Wolverine World Wide, Inc.

Good day and welcome to the Wolverine Worldwide Inc. First Quarter 2024 Earnings Call. All participants will be in the 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. To ask a question, you may press star then one on a touchtone phone. To withdraw your question, please press star then two. Please note, this event is being recorded. I would now like to turn the conference over to Alex Wiseman, Vice President of Finance. Please go ahead.

Good morning, and welcome to our first quarter fiscal 2024 conference call. On the call today are Chris Huffnagle, President and Chief Executive Officer, and Mike Stornett, Executive Vice President and Chief Financial Officer. Earlier this morning, we issued our earnings press release and announced our financial results for the first quarter of 2024. The press release is available on many news sites and can be viewed on our corporate website at wolverineworldwide.com. This morning's earnings press release and comments made during today's earnings call include non-GAAP financial measures. These non-GAAP financial measures were reconciled to the most comparable GAAP financial measures and attached tables within the body of the release. References made regarding financial results and outlook for 2024 and comparable results from 2023 in each case for our ongoing business exclude the impact of Keds, Wolverine Leathers, and Sperry. I'd like to also remind you that statements describing the company's expectations, plans, predictions, and projections, such as those regarding the company's outlook for fiscal 2024, 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 forward-looking statements. These important risk factors are identified in the company's SEC filings and in our press releases. With that being said, I'd now like to turn the call over to Chris Huffnagle.

Thanks, Alex. Good morning, everyone. and thank you for joining us on today's call. I'm pleased to report we continue to make progress against our aggressive plan to turn around and transform Wolverine worldwide. Executing our plan with tremendous pace to first stabilize the company, set a new foundation for return to growth, and ultimately deliver greater returns for our shareholders. Importantly, we are doing what we said we would do. In the first quarter, we exceeded revenue expectations with a balanced performance across the portfolio led by beats to our plan from Merrill and Saucony. We exceeded earnings expectations while simultaneously investing more than we initially planned in brand marketing to capitalize the momentum we're seeing in the business today and to help build brand equity for the future. And we continue to strengthen the company's balance sheet, which we remain intently focused on, by further reducing our debt and inventory levels more than we anticipated going into the quarter, a good start to an important year for the company. While our transformation efforts have addressed nearly every aspect of our global operations, we've worked particularly hard to rapidly improve our brand's product pipelines and presentation in the marketplace. We've made good progress to date, and the product launch calendar for 2024 and into 2025 is especially strong. We've also worked to cultivate a healthier marketplace, and at retail we continue to see inventory levels decline and rogue seller activity abate. Because of our efforts, we're beginning to see sequential improvement in our selling trends. This is encouraging and provides a level of confidence that our strategies and tactics are beginning to gain traction. Average weekly replenishment orders from our wholesale partners accelerated materially from the fourth quarter of 2023 to the first quarter of 2024, and our own e-commerce demand has improved each month this year, most recently inflecting the growth in March and accelerating further in April. At the same time, we've delivered a much healthier gross margin across the business, achieving an all-time record gross margin in the first quarter as a company, a testament to the good work we've done on supply chain costs, pricing, inventory, and better managing the marketplace. We've said consistently that we believe our turnaround will be led by margin improvement, which we're seeing today, followed by our plan and selection to growth in the second half of the year. While we're motivated and encouraged by our progress and the proof points we're seeing, we acknowledge it's still very early days in our transformation. We still have a lot of work to do to hit our stride and realize the full potential of the company. And there's no doubt challenges beyond our control exist in the marketplace today. However, as we move forward, our vision remains the same, to become builders of great global brands, brands that make people's lives and the world better. Our brand building model is centered squarely on building awesome products, telling amazing stories, and driving the business every day. To achieve our vision, we continue to invest in the capabilities that are necessary to execute this new model, strengthening our talent, insights, processes, and tools. I'd like to spend a few minutes now providing an update on this important work and share some real-time examples of the positive momentum in the business today, our proof points that we believe will ultimately lead to an inflection to growth and the successful turnaround of Wolverine Worldwide. Starting with our number one priority, designing awesome, style-led, trend-right products that are not only innovative, but also price-right and place-right. As always, it begins with the consumer. Our brands are actively incorporating a stronger dose of market and consumer insights into their product development processes and becoming more externally focused, leveraging the collective, our recently established center of excellence, for elevated trend, features, and color forecasting, as well as enhanced consumer testing. In addition, we're bolstering our talent and key brand product roles, and modernizing our toolset with the rollout of a new best-in-class digital product line management platform, which remains on track to be deployed across our portfolio after being piloted in Merrill. Now onto some examples of proof points on product. Saucony has moved quickly to advance and accelerate development in its product pipeline. The brand started to regain traction with the launch of its new Ride and Guide 17 franchises earlier this year, both of which have performed well at retail. These launches were quickly followed by the very successful introduction of new models in the brand's elite performance franchise, the Endorphin. And just last week, the brand launched the new Triumph 22, driving growth of over 80% for the franchise in its first week on Saucony.com. At the Boston Marathon a few weeks ago, Saucony was the second most worn brand and gained share year over year. The brand is also gaining momentum on the lifestyle side with its RetroTrek collections, led by the ProGrid Omni, Shadow, and Azuroth. It's been a good few months for the brand, resulting in upticks in brand heat and demand. This summer, the brand plans to launch the Hurricane 24, and we're already eager for the next editions of all these key franchises in 2025. The brand is supercharging its innovation pipeline and elevating its design, all while taking a more thoughtful and strategic approach than any opportunities the brand has in a very attractive and growing category. The other brands in the portfolio are close behind. For Merrill, the Moab Speed II, which is recently recognized as an ISPO award for the best new product in the hiking category, modernizes the trail by incorporating the beloved fit and comfort of the Moab into a faster, lighter, and more athletic silhouette. It is the brand's biggest story this year and is driving strong sell-through today at key wholesale accounts and at Merrill.com. This performance is helping generate increased interest in the marketplace and continued market share gains for the category leader. On the lifestyle front, Merrill's wrapped collection can use to outpace our expectations. selling out with each delivery of new inventory. Having proven the concept at Merrill.com, we now plan to thoughtfully expand its distribution to our wholesale accounts, both in the U.S. and around the world. We're also fast-tracking new styles for WRAP next year, especially for her, including mules and a trend-right Mary Jane. Finally, Wolverine Brand's Trade Wedge, Rancher, and ReForce franchises are all performing well today. With both the Trade Wedge and Rancher consistently beating our sell-through forecasts, and the reforce off to a solid start at Wolverine.com. Going forward, the brand has plans to expand their product franchises, most notably introducing significant new innovations to the Western category later this year, as that is an important consumer trend. To win in today's market, brands need to do more than just build awesome products. They also have to tell amazing stories. And we're focused on telling stories that excite consumers about our brands as well as our products. As with the product process, the consumer now sits at the center of our marketing approach. Our teams are utilizing consumer insights at the very start of creative development to create more compelling storytelling, and consumer testing is now being leveraged throughout the process, including evaluating creative effectiveness prior to a campaign's launch. To lead our execution here, we've hired new consumer-focused marketing leaders for both Merrill and Sweaty Betty over the last six months, with plans to place a new marketing leader for Saucony shortly. in addition to leveraging the collective to ensure we share best practices and insights across the portfolio. We're also evolving towards a better full funnel approach to marketing investment and campaign objectives that balance functional product stories with brand building messages. It is vital that we build brand equity and deepen emotional connections with our consumers. We need to compete for both share of closet and share of mind to win in today's competitive marketplace. A few examples of how we're telling amazing stories in the market today. Sweaty Betty aims to empower women, and just last week the brand launched its second iteration of the Wear the Damn Shorts campaign to encourage its sisterhood community to be confident and comfortable with their bodies. Last year, the t-shirt featuring the campaign's tagline was the brand's most requested t-shirt in its history. This year, the campaign has already driven a 63% increase year-over-year in shorts revenue and a 52% sell-through of the t-shirt since launch. The campaign has delivered over 30 million impressions and over 1.5 million video views. In total, Sweaty Betty has driven nearly a 40% increase in paid impressions globally year-to-date, and the brand continues to resonate with its core consumer. Saucony kicked off the spring with a successful Marathons campaign, which encouraged consumers to drop their phones and hit the pavement, driving over 1 billion impressions. More recently, the brand engaged its running community at the London Marathon through a host of events and activations, generating well over a million impressions and helping fuel all-time record search interest for the brand in the U.K., Year-to-date, global search interest for Saucony is up over 20% compared to 2023, and this is all ahead of Saucony being named the presenting sponsor for this year's London 10K, and our many activations plan to coincide with this important partnership. And last, Merrill just launched its biggest campaign of the year, Good Things Await, inviting consumers to experience the simple power of being outside. This campaign meets the consumer where and when they want to be engaged, either in their social channels, on connected TV, in print, or in-store. It's the most comprehensive marketing campaign in the brand's history, generating over 7 billion media impressions so far and helping drive strength and interest in the brand. As the global leader in Hike, it's incumbent upon the brand to drive innovation and heat in the category, and I'm encouraged by the progress we're making in Merrill. Finally, our teams are intent on driving the business each and every day. We have a renewed focus on strengthening our relationships with our global distribution network, both in the US and around the world. We continue to hold strategic top-top meetings with our key domestic retail partners, and in March, 16 of our key international partners visited our campus here in Grand Rapids for a strategic planning summit. This was the first of its kind event in our company's history, and the first time we've hosted a group like this on campus since the pandemic. To further support our partners around the world and drive the business, just last week we announced new licensing agreements for Merrill and Saucony Kids Footwear, along with Merrill Apparel and Accessories. These new agreements will help us deliver better, fuller assortments, and more effectively and efficiently realize the full potential of our brands globally. In collaboration with our longtime partner in Japan, Merrill opened its first-of-its-kind flagship store last fall in Harajuku in Tokyo, one of the very best and most influential retail districts in the world. The store has outperformed its plan since opening, leading to the opening of a new store in nearby Shibuya Scramble Square at the beginning of March, which successfully captured a younger consumer, driven a more balanced head-to-toe sales mix, and is significantly exceeding its plan since opening. The strategy in Japan is helping reposition, modernize, and energize Merrill, and we're taking these learnings to other brands and markets in the portfolio. Here in the U.S., Saucon is expanding into meaningful new lifestyle distribution over the course of the year as a result of the heat it's generating with trend-right, retro-tech designs from its archives. The brand is also opening its aperture to capture the broader global running lifestyle opportunity, well beyond niche elite offerings. In February, I said I was bullish on Saucony's future prospects, driven by a much improved innovation pipeline. And I'm even more excited today on the potential of the brand moving forward. We're also making important progress cleaning up the marketplace, spearheaded by our newly created brand protection team. To date, we've closed or restricted over 30 customers and partners and shuttered approximately 400 retail accounts. This will continue as we work to be great brand managers, coupled with a stronger focus on sell-through versus sell-in, and our brands better managing supply and demand in the marketplace. While awesome products and amazing stories are critical to building great brands, I'm equally focused on aligning and uniting the global teams to drive the business each and every day. Our team's good work is translating into important early proof points and helping to build a new, firmer foundation for the future. Before I turn the call over to Mike, I'd like to comment on our other announcement this morning. After a comprehensive search, I'm pleased to announce that Taryn Miller will succeed Mike Stornett as the company's chief financial officer. Taryn brings over 25 years of global financial and operational experience along with strategic thought leadership to Wolverine worldwide. I'm excited for her to join the executive team at this important moment in our transformation and look forward to you all meeting and working with Taryn. She's a tremendous addition to our team. I'd also like to take this opportunity to personally thank Mike. He's dedicated nearly three decades of his life to the company. including the last nine years as our CFO. Since I stepped into this seat last August, his deep knowledge of the business, drive, and undeniable grit have been invaluable to me and the company as we work to stabilize and reimagine the company. No one is more passionate about Wolverine's success, and no one works harder than Mike. Thank you, Mike, for everything you've done and for your commitment to a smooth and seamless transition moving forward over the next several months. I, along with everyone at Wolverine Worldwide, wish you and Amy the very best in your coming retirement. It's well-deserved. and we'll miss you. With that, I'm going to hand it over to Mike to review our performance in the first quarter and expectations for the year in more detail. Mike?