Key Points
- Wolverine World Wide drastically cut its full-year 2023 EPS and revenue estimates but is cutting its inventory ahead of the holiday shopping season.
- WWW shares are trading at 16.4X forward earnings with a 4.78% annual dividend yield.
- V.F. Corp is in a turnaround and saw its shares spike as activist investor Engaged Capital discloses stake and justification for a three-year price target in the mid-$40s.
- 5 stocks we like better than Wolverine World Wide
The weather is getting notably cooler as this winter is expected to be more frigid, frosty and slushy than years past, according to the Farmer's Almanac forecast. Outdoor apparel and footwear are two segments of retail that may get a boost this year as a result of the chillier weather to come. Here are two stocks that may get a resurgence as consumers look to restock their outdoor wares in preparation for the colder temperatures.
You may not be familiar with the name Wolverine World Wide. Still, chances are you have heard of the many footwear brands in its portfolio, including Merrell, Sperry, Wolverine boots, Harley-Davidson Footwear, Stride Rite, Bates, Chaco, Saucony and HYTEST safety footwear. They make numerous brands of boots and outdoor active lifestyle shoes, apparel and accessories sold in over 200 countries. The company has been suffering from normalization after unprecedented demand during the reopening and post-COVID period. Shares have fallen 25.4% year-to-date (YTD). The stock pays a 4.78% annual dividend yield.
Normalization and Inventory Liquidation
On August 10, 2023, Wolverine reported its Q2 2023 earnings for the quarter ending June 2023. The company reported EPS of 19 cents per share, in line with consensus analyst estimates. Revenues fell 17.4% YoY to $589.1 million, beating analyst estimates of $582.97 million. Gross margins fell to 38.7%, down from 43%, due to the sale of higher-cost inventory stemming from transitory supply chain costs from 2022 and more promotions to move end-of-life inventory. Inventory fell $97.3 million sequentially at $647.9 million.
Nasty Full-Year 2023 Guidance Cut
Wolverine cut its full-year 2023 guidance. It forecasts full-year 2023 EPS of 45 to 55 cents versus $1.42 consensus estimates. Full-year 2023 revenues are expected between $2/26 billion to $2.28 billion versus $2.51 billion consensus analyst estimates. The company is transitioning a new CEO, Chris Hufnagel. After the disappointing annual guidance, he plans to drive significant profit improvement in 2024. Shares collapsed over 29% as a result of the lowered guidance.
CFO Insights
Wolverine World Wide CFO Mike Stornant commented, "The trading environment is challenging, especially in global wholesale channels where order demand has slowed as retailers manage their businesses more cautiously." He continued, "We remain focused on improving our balance sheet metrics while driving further profit improvement benefits. We now expect the Profit Improvement Office to deliver at least $70 million in savings for 2023. We are on track to deliver our year-end inventory target of $520 million, which will set the business up for new products and cleaner trading in 2024." The company plans to sell non-core assets of at least $50 million during the rest of the year to accelerate debt paydown.
Wolverine World Wide analyst, ratings and price targets are at MarketBeat. Wolverine World Wide peers and competitor stocks can be found with the MarketBeat stock screener.
Weekly Descending Triangle
The weekly candlestick chart for WWW illustrates the descending triangle pattern. The descending trendline started at $17.63 in April 2023. WWW continued to fall, making lower highs on bounces and lower lows on pullbacks until its Q2 2023 earnings release and guidance cut. This caused shares to collapse through the weekly market structure low (MSL) buy trigger at $8.48 and form the horizontal flat-bottom trendline of the triangle at $7.21. The weekly relative strength index (RSI) bounced up through the 30-band as shares attempted to trigger the weekly MSL. Pullback supports are at $6.58, $5.56, $4.78 and $4.08.
The company that owns popular iconic apparel and footwear brands, including Vans, The North Face, Timberland and Dickies is another one you may not be familiar with V.F. Corp. The V.F. stands for Vanity Fair Mills. The company was founded in 1899 and produced silk lingerie until it expanded its product line in 1969. The company sells its wares in over 50 countries worldwide, with a workforce spanning 50,000 employees. The company hired former Logitech International S.A. NASDAQ: LOGI CEO Bracken Darrell to onboard as the new CEO of V.F. Corp., effective July 17, 2023. Shares are down 35% YTD and have a 6.66% annual dividend yield.
Tough Turnaround
V.F. Corp reported fiscal Q1 2023 losses of 15 cents per share, missing consensus analyst estimates by three cents. Revenues fell 8% YoY to $2.09 billion, beating $2.07 billion analyst estimates. The North Face delivered 12% revenue growth, making it the 10th consecutive quarter of double-digit growth. Vans sales fell 22% YoY. Wholesale fell 12%, and direct-to-consumer (DTC) sales fell 3% YoY. International markets increased by 3%, with Greater China rising 24%.
V.F. Corp CEO Bracken Darrel commented, "V.F. has a portfolio of globally recognized, iconic brands, a deeply embedded purpose and impressive talent, all of which gives me every confidence we have all the necessary ingredients to unlock the company's significant potential and return to delivering strong, sustainable and profitable growth which will translate to elevated shareholder returns."
Reiterates Guidance
V.F. Corp reiterates fiscal full-year 2024 EPS of $2.05 to $2.25 versus $2.08 consensus analyst estimates. Revenues are expected to be modestly down to flat, driven by ongoing weakness in the wholesale business and a longer turnaround for Vans. Free cash flow is expected to be in line with previous guidance at $900 million.
Activist Investor Steps Up
On October 17, 2023, shares of V.F. Corp spiked 14% as activist investment firm Engage Capital disclosed its stake at an activist investor conference. Engage justified how V.F. Corp could reach a mid-$40 target within the next three years with operational improvements. Engage suggests cutting costs by over $300 million per year. It also wants V.F. Corp to sell off some of its non-core assets and real estate and refresh its Board of Directors. They suggest looking to unload Timberland, Dickies, Smartwool and Supreme brands. Engage argues that V.F. Corp is trading at a large discount to peers at just a $6 billion market cap.
V.F. Corp analyst ratings and price targets are at MarketBeat.
Weekly Falling Channel Breakout
The weekly candlestick chart for VFC shows a falling channel breakout attempt triggered by activist investor Engage Capital's stake disclosure. VFC made six consecutive lower lows until the disclosure surged the price up over 16%. This also created a weekly market structure low (MSL) trigger on a breakout through $18.90. The weekly RSI also bounced through the 40-band. The reversion must hold above the descending upper trendline at $16.26 to confirm the breakout. Pullback support levels are at $16.26, $15.11, $14.35 and $13.60.
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