WWW Q1 Earnings Call: Tariff Uncertainty Tempers Strong Brand Momentum

Footwear conglomerate Wolverine Worldwide (NYSE:WWW) fell short of the market’s revenue expectations in Q1 CY2025 as sales rose 4.4% year on year to $412.3 million. Its non-GAAP EPS of $0.18 per share was 64.2% above analysts’ consensus estimates.

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StockStory’s Take

Wolverine Worldwide’s first quarter results reflected continued progress in reinvigorating its key brands, as management emphasized robust growth in Saucony and Merrell. CEO Chris Hufnagel highlighted sequential improvements in top-line trends, crediting a disciplined approach to inventory management and reduced promotional activity for driving higher gross margins. Saucony’s performance was attributed to new product launches like the Endorphin Elite 2 and expanded lifestyle distribution, while Merrell benefited from product innovation in trail and hike categories. Management acknowledged ongoing challenges in the Work Group and Sweaty Betty brands, but noted meaningful gross margin gains in Sweaty Betty through a shift toward full-price sales and reduced discounting.

Looking ahead, Wolverine Worldwide is focused on mitigating the impact of recently announced tariffs and navigating a fluid consumer environment. Management withdrew full-year guidance, citing significant uncertainty around trade policy and consumer sentiment. CEO Chris Hufnagel outlined plans to leverage a diversified supply chain, implement targeted price increases, and intensify operational cost controls to offset an estimated $30 million profit impact from tariffs. While the company expects continued revenue growth from its largest brands and a more balanced approach to inventory, CFO Taryn Miller cautioned that the second half of 2025 could bring greater margin pressures as tariff effects intensify.

Key Insights from Management’s Remarks

Management attributed first quarter gains to strong demand for Saucony and Merrell, strategic pricing, and improved inventory discipline, but highlighted new tariff headwinds and mixed performance in smaller brands.

• Saucony’s performance run and lifestyle growth: Saucony delivered 30% year-over-year revenue growth, driven by new launches in both performance running (e.g., Endorphin Elite 2) and lifestyle segments, with expanded distribution into over 900 new doors.
• Merrell innovation and market share: Merrell achieved double-digit revenue growth, gaining share in hike, trail, and lifestyle categories. The brand’s focus on modernizing core franchises and launching visually distinctive products like the SpeedARC Surge Boa contributed to its momentum.
• Sweaty Betty profitability focus: Management prioritized margin expansion at Sweaty Betty, shifting away from promotions to a more full-price strategy. Gross margin improved by nearly 1,000 basis points, although this came at the expense of top-line growth.
• Work Group challenges: The Work Group saw revenue declines, partially due to lapping prior-year discounting and challenges in the product offering. Management is introducing new products and expects performance to stabilize as inventory normalizes.
• Supply chain diversification and tariff mitigation: Wolverine has reduced U.S. sourcing from China to less than 10%, aiming for near zero by 2026. Management is leveraging a nimble supply chain and dual sourcing to limit tariff exposure and redirect product to international markets.

Drivers of Future Performance

Wolverine Worldwide’s outlook is shaped by efforts to counter tariff headwinds, strengthen its largest brands, and adapt spending in response to an uncertain economic environment.

• Tariff mitigation and pricing actions: Management expects incremental tariffs to impact 2025 profit by about $30 million before mitigation. To address this, the company is accelerating supply chain diversification and implementing selective price increases, though these are not expected to fully offset cost pressures.
• Investment in core brands and retail expansion: Continued investment in Saucony and Merrell, including new product launches and international store openings, is expected to drive revenue growth. The company is also ramping up retail marketing and city activations to build brand awareness despite a more cautious approach to discretionary spending.
• Operational cost controls and cautious inventory management: The company is scrutinizing SG&A (selling, general and administrative) costs and managing inventory more conservatively, particularly in categories facing softer demand. Management’s new integrated business planning group is tasked with aligning inventory levels to expected demand and preventing excess stock in the event of a consumer slowdown.

Catalysts in Upcoming Quarters

In coming quarters, the StockStory team will be watching (1) the effectiveness of tariff mitigation strategies and their impact on margins, (2) the ability of Saucony and Merrell to sustain growth amid increased pricing and operational changes, and (3) signs of improved stability or turnaround in the Work Group and Sweaty Betty brands. Execution on inventory management and the balance between pricing actions and consumer demand will also be critical markers of success.

Wolverine Worldwide currently trades at a forward P/E ratio of 15×. In the wake of earnings, is it a buy or sell? The answer lies in our full research report (it’s free).

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