Wolverine World Wide Q1 2025 Earnings Report

Wolverine World Wide EPS Results

• Actual EPS: $0.18
• Consensus EPS: $0.11
• Beat/Miss: Beat by +$0.07
• One Year Ago EPS: $0.11

Wolverine World Wide Revenue Results

• Actual Revenue: $412.30 million
• Expected Revenue: $395.94 million
• Beat/Miss: Beat by +$16.37 million
• YoY Revenue Growth: +4.40%

Wolverine World Wide Announcement Details

• Quarter: Q1 2025
• Date: 5/8/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, May 8, 2025
• Conference Call Time: 7:30AM ET

Wolverine World Wide (NYSE:WWW) designs, manufactures, sources, markets, licenses, and distributes footwear, apparel, and accessories in the United States, Europe, the Middle East, Africa, the Asia Pacific, Canada and Latin America. It operates through Active Group and Work Group segments. The company offers casual footwear and apparel; performance outdoor and athletic footwear and apparel; kids' footwear; industrial work boots and apparel; and uniform shoes and boots. The company sources and markets a range of footwear and apparel styles, including shoes, boots and sandals under the Bates, Cat, Chaco, Harley-Davidson, Hush Puppies, Hytest, Merrell, Saucony, Sperry, Keds, Sweaty Betty, and Wolverine brands; and licenses under the Stride Rite brand. It also markets Merrell and Wolverine branded apparel and accessories, as well as licenses its brands for use on non-footwear products, including the Hush Puppies apparel, eyewear, watches, socks, handbags, and plush toys; and Wolverine branded eyewear and gloves. In addition, the company markets pigskin leather under the Wolverine Leather division; sourcing division provides consulting services related to product development, production control, quality assurance, materials procurement, compliance, and other service; and multi-brand direct-to-consumer division includes retail stores that sell footwear and apparel of its brand portfolio. Further, it sells its products to department stores, national chains, catalog and specialty retailers, independent retailers, uniform outlets, and mass merchant and government customers through retail stores, third-party licensees and distributors, and joint ventures; and operates brick and mortar retails stores, and e-commerce sites. Additionally, the company operates through a network of retail stores and e-commerce sites. Wolverine World Wide, Inc. was founded in 1883 and is headquartered in Rockford, Michigan.

Wolverine World Wide Q1 2025 Earnings Call Transcript

Presentation

[Operator]

Greetings, and welcome to the Wolverine Worldwide First Quarter Fiscal twenty twenty five Earnings Call. At this time, all participants are in a listen only mode. A question and answer session will follow the normal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Alex Wiseman, Vice President of Finance.

[Operator]

You may begin.

[Alex Wiseman, Senior Vice President, Corporate Finance at Wolverine World Wide]

Good morning, and welcome to our first quarter fiscal twenty twenty five conference call. On the call today are Chris Huffnagel, President and Chief Executive Officer and Terren Miller, Chief Financial Officer. Earlier this morning, we issued a press release announcing our financial results for the first quarter of twenty twenty five and guidance for the second quarter of twenty twenty five. The press release is available on many news sites and can be viewed on our corporate website at wolverineworldwide.com. This morning's press release and comments made during today's earnings call include non GAAP financial measures.

[Alex Wiseman, Senior Vice President, Corporate Finance at Wolverine World Wide]

These non GAAP financial measures, including references to the ongoing business, were reconciled to the most comparable GAAP financial measures in attached tables within the body of the release or on our Investor Relations page on our website, wolverineworldwide.com. I'd also like to remind you that statements describing the company's expectations, plans, predictions and projections, such as those regarding the company's outlook for the second quarter of twenty twenty five, 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.

[Alex Wiseman, Senior Vice President, Corporate Finance at Wolverine World Wide]

These important risk factors are identified in the company's SEC filings and in our press releases. With that, I'll now turn the call over to Chris Huffnagel.

[Christopher Hufnagel, CEO, President & Director at Wolverine World Wide]

Thanks, Alex. Good morning, and thanks to everyone joining us for today's call. Given everything that transpired since April 2, we have a lot of ground to cover this morning, so let's get right into it. First, let me start here. The headline is simply that for the things that we can control, I feel very good about where we are today and more importantly, about where we're going tomorrow.

[Christopher Hufnagel, CEO, President & Director at Wolverine World Wide]

With that said, there's definitely uncertainty in the marketplace. So on this call, I'm going to cover both what we know and what we don't know, along with the actions we've taken to date and our plan to navigate the challenges on the horizon. First, what we know. Wolverine worldwide delivered sequential improvement in top line trends throughout 2024 and ultimately inflected the growth in the fourth quarter, a meaningful achievement marking the conclusion of a year of fast and bold actions to reestablish our footing of the company and reinvigorate our brands. Momentum generated last year is continuing to build into 2025.

[Christopher Hufnagel, CEO, President & Director at Wolverine World Wide]

In the first quarter, we exceeded our expectations on just about every financial measure. Revenue grew by over 5% on an ongoing basis and nearly 7% on a constant currency basis. We also achieved record Q1 gross margin, in part due to healthier brands and better inventory management resulting in improved pricing power and a stronger full price business, the fourth time in the last five quarters that we posted record gross margins. As a result, I'm pleased to report that earnings increased by more than three times compared to last year. These results are another important proof point of our strategic direction and solid execution by our team.

[Christopher Hufnagel, CEO, President & Director at Wolverine World Wide]

A sincere thank you to our team and partners around the world for a great start to the year. Our first quarter results were driven by our two biggest brands. Let me start with Saucony followed by Merrell. Saucony delivered revenue growth of 30% year over year in the first quarter with broad based contributions from all regions and channels led by strong double digit growth in North America and more than doubling our age specific business. In addition, the brand improved gross margin by nearly 400 basis points compared to the prior year continuing to drive a better healthier full price business.

[Christopher Hufnagel, CEO, President & Director at Wolverine World Wide]

Translated its brand heat and product innovation into significant higher average selling prices throughout the quarter in The U. S, coupled with strong market share gains in the important and highly competitive run specialty channel. Saucony's core four franchises, the Ride, Guide, Triumph and Hurricane, along with the Pinnacle Endorphin collection, continue to fuel the brand's growth in the performance running category. We launched new ride and guide models in the first couple of months of this year and both franchises delivered solid double digit revenue growth at U. S.

[Christopher Hufnagel, CEO, President & Director at Wolverine World Wide]

Retail.

[Christopher Hufnagel, CEO, President & Director at Wolverine World Wide]

In March, Saucony launched the highly anticipated Endorphin Elite two,

[Christopher Hufnagel, CEO, President & Director at Wolverine World Wide]

incorporating next generation IncrediRun foam and a full length slotted carbon fiber plate. This super shoe helped drive growth for the Endorphin Elite franchise of over 30% versus last year at U. S. Retail. And I'm pleased to share that three of the brand styles placed in the top 10 most worn shoes by runners at the Boston Marathon last month, more than any other brand and another proof point of Saucony's reinvigorated product innovation pipeline.

[Christopher Hufnagel, CEO, President & Director at Wolverine World Wide]

On the lifestyle side, the brand continues to draw on its deep product archive and partner with leading pacemakers to deliver trend right styles to the marketplace. Saucony's strategic positioning at the intersection of culture and authentic running heritage has propelled the brand in key franchises like the Pro Grid Omni nine, Ride Millennium and others around the world. Building on the roughly 900 door expansion in lifestyle athletic specialty this spring, brand expects to add over 400 more doors in the back half of this year as a result of positive sell through trends. The brand continues to take a methodical approach to strategically growing distribution with the right partners. We're also investing meaningfully to drive brand awareness and affinity.

[Christopher Hufnagel, CEO, President & Director at Wolverine World Wide]

Last year, for example, Saucony sponsored the London ten ks with a holistic set of activations around the event. This sponsorship drove strong results, including record brand search interest in The UK and accelerated e commerce growth. This

[Christopher Hufnagel, CEO, President & Director at Wolverine World Wide]

year,

[Christopher Hufnagel, CEO, President & Director at Wolverine World Wide]

we plan to repeat the sponsorship of this great event and expand the brand's investment to other runs, including the Shortage ten ks in London as part of our key city strategy. I'm pleased to report that Socate opened a flagship store in Harajuku, Tokyo this past quarter, and we anticipate opening a second in London's Coven Garden in just a few weeks, with future plans to open a host of new stores across Asia Pacific with our best in class partners. At U. S. Retail, the brand is ramping up activations in retail marketing to drive sell through.

[Christopher Hufnagel, CEO, President & Director at Wolverine World Wide]

We anticipate twenty twenty five will be the single biggest investment year in Saucony since we acquired the brand nearly thirteen years ago. I believe Saucony has tremendous potential in both performance and lifestyle and possesses the ability to blur the lines in a compelling way. I continue to maintain the brand is on a path to do something very special, leveraging a unique synergy between superior performance run product innovation and cultural relevance on a global scale. Moving to Merrell. Merrell grew revenue by 13% compared to Q1 last year with the largest contributions coming from Asia Pacific and EMEA.

[Christopher Hufnagel, CEO, President & Director at Wolverine World Wide]

In The U. S. Merrell continued to take market share in its primary category of hike, now the ninth time we've done so in the last ten quarters. This quarter we also took share in trail running and lifestyle. The brand improved gross margin by more than 200 basis points versus last year, driven in part by an increase in average selling price at U.

[Christopher Hufnagel, CEO, President & Director at Wolverine World Wide]

S. Retail. A strong quarter, now three consecutive quarters of growth and another proof point for the company's biggest brand. Merrell's recent performance is a direct result of our focus on modernizing the trail as a leader in the category. The brand initiated strategy with faster and lighter product innovation in core outdoor performance categories a little over a year ago, introducing award winning collections like the Moab Speed two and Hike and the Agility Peak five and Trail Running, both of which have become significant franchises and continue to grow rapidly in the first quarter.

[Christopher Hufnagel, CEO, President & Director at Wolverine World Wide]

To push product innovation to an even greater level, Merrell launched the visually disruptive SpeedArc Surge BOA in January, built on the brand's new SpeedArc platform for a uniquely comfortable ride with exceptional energy return. It sold through almost entirely in a matter of a few months at a nearly $300 price point. In March, Merrill followed up with the launch of the SpeedArc Madness, the next iteration in the Speedark family, which is driving healthy sell through in just a few weeks in the market. Merrell continued to make progress in its lifestyle business as well, driving very strong double digit growth in both men's and women's at U. Retail in the first quarter and even faster growth in influential Tier zero accounts, albeit on a smaller base.

[Christopher Hufnagel, CEO, President & Director at Wolverine World Wide]

The brand continues to test and earn placement of strategic accounts to reach younger consumers, particularly women. I'm pleased with the progress we've made to inflect and now accelerate the growth of our two largest brands through the fast and rigorous execution of our growth playbook. Our product pipelines are stronger. We've implemented disciplined distribution strategies while simultaneously cleaning up the marketplace, are beginning to build brand heat momentum through compelling new brand campaigns, key city activations, innovative collaborations and investments in retail marketing on the sales floor. While we've made great strides in these critical businesses, we have certain areas where we believe we can and should perform better, specifically the Wolverine brand and Sweaty Betty.

[Christopher Hufnagel, CEO, President & Director at Wolverine World Wide]

Starting with Wolverine, we continue to work to find consistent footing here. As we shared previously, while the brand's Q4 results were strong, we caution that our trends were still inconsistent and the business was down in the first quarter on this continued choppiness. Our effort to strengthen soft spots in the West category and in premium are gaining traction with new offerings like the Rancho Pro and Vantage. However, brand is comping against a period of significant discounting on certain styles last year as we cleaned up our inventory position, a headwind which we anticipate will begin to dissipate as we move to the back half of the year. On a positive note, our year over year U.

[Christopher Hufnagel, CEO, President & Director at Wolverine World Wide]

S. Market share churn in the quarter improved somewhat and our DTC business is performing better. Finally, importantly, we've initiated a search for a new leadership for the work group as Tom Kennedy is planning to retire later this year. In closing with Sweatybody, Over the past year, we've largely been focused on better integrating and improving the profitability of SweatyBuddy, prerequisites to building a healthier brand and business. While affinity for the brand is strong with a unique and differentiated position in a desirable category, we believe we must further bolster our premium position.

[Christopher Hufnagel, CEO, President & Director at Wolverine World Wide]

Whether the products we build, the stories we tell or how we manage the business each day. We're focused on driving less promotional business this year at the expense of top line growth in the near term. Encouragingly, first quarter gross margins were up nearly 1,000 basis points year over year driven by improving our full price mix at Sweaty Betty by approximately the same amount with continued improvement in the first few weeks of the second quarter. Additionally, we're encouraged by some of the early results we're seeing in acquiring new consumers under our more full price strategy, as new consumer acquisition was ahead of our internal plan in the first quarter and the lifetime value of the full price consumer on average is 20 percent higher than consumers we acquired through Promotional Tactics. We've added new talent to the brand over the past six months as well, most notably a new product chief.

[Christopher Hufnagel, CEO, President & Director at Wolverine World Wide]

And we're chasing new products for the back half of this year, targeting the important holiday selling period. While not satisfied with our top line results, we have confidence in our strategy, and we're currently focused on building a stronger brand and business the right way. While the challenges and opportunities are different for Wolverine and Sweatybody, we believe they've been properly identified, and we're working at pace to get these businesses moving in a more positive direction. Now let me pivot to where we are as a company coming out of our turnaround and heading in the rest of the year. On my second call with you as CEO in November 2023, I identified key areas we had to improve upon as an organization to become great global brand builders, And I outlined an ambitious plan to redesign the company to compete and win in the future.

[Christopher Hufnagel, CEO, President & Director at Wolverine World Wide]

Central to this effort was transforming our culture and building new capabilities, squarely focused on our consumer and modern brand building. Since then, we've made good progress, I'm pleased with the improved results we're posting. Given the turnaround in our business, our team's confidence continues to grow in our strategy and ability to execute with distinction. Confident in the progress we've made in transforming the company and informed by our stronger performance of the business, we exited the first quarter with an outlook well on track to deliver our full year 2025 expectations, which called for solid revenue growth led by our biggest brands, meaningful profit improvement year over year and material investments in our brands and suite of new tools and capabilities. Unfortunately, significant uncertainty entered the equation on April 2 with the initial tariff proclamations followed by the subsequent revisions.

[Christopher Hufnagel, CEO, President & Director at Wolverine World Wide]

As we sit here today, it is difficult, if not impossible to predict the potential twists and turns in trade policy along with consumer sentiment and spending. Therefore, we were compelled to withdraw our full year guidance for 2025, a decision we did not take lightly, but felt prudent given the dynamic situation. For what we can control, I remain optimistic and bullish on our prospects. Our current order book and DTC trends support the top end of our previous full year revenue outlook, not to mention improving market share gains across most brands in our portfolio. In addition, I can tell you that overall demand trends for our brands appear to be holding at this point.

[Christopher Hufnagel, CEO, President & Director at Wolverine World Wide]

Sell through at U. S. Retail, for example, has remained strong throughout April, and we're getting similar reports from our international regions. For what we can't control, we believe that we are well positioned to navigate the current challenges thanks to the momentum we've generated, a strong and gritty team and a variety of strategic and operational advantages, along with many actions already taken or in motion to mitigate the risk. Let me provide a few details about why I'm optimistic.

[Christopher Hufnagel, CEO, President & Director at Wolverine World Wide]

Today, sourcing footprint is strategically diversified due to a very intentional evolution over the past several years. In 2019, nearly 40% of our products sold in The U. S. Was sourced from China. This year we now expect that to be just high single digits, primarily related to our workgroup brands.

[Christopher Hufnagel, CEO, President & Director at Wolverine World Wide]

Our supply chain is also nimbler today, enabling optimization across a mix of suppliers and factories, in some cases leveraging dual sourcing of franchises to maximize flexibility. Importantly, we've invested in developing our relationship with our key supply chain partners over the last couple of years through annual summits and close strategic partnership and planning. And we benefited greatly from pointing an industry veteran as our Chief Global Supply Chain Officer a little over a year ago. On the commercial side, our business is truly global, with our brands being sold in approximately 170 countries and territories around the world through an asset light model powered largely through wholesale and distributor partnerships. As on the sourcing side, we focused considerable effort on continuing to strengthen these relationships over the past eighteen months, engaging in top to top meetings, hosting our key partners here on campus, and more regularly visiting important markets around the world.

[Christopher Hufnagel, CEO, President & Director at Wolverine World Wide]

I'm pleased to report our business is strong and growing outside The U. S, up mid teens year over year in the first quarter with a good outlook for the balance of the year. Finally, our team has developed critical capabilities and confidence over the last two years in facing the challenges of stabilizing and turning on the company. We've developed a pension for fast and bold action as an organization, and we've implemented new tools and processes to help us better manage the business, in addition to adding talent with new skill sets and strong pedigrees to the company. With the benefit of these advantages and building momentum for our team and brands, we're taking a proactive approach to address the current challenges head on.

[Christopher Hufnagel, CEO, President & Director at Wolverine World Wide]

We have a solid plan to protect profitability while also working to protect the momentum we generated across a range of model scenarios. Our approach consists of three components: mitigate, navigate and elevate. To mitigate the impact of tariffs and deliver the products our consumers want at the best possible value, we've initiated a holistic balance set of actions across the entire value chain. We plan to leverage our diversified supply chain and dual sourcing flexibility to the maximum extent possible to limit our exposure to elevated tariffs on goods sourced from China into The U. S.

[Christopher Hufnagel, CEO, President & Director at Wolverine World Wide]

As mentioned, we expect this will amount to be less than 10% of our volume this year, and we're targeting to push this down to near zero in 2026. In addition, we're in discussions with our supply chain partners on the financial impact of the tariffs and redirecting product into our vast international distribution network where we have demand tailwinds without coronavirus tariffs. While we intend to continue to invest in our brand's momentum, we're simultaneously executing plan to capture SG and A savings across discretionary areas of the business in the near term until the dust settles. Finally, we've communicated a set of strategic and surgical price adjustments to the marketplace. Taking price increases is not something we do without significant consideration, but we believe our brands and momentum, positioning in the marketplace and product innovation pipelines will help limit potential demand headwinds.

[Christopher Hufnagel, CEO, President & Director at Wolverine World Wide]

To navigate what is still a very fluid situation going forward, we formed a dedicated internal team which is meeting daily, helping surface insights, align planning and drive action at pace across the global enterprise. We've taken the playbook from our turnaround stabilization efforts over the past twenty one months and applied every learning to this new reality. This new muscle we built will serve us well in the days and weeks and months ahead. Despite the challenges, we are viewing the shifting landscape also as an opportunity to elevate and emerge a better and stronger company. We intend to proceed with our highest priority growth investments to accelerate share gains in certain areas and at the same time scrutinize every expense.

[Christopher Hufnagel, CEO, President & Director at Wolverine World Wide]

As in any difficult situation, there will inevitably be winners and losers. It's our responsibility to be among the former. With that, I'd now like to hand the call over to Terren Miller to take you through our first quarter results and how we're viewing 2025 in more detail. Terren?

[Taryn Miller, Chief Financial Officer at Wolverine World Wide]

Thank you, Chris, and welcome, everyone. We had a strong start to the year with growth across revenue, margin and earnings per share ahead of our expectations. Our first quarter performance demonstrates the strength of our focused portfolio, investments to support our brands and strategic initiatives and the dedicated execution by our team. First quarter revenue of $412,000,000 was above our outlook of approximately $395,000,000 The majority of the over delivery was driven by increased demand in the active group and favorable foreign currency contributed $6,000,000 Constant currency revenue growth for our ongoing business in the quarter was 6.7% versus the prior year and reflects increased demand for our brands and products as we execute our consumer focused strategy. The year over year comparison includes $6,000,000 of revenue in the first quarter of twenty twenty four that did not repeat this year related to the Merrill and Saucony kids business model change.

[Taryn Miller, Chief Financial Officer at Wolverine World Wide]

Active Group revenue grew 13% compared to the prior year, better than our outlook of mid single digit growth. The beat was primarily due to accelerating momentum in Saucony, which was up 30% year over year due to strong demand in both performance run and lifestyle. Triumph 22, Ride 18, and Guide 18, as well as the Endorphin franchise led the way, driving higher replenishment orders from the wholesale channel and elevated consumer demand on Saucony.com. Merrell revenue grew 13% in the quarter with growth in core product franchises including Moab three, Agility Peak five, and Moab Speed two. Sweaty Betty revenue declined 16% this quarter, which was in line with our expectations.

[Taryn Miller, Chief Financial Officer at Wolverine World Wide]

We shared in our fourth quarter call that we were taking actions to improve the profitability of Sweaty Betty. As Chris shared, Sweaty Betty made meaningful progress towards this goal in the first quarter with material gross margin expansion driven by lower levels of promotion coupled with a better mix of full price sales. Workgroup revenue decreased 17% in the quarter, somewhat below our expectations. Approximately half of the decline was a result of a timing shift between the fourth quarter of twenty twenty four and the first quarter of twenty twenty five that we shared in our February call. The other half of the decline relates to the non repeat of significant discounting on certain styles from the prior year and challenges in our product offering, which we are actively addressing.

[Taryn Miller, Chief Financial Officer at Wolverine World Wide]

Expect work group performance to improve as new products go into market and inventory on key products is replenished. Adjusted gross margin of 47.3% increased 80 basis points compared to last year. Gross margins were above our expectations and reflect a healthier sales mix, lower promotional activity and the benefit of supply chain initiatives. Adjusted operating margin of 6% increased 100 basis points compared to last year and exceeded our outlook for the quarter, driven by operating cost leverage on the stronger revenue performance. As a result of the improvement in revenue and operating margin, adjusted diluted earnings per share improved from $05 in the first quarter of twenty twenty four to $0.18 in 2025 above our outlook of $0.10 Net debt was $6.00 $4,000,000 down approximately $80,000,000 versus last year.

[Taryn Miller, Chief Financial Officer at Wolverine World Wide]

Turning to our outlook for the balance of the year. In response to the dynamic nature of our operating environment, particularly the evolving tariff situation and its impact on our business, we've reassessed our outlook. We are concentrating on several key factors: our strategic progress, the effects of higher tariff rates on costs and inventory, our initiatives to mitigate these costs, and anticipated consumer and customer responses. As a result of our assessment, while we are providing guidance for the second quarter today, we are withdrawing the full year 2025 guidance we provided in February. Once we have better visibility regarding the tariff rates and their potential impact on our business and our consumers, we'll be in a better position to return to providing a current fiscal year outlook.

[Taryn Miller, Chief Financial Officer at Wolverine World Wide]

We believe this approach provides a clear and strategic view of our progress and performance and allows us to navigate the complexities effectively. Let me walk you through how these factors informed our guidance update for 2025, starting with our strategic progress. Our first quarter results combined with the development of the order book, strengthened our confidence in our February outlook. The active group led by our two largest brands, Merrell and Saucony, continues to build momentum, bringing innovative products to market, growing distribution, and expanding market share. Buddy Betty remains focused on margin expansion driven by a continued shift to more full price business, which provides a stronger foundation for future growth.

[Taryn Miller, Chief Financial Officer at Wolverine World Wide]

In the work group, the focus remains on bolstering product innovation and maximizing trends through key franchises such as the Rancher and the Trade Wedge. Turning to the direct impact of increased tariffs on the cost of goods. We accelerated plans to move production out of China in 2025 for US products. Less than 10% of our products are now expected to be sourced from China, down from the mid teens just earlier this year. Using our current sourcing and incremental tariff rates of 145% for China and 10% for other sourcing countries, we expect these incremental tariffs to translate to an estimated $30,000,000 profit impact to 2025 before any mitigation.

[Taryn Miller, Chief Financial Officer at Wolverine World Wide]

Before the new tariffs were announced, we had already started strategic actions to enhance our profitability. Now we are intensifying those efforts and accelerating existing initiatives while prudently reducing spending in certain planned areas. We're working closely with our customers and partners to implement strategic pricing, reduce product costs, and lower SG and A spending. In parallel, as I shared, we've already reduced our US sourcing from China and plan to lower it further over time. Our objective remains to balance the need to protect margins and cash flow with the imperative to invest in initiatives that fortify our brands to drive long term sustainable growth.

[Taryn Miller, Chief Financial Officer at Wolverine World Wide]

This approach will enable us to navigate a potential decline in consumer spending in the second half of twenty twenty five. Given the current trade uncertainty, we are reinforcing our emphasis on our balance sheet health. The investments we've made in integrated business planning are enabling us to make more informed decisions about inventory flow, allowing us to mitigate the impact of increased tariffs on the value and volume of our inventory. We remain committed to our capital allocation priorities, which are investing in the business to fuel profitable growth, reducing debt and maintaining the dividend. Turning to our outlook for the second quarter.

[Taryn Miller, Chief Financial Officer at Wolverine World Wide]

Based on current trends in the business, we are seeing the momentum we've built over the past several quarters continue into the second quarter. We expect the impact of higher tariffs to be more significant in the second half of twenty twenty five than in the second quarter. We expect second quarter revenue to be in the range of $440,000,000 to $450,000,000 a year over year increase of approximately 5% at the midpoint or 4.6% on a constant currency basis. The year over year comparison includes $2,000,000 of revenue in the second quarter of twenty twenty four that will not repeat this year related to the Merrill and Saucony Kids business model change. Regarding foreign currency, spot rates have shifted significantly since the beginning of the year with the US dollar weakening against most currencies.

[Taryn Miller, Chief Financial Officer at Wolverine World Wide]

While the current rates are favorable to our original outlook, we are closely monitoring the situation and expect continued volatility, especially as the tariff situation evolves. At the midpoint of the range, active group revenue for the second quarter to grow by high single digit percentage year over year. Work group revenue is expected to decline by a low single digit percentage, reflecting a sequential improvement compared to the first quarter. We expect improvements in operating margin and earnings with second quarter adjusted operating margins of approximately 7.2% and adjusted diluted earnings per share of $0.19 to $0.24 In summary, our first quarter performance and outlook for the second quarter highlight the effectiveness of our strategy in enhancing our brands and strengthening our financial position. The realities and challenges in our current market conditions are evident.

[Taryn Miller, Chief Financial Officer at Wolverine World Wide]

Our actions are designed to thoughtfully balance earnings and cash flow improvement with essential reinvestment to ensure sustained profitable growth and value for our shareholders. We are in a better position today to address these challenges than we were twelve months ago. Our brands are stronger, our teams are leveraging new capabilities, and our balance sheet has improved significantly. And with that, let me hand the call back to Chris before we open it up for questions.

[Christopher Hufnagel, CEO, President & Director at Wolverine World Wide]

Thanks, Terren. After a very strong start to the year, we, along with our entire industry, are now facing a dynamic marketplace and uncertain road ahead. Despite this reality, I believe the new Wolverine worldwide is well positioned to navigate the challenges and emerge a better company. Our advantages and actions include original leading brands attractive categories that we believe are aligned with long term macro consumer trends and present sizable opportunities for future growth a proven playbook that's reinvigorated our biggest brands and is helping to drive momentum across the business A diversified and nimble supply chain and global distribution network that enables us to optimize and pivot as needed, a holistic balanced tariff action plan designed to protect the business' profitability and our brands' momentum, informed

[Taryn Miller, Chief Financial Officer at Wolverine World Wide]

by

[Christopher Hufnagel, CEO, President & Director at Wolverine World Wide]

the lessons learned from our stabilization and turnaround efforts. And finally, and possibly most importantly, a strong and resilient team with an emerging culture obsessed with winning, coupled with enhanced capabilities bolstered by new talent, processes and tools. Every situation presents opportunity, and our team is determined to be among the winners. We remain focused on building the new Wolverine worldwide, the company premised on building and leading great global brands with everyone working together to win and ultimately to make every day better. With that, thank you to all of you for taking the time to be with us this morning, and we're happy to take your questions.

[Christopher Hufnagel, CEO, President & Director at Wolverine World Wide]

Operator?

[Operator]

Thank you. We'll now be conducting a question and answer session.

[Operator]

session.

[Operator]

And your first question is from Laurent Vasilescu from BNP Paribas. Please proceed with your question.

[Laurent Vasilescu, Managing Director & Senior Equity Analyst at Exane BNP Paribas]

Good morning. Thank you very much for taking my question. And I have to say congrats on a really solid first quarter. And and thank you very much for for for giving at least guidance for two q. While while I recognize you're you are pulling annual guidance, it sounds like most of your China sourcing is for the work business.

[Laurent Vasilescu, Managing Director & Senior Equity Analyst at Exane BNP Paribas]

Also, it sounded like, Chris, you were mentioning that the order book is holding up. So on those two points made in the prepared remarks, any high level changes that you're seeing with regards to socketing and Merrill business for the full year relative to what you called out in February?

[Christopher Hufnagel, CEO, President & Director at Wolverine World Wide]

Thanks, Laurent. Thanks for getting up early. Appreciate the question. Yeah. You picked up those those comments correct.

[Christopher Hufnagel, CEO, President & Director at Wolverine World Wide]

We've you know, thankfully, several years ago, we began, doing a better job diversifying our sourcing base. And, obviously, those efforts have have accelerated coming out of the tariff proclamation. And we'll be down, like we said, you know, well below 10% this year, and moving towards zero in '26. As it relates to sort of momentum in the business and sort of order book visibility, I think we we we we're we're where we were. We feel good about how '25 is shaping up.

[Christopher Hufnagel, CEO, President & Director at Wolverine World Wide]

And certainly, in some places, we think we've got a little bit more momentum than we had before. We're encouraged by, where our brands sit. I think the product pipelines feel very good. We're obviously tracking the business, each and every day, both focused on our own DTC business along with order book trends, and at once trends. So I think in general, you know, certainly pre April 2, we felt good about, where we sat for the year, the momentum we've seen, and we haven't seen anything materially change, since then.

[Christopher Hufnagel, CEO, President & Director at Wolverine World Wide]

But, obviously, we're paying close attention to it. You know, even in Fed chairman Paul was out yesterday talking about no big changes in the data yet other than sentiment and sort of where where the world's going. So that level of uncertainty with where the consumer is and certainly where the tariff situation will ultimately settle, led us to the decision to to withdraw the full year. At the same time, give you a little bit more visibility on how we saw the the second quarter, playing out.

[Laurent Vasilescu, Managing Director & Senior Equity Analyst at Exane BNP Paribas]

Very helpful. And then, two housekeeping questions here. I think last quarter, there was a shift in work revenues between 1Q and 4Q. Did did you see any shift between, 2Q into 1Q? Is there one from 2Q into 3Q?

[Laurent Vasilescu, Managing Director & Senior Equity Analyst at Exane BNP Paribas]

And then, second part of the housekeeping question. Darren, I think it was very helpful to that you quantified $30,000,000 profit impact from the tariffs. Is that on the gross margin? Is that EBIT? Is that net income?

[Laurent Vasilescu, Managing Director & Senior Equity Analyst at Exane BNP Paribas]

And should we think about it between, like, equally split between three q and four q? Thank you.

[Taryn Miller, Chief Financial Officer at Wolverine World Wide]

Yeah. On the work group question, thank you, Laurent, the no other shifts that I would call out other than the shift that we had called out in, in our earnings call in in February as and, basically, that being half of the decline that we saw in the first quarter this year. No other shift to report. Regarding the the second housekeeping item in terms of the $30,000,000 tariff impact without taking any mitigation, that's it's really gross gross margin profit. I think of it very similarly when we're giving you that approximate $30,000,000.

[Taryn Miller, Chief Financial Officer at Wolverine World Wide]

And we did we're not providing right now a q three, q '4 how it phases in.

[Laurent Vasilescu, Managing Director & Senior Equity Analyst at Exane BNP Paribas]

Understood. Thank you very much for all the color and best of luck.

[Christopher Hufnagel, CEO, President & Director at Wolverine World Wide]

Thanks, Laurent.

[Operator]

Our next question comes from the line of Ashley Owens from KeyBanc. So

[Ashley Owens, Vice President & Senior Equity Research Analyst at KeyBanc Capital Markets]

maybe just to start, you mentioned taking price increases across the marketplace as part of the broader plan to help mitigate some of this tariff impact. Can you just discuss the magnitude of these increases? And then maybe more specifically, if these will be applied across all brands and select or if it's more limited and where the focus would be, if so? And then maybe how much these are helping to offset or recapture some of those product cost increases? Thank you.

[Christopher Hufnagel, CEO, President & Director at Wolverine World Wide]

Yeah. Thanks, Ashley. Great question. I think our approach to to price increases were were thoughtful and considered and strategic and surgical. We we didn't apply a blanket across every brand, every category.

[Christopher Hufnagel, CEO, President & Director at Wolverine World Wide]

We looked, very closely at where our brand sat, where the competition was, where we felt we had opportunity, and and tried to tried to be thoughtful. So it's hard to take a broad stroke across everyone and say this is exactly what we did. It was, it was done by brand, specifically, and at the same time reviewed with us at the level and then communicated this week and will be effective later this quarter. So, again, it was hard to paint with with a broad brush, you know, surgically. And I'll give you some examples, you know, in Saucony, sort of like mid single digits for specific products, similar similar to to Merrill and similar to the work group.

[Christopher Hufnagel, CEO, President & Director at Wolverine World Wide]

We don't anticipate this to fully offset the the impact of the tariffs, which is why we are looking to other levers to pull to offset that risk. But it is a combination of efforts that will pull across the enterprise, to react to the current situation. But, the the price increases were were thoughtful, strategic, surgical, and considered, and with the best insights we had to partially have sought offset the the tariffs.

[Ashley Owens, Vice President & Senior Equity Research Analyst at KeyBanc Capital Markets]

Okay. Great. And then just two quick follow ups. So one, I didn't see an outlook or breakdown of expectations for second quarter by segments. Anything you can say quarter to date there?

[Ashley Owens, Vice President & Senior Equity Research Analyst at KeyBanc Capital Markets]

And then two, for gross margin for second quarter, I know similar situation. Understand a lot with the ongoing volatility, but just any guidelines as to how we should be weighing some of the higher full price sales you've been realizing versus initial impacts? And how much of that you're planning to absorb or maybe pass through in the second quarter? Just any goalpost for how we should be thinking about the gross margin line would be helpful. Thanks.

[Christopher Hufnagel, CEO, President & Director at Wolverine World Wide]

I'll take the first part and hand the second part to Terrence. As we said, we we haven't seen any any any fall off yet, both both from a consumer sentiment or from customers. We haven't seen that yet. Obviously, we're we're paying very close attention to that. I will say, interestingly enough, we actually seen an uptick in softening since the tariff announcements, in that business.

[Christopher Hufnagel, CEO, President & Director at Wolverine World Wide]

So but nothing adverse yet. At the same time, you know, we're all paying close attention to where the consumers obviously, lots of talk about uncertainty and and where consumer sentiment is. Obviously, sentiment doesn't equal spending, but we'll certainly pay attention to that moving forward.

[Taryn Miller, Chief Financial Officer at Wolverine World Wide]

And then regarding your question in terms of of gross margins for the quarter, we did not give gross margin for the for the quarter. Given the current operating margins or operating environment dynamics and the range of outcomes, we're giving a somewhat broader range for the quarter as opposed to, you know, the $440,000,000 to the 450,000,000 in revenue. It's a bit broader than we would normally give. We're also focusing the guidance on key metrics such as revenue, the operating profit, earnings per share rather than the specifics on gross margin or s g and a. I I believe that these metrics can give you a clear view of the progress we're making, the momentum we're seeing in the business, and it also allows us to navigate the complexities and some of the uncertainties in the environment.

[Taryn Miller, Chief Financial Officer at Wolverine World Wide]

That's a bit of the reason in terms of of the guidance that we give did give for the second quarter. Regarding the segment expectations, what what we had shared was for active group, we expect that to be high single digit revenue growth. And for the work group, we would expect a decline of low single digits, which is that improvement, sequentially that we're seeing quarter to quarter. Okay. Got it.

[Taryn Miller, Chief Financial Officer at Wolverine World Wide]

That's helpful. Thank you.

[Christopher Hufnagel, CEO, President & Director at Wolverine World Wide]

Thanks, Ashley.

[Operator]

Thank you. Our next question comes from the line of Sam Poser from Williams Trading. Please proceed with your question.

[Sam poser, Equity Analyst at Williams Trading LLC]

Thank you guys for taking my questions. I've got a handful, but starting with you're talking a lot about you talked about order book and things like that. What are you doing from like a demand planning basis when looking into the back half? Are you pulling back on the supply in advance of the potential for less consumer demand regardless of what you're seeing now in order so you don't get caught with too much inventory if it does slow down? Taking the order book out of it, I'm really talking about consumer demand, not with some buyers from whatever retailer are placing.

[Christopher Hufnagel, CEO, President & Director at Wolverine World Wide]

Good question, Sam. Thanks for getting up early with us. One of the things that we've done, over the last year or so is to stand up a new integrated business planning group. We didn't do a particularly good job as a company navigating everything coming out of COVID, and we knew that we had to improve that capability. We haven't talked a lot about it, but this new team, is really doing a very nice job, orchestrating efforts across the enterprise, both demand signals coming from the marketplace and then how we plan, and and produce inventory.

[Christopher Hufnagel, CEO, President & Director at Wolverine World Wide]

Specific to your question on on how we're thinking about the back half of the year, it's hard to paint a broad brush across the entire enterprise. I would there there are some places we are certainly more cautious just given brand momentum, what's happening in that market, how we view the product pipeline, and we will be, constrained there to to make sure that we manage inventory responsibly. At the same time, where there is momentum or we we have some excitement or we do think that demand will persist, I think we'll we'll be a little more bullish on those on those prospects. And certainly, you know, from a footwear standpoint, as the consumer in the marketplace goes through cycles, whatever we wanna call them, you know, we believe that certain segments generally hold up a little bit better. And we certainly think athletic and outdoor in some downward cycles, generally hold up a fair little bit better than other categories.

[Christopher Hufnagel, CEO, President & Director at Wolverine World Wide]

So to answer your question, Sam, very close attention to the marketplace where the consumers and customers are, paying attention to the order book, a new capability with our integrated business planning team, and then, more surgical, not across the board cuts related inventory if we're nervous about the environment, but more thoughtful about where each brand sits and the momentum they possess.

[Sam poser, Equity Analyst at Williams Trading LLC]

Let me just ask you a different way real quick is, like, given I mean, given the momentum, let's say, of Saucony or Merrill at the moment, when you look at the back half, do you anticipate the same kind of momentum, or are you gonna temper your expectation for that momentum in the way you feed the beast to support it?

[Taryn Miller, Chief Financial Officer at Wolverine World Wide]

Yeah. So, you know, again, we're not gonna we're not gonna provide we're not providing second half guidance. I think the what you can infer from what Chris just said is that somewhat, yes, we have pulled back on inventory versus our original expectations in the back half.

[Sam poser, Equity Analyst at Williams Trading LLC]

Thank you. And then I continue to get lots of promotional emails from Merrill. And you had a a nice margin increase there, and it sounds like it's gaining some momentum. And you also talked you said that you were talking about your how you were working with distribution with the Merrell brand. Can you talk some and give us some details on why we're seeing so much promotional, at least emails directly from Merrill?

[Sam poser, Equity Analyst at Williams Trading LLC]

And how and is that cleaning up old stuff? Or what's going on? And then was it sell in or sell through that drove the the Merrill increase in q one?

[Christopher Hufnagel, CEO, President & Director at Wolverine World Wide]

Specifically on the promotional thing, it's a good question, and I appreciate you raising it. We we are working hard to become a less promotional business. Certainly, the the factors over the last handful of years led the company to a place where we had to clear more for a whole variety of reasons. We are much cleaner today. Our brands are in a much better place today, and we're working to become a less promotional business.

[Christopher Hufnagel, CEO, President & Director at Wolverine World Wide]

That does not happen overnight though. That there is a period of time which we have to make that transition, and you're gonna see that. I would anticipate a material increase across our portfolio and dropping those that promotional cadence of emails, at the same time improving our gross margins. But there there will be a shift that has to take place. Merrell specific in the first quarter, you know, from a DTC standpoint, you know, it probably lagged a little bit of our other brands on a full price mix.

[Christopher Hufnagel, CEO, President & Director at Wolverine World Wide]

It was largely due due to a one style that was was a little bit late, getting into our distribution centers so so we could roll it out. So, specifically, you will see us become less promotional. That's bearing true in the facts, and it's something that we're talking about more broadly as an organization. I'm pleased with the progress we've made, but, it's not gonna happen in a quarter. But, certainly, as we get into the back half of this year and begin to lap next year, you should certainly feel it.

[Sam poser, Equity Analyst at Williams Trading LLC]

And then lastly, can you just thank you. And can you just give us a breakdown with your international business of units versus dollars or how does because you have so much distributor business in your international market. Can you talk about how it's about 50% of the total revenue, but how much of it is it in units versus domestic sales? And any color you can give us on that? And I don't even know how to ask it.

[Sam poser, Equity Analyst at Williams Trading LLC]

You haven't broken it out in the past with the subs and the distributors. But any color given all the noise here and how big in like wholesale equivalent that would really be if it was all a sub or something like that?

[Christopher Hufnagel, CEO, President & Director at Wolverine World Wide]

Sorry. Alex provide a couple of points to that question.

[Alex Wiseman, Senior Vice President, Corporate Finance at Wolverine World Wide]

Sam, in our our investor presentation, which is is on our website right now, you'll see on on page nine, we we give you some, insights into our regional dispersion of of revenue and units. And so in there, you'll see, outside of The US, you know, you'll see a a large chunk of our pair is kinda generated, outside The The US and international markets. So I won't go through each region for you, but just point you

[Alex Wiseman, Senior Vice President, Corporate Finance at Wolverine World Wide]

to

[Alex Wiseman, Senior Vice President, Corporate Finance at Wolverine World Wide]

that that specific page in the investor presentation and happy to follow-up with you after on any specific questions.

[Operator]

Our next question comes from the line of Peter McGoldrick from Stifel.

[Peter McGoldrick, Equity Research Associate at Stifel Financial]

I

[Peter McGoldrick, Equity Research Associate at Stifel Financial]

was curious on the Saucony lifestyle rollout to the 900 new retailers. Can you talk a bit about the audience you're attracting there and the initial response? And then the how how we should think of the additional 400 stores and the consequence that has to, the forward revenue trajectory.

[Christopher Hufnagel, CEO, President & Director at Wolverine World Wide]

Sure. Thanks, Peter. And then welcome to the coverage. Yeah. We're we're very bullish on the prospects of Saucony lifestyle.

[Christopher Hufnagel, CEO, President & Director at Wolverine World Wide]

You know? Saucony is a is a century old brand, benefits from a great product archive. And we found this this, in sort of resetting the brand over the past handful of years and developing a new strategy with the new team. There's an amazing opportunity at this intersection of run heritage and lifestyle and being part of the cult cultural conversation. And I think the team has done a very nice job in very short order to tapping into that.

[Christopher Hufnagel, CEO, President & Director at Wolverine World Wide]

The lifestyle side, it is a meaningful part of the business. We're showing up in new distribution, you know, doors like Foot Locker and Journeys and Snipes. We we're we're seeing the branch up there in meaningful ways, and we've tested that product in those doors. And so the expansion that you're seeing, is is is test based saying, you know, there is demand for the brand and brand heat, and we're gonna open that up. So we've opened that aperture.

[Christopher Hufnagel, CEO, President & Director at Wolverine World Wide]

The business continues to perform well. Men men's, women's, and kids, and we're encouraged by the reception. And it it really helps balance and complement that performance run piece, which is which is where the brand certainly is known for and cuts its teeth. And that's why I think the prospects for the brand are so bright. You know, on the February 24 call, in the middle of the turnaround, I I said that I was bullish on the prospects for Saucony because I've, been part of the strategy, been part around the new leadership team, and certainly from from where the brand was, its its history of innovation being one of the original running brands, then be able to capitalize on both run, and lifestyle, I think, in an amazing opportunity.

[Christopher Hufnagel, CEO, President & Director at Wolverine World Wide]

And, I remain very bullish on the prospects of that brand and that team. And, certainly, the lifestyle piece is an important part of our growth story.

[Peter McGoldrick, Equity Research Associate at Stifel Financial]

Thanks for that. And I think I caught this correctly that sweaty Betty had 1,000 bps underlying margin improvement. That's pretty material to the overall gross margin progression, the underlying progression excluding tariffs. How should we think of the comparisons for that as as the year roll rolls forward?

[Christopher Hufnagel, CEO, President & Director at Wolverine World Wide]

Yeah. I mean, let's talk anything and and and and hopefully my prepared remarks spoke to it. You know? We are committing committed to making that, and and bolstering, its premium positioning. And I think we had gotten too promotional, too many too many sale messages, and and and we need to do a better job there.

[Christopher Hufnagel, CEO, President & Director at Wolverine World Wide]

So at the expense of short term top line revenue in the in in in the spirit of chasing long term brand health in a premium positioning, we're we're gonna walk that back. And you'll see pressure on the top line, but the thousand basis points of gross margin expansion driven by a thousand basis points of improvement in full price mix is material to that. So we have work to do in Saucony. I'm headed there over the weekend. I'll be in London next week to spend sorry.

[Christopher Hufnagel, CEO, President & Director at Wolverine World Wide]

Sweaty Betty, not Saucony. I'll be I'll be spending time, in with the Sweaty Betty team next week. But we have work to go do there, but I think we're on the right path.

[Peter McGoldrick, Equity Research Associate at Stifel Financial]

Alright. Thank you. Good luck in the future.

[Christopher Hufnagel, CEO, President & Director at Wolverine World Wide]

Thanks, Peter.

[Operator]

Thank you. Our next question comes from the line of Anna Andreva from Piper Sandler. Please proceed with your question.

[Anna Andreeva, Senior managing director and senior research analyst at Piper Sandler Companies]

Great. Thanks so much. Good morning, and congrats. Really nice results. A couple

[Christopher Hufnagel, CEO, President & Director at Wolverine World Wide]

Thank you.

[Anna Andreeva, Senior managing director and senior research analyst at Piper Sandler Companies]

Couple from a couple from us. First on Merrill, great to see that double digit momentum, for the brand. In The US, can you guys talk about what are you seeing with the new distribution versus share gain at the existing doors? And are you seeing the hype category improve at all, or this has been more about share gains accelerating even further for the brand? And then we have a couple of others.

[Christopher Hufnagel, CEO, President & Director at Wolverine World Wide]

Sure. Thanks. You know, there's there's a lot of things to be excited about at Merrill. You know, three consecutive quarters of growth, nice movement in the Moab three. The Moab two continues to gain traction.

[Christopher Hufnagel, CEO, President & Director at Wolverine World Wide]

The Agility Peak five in Trail Run, you know, gaining share in hike, trail, and lifestyle in the same quarter are certainly all encouraging. The drop of the Speedark Surge Boa followed by the Speedark Mattis, you know, a $300 price point for Merrill is is is is pretty thin air, and and we're very pleased with with with that what that has done. It is visually disruptive. It looks different, and importantly, it performs. And then the lifestyle piece, you know, certainly some continued momentum in Junglemox, and then the Rats collection, you know, which is this barefoot, sort of transitional shoe that that that that, has so many uses.

[Christopher Hufnagel, CEO, President & Director at Wolverine World Wide]

It looks different. We're encouraged by by where that is and where the product engine has come. We do have a new product season in brand too, which we're very excited about. So, there's a lot of things to be excited about for the Merrell brand. And, certainly, expansion from the lifestyle piece in The US is important.

[Christopher Hufnagel, CEO, President & Director at Wolverine World Wide]

You know, new doors that we talked about opening up in in in some some lifestyle retailers, which we had not been in for a period of time, is encouraging. Hike, you know, outdoor hike, you know, still obviously some pressure there, but we're pleased that we continue to gain share, in that business. It's part of our responsibility as the market leader to help innovate. And we certainly think, you know, the Moab Speed two, the SpeedArc Surge Boa, you know, those products certainly do help evolve, and bring innovation innovation to that to that category. So I'm pleased with Merrill's progress.

[Christopher Hufnagel, CEO, President & Director at Wolverine World Wide]

It's great to see the double digit growth. And, honestly, I'm excited about the the team we have in the field, and how we continue to evolve and grow that brand in the future.

[Anna Andreeva, Senior managing director and senior research analyst at Piper Sandler Companies]

Okay. No. That's that's awesome. Very helpful. And, Moab, that was great.

[Anna Andreeva, Senior managing director and senior research analyst at Piper Sandler Companies]

On Sweaty Betty, appreciating the fact that you guys are managing the brand for profitability right now, but can you just give us the updated thoughts on the commitment to Sweaty Betty as part of the portfolio, and what KPIs are you watching to measure the success there?

[Christopher Hufnagel, CEO, President & Director at Wolverine World Wide]

Thanks for the question. Yeah. You know, I think, you know, certainly, our focus right now is improving the profitability, helping to build it and make it a great brand, and then then grow that business. We have some some new players in place, which is important. Certainly getting Saucony and Merrill, growing again, adding Susie Kuhn to the team, having her oversee the work group allows us to really focus our efforts, in businesses that aren't quite quite tracking.

[Christopher Hufnagel, CEO, President & Director at Wolverine World Wide]

So, I'm excited, to to spend more time with the sweaty bedding team. Like I said, I'm on my way to London, to be with that team plus visit, the construction of our new Saucony store in Covent Garden. But, we're committed, to improving the profitability, making that a great brand, and then growing Sweaty Buddy.

[Anna Andreeva, Senior managing director and senior research analyst at Piper Sandler Companies]

Chris, is there a timeline that you think about as a kind of a realistic recovery for the brand in the near to medium term?

[Christopher Hufnagel, CEO, President & Director at Wolverine World Wide]

Well, I think we're we're comping some promotional activity from last year. We talked about becoming less promotional, not not giving specific timelines. I will point to, you know, you know, where the company was a year ago and certainly where our biggest brands are today. We have a playbook for growth. We have an aligned and motivated team.

[Christopher Hufnagel, CEO, President & Director at Wolverine World Wide]

And frankly, we're we're doing fewer things, and we're doing those fewer things better today than we were eighteen months ago. So, I think, we are committed to the work. We've got the right team. We've identified the issues, and now now we have to go solve those.

[Anna Andreeva, Senior managing director and senior research analyst at Piper Sandler Companies]

Okay. No. That's fair enough. And just as a final one, I think you mentioned that Saucony further accelerated here in the second quarter. Can you just confirm that?

[Anna Andreeva, Senior managing director and senior research analyst at Piper Sandler Companies]

And thank you so much again, guys.

[Christopher Hufnagel, CEO, President & Director at Wolverine World Wide]

Yeah. Yeah. My comment was, I think, in response to Laurent's question about sort sort of what what we had seen. You know, interestingly enough, we sort of track sort of pre pre Liberation Day, post Liberation Day, and Saucony act actually has accelerated, since since April 2. So that's just sort of early days.

[Christopher Hufnagel, CEO, President & Director at Wolverine World Wide]

It's it's a very small data point, but we haven't seen haven't seen any negative effects, so far.

[Taryn Miller, Chief Financial Officer at Wolverine World Wide]

And we didn't give That's correct. Did not give any brand specific guidance for the second quarter, Anna. Quarter.

[Anna Andreeva, Senior managing director and senior research analyst at Piper Sandler Companies]

Correct. Well, thanks so much and best of luck.

[Christopher Hufnagel, CEO, President & Director at Wolverine World Wide]

Thanks, Anna.

[Operator]

Thank

[Operator]

you. Our next question comes from the line of Mauricio Serna from UBS. Please proceed with your question.

[Mauricio Serna, Executive Director at UBS Group]

Great. Great. Good morning and congratulations on the results. I had a couple of questions. First, housekeeping on the provided outlook.

[Mauricio Serna, Executive Director at UBS Group]

Just making sure, for Q2, are you guys expecting any impact from tariff? And then on the $30,000,000 impact on your gross profit, does that include already China being high single digits of what's coming into The US?

[Taryn Miller, Chief Financial Officer at Wolverine World Wide]

The regarding your question, thank you, Marcia, for for the for what we have assumed in terms of the 30,000,000 tariffs before mitigation. I will start there. That include what it assumes is we didn't give any we're not giving the specifics of what it means in terms of of the sourcing. What we're saying is we expect it to be less than 10% and that from where we started earlier this year to that less than 10% that we've talked about for 2025, that is included in the $30,000,000 that we identified.

[Mauricio Serna, Executive Director at UBS Group]

Okay. So being less than 10% is okay. Sorry. Sorry. Go ahead.

[Taryn Miller, Chief Financial Officer at Wolverine World Wide]

I'm sorry. And your first question?

[Mauricio Serna, Executive Director at UBS Group]

Oh, like, does does q two have any impact on tariffs?

[Taryn Miller, Chief Financial Officer at Wolverine World Wide]

Yeah. Thank you. The q two tariff impact, we're we're not identifying any meaningful. We don't we expect it to be

[Mauricio Serna, Executive Director at UBS Group]

Okay.

[Taryn Miller, Chief Financial Officer at Wolverine World Wide]

More significant in the second half.

[Mauricio Serna, Executive Director at UBS Group]

Okay. Got it. Got it. Okay. So sorry.

[Mauricio Serna, Executive Director at UBS Group]

And then just to make sure I understood that that, like, the 30,000,000 does include that, you know, it's gonna be less than 10% of China sourcing for US. Is that is that is that correct?

[Taryn Miller, Chief Financial Officer at Wolverine World Wide]

At the end of '20 2025, yes.

[Mauricio Serna, Executive Director at UBS Group]

Okay. Got it. And then maybe just, one thing about the about the q one result. Just wondering, you know, pretty strong results across the board. Just was wondering, like, what happened in the DTC channel that you saw, like, 7% decline on the ongoing business?

[Christopher Hufnagel, CEO, President & Director at Wolverine World Wide]

Yeah. From a DTC standpoint, you know, certainly, we we've talked a little bit about that. You know, I think that's part of our taking a a less promotional stance in our DTC businesses. You know, Saucony was up. Merrill was down a little bit.

[Christopher Hufnagel, CEO, President & Director at Wolverine World Wide]

And then we talked about pressure in in Sweaty Betty and Workgroup. So, I think we are trying to take a long approach in DTC, trying to manage that business more responsibly, make that a full more full price business. And by and large across all of our brands, saw a nice increase in in gross gross margin. I think it was 550 basis points in total in DTC up in the quarter, which is which is a nice lift. And, certainly, the the increase in in full price mix is an important metric.

[Christopher Hufnagel, CEO, President & Director at Wolverine World Wide]

So it's something we pay attention to, obviously. You know, we get we get reads every two hours. We're working to improve improve that channel. But right now, it's to make that a better experience for our consumers, a more full price business, a less promotional business, and really give our consumers a a more frictionless experience as they engage with our brand.

[Mauricio Serna, Executive Director at UBS Group]

Great. And and very last one, thanks again for the time. Any initiative underway that you're thinking about to maybe resume kinda like the the pay down of debt?

[Taryn Miller, Chief Financial Officer at Wolverine World Wide]

The pay down of debt? Yes. I think in terms of of where we're at, what we've called out with our capital allocation priorities haven't changed. And in terms of we where the in terms of paying down debt, investing in our business, and and maintaining the dividend. So we haven't I given that we aren't giving any back half guidance, I I don't have a a debt leverage target for the year other than to say that our goal is to continue to focus on deleveraging.

[Taryn Miller, Chief Financial Officer at Wolverine World Wide]

You know, given the debt that we paid down last year, we're in a much better place than where we were a year ago, Mauricio. And I think from the standpoint that we made great progress on improving the financial performance of the company in terms of what you see you're seeing in the margins, but also strengthening the balance sheet. So with that lower healthier inventory and part of what Chris is talking about that we're able to do and our significantly reduced debt, this puts these improvements in our financial position makes us puts us in a much better place.

[Mauricio Serna, Executive Director at UBS Group]

Understood. Thanks so much, and congratulations again on the results.

[Christopher Hufnagel, CEO, President & Director at Wolverine World Wide]

Thanks, Mauricio.

[Operator]

Thank you. Our next question comes from the line of Mitch Kmetz from Seaport Research Partners. Please proceed with the question.

[Mitch Kummetz, Senior Analyst at Seaport Research Partners]

Yes. Thanks for taking my questions. I guess my first question, Chris, on the second quarter, the top line outlook. I mean, sounds like you guys had a good start to the quarter. You referenced Saucony.

[Mitch Kummetz, Senior Analyst at Seaport Research Partners]

Also, you said that you have yet to see any real change in the consumer or your customers. Can you maybe speak to the assumptions that you're using for the balance of the quarter? Are you kind of assuming that April trends hold through May and June? Are you assuming a more cautious stance on the consumer and your customers?

[Mitch Kummetz, Senior Analyst at Seaport Research Partners]

And then I have a couple of follow ups.

[Christopher Hufnagel, CEO, President & Director at Wolverine World Wide]

Yeah. It's a good question, Mitch. I I think it's a little bit of mix. I think we're sort of looking at the momentum we have, the backlog we have, the sell through rates, the conversations we're having with with with our customers and what we're seeing from the consumer standpoint. At the same time, our eyes are wide open to to to what's happening in the more macro landscape.

[Christopher Hufnagel, CEO, President & Director at Wolverine World Wide]

And, you know, I'll echo what what was said yesterday. You know, I think, you know, in the data right now, the data still looks pretty good, but there's obviously a ton of talk about where consumer sentiment is. You know, we we we look at those studies. We there was a good report that the FDA published a week or so ago about about where they see see the consumer going. So it's mixed.

[Christopher Hufnagel, CEO, President & Director at Wolverine World Wide]

We're trying to, both understand where our brands are, where the momentum is, what we're hearing from our our customers and and sell through rates and order book. At the same time, you know, very cognizant of what's happening in in the broader world and and what downstream effect, all of these things will will have on the consumer. So and I and I would say, you know, that the processes and tools we built over the last two years, whether it's the new integrated business planning function, whether it's our our Tuesday read and react sessions, and some new talent we brought to the business that have a more retail consumer mindset, I think we're sort of breaking old old habits and old muscle, how we weren't as tied into, the pulse of what's happening with the consumer. It doesn't mean that we're gonna be perfect, but I certainly think we've got a much better handle on how we run the business day to day and and certainly more agile and nimble than we may have been historically. And, again, you know, we're not afraid to take fast action, in the spirit of protecting and building our brands in the best interest of our shareholders.

[Mitch Kummetz, Senior Analyst at Seaport Research Partners]

Yep. And then on the $30,000,000 it sounds like you've built in the impact of China, I think you said less than 10% and then also 145% tariff. But are you actually currently landing goods from China at 145? Are you holding off on doing that, you know, that maybe that that number comes down from 145, which might I mean, if you are doing that, that might imply maybe some upside to the 30,000,000.

[Taryn Miller, Chief Financial Officer at Wolverine World Wide]

Without getting too detailed in terms of what we are or not, shipping, because it's gonna vary a little bit by the brand. And and to Chris' point of being very thoughtful, being very surgical about what we are moving, what I would say is, you know, given the fact that we we have said that earlier this year, China represented mid teens, and now we're saying less than 10%. I think that calls out that, we have reduced significantly, our sourcing from China, and anything that we do plan to bring in is assumed in that in that $30,000,000 unmitigated.

[Mitch Kummetz, Senior Analyst at Seaport Research Partners]

Okay. And then and then lastly, you guys have referenced some, potential offsets whether it be price or, you know, SG and A savings. Is there any way to quantify the amount of offsets that you've identified? Are you, I mean, are you talking 5,000,000, 10 million, 15 million? I'm sure you've probably done some of that math.

[Mitch Kummetz, Senior Analyst at Seaport Research Partners]

I'm hoping you could share that with us.

[Christopher Hufnagel, CEO, President & Director at Wolverine World Wide]

Yeah. We're not gonna share too much of the math with you. You know, obviously, for us, it's a handful of levers that we're gonna pull. Certainly, as we're thinking about a price that we're paying for these goods, certainly, our price in the marketplace, and then a high level of scrutiny on all the dollars that we spent, making sure that we're continuing to try to protect and fuel where we have brand momentum. Other discretionary things that that would have been nice to do, those things are are gonna be on pause until until we see see where the dust settles.

[Christopher Hufnagel, CEO, President & Director at Wolverine World Wide]

We're obviously, you know, anxious to see, you know, what happens with the trade trade war and and where that is. At the same time, we're we're moving quickly to mitigate the risk that we see today and then certainly work to exploit the opportunities that we believe we have or that we may have in the future, at the same time trying to run the company really responsibly in the in the face of this this sort of unprecedented event.

[Mitch Kummetz, Senior Analyst at Seaport Research Partners]

Okay. Great. Thanks, guys.

[Mauricio Serna, Executive Director at UBS Group]

Thanks, Mitch.

[Taryn Miller, Chief Financial Officer at Wolverine World Wide]

Hey. Mauricio, just one more comment Alex pointed out to me when when I when I did say that reducing debt is definitely part of deleveraging as part of our priorities and plans, I think it is important to call out the reason I talked about the strength of our balance sheet compared to where we were a year ago, and the confidence of of moving through the challenges we see today. It'd be important to point out the foundation of our capital structure is the 550,000,000 4 percent senior notes that we have maturing in 2029. And con and complementing that, our senior notes is are are mostly undrawn bank credit facility of 830,000,000. So just to give you some color in terms of the debt structure that we have and the great progress that we made last year, certainly, deleveraging is important, and and but we feel good about where we're at today.

[Operator]

Thank

[Operator]

you. There are no further questions. Ladies and gentlemen, that concludes today's meeting. Thank you all for joining, and you may now disconnect.

Participants

Executives

• Alex Wiseman, Senior Vice President, Corporate Finance
• Christopher Hufnagel, CEO, President & Director
• Taryn Miller, Chief Financial Officer

Analysts

• Laurent Vasilescu, Managing Director & Senior Equity Analyst at Exane BNP Paribas
• Ashley Owens, Vice President & Senior Equity Research Analyst at KeyBanc Capital Markets
• Sam poser, Equity Analyst at Williams Trading LLC
• Peter McGoldrick, Equity Research Associate at Stifel Financial
• Anna Andreeva, Senior managing director and senior research analyst at Piper Sandler Companies
• Mauricio Serna, Executive Director at UBS Group
• Mitch Kummetz, Senior Analyst at Seaport Research Partners