by Stephen Garner

Wolverine Worldwide has announced an update on the progress of its ongoing strategic initiatives, which includes the divestiture of its Robeez brand.

Among these strategies is achieving a healthier supply chain. During 2016, an assessment of third-party manufacturing was finalized and resulted in a tightening of the factory base by nearly one-third. This rationalization strengthens the company’s position with key manufacturing partners around the world. While consolidating manufacturing partners, the geographic sourcing base has been diversified, with more than half of the company’s products expected to be produced outside of China by the end of 2017. Many of these actions have helped drive lower product costs, which are anticipated to improve by two to three percent across the portfolio in 2017. In addition, the company plans to open its first distribution center on the West Coast by mid-2017, which is expected to reduce time to market and provide logistics cost savings in 2018.

In order to proactively address changing consumer behaviors, the company has increased investment in e-commerce, while addressing unprofitable brick-and-mortar stores through closures, rent relief negotiations, and performance improvement initiatives. Based on timing, store closures are expected to reduce 2017 revenue by $125 million to $175 million. Once completed, the company’s store rationalization efforts are expected to improve operating profit by $20 million on an annualized basis.

An evaluation of the brand portfolio was completed this fall to allow the company to focus on the biggest opportunities. Strategic alternatives for several brands were considered, including divestiture. Harris Williams & Co. has been exclusively retained and is currently assisting with the process. Robeez was the first brand to reach resolution with the completion of a sale transaction on December 16, 2016. Additional progress on divestitures and other changes is anticipated in the first quarter of 2017.

Strong management of working capital has been a key priority as well. Year-end inventory is now expected to be down high teens, compared to the previous expectations of a low-teens decline, and cash flow generation is anticipated to be better than expected. As a result of a more flexible debt structure and very strong cash generation, the company is positioned for additional share repurchases and potential future acquisitions.

“We’ve made tremendous progress against our key initiatives in 2016, and I am excited to provide an update as we transition into the year ahead,” said Blake W. Krueger, Wolverine Worldwide’s chairman, chief executive officer and president.  “As we enter 2017, we have formalized our most important strategic initiatives into the next evolution of our strategic platform – the Wolverine Way Forward.  We are intent on protecting our brands through responsible brand stewardship and delivering growth by leveraging our focus on our consumers, product innovation and speed, all while driving operational excellence and expanding operating margin.  To help drive this, we will open a new, 14,000-square-foot consumer and innovation hub next month, co-locating consumer insights, strategy, advanced concepts, and product development teams in a modern, collaborative environment. At the same time, our work to position the company for improved profitability through our operational excellence initiatives continues, and we remain on track to deliver against our 2018 adjusted operating margin goal.  We believe we have the right strategies in place, and I am enthused by the opportunity ahead of us.”