On Thursday, Wolverine World Wide (NYSE:WWW) saw its price target modestly increased to $7.50 from $7.00 by Williams Trading, while the firm retained a Sell rating on the stock. The analyst noted that Wolverine's fourth-quarter 2023 performance matched the preliminary results shared at the ICR Conference in January. However, the firm expressed skepticism about the company's fiscal year 2024 guidance, particularly the gross margin forecast, which it deemed overly optimistic.
Wolverine's inventory at the end of the fourth quarter was reported to be down 39% year-over-year. This decrease translates to approximately 24.8 weeks of supply based on Williams Trading's estimates. For fiscal year 2024, Wolverine has projected a gross margin of 44.5%, an increase of 460 basis points. This expectation includes around $95 million in supply chain and cost improvement savings, which are anticipated to be partially offset by foreign exchange headwinds.
The analyst pointed out that the gross margin guidance might overestimate the extent to which increased promotional activity, especially in the second half of the fiscal year, could be counterbalanced by new products from brands such as Merrell, Saucony, and Wolverine. Wolverine's management has been vocal about their strategies, including developing a pull model, discontinuing partnerships that dilute their brand, and tackling the gray market. They have also expressed a long-term goal of enhancing their brand-building prowess.
At the close of the fourth quarter, Wolverine's net debt stood at $740 million, marking a 20% decrease from the third quarter. By the end of fiscal 2024, the debt is expected to be reduced further to $575 million. The recent divestiture of the Sperry brand is anticipated to contribute to debt repayment in the first quarter and allow for reinvestment into other brands, particularly Saucony. Additionally, plans are in place to cut yearly inventory by $70 million, aiming for a total inventory of around $300 million by the end of 2024. Despite these efforts, Williams Trading estimates that the inventory will remain approximately $30 million above the optimal level. The firm remains uncertain if Wolverine can achieve its revenue, net debt, and inventory targets for the year, considering the aggressive nature of the revenue guidance.
InvestingPro Insights
As Wolverine World Wide (NYSE:WWW) navigates through its fiscal year, analysts and investors are keeping a close eye on its financial metrics and strategic moves. According to the latest data from InvestingPro, Wolverine's market capitalization has adjusted to $742.04 million, reflecting the company's current market value. Despite the challenges, the company's gross profit margin stands strong at 38.92% for the last twelve months as of Q4 2023, showcasing its ability to maintain profitability in operations.
An InvestingPro Tip worth noting is that Wolverine has maintained dividend payments for 37 consecutive years, indicating a commitment to returning value to shareholders. This consistency is reflected in the company's attractive dividend yield of 4.29% as of the latest data, which may appeal to income-focused investors. Additionally, Wolverine's management has been proactive in cost-saving measures and strategic brand development, aiming to enhance the company's financial health and market position.
However, there are concerns among analysts, as highlighted by two InvestingPro Tips: Firstly, 2 analysts have revised their earnings downwards for the upcoming period, suggesting that Wolverine may face headwinds that could impact its profitability. Secondly, analysts anticipate a sales decline in the current year, which could put pressure on the company's ambitious fiscal targets.
For those looking to dive deeper into Wolverine's financials and future prospects, InvestingPro offers additional insights and tips. By using the coupon code PRONEWS24, readers can get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking even more valuable analysis to inform their investment decisions.
Investors interested in Wolverine World Wide can find a comprehensive set of additional InvestingPro Tips at: https://www.investing.com/pro/WWW, aiding them in making more informed decisions backed by real-time data and expert analysis.
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