Wolverine World Wide, Inc.

Good morning, everyone, and welcome to the Wolverine Worldwide First Quarter Fiscal 2022 Results Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please also note today's event is being recorded. At this time, I'd like to turn the floor over to Alice Wiseman, Vice President of Finance and Investor Relations. Sir, please go ahead.

Good morning and welcome to our first quarter 2022 conference call. On the call today are Brendan Hoffman, our President and Chief Executive Officer, and Mike Starnett, our Executive Vice President and Chief Financial Officer. Earlier this morning, we announced our financial results for the first quarter 2022. The press release is available on many news sites and can be viewed on our corporate website at wolverineworldwide.com. If you would prefer to have a copy of the release sent to you directly, please call Jean Fontana at 646-277-1214. This morning's press release and comments made during today's earnings call include non-GAAP disclosures, which adjust, for example, for the impacts of environmental and other related costs, net of cost recoveries, and foreign exchange rate changes. Additionally, prior year non-GAAP disclosures include adjustments for air freight charges related to production and shipping delays caused by the COVID-19 pandemic. References to organic performance reflect the exclusion of the Sweaty Betty brand, which was acquired in August 2021. These disclosures were reconciled in the attached tables within the body of the release or in supplemental tables found on our website under the investor relations tab at the webcast and presentations link. 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 fiscal year 2022, 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. These important risk factors are identified in the company's FCC filings and in our press releases. With that being said, I'd now like to turn the call over to Brendan Hoffman.

Thank you, Alex. Good morning, everyone, and thank you for joining today's call. We are pleased to report strong first quarter performance despite ongoing supply chain challenges and a difficult macro and geopolitical backdrop. Our better than expected results are a testament to our team's focus and solid execution. Although these continued headwinds present complex challenges to our business in the near term, they are counterbalanced by sustainable changes in consumer trends in wellness, outdoor performance, and work that provide tailwinds for future growth. We remain focused on executing strategies to position our brands to capitalize on the industry backdrop and to drive market share gains in 2022 and beyond, while enhancing the profitability of our business. Now we'll provide a quick overview of our first quarter results, focusing on our biggest brands, where we continue to see strong demand as well as our key accomplishments. First quarter revenue increased 20% to $615 million, above the high end of our guidance. Excluding Sweaty Betty, revenue growth was 10%. Merrill performed in line with our expectations, with revenue of $148 million, down 2%. Availability of new product in the quarter was impacted by factory shutdowns in the back half of 2021, as previously noted. Merrill's demand remains very strong across all geographic regions, and we are seeing an improvement in the inbound flow of goods. As a result, we expect to deliver low teens growth in Q2 with anticipated sequential improvements in Q3 and Q4 as new product launches hit the market. For the full year, Merrill should deliver high teens growth. Merrill continues to elevate engagement with consumers supporting product successes. We launched our More Less campaign during International Women's Month, which resonated with consumers and fueled a 25% increase in demand for Antora, a trail running style uniquely tailored for women. Similarly, Merrill's Hype by Haters campaign with the viral hashtag BDE, Big Daddy Energy, brought nearly 4 million impressions via influencer outreach driving Hydromach to be the top unit seller on Merrill.com. We plan to launch a sustainability campaign, This is Home, along with Retread, Merrill's first footwear recycle program. The brand will be increasing investment in paid media through the remainder of the year as we rebalance our spend to emphasize brand building, top of funnel marketing. Saucony slightly exceeded our expectations with revenue of approximately $106 million and growth of 4%. While Saucony entered the quarter with a good inventory position and carryover styles, new product launches were delayed, as expected, due to supply chain challenges. Saucony's lifestyle business continues to perform very well in Italy, a critical market of fashion relevance, and we see ongoing momentum in the other international markets. The order book for Saucony gives us good visibility to growth over the remainder of the year as new product flow improves. As such, we expect double-digit revenue growth in Q2 for Saucony with a full-year outlook of high teens growth. During the quarter, we made a strategic media shift to broaden consumer reach. At the beginning of March, we launched a brand awareness campaign, Call Us Runners, in connected TV across all Roku apps with a supporting social campaign on Facebook and Instagram. We saw strong PR placements featuring the Saucony brand campaign, Call Us Runners, across multiple publications. Examples include an International Women's Day article in Ebony, highlighting our diversity efforts with the feature of JL from Black Girls Run. An Endorphin Pro 2, Triumph 19, and Guide 14 featured in Runner's World and Men's Health, which was syndicated to MSN and Yahoo!. We also saw Endorphin Pro 2 feature in Esquire in the UK. In sports marketing, three athletes ran the Boston Marathon in Endorphin Pro 3, further amplifying our brand presence in sport. Looking ahead, we will focus on core franchises for everyday active with Ride, Guide, Convara campaigns set to run on social media channels starting in May. Sweaty Betty revenues of $54 million were down 2% on a pro forma basis, but up 3% in constant currency. The brand was significantly impacted by geopolitical instability, given the brand's high exposure to the U.K. and Europe, where overall high street retail struggled. The broader challenges and new logistic delays had an unplanned impact on e-commerce traffic and new product launches in Q1, while store performance was relatively strong. Sweaty Betty continues to bring category-leading innovative fashion elements to technical activewear. This is reflected in the powerful lineup of new product introductions throughout the balance of the year. The brand has complemented performance product launches with lifestyle product offerings to serve the broader needs of the consumer in a post-pandemic world. Over the course of the year, Sweaty Betty will build on the recent success of its newly launched SuperSoft, already the brand's second-biggest franchise, as well as its cold weather products, such as ski, outerwear, and thermo. We expect Q2 revenues to be down mid-single digits for Sweaty Betty, with a return to double-digit growth in the second half of the year, resulting in low teens' full-year growth. Sweaty Betty is a predominantly DTC brand, and we are leveraging important learnings from the team that we can apply to our other brands. This cross-sharing is reciprocal. As an example, Sweaty Betty will be launching a new SMS trial in the U.S. market leveraging the work already done around this and our other brands. This functionality will support diversification and channel mix and offset privacy challenges in our current email-based CRM programs. In addition, to build on the success of the Insiders Loyalty Program, we are launching a new perk of the month to support trade and returning customer frequency. On the brick and mortar front, Sweaty Betty continues to attract new customers with profitable new store openings in the U.K. In the quarter, we opened four new stores. We have begun to investigate reentering brick and mortar here in the U.S. as the next stage of their expansion. Sperry had a very strong quarter with revenue of $67 million and growth of 19%. The brand continues to benefit from healthier boat shoe trends and had strong performance in U.S. wholesale with bright signals from certain international markets. We expect Sperry to grow mid-single digits in Q2 which is partially impacted by a shift of revenue into Q3 to timing of inventory receipts. For the full year, Sperry should deliver low teens growth. Wolverine brand delivered 12% growth in the quarter, in line with our expectations. Our portfolio of work brands performed very well with revenue of $130 million and growth of 21%. The company has a strong market share leadership position in the U.S. work boot category with over 30% of share and Wolverine brand leads the way. Wolverine continues to win with industry-leading product and creative collaborations. We expect Wolverine to grow in the high teens in Q2 with full-year growth in the mid-teens. Now an update on the supply chain. In the first quarter, we continue to experience logistic delays with lead time still almost twice as long as pre-COVID levels. Although factory production levels have meaningfully improved, Freight movement in the first quarter was affected by China's zero tolerance restrictions, the Russia-Ukraine war, and ongoing U.S. port congestion and trucking capacity limitations. We expect supply chain to be a lessening but still meaningful headwind throughout the year, with evolving COVID issues in China presenting a new potential challenge. At the end of the quarter, our inventory was up 36%, excluding Sweaty Betty, against abnormally low levels last year, and consists of healthy levels of core and carryover inventory. We expect inventory flow and newness to improve throughout the year. Moving on to the progress we made in the first quarter against our refined approach in support of sustainable future growth. On our last call, we spoke about an important shift in our approach to deliver our growth strategies, which fundamentally means a renewed focus on our biggest opportunities. This will mean prioritizing investments on our largest brands in global markets. The fundamentals remain in place, leading with an acceleration of our digital and e-commerce capabilities, elevating product innovation, and optimizing our international market opportunities. The product introductions, collaborations, and marketing campaigns we are delivering in 2022 are just the beginning. I'm incredibly proud of what the teams have accomplished and excited for the journey ahead. I see tremendous opportunities to unlock growth and shareholder value through a more comprehensive corporate strategy. Our leadership team is currently focused on this work, and we are excited to have Boston Consulting Group on board to support our efforts. I look forward to sharing more about this initiative as we get later in the year. Let me provide a brief insight in some of the key growth areas, beginning with our DTC and digital focus. We continue to focus on advancing our DTC capabilities and driving authentic engagements with consumers. That said, the DTC businesses for most of our brands are through the e-commerce direct channel, which had benefited significantly from consumer shopping behavior during COVID, but is now seeing some reversal as consumers shift back to stores. As a result of this change, combined with the impact of delayed product launches due to supply chain challenges, and shifts in consumer sentiment towards experiential spending, e-commerce sales did not meet our expectations during the quarter. Including our newly acquired Sweaty Betty business, first quarter direct-to-consumer revenue increased 24%. DTC e-commerce revenue increased 16% compared to last year. DT store revenue was up 60% versus the prior year. Excluding Sweaty Betty, first quarter direct-to-consumer revenue decreased 14%, reflecting e-commerce decline of 16% and store revenue decline of 8%. During the quarter, we focused on attracting new customers to the brands. We better balanced some of our marketing investments to top of funnel, which we believe is important to the long-term growth and durability of our brands. We are testing and learning a number of strategies and also balancing higher performance marketing costs with anticipated returns. We will continue to expand our reach through a better flow of newness and purposeful storytelling throughout the rest of the year. With a commitment to growing DTC, capital investment in e-commerce store infrastructure is expected to more than double this year, and we feel this will support growth into 2023. We expect our DTC business to grow over 20% for the full year, 5% excluding Sweaty Betty, and approach nearly 30% of total revenue in 2022. This reflects our expectation for an acceleration of DTC growth as we move past tougher compares in H1 of 2021, particularly in e-commerce, improved flow of new product offerings, and benefit from our top-of-funnel brand-building marketing initiatives. Beyond DTC, we continue to support our presence in the wholesale channel through key partnerships. As many of you are aware, DSW is testing a new format called Warehouse Reimagined, featuring shop and shops that showcase national brands. We believe this is an opportunity to amplify visibility of brands such as our iconic Hush Puppies brand. Moving on to product innovation, product is at the center of everything we do and a key strength across our brands. While supply chain challenges led to product delivery delays, this was another quarter of successful product newness enhancements and collaborations across our brands. To name a few, Sweaty Betty, in conjunction with its apparel expansion in the hiking category, teamed up with Merrill to introduce a limited edition Moab Speed, reflective of the Sweaty Betty ethos. We are thrilled by the strong response. As we discussed last quarter, we will leverage our brand equity and product development capabilities to expand into new categories that will broaden our customer reach and drive higher spend per customer. At Sperry, we launched Sperry Sport, the brand's most technically advanced performance launch yet, as we return to our performance-based roots. The assortment provides the versatility to cross over from lifestyle activities to sport. We are excited to be launching this new collection that is just hitting the stores this month. Sperry Sport Dive in product campaign drove new customer growth, 75% of Sperry.com buyers are new, and significant interest from media, including travel and leisure, where we were top pick. Our Make Waves brand campaign will continue to pulse and run through October. We also launched C-Cycle storytelling during Earth Month to begin activating our brand purpose, all for water, water for all. At Wolverine, we had a hugely successful collaboration with Halo, bringing the video game-inspired boot to life. The boot featured the Master Chief emblem while offering the same comfort and support inherent in Wolverine boots with a midsole that contains UltraSpin technology for a lightweight, energized ride. The product sold out in under one minute with 250,000 visits to the Halo landing page, leading to a 22% growth in its email database in a two-week span. These launches and collaborations clearly showcase the potential of these brands to excel in innovation and creativity. The next key growth area is the acceleration of our international business. In the first quarter, international revenue grew 35% as compared to last year. Excluding Sweaty Betty, international revenue grew 10%, driven by growth in our third-party distributor business, with recovery seen in our top markets as well as strong performance in our China joint venture. Our third-party businesses in Asia, EMA, and Latin America delivered revenue growth, excluding Sweaty Betty, of 40%, 60%, and 90% respectively versus 2021 and are accelerating to pre-pandemic levels. Our own business in EMA and Canada declined 21% and 28% respectively as they were impacted by supply chain constraints similar to our domestic business. We are particularly encouraged by momentum in LATAM, with Cat and Merrill brand growth of 66% and 137% respectively. Our brands are well-positioned to take share in this region as key markets, including Chile and Peru, recover. Notably, in the first quarter, two branded sites for Saucony in Chile and Merrill in Peru were launched, and the Merrill Cusco's Peru store will open in Q2. As we look out, I also want to touch on the impact of the Russia-Ukraine conflict. Our Russia business is very small, historically less than 1% of revenue. And during this quarter, we were able to divert the inventory allocated for our Russian distributor to other regions. That said, the war impacted consumer confidence in Europe, which is impacting business. We are monitoring the situation closely and making any adjustments as necessary. In efforts to support displaced Ukrainians and those affected by the war, we have made meaningful donations, including nearly 100,000 pairs of shoes to those in need. In conclusion, while the global macro environment and supply chain challenges are likely to create headwinds in the short term, we are more confident than ever in the future of our brands. With that, I will turn it over to Mike to discuss our financial results.