Seeking Alpha
Research analyst, growth, value, IPOs
Profile| Send Message| ()  

Recently Wolverine World Wide (WWW) opened a Sebago store in London, England. The store is the latest in the company’s attempts to further its international exposure and also to likely capitalize on the fact that Kate Middleton wore Sebago shoes recently in a trip to Canada.

Wolverine World Wide is a large shoe company which operates with shoes in three different operating segments:

Lifestyle

- Hush Puppies- casual

- Sebago-casual, marine

- Cushe-fresh, laid back casual

- Soft Style-casual

Outdoor

- Merrell-athlete, running

- Chaco-adventure, river

- Patagonia- outdoor, environmental friendly

Heritage

- Caterpillar-durable, work boots

- Wolverine-rugged, work boots

- Bates-armed service, uniform

-Harley Davidson-biker shoes for riding and fashion

Two of the heritage brands are licensed from larger companies: Caterpillar (CAT) and Harley Davidson (HOG).

The flagship store opening in London is on the famous Regent Street. The street serves as a huge retail corridor for many clothing companies in England. The first Apple (AAPL) retail store in Europe was opened on Regent in 2004. Other United States companies that have a presence on the street include Gap (GPS), and Guess. The store will be the first company owned Sebago store. Previous stores opened under the Sebago brand can be found in Paris and Oslo among other European cities. The building is two stories and modeled after a yacht with a strong nautical theme throughout the store including the yacht themed staircase.

A picture of the Duchess of Cambridge, Kate Middleton, was featured in People Weekly which showed a pair of Sebago shoes on her feet. The picture was from a nine day tour of Canada during the summer of 2011. The Sebago Bala shoes retail for $123.

The company tried to capitalize on the Kate Middleton mania by showcasing that particular shoe and photos of the Duchess on their website. In the most recent quarter the company announced a huge boost in international sales. Sales were up 13 percent compared to the quarter last year. Analysts had expected $0.75 earnings per share but Wolverine surprised with $0.82 for the quarter. That represented a seventeen percent increase in earnings per share from the prior year ($0.70). As a result of the increased earnings, Wolverine World Wide raised their full year guidance to $2.46-$2.52 per share on revenue estimates of $1.40-$1.43 billion.

Wolverine shoes are sold in 190 countries throughout their own retail stores as well as other large shoe stores and department stores around the world. The company owns over ninety stores including the Track N Trail store brand which operates in malls around the United States. Over fifty million pairs of shoes were sold in 2010 for the company.

Wolverine pays a $0.12 quarterly dividend representing a current yield of 1.3%. The company has paid a dividend since they became a public company in 1984 with a few years of no payouts. The dividend has risen almost every year since its inception. The most recent raise was in March of 2011 from a previous $0.11 per quarter.

Wolverine’s two main direct competitors are Red Wing Shoes and Timberland. Timberland was recently acquired by VF Corporation (VFC) for close to $2 billion. Wolverine trades with a market capitalization of $1.7 billion and a buyout of the company by a larger retail or shoe company would not be out of the question.

Shares of Wolverine are trading at $34.40 at time of writing. With analyst’s earnings estimates of $2.53 shares trade at a price earnings ratio of 13.5 Next year’s earnings are estimated to be $2.82 would put the share at twelve times next year’s earnings. Earnings for the last four quarters have all beat analysts’ estimates.

Institutional and mutual fund ownership is strong with 88%. Vanguard, Blackrock, and State Street are all large holders of the stock with 5%, 6%, and 2% ownerships respectively. Insiders own three percent of the publicly traded shares.

In my recent Hitting the Mall for the Holidays article I put a hold rating on Wolverine shares. I cited job losses and shoes being an extra item that could be cut out by people’s wallets during the holiday season and after. However, I write today that shares should trade close to 15x next year’s earnings which would place shares at a value of $42.30. This would represent an increase of 22% in today’s share price. I hate to reverse my position but think shares look attractive and the company’s international expansion could transform the company and its ability to open its own retail stores.

Source: Investing With Wolverine World Wide As Kate Middleton Helps Shoe Sales And International Exposure