Analysts: Challenges Ahead for Wolverine

Market watchers said economy could impact the firm in the near-term.

The Wolverine and Patagonia footwear brands saw earnings increase, while the Hush Puppies Group, parent of Wolverine’s which includes Merrell, posted declines.

Chris Svezia, an analyst at Susquehanna Financial Group, believes that most of Wolverine’s challenges are “a reflection of what’s going on in the global landscape,” not a failing of the company’s business. However, he cautioned, many of the benefits Wolverine experienced in the first quarter, including a positive impact of foreign exchange and high margins on its at-once business, could reverse in coming quarters.

“We’re going to see steeper declines in revenues in the second quarter, and visibility into the third quarter is still tough,” Svezia said. “It will be difficult to see significant gains unless we get an overall improvement at retail. But this is not a broken brand, it’s just suffering at the same rate as most global brown shoe companies. By the fourth quarter, [Wolverine] could be an interesting story.”

For the first quarter, Wolverine saved about $1.2 million through its restructuring plan, which was put into place in January. That plan included the elimination of 10 percent of its workforce, or 450 jobs, as well as the merging of distribution operations and the closure of a tannery in its hometown of Rockford. It should save the company $17 million to $19 million annually, at a cost of $31 million to $36 million (before taxes) recorded throughout 2009.

The company last week reaffirmed its guidance for the year. Wolverine expects earnings of $1.74 to $1.97 a share, adjusted 12 to 15 cents for foreign exchange and 12 cents for increased pension expenses. Wolverine also reaffirmed that its revenues for 2009 would be between $1.07 billion to $1.15 billion.

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