Annual Report 2012 the New Wolverine Worldwide – the World’S Preeminent Collection of Leading Lifestyle Brands
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ANNUAL REPORT 2012 The New WOLVERINE WORLDWIDE – The World’s Preeminent Collection of Leading Lifestyle Brands. n We have a global and diverse brand portfolio Revenue with more than 1,000 years of combined in millions history and authentic brand heritage n We reach a broad array of consumers, geographies, and channels of distribution n We are leveraging the strong appeal of our brands into apparel and accessories that are exceptional in both performance and style n We have a proven ability to lead great brands and deliver long-term growth and consistent financial performance Diluted Earnings per Share (1) Adjusted for non-recurring restructuring and other transition charges ($0.06 per diluted share). (2) Adjusted for non-recurring transaction and integration charges ($0.66 per diluted share) related to the acquisition of the Performance+Lifestyle Group. to our WOLVERINE WORLDWIDE SHAREHOLDERS ANNUAL REPORT 2012 Blake W. Krueger Chairman of the Board, Chief Executive Officer and President iscal 2012 was an exceptional year for The integration of these two F Wolverine Worldwide and, by almost any world-class businesses and measure, the most transformative one in our 130- teams is well underway and year history. Today, our “new” Company has an ahead of schedule, and has expanded, unparalleled portfolio of global lifestyle gone much smoother than we brands; a deep, seasoned team of motivated could have hoped. The cultural associates; and a global brand-building model fit has been great. designed to drive sustained, long-term growth for our shareholders. I am very proud of what During my long association we accomplished this past year, and even more with Wolverine Worldwide, excited about the future of our Company. I have seen our Company and the industry go through many On October 9, 2012, the Company acquired changes. Over this span of the Performance+Lifestyle Group (“PLG”) from time, Wolverine’s focus, and Collective Brands, Inc. The addition of the Sperry the foundation for our success, Top-Sider, Saucony, Keds, and Stride Rite brands to has always been people, Wolverine Worldwide’s already impressive portfolio coupled with our relentless of lifestyle brands was a game-changer on many pursuit of innovative ideas and fronts. Combined, our 16 brands represent well products – all with a mindset over 1,000 years of heritage, authenticity and brand focused on growth. We’ve had numerous game-changers in equity – and today, Wolverine Worldwide is one our history – inventing casual footwear with the Hush Puppies of the largest non-athletic footwear companies in brand in 1958; starting our push into international markets the world. Some highlights of the new Wolverine over 50 years ago; revolutionizing work boots with patented include the following: comfort technology; inventing the “after-sport” category with the Merrell Jungle Moc, and now, almost doubling the n We expect to market approximately 100 million size of our Company by adding four world-class brands to our units of footwear and apparel around the world portfolio. The acquisition was certainly a milestone event in this year. our Company’s history, one of the industry’s biggest stories in years, and something that we expect will positively impact our n Our brand portfolio has offerings for men, Company and shareholders for years to come. women and children across all age groups and lifestyles and almost all product categories – A RECORD YEAR casual, dress, fashion, work, children’s, athletic While the acquisition was the most significant event for and street. our Company in 2012, I am also pleased to report solid n Our products can be found in more than performance in many other areas of the business, particularly 200 countries and territories. in the face of unique macroeconomic market challenges in certain regions. n Our team is more than 8,200 strong and located in over 50 locations spread across We reported record revenue for the year of $1.641 billion – 19 different countries. including $219.4 million from Sperry Top-Sider, Saucony, Keds, I am even more excited about this acquisition and Stride Rite since the date of acquisition, and $1.421 billion today than I was when the transaction closed in in revenue from the pre-acquisition legacy business – a third October. These new brands fit perfectly into our consecutive year of record revenue from these brands. portfolio and will deliver meaningful incremental While it was another record year for revenue, the ongoing growth – particularly in untapped international economic strife in Europe negatively impacted our full-year markets for our new brands – and we expect results. Compounding these economic challenges, the second significant positive benefits and synergies. consecutive year of unseasonable weather patterns in Product innovation in our business is always critically numerous key markets also adversely affected several of our important, and we drove dynamic new initiatives brands. Despite these challenges, we stayed committed to across multiple brands in our portfolio throughout the our strategy of investing in our most critical initiatives and year. To share just a few: growth drivers. n Sperry Top-Sider maintained its dominant position While Europe was tough all year, the U.S. business, our in the U.S. boat shoe market, and today more than largest market, was strong, growing at a mid-single digit half of its total sales are in the women’s category. pace during the year on a consolidated basis. We also drove Sperry Top-Sider also extended beyond boat shoes significant growth in other major geographic regions, including to become the leading casual footwear brand in Asia-Pacific and Latin America. We were very pleased that the U.S. several of the brands in our portfolio delivered double-digit n Hush Puppies enhanced its women’s presence growth during the year, despite the less than ideal macro- with the 1958 Collection and the brand made retail environment. a bold statement in men’s with FIVE, a dress- Our strength in building global brands manifested itself in casual and performance collaboration with the many different ways in 2012. First and foremost, we took Vibram company. significant action to expand the international reach of our n Saucony continued to gain market share in the brand portfolio during the year. In the spring, we announced specialty run channel, and is closing in on the #2 the establishment of two joint ventures for the Company – position in this channel with products such as the one in India and the other in Colombia. These joint ventures Guide 5 and Kinvara 3, which respectively earned demonstrate the Company’s ability to remain flexible and the “Editor’s Choice Award” as “Best Shoe of implement alternative business models to maximize returns 2012” in Runner’s World and “Best Shoe” in the for our shareholders. Balanced global growth remains a Performance Category from the Running Network. priority, and, with our third-party partners, our global footprint of branded specialty stores grew to over 1,400 and our shop- in-shop presence to over 8,750. Fiscal 2012 was an exceptional year for Wolverine Worldwide and, by almost any measure, the most transformative one in our 130-year history. The addition of the Sperry Top-Sider, Saucony, Keds, and Stride Rite brands to Wolverine Worldwide’s already impressive portfolio of lifestyle brands was a game- changer on many fronts. Combined, our 16 brands represent well over 1,000 years of heritage, authenticity and brand equity – and today, Wolverine Worldwide is one of the largest non- athletic footwear companies in the world. n Merrell continued to be a leader in innovation in the outdoor footwear industry. The early introductions of its M-Connect product collection have performed exceptionally well at retail, and this launch is set to be among the largest in the brand’s 30-year history. n The Wolverine brand continued to expand its relevance as a lifestyle footwear choice with its expanded 1000 Mile and 1883 collections. The brand opened a very successful store in New York City and further extended into women’s footwear with a powerful collaboration with well-known designer Samantha Pleet. n Keds announced a multi-year partnership with seven-time Grammy winning, multi-platinum singer-songwriter Taylor Swift. Keds’ partnership with Taylor Swift coincided with the launch of her latest album, RED. Time magazine has named Taylor Swift as one of the 100 most influential people in the world and she is Billboard’s youngest-ever “Woman of the Year.” These are just a few examples of how our brands were winning in the marketplace in 2012 and set the stage for sustained long-term growth. STRATEGIC DIRECTION RECOGNITION FOR As we open a new chapter for the Company, our vision OUR BRANDS AND OUR TEAM remains the same – “to excite consumers around the As in years past, the Company, as a whole, and many of its world with footwear and apparel that bring style to brands received tremendous recognition in 2012. purpose.” To deliver against this vision, our Company remains intently focused on our three key strategic Near the end of the year, Wolverine Worldwide was honored initiatives – what we call our global brand-building model. with the Company of the Year award from Footwear News at their annual FN Achievement Awards. Footwear News 1. We remain focused on consistent, above-industry is one of the leading trade publications within our industry, growth for our footwear wholesale business around and this is the second time Wolverine has received this the world. This is our foundational business, and prestigious award. our brands enjoy great momentum today in many global markets. In early February of this year, we were named Company of the Year and the Sperry Top-Sider and Wolverine brands 2.