Wolverine World Wide, Inc. (NYSE:WWW) Q1 2024 Earnings Call Transcript

Wolverine World Wide, Inc. (NYSE:WWW) Q1 2024 Earnings Call Transcript May 8, 2024

Wolverine World Wide, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good day and welcome to the Wolverine World Wide, Inc. First Quarter 2024 Earnings Call. All participants will be in the listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Alex Wiseman, Vice President of Finance. Please go ahead.

Alex Wiseman: Good morning, and welcome to our first quarter fiscal 2024 conference call. On the call today are Chris Hufnagel, President and Chief Executive Officer; and Mike Stornant, Executive Vice President and Chief Financial Officer. Earlier this morning, we issued our earnings press release and announced our financial results for the first quarter 2024. The press release is available on many news sites and can be viewed on our corporate website at wolverineworldwide.com. This morning’s earnings press release and comments made during today’s earnings call include non-GAAP financial measures. These non-GAAP financial measures were reconciled to most comparable GAAP financial measures and attached tables within the body of the release.

References made regarding financial results and outlook for 2024 and comparable results from 2023 in each case for our ongoing business exclude the impact of Keds, Wolverine Leathers and Sperry. I’d like to also remind you that statements describing the company’s expectations, plans, predictions and projections such as those regarding the company’s outlook for fiscal year 2024, growth opportunities and trends expected to affect the company’s future performance made during today’s conference call are forward-looking statements under U.S. securities laws. As a result, we must caution you that there are a number of factors that could cause actual results to differ materially from those described in the forward-looking statements. These important risk factors are identified in the company’s SEC filings and in our press releases.

With that being said, I’d now like to turn the call over to Chris Hufnagel.

Chris Hufnagel: Thanks, Alex. Good morning, everyone, and thank you for joining us on today’s call. I’m pleased to report we continue to make progress against our aggressive plan to turn around and transform Wolverine World Wide. Executing our plan with tremendous pace to first stabilize the company, set new foundation for return to growth and ultimately deliver greater returns for our shareholders. Importantly, we were doing what we said we would do. In the first quarter, we exceeded revenue expectations with a balanced performance across the portfolio led by beats to our plan for Merrell and Saucony. We exceeded earnings expectations while simultaneously investing more than we initially planned in brand marketing to capitalize momentum we’re seeing in the business today and to help build brand equity for the future.

And we continue to strengthen the company’s balance sheet, which we remain intently focused on by further reducing our debt and inventory levels more than we anticipated going into the quarter, a good start to an important year for the company. While our transformation efforts have addressed nearly every aspect of our global operations, we’ve worked particularly hard to rapidly improve our brand’s product pipelines and presentation in the marketplace. We’ve made good progress to date in the product launch calendar for 2024 and into 2025 is especially strong. We’ve also worked to cultivate a healthier marketplace. And at retail, we continue to see inventory levels decline and rogue seller activity abate. Because of our efforts, we’re beginning to see sequential improvement in our selling trends.

This is encouraging and provides a level of confidence that our strategies and tactics are beginning to gain traction. Average weekly replenishment orders from our wholesale partners accelerated materially from the fourth quarter of 2023 to the first quarter of 2024, and our owned e-commerce demand has improved each month this year, most recently inflecting the growth in March and accelerating further in April. At the same time, we’ve delivered a much healthier gross margin across the business, achieving an all-time record gross margin in the first quarter as a company. A testament to the good work we’ve done on supply chain costs, pricing, inventory, and better managing the marketplace. We’ve set consistently that we believe our turnaround will be led by margin improvement, which we’re seeing today, followed by our plan inflection to growth in the second half of the year.

While we’re motivated and encouraged by our progress and the proof points we’re seeing, we acknowledge it’s still very early days in our transformation. We still have a lot of work to do to hit our stride and realize the full potential of the company, and there’s no doubt challenges beyond our control exist in the marketplace today. However, as we move forward, our vision remains the same to become builders of great global brands, brands that make people’s lives and the world better. Our brand building model centered squarely on building awesome products, telling amazing stories, and driving the business every day. To achieve our vision, we continue to invest in the capabilities that are necessary to execute this new model, strengthening our talent, insights, processes and tools.

I’d like to spend a few minutes now providing an update on this important work and share some real time examples of the positive momentum in the business today. Our proof points that we believe will ultimately lead to an inflection to growth and the successful turnaround of Wolverine World Wide. Starting with our number one priority, designing awesome style led trend like products that are not only innovative, but also priced right and placed right. As always, it begins with the consumer. Our brands are actively incorporating a stronger dose of market and consumer insights into their product development processes and becoming more externally focused, leveraging the collective, our recently established center of excellence for elevated trend, features and color forecasting as well as enhanced consumer testing.

In addition, we’re bolstering our talent and keep brand product roles and modernizing our tool set with the rollout of a new best-in-class digital product line management platform, which remains on track to be deployed across our portfolio after being piloted in Merrell. Now onto some examples of proof points on product. Saucony has moved quickly to advance and accelerate development in its product pipeline. The brand started to regain traction with the launch of its new Ride and Guide 17 franchises earlier this year, both of which have performed well at retail. These launches were quickly followed by the very successful introduction of new models in the brand’s elite performance franchise, the Endorphin. And just last week, the brand launched the new Triumph 22 driving growth of over 80% for the franchise in its first week on saucony.com.

At the Boston Marathon a few weeks ago, Saucony was the second most worn brand and gained share year-over-year. The brand is also gaining momentum on the lifestyle side with its retro tech collections led by the ProGrid Omni, Shadow and Azure. It’s been a good few months for the brand resulting in upticks in brand heat and demand. This summer, the brand plans to launch the Hurricane 24 and we’re already eager for the next additions of all these key franchises in 2025. The brand is supercharging its innovation pipeline and elevating its design, all while taking a more thoughtful and strategic approach than any opportunities the brand has in a very attractive and growing category. The other brands in the portfolio are close behind. For Merrell, the Moab Speed 2, which is recently recognized as an ISPO Award for the best new product in the hiking category, modernizes the trail by incorporating the beloved fit and comfort of the Moab into a faster, lighter and more athletic silhouette.

It is the brand’s biggest story this year and is driving strong sell through today at key wholesale accounts and at merrell.com. This performance is helping generate increased interest in the marketplace and continued market share gains for the category leader. On the lifestyle front, Merrell’s wrap collection continues to outpace our expectations, selling out with each delivery of new inventory. Having proven the concept at merrell.com, we now plan to thoughtfully expand its distribution to our wholesale accounts both in the U.S. and around the world. We’re also fast tracking new styles for wrap next year, especially for her, including mules and a trend-right Mary Jane. Finally, Wolverine brand’s Trade Wedge, Rancher and Reforce franchise are all performing well today, with both the Trade Wedge and Rancher consistently beating our sell through forecasts and the Reforce off to a solid start at wolverine.com.

Going forward, the brand has plans to expand their product franchises, most notably introducing significant new innovation to the western category later this year, as that is an important consumer trend. To win in today’s market, brands need to do more than just build awesome products. They also have to tell amazing stories, and we’re focused on telling stories that excite consumers about our brands as well as our products. As with the product process, the consumer now sits at the center of our marketing approach. Our teams are utilizing consumer insights at the very start of creative development to create more compelling storytelling, and consumer testing is now being leveraged throughout the process, including evaluating creative effectiveness prior to a campaign’s launch.

To lead our execution here, we’ve hired new consumer focused marketing leaders for both Merrell and Sweaty Betty over the last six months with plans to place a new marketing leader for Saucony shortly. In addition to leveraging the collective to ensure we share best practices and insights across the portfolio. We’re also evolving towards a better, full funnel approach to marketing investment and campaign objectives that balance functional product stories with brand building messages. It is vital that we build brand equity and deepen emotional connections with our consumers. We need to compete for both share of closet and share of mind to win in today’s competitive marketplace. A few examples of how we’re telling amazing stories in the market today.

Sweaty Betty aims to empower women and just last week, the brand launched its second iteration of the Wear the Damn Shorts campaign to encourage its sisterhood community to be confident and comfortable with their bodies. Last year, the T-shirt featuring the campaign’s tagline was the brand’s most requested T-shirt in its history. This year, the campaign has already driven a 63% increase year-over-year in shorts revenue and a 52% sell through of the T-shirt since launch. The campaign has delivered over 30 million impressions over 1.5 million video views. In total, Sweaty Betty has driven nearly a 40% increase in paid impressions globally year-to-date, and the brand continues to resonate with its core consumer. Saucony kicked off this spring with a successful Marathon’s campaign, which encouraged consumers to drop their phones and hit the pavement, driving over 1 billion impressions.

More recently, the brand engaged its running community at the London Marathon through a host of events and activations, generating well over 1 million impressions and helping fuel all-time record search interest for the brand in the UK. Year-to-date global search interest for Saucony is up over 20% compared to 2023, and this is all ahead of Saucony being named the presenting sponsor for this year’s London 10K. And our many activations planned to coincide with this importance partnership. And last Merrell just launched its biggest campaign of the year. Good things await, inviting consumers to experience the simple power of being outside. This campaign meets the consumer where and when they want to be engaged, either in their social channels, on connected TV, in print or in store.

It’s the most comprehensive marketing campaign in the brand’s history, generating over 7 billion meeting impressions so far and helping drive strength and interest in the brand. As the global leader in hike, it’s incumbent upon the brand to drive innovation and heat in the category, and I’m encouraged by the progress we’re making in Merrell. Finally, our teams are intent on driving the business each and every day. We have a renewed focus on strengthening our relationships with our global distribution network, both in the U.S. and around the world. We continue to hold strategic topsoil [ph] meetings with our key domestic retail partners, and in March 16 of our key international partners visited our campus here in Grand Rapids for strategic planning summit.

This was a first of its kind event in our company’s history, and the first time we’ve hosted a group like this on campus since the pandemic. To further support our partners around the world and drive the business, just last week, we announced new license agreements for Merrell and Saucony kids footwear, along with Merrell apparel and accessories. These new agreements will help us deliver better, fuller assortments and more effectively and efficiently realize the full potential of our brands globally. In collaboration with our longtime partner in Japan, Merrell opened its first of its kind flagship store last fall in Harajuku in Tokyo, one of the very best and most influential retail districts in the world. The store has outperformed its plan since opening, leading to the opening of a new store in nearby Shibuya Scramble Square at the beginning of March, which successfully captured a younger consumer, driven a more balanced head-to-toe sales mix and is significantly exceeding its plan since opening.

The strategy in Japan is helping reposition, modernize and energize Merrell and we’re taking these learnings to other brands and markets in the portfolio. Here in the U.S., Saucony is expanding into meaningful new lifestyle distribution over the course of the year. As a result of the heat it’s generating with trend-right, retro tech designs from its archives. The brand is also opening its aperture to capture the broader global running lifestyle opportunity well beyond niche elite offerings. In February, I said I was bullish on Saucony’s future prospects driven by a much improved innovation pipeline, and I’m even more excited today on the potential of the brand moving forward. We’re also making important progress cleaning up the marketplace, spearheaded by our newly created brand protection team.

To date, we’ve closed or restricted over 30 customers and partners and shuttered approximately 400 retail accounts. This will continue as we work to be great brand managers coupled with a stronger focus on sell through versus sell in and our brands better managing supply and demand in the marketplace. While awesome products and amazing stories are critical to building great brands, I’m equally focused on aligning the global teams to drive the business each and every day. Our team’s good work is translating into important early proof points and helping to build a new, firmer foundation for the future. Before I turn the call over to Mike, I’d like to comment on our other announcement this morning. After a comprehensive search, I’m pleased to announce that Taryn Miller will succeed Mike Stornant as the Company’s Chief Financial Officer.

Taryn brings over 25 years of global financial and operational experience along with strategic thought leadership to Wolverine World Wide. I’m excited for her to join the executive team at this important moment in our transformation and look forward to you all meeting and working with Taryn. She’s a tremendous addition to our team. I’d also like to take this opportunity to personally thank Mike. He’s dedicated nearly three decades of his life to the company, including the last nine years as our CFO. Since I stepped into this seat last August, his deep knowledge of the business, drive and undeniable grit have been invaluable to me and the company as we work to stabilize and re-imagine the company. No one is more passionate about Wolverine’s success and no one works harder than Mike.

Thank you, Mike, for everything you’ve done and for your commitment to a smooth and seamless transition moving forward over the next several months. I, along with everyone at Wolverine World Wide, wish you and Amy the very best in your coming retirement. It’s well deserved and we’ll miss you. With that, I’m going to hand it over to Mike to review our performance in the first quarter and expectations for the year in more detail. Mike?

Mike Stornant: Thank you for those comments, Chris, and good morning to everyone on the call. This morning I’ll start with a review of the first quarter followed by our expectations for fiscal 2024. We are very encouraged by our first quarter results. We delivered or exceeded our key financial objectives and saw improvement across performance metrics that support the stabilization of the business. First quarter revenue for our ongoing business of $390.8 million was above our outlook of $360 million. Demand trends and selling execution continued to improve. Our wholesale performance in Europe was especially strong thanks to actions taken by our global supply chain team to mitigate logistics delays related to the Suez Canal. Approximately $8 million of revenue shifted from Q2 into Q1 as a result.

As a reminder, Q1 2023 included more than $75 million of revenue that did not repeat in the first quarter of this year, including excessive end of life inventory liquidation, a timing shift in international shipments and business model changes. Adjusted gross margin of 46.5% was better than our outlook of approximately 46% and improved 540 basis points versus last year. A healthier sales mix, lower e-commerce promotions and the benefit from the supply chain cost initiatives executed last year all contributed to this record gross margin performance. As a reminder, first quarter gross margin was planned to be the highest of any quarter this year due mostly to the lower mix of international distributor shipments in the quarter which carry a lower gross margin.

Adjusted SG&A expense of $162 million was in line with our expectations given the higher revenue and includes a $3 million year-over-year increase in investments for demand creation and technology. Adjusted operating margin of 5% exceeded our outlook for the quarter and adjusted diluted earnings per share for the quarter were $0.05 and better than expected. The health of our balance sheet continues to improve and we exceeded our expectations for inventory, cash flow and net debt for the quarter. Inventory for the ongoing business was $354 million, down 40% from last year as a result of continued progress on rightsizing inventory, nimble supply chain execution and improved planning. Net debt was $685 million, down approximately $380 million versus last year.

Bank-defined leverage was 3.1 times at the end of the first quarter. Let me now provide details on our outlook for 2024. Our guidance reflects the expected performance of our ongoing business and now adjust for the recently announced licensing model for our Merrell and Saucony kids business. This change in business model will further simplify our operations and leverage our newly established global licensing team. This change is expected to reduce 2024 revenue by approximately $20 million and will have a neutral impact on earnings in 2024 as we transition the business to our new partner. Fiscal 2024 revenue for our ongoing business is now expected in the range of $1.68 billion to $1.73 billion. This compares to 2023 revenue for our ongoing business of $1.99 billion and represents a decline of 14.4% at the midpoint of the range.

Discrete items in 2023 totaling $165 million in revenue will not recur in 2024. These include approximately $70 million of extraordinary end of life inventory liquidation heavily weighted to the first half of the year, approximately $55 million in revenue prior to certain business model changes, including the transition of our China joint venture to a distributor model for Merrell and Saucony, and approximately $40 million in a timely shift of international distributor shipments that benefited Q1 in 2023. We expect the transition to a licensing model for Merrell and Saucony Kids will result in approximately $20 million of 2023 revenue that will not recur in 2024. Excluding these discrete items and licensing business model changes, the midpoint decline in full year revenue will be approximately 5.6%.

Our revenue outlook for our groups and brands remains unchanged. As a reminder, we expect Active Group revenue to decline mid-teens. Merrell is expected to decline in the low-double digit range with inflection to growth expected in the second half of the year. Saucony is expected to decline in the low-20% range with sequential improvement as we move through the back half of the year, and Sweaty Betty is expected to be approximately flat. Work Group revenue is expected to decline high-single digits, with Wolverine brand expected to be down mid-single digits. Turning to gross margin. Adjusted gross margin is expected to be approximately 44.5% at the midpoint of the outlook range, up approximately 460 basis points compared to 2023 and a record for the company.

We continue to expect significant reductions in supply chain and product costs. The benefit of healthier inventory and a better mix of full price sales partially offset by foreign currency headwinds that impact inventory costs. Adjusted selling and general administrative expenses are now expected to be approximately $640 million at the midpoint of the outlook range, or 37.5% of sales, compared to $716 million in 2023, or 36% of sales. The lower operating cost structure includes $95 million of savings from the 2023 restructuring and other profit initiatives and $10 million from the model change for our Kids business. This is partially offset by incremental investment for demand creation and modern systems, normalized incentive compensation expense and general inflation.

Adjusted operating margin is expected to be approximately 7% at the midpoint of the outlook range, compared to 3.9% in 2023. Interest and other expenses are projected to be approximately $40 million, down from $63 million in 2023 and benefiting from the significant debt reduction achieved to date. The effective tax rate is projected to be approximately 18%. As a result of these key assumptions adjusted diluted earnings per share is expected to be in the range of $0.65 to $0.85 including a $0.10 negative impact from foreign currency exchange fluctuations. This compares to $0.15 in 2023 for our ongoing business. Working capital and cash flow optimization remain a priority in 2024. We now expect inventory to decline by at least $75 million during the year as we continue to work through specific areas of excess inventory.

On this topic as the industry faces new and evolving product regulations related to PFAS, we are taking a proactive approach. In partnership with our key retail partners and our own direct channels we are responsibly working through this inventory. We expect to be compliant with PFAS restrictions when and where required in the future. Operating free cash flow is expected in the range of $110 million to $130 million. We now expect net debt to improve by $175 million to $565 million at year end with bank-defined leverage below 3 times. Shifting to our outlook for the second quarter, we expect second quarter revenue of approximately $410 million, a decline of approximately 21%. As announced earlier this year we are closing our Louisville distribution center and currently moving our Saucony inventory to our California distribution center.

We expect this transition to result in a shift in revenue and profit from Q2 into Q3. Second quarter gross margin is expected to be approximately 43%, up 390 basis points from last year. This would result in first half gross margin slightly above 44.5%, which is in line with our outlook for the full year. We expect second quarter adjusted operating margin to be approximately 5% and adjusted diluted earnings per share to be approximately $0.10. The order book for our global wholesale and distributor businesses is developed as expected when we established our full year guidance in February, and the rate of replenishment orders has continued to improve. In addition, our e-commerce businesses are expected to inflect to growth in the second quarter, with growth also expected in Q3 and Q4.

As a result, we continue to expect sequential revenue improvement through the back half of the year with year-over-year growth in Q4. We also expect second half gross margin and SG&A expense to be similar to the first half, which will drive positive SG&A and operating margin leverage in the second half of the year. Let me summarize the key points I hope you’ll take away this morning. 2024 is a year of transition for the company as we expect significant gross margin expansion will precede an inflection to growth in the back half of the year and we set our brands up to accelerate in 2025. We recognize that improved and sustainable gross margin is necessary to create capacity for consistent brand investment into the future. We are balancing the need for meaningful earnings and cash flow improvement with critical reinvestments required to modernize our systems, drive demand creation and build other important capabilities.

And finally, after a solid performance in Q1, we now have better visibility to future order demand, more stable operating trends, and strong consumer reaction to our new product introductions. This progress gives us further confidence in our outlook for the rest of the year. Before I turn the call back to Chris, I want to personally welcome Taryn Miller to Wolverine as our new CFO. She brings the valuable experience needed to help lead the ongoing transformation of this company and she’s a tremendous addition to our leadership team. I am fully committed to working with her and Chris during this important transition and I’m excited to support the company in my new role over the coming months. Now I’ll turn the call back to Chris.

Chris Hufnagel: Thanks Mike. In closing, I’m encouraged by the progress we’ve made in just a few quarters, and even more excited that we’re seeing early proof points that our strategy in execution are beginning to work. On our last call, I said 2024 would be a pivotal year for the company and that our teams were motivated by both the challenges and opportunities, I believe this is even more true today. There’s no doubt we have more work to do, but I believe we’ve taken the right steps and are on the right path to transform Wolverine World Wide, all guided by becoming great brand builders and ultimately delivering greater returns for our shareholders. Thank you for taking time to be with us this morning.

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Q&A Session

Operator: Thank you. We will now begin the question-and-answer session. [Operator Instructions] The first question comes from the line of Mitch Kummetz with Seaport Research. Please go ahead.

Mitch Kummetz: Yes. Thanks for taking my question and Mike really enjoyed working with you over the years and wish you the best of luck. So let me start just on the quarter it looks like you guys beat revenues, beat your plan by maybe $30-plus million. It sounded like maybe there was $8 million a pull-forward in Europe. Can you say if there was any pull-forward outside of Europe like in the U.S.? And then what really drove the beat, either by brand or by channel? Any more color there and then I’ve got to follow.

Mike Stornant: Sure. Thanks, Mitch, for the comments. I’ll say over performance really across the board. I think that was an important theme for the first quarter, whether that be at the brand level or the regional level. The call out on the pull-forward or the timing shift for the Europe wholesale business really had to do with how we planned or sort of hedged our bet a little bit on the timing of the logistics issues with the Suez Canal. We overcame that and we called that out as about an $8 million shift. Say there may be $2 million or $3 million more across the business. Nothing significant to call out, but a little bit more in terms of timing. Just not so much pulling forward shipments, but just the way we were able to move goods through the warehouse and some of the demand that picked-up later in the quarter, which we were able to kind of satisfy with some early shipments, so nothing dramatic outside of that issue.

Mitch Kummetz: And then on the guide, you adjust for the $20 million in the licensing change on Kids; it looks like the sales guide is unchanged, given some upside in the first quarter and particularly better replenishment trends I’m curious why you didn’t flow through more of the 1Q beat or kind of raise your outlook on the year based on those improving revenue trends? Can you address that and also maybe talk about the impact of the – or quantify the impact of the Saucony shift from 2Q to 3Q?

Chris Hufnagel: Sure, I’ll take the first and Mike can talk about the timing thing. I think we certainly were encouraged by some acceleration in the trends as we moved through the quarter. And how we were thinking about how the quarter might play out and certainly how the year may play out. We’ve talked about increasing improvements in replenishment at wholesale. We’ve talked about an acceleration on direct-to-consumer business, which leaves us all sort of encouraged about the work that we’re doing is getting traction and we’re working on returning the company back to growth. At the same time, our year is predicated on a back half inflection, sequential improvement quarter-by-quarter, which we’ve talked consistently about, and now we’re actually in the place.

Now we’re beginning to chase inventory. We worked really, really hard as you know, as part of the turnaround is to really better manage the inventory piece and we’ve done a good job at that. And we’ve worked to maintain lean just because of where we have been and where we thought we needed to go. Now that we’re seeing an inflection in some proof points of growth, we’re beginning to chase inventories. We’re still taking a conservative approach. I think hopefully it came through in my prepared remarks that while the quarter was a beat to expectations, it was a relatively low bar and we still have work to go do as a company to get back to where we need to be as an organization. But early proof points are encouraging and we certainly are happy about the traction that we have, at the same time we have a lot of the year left to go.

Mike Stornant: The second part of your question, Mitch, on the distribution center transition that’s just getting underway right now, and so obviously we’re being cautious on how that might impact the quarter. I would say just we didn’t quantify it in the remarks, but we are kind of thinking in the range of $5 million to $10 million of potential revenue shifts there, but doing everything we can to mitigate that. And the teams are already making great progress on the transition, but just important to call it out because obviously as we get through that over the coming four or five weeks that could have some impact on the flow of goods and chasing some of the demand that Chris has been talking about. Having said that, really good coordination with our key accounts and planning this transition and good support from our customers in terms of how we’re going to reflow the goods, too.

Mitch Kummetz: All right. Thanks again.

Chris Hufnagel: Thanks, Mitch.

Operator: Thank you. The next question comes from Laurent Vasilescu with BNP Paribas. Please go ahead.

Laurent Vasilescu: Good morning. Thank you very much for taking my question. Chris, you and your team have done a lot of heavy lifting over the last year with divestitures and business model changes like the JV and the licensed business announced a couple of days ago. Curious to know if you’re contemplating any more changes over the next six months or if you’ve reached, you think a steady state point for the business to grow going forward?

Chris Hufnagel: Thank you, Laurent. Appreciate the question. We certainly have done a lot of heavy lifting over the past nine months or so, really focused on stabilizing the business, and we’ve tried to take sort of a very thoughtful, sequential, systematic approach to what we thought we needed to go to do to both turnaround and then ultimately transform the business. We have done a tremendous amount of things sort of on the back office side in that effort. Are we done doing all of those things? I think we certainly have done a lot of them. Will we continue to contemplate other things? I think we will. I think we have to become very active. It is a very fast changing dynamic marketplace and I think we can’t afford to get comfortable.

And I think we have to keep optimizing the business. And I think we have to keep very focused on what our fewest priorities are and really driving growth. But behind a handful of our brands, and frankly trying to do fewer things, but just do that, do those things better. I will tell you, it is refreshing now as we’ve done a lot of those hard activities and whether selling things or divesting things or restructuring the business, the conversations around here really have really pivoted towards growth and where our brands are in the marketplace. How are we chasing inventories? What’s working from a demand creation standpoint? How are we doing on DTC. So I don’t want to say that all of the stabilization work and all of that is done is behind us because I frankly think great companies are always working to optimize.

At the same time the conversations here right now are about chasing demand and really becoming awesome brand builders.

Laurent Vasilescu: Very helpful, Chris. And then if I can zero in on Saucony. Saucony, I appreciate the slides, the 2Q guide. Saucony applies to [indiscernible] to be down mid-teens, maybe can you unpack that a bit more? What are you seeing in terms of the order book? How is the one specialty channel doing? Are inventories clean there? Are you seeing growth in some of your retro product? Any color there, Chris, would be very helpful for the audience.

Chris Hufnagel: Sure. Yes. Thank you. Laurent. Saucony is a fascinating story right now. I remain very encouraged and bullish on the prospect of Saucony. I mentioned that on the last call and we certainly are seeing early proof points of the work that we’ve done. Really first and foremost, really attacking the product pipeline, bringing innovation back, looking at what categories in which we play and thinking about color and materials, and then really using the archives as a growth vehicle. So there are certainly are some really strong signs that we’re seeing good momentum really behind the Ride and Guide 17. The Endorphin collection was an immediate shot in the arm when the brand dropped that a month or so ago. And then just last week we dropped the Triumph 22, which is an awesome new shoe.

So there is chatter in the important run specialty channel, and we are seeing our styles begin to tick up. There is a nice movement in search interest. For those of you that pay attention to Google search interest, I think we’re up 23% year-to-date as a brand which is encouraging. At the same time, we’re working to clean up the business that Saucony is. So there are headwinds there around the close up sales that we’re anniversary. We had a very low margin profile business in some of the family channel accounts that we have to work on that margin business, and we’re working to be less promotional at dot-com [ph] as well. So I think you have to look under the covers of the Saucony business and not just at the top line, and understand how we’re trying to rationalize that business, take a new strategic approach.

We’re anniversaring some things that are going to go away, but then I would encourage everyone to focus on the new products that we’ve dropped and the momentum we’re driving both behind performance and lifestyle run. And then importantly, the retro tech collection, which is just an amazing gift we have in our archives.

Laurent Vasilescu: Very helpful. Thank you very much, Chris, for all the color. Best of luck.

Chris Hufnagel: Thanks, Laurent.

Operator: Thank you. The next question comes from Sam Poser with William’s Trading. Please go ahead.

Sam Poser: Thank you very much for taking my questions. I just want to follow up on the lifestyle product or the retro product in Saucony, and then I got a couple other questions. When you look at sort of the big growth driver over time, is this going to be in more performance running, or do you see it getting a more – just more scale across call it athletic, specialty and so on?