINANCIAL WEBSITES HIGHLIGHTS Company: www.wolverineworldwide.com CORPORATE HEADQUARTERS Shareholder: www.wolverineworldwide.gcs-web.com 9341 Courtland Drive, N.E. 0N AN ADJUSTED BASIS Inquiries: www.wolverineworldwide.com/contact-us/investor-contact/ Rockford, Michigan 49351 Telephone 616.866.5500 FORM 10-K REPORT A copy of this Annual Report and the Annual Report to the COMMON STOCK LISTING Securities and Exchange Commission on Form 10-K for 2018, New York Stock Exchange including the consolidated financial statements and financial (Symbol: WWW) statement schedules, may be obtained by any shareholder $2.24 BILLION IN TOTAL REVENUE without charge by writing General Counsel and Secretary, 9341 INDEPENDENT REGISTERED Courtland Drive, N.E., Rockford, Michigan 49351 or by accessing REPRESENTING UNDERLYING GROWTH OF NEARLY 3% PUBLIC ACCOUNTING FIRM the “Investor Relations” section of the Company’s website at Ernst & Young, LLP www.wolverineworldwide.com. REGISTRAR AND TRANSFER AGENT ANNUAL MEETING Computershare RECORD GROSS MARGIN The annual meeting of shareholders will be held at the Company’s P.O. Box 30170 offices at the Company’s headquarters at 9341 Courtland Drive NE., College Station, Texas 77842-3170 Rockford, Michigan on May 2, 2019, at 10:00 a.m. E.D.T. Telephone 800.622.6757 (U.S., Canada & Puerto Rico) 781.575.4735 (International) A SPECIAL OFFER FOR OUR SHAREHOLDERS OF 41.1% We encourage you to experience our brands for yourself. Shareholders INVESTOR RELATIONS THAT EXPANDED 150 BASIS POINTS are invited to take advantage of a special 30% discount on Company Michael D. Stornant products. Please contact a member of our Consumer Relations team Senior Vice President, at the special Wolverine Worldwide Shareholder toll-free number, Chief Financial Officer & Treasurer 1-866-889-3151, to receive more information about this offer. A member of our Consumer Relations team can assist shareholders with placing an order for any of our company products available at 12% one of our branded websites: Batesfootwear.com | Catfootwear.com | Chacos.com OPERATING MARGIN, Harley-davidsonfootwear.com | Hushpuppies.com AN 80-BASIS POINT IMPROVEMENT Keds.com | Merrell.com | Onlineshoes.com | Saucony.com OVER LAST YEAR Sperry.com | Wolverine.com RECORD EPS OF $2.17 AN INCREASE OF 32% COMPARED TO PRIOR YEAR 2018 ANNUAL REPORT 156324CVR_r4_2018AR.V10.indd 4-6 3/13/19 3:26 PM LETTER TO OUR SHAREHOLDERS 2018 was a successful year for the Company as Earnings significantly exceeded our outlook entering we transitioned from the Wolverine Way Forward the year, with record adjusted earnings per share of transformation into the next chapter of the Wolverine $2.17, an increase of 32% compared to the prior year. story – adoption of our new Brand Growth Model and execution against our new Global Growth Agenda. We are leveraging these new tools, processes and EARLY SUCCESS OF THE GLOBAL GROWTH AGENDA capabilities to help drive better top-line performance AND BRAND GROWTH MODEL and operational efficiencies. We are again investing for growth in 2019 with a specific focus on the key We saw solid underlying revenue growth during 2018 components of our Growth Agenda. The Company across our portfolio. Several of our largest brands has made dramatic progress over the last several benefited from being the early adopters of our new years, and I’m proud to highlight several milestones Brand Growth Model and our focused investments achieved in 2018. behind our Global Growth Agenda also contributed to our performance. Specifically, we drove revenue increases across several of our largest brands… 2018 FINANCIAL REVIEW MERRELL® grew at a high single-digit rate during 2018 with increases across all consumer territories and regions. The brand’s Direct-to-Consumer businesses had an exceptional year with eCommerce growing ATTRACTIVE REVENUE GROWTH LEVERAGED INTO STRONG over 30% and Stores growing at a mid-teens rate. EXPANSION IN MARGINS AND EARNINGS GROWTH SPERRY® returned to low single-digit growth during The financial performance of the Company continued 2018 despite ongoing headwinds for the Boat to accelerate in 2018. Revenue of $2.24 billion grew category, driven by impressive increases in the at an underlying rate of nearly 3%, with a record vulcanized, casual and boot product categories. The gross margin of 41.1% that expanded 150 basis points brand also experienced higher revenue within its compared to last year’s adjusted gross margin. We eCommerce and Stores business segments. also delivered an adjusted operating margin of 12.0% - ahead of our scheduled timeline. This was an 80-basis CAT FOOTWEAR® grew at a mid-single digit pace for the point improvement over last year and included the year, with broad growth across all regions. The Work significant incremental investments of approximately category was particularly strong for the brand and $41 million for our Global Growth Agenda. the eCommerce category also grew at a robust rate of approximately 45% for the year. 2018 ANNUAL REPORT 156324BDY_r2_2018AR.V10.indd 1 3/13/19 2:31 PM LETTER TO OUR SHAREHOLDERS LETTER TO OUR SHAREHOLDERS WOLVERINE® grew at a high single-digit rate during $1.5 billion. As a result, we have significant financial 2018, and maintained its number one market share flexibility to invest for organic growth, return capital position in the U.S. Work category. The brand to our shareholders and fund future acquisitions. also experienced very strong growth within its eCommerce business of nearly 50%. SAUCONY® experienced an underlying revenue decline in the high single-digit range, with ongoing headwinds GLOBAL GROWTH AGENDA – within the Run Specialty channel in the U.S. However, the brand drove continued momentum in the important A YEAR IN REVIEW EMEA region and achieved over 30% growth in the eCommerce channel. We are encouraged by the improved revenue trends experienced over the past We made approximately $41 million of incremental several quarters and the receipt of several recent investments in 2018 to drive organic growth. The first prestigious product awards. element of our Global Growth Agenda is focused on a more innovative and faster Product Creation Engine. Investments were made across a wide variety of STRONG CASH FLOW GENERATION, CAPITAL initiatives, including new creative talent to support DEPLOYMENT, AND FINANCIAL POSITION implementation of our Brand Growth Model and new systems and go-to-market strategies to streamline We also deployed our capital in an efficient manner the product development process and accelerate during the year by executing $175 million in share speed-to-market. repurchases, reducing debt by $212 million, increasing our dividend 33% and making $60 million of We also made significant investments during 2018 discretionary pension contributions to bring the plans to advance our Digital-Direct Offense, the second to near fully funded status. During 2018, we generated element of our Global Growth Agenda. Investments $235 million in cash from underlying operations. were primarily focused on tools and capabilities to improve social prospecting, increase customer In December, we completed a refinancing of our retention and develop a more constant flow of debt, which will result in lower interest costs and compelling new digital content. These investments greater flexibility for future uses of cash, including directly impacted our owned eCommerce business, acquisitions. The Company ended 2018 in strong which has been our fastest growing channel over the financial position with a bank-defined leverage ratio last two years – with growth accelerating to nearly of 1.26 times and total liquidity of approximately 30% during 2018. 2018 ANNUAL REPORT 156324BDY_r2_2018AR.V10.indd 2 3/13/19 2:31 PM LETTER TO OUR SHAREHOLDERS LETTER TO OUR SHAREHOLDERS The third element of our Global Growth Agenda IN CLOSING is centered around International Expansion. We focused on attacking international opportunities to make our products and brands more relevant in Our 2018 success reflects the hard work and effort by key global markets, and have invested in strategic our team over the last several years to transform the and operational resources for our regional teams, business to succeed in the fast-changing global retail especially in China, where we recently announced environment. We are entering a disruptive phase for a joint venture for our Merrell and Saucony brands. the Company where we are focused on the consumer Our International business achieved mid-single and acting with speed and urgency in everything that digit growth in 2018 and we expect this growth rate we do. to accelerate during 2019 as we target more direct investments in Europe and China. Our new Brand Growth Model, improved profitability base, significant liquidity and strong cash flow provides The early success associated with the implementation greater flexibility to invest in growth, return capital to of our Brand Growth Model and our focused Global shareholders and pursue strategic acquisitions. Growth Agenda is very encouraging. We are now positioned to complete the final stage of our I want to thank our global team around the world transformation and expand on the initiatives and for all their hard work and efforts over this past year concepts that were initiated and validated in 2018. to help reshape the Company and drive growth, and During 2019, we will implement these new skillsets, ultimately deliver value for our shareholders. On behalf tools and processes across the full brand portfolio. of everyone at Wolverine, I would also like to thank you, our shareholders, for your continued support of Transforming Wolverine Worldwide to become a our Company. Consumer-Obsessed, Design-Led Growth Company requires becoming an even more nimble and agile company, with our brands operating to make the consumer experience frictionless and more convenient across all touch points. As we look to drive innovation and growth, we will focus on our BLAKE W.