Why Wolverine World Wide, Inc. (WWW) Stock Is Wowing Shareholders

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Wolverine World Wide, Inc. (NYSE:WWW) will be one of the first companies to release its earnings for the quarter. But Wolverine World Wide stock has already anticipated strong results from the company next Tuesday, and even though analyst projections are calling for a decline in earnings from the year-ago quarter, massive sales growth should point the way to an earnings recovery in the long run.

Wolverine World Wide, Inc. (NYSE:WWW)

Wolverine World Wide, Inc. (NYSE:WWW) is part of the highly competitive footwear business, with its shoe offerings including its namesake Wolverine brand as well as Keds, Stride Rite, Saucony, and Hush Puppies. Let’s take an early look at what’s been happening with Wolverine World Wide over the past quarter and what we’re likely to see in its report.

Stats on Wolverine World Wide

Analyst EPS Estimate $0.34
Change From Year-Ago EPS (29%)
Revenue Estimate $591.03 million
Change From Year-Ago Revenue 89%
Earnings Beats in Past 4 Quarters 3

Source: Yahoo! Finance.

Why aren’t Wolverine World Wide’s earnings keeping up with its revenue growth this quarter?
Analysts have had mixed views on Wolverine World Wide, Inc. (NYSE:WWW)’s earnings prospects recently, cutting their estimates for the June quarter by $0.07 per share but boosting their full-year 2013 and 2014 consensus estimates by 1% to 2%. Wolverine World Wide stock has reacted favorably, rising more than 25% since early April.

The big move for Wolverine World Wide, Inc. (NYSE:WWW) came last year, when the company made a $1.2 billion purchase of the Performance and Lifestyle Group of Collective Brands, the parent company of the Payless ShoeSource chain. The move came as part of a group deal with private equity companies that were interested in the Payless retail business, but it gave Wolverine ownership of the popular Keds, Saucony, Stride-Rite, and Sperry Top-Sider brands. The deal has led to the huge gains in revenue that Wolverine World Wide, Inc. (NYSE:WWW) has seen, but it has also had an impact on earnings as the company works to integrate its purchase.

Even with that strategic acquisition, Wolverine faces a big challenge from competitors. Deckers Outdoor Corp (NASDAQ:DECK) has had to deal with investors’ skepticism about whether its UGG line of footwear can avoid the same fate that fad products from other companies have suffered in years past, but value investor Whitney Tilson notes that many UGG buyers see their shoes as a utilitarian rather than a fashion choice. Meanwhile, Saucony gives Wolverine World Wide, Inc. (NYSE:WWW) an entry into the athletic shoe industry, but NIKE, Inc. (NYSE:NKE) continues to dominate the industry with its strong gross margins. In order to disrupt NIKE, Inc. (NYSE:NKE)’s strength, Wolverine will need to emphasize Saucony’s focus on running shoes, aiming to capture business from runners who value attention to their specific needs rather than NIKE, Inc. (NYSE:NKE)’s broad array of shoes covering multiple sports.

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