There isn't anything hush about this puppy. Wolverine (NYSE:WWW), maker of such popular brands as Hush Puppies, Bates, HyTest, Merrell, Sebago and Wolverine shoes, reported record revenue and earnings for its 2007 third quarter.

Record-Setting Q3
Third-quarter revenue climbed to $310.2 million from $298.9 million in the same quarter a year ago and earnings per share increased to $54 cents per share from 46 cents per share in the year prior. If you work the math, you'll see a 17.4% gain in earnings on a 3.8% increase in revenue.

For the first nine months of its fiscal year, the numbers are bit more sedate, but they are still impressive. Revenue amounted to $841.5 million compared with $800.2 million a year ago and earnings per share came in at $1.21 per share, up from $1.05 per share during the same period in 2006. That is a 15.2% gain in earnings on a 5.2% gain in revenue. (For more on earnings, see Earnings: Quality Means Everything and Earnings Forecasts: A Primer.)

Blake Krueger, Wolverine's president and chief executive officer, has pointed out that this is Wolverine's 21st consecutive quarter of increased revenue and earnings. He acknowledged a difficult retail environment that has led to lower store traffic, but that the company has still managed to end the quarter with an 11% order backlog. Krueger also indicated that the company had made a decision to transition out of its lower-margin businesses to focus more on the higher-margin ones.

Stephen Gulis, Wolverine's chief financial officer, reiterated that this strategy had the effect of reducing overall revenue somewhat but expanding the firm's gross margin by 100 basis points.

A Comfortable Fit
Looking ahead, the company's guidance statements were fairly conservative and pretty much in line with street estimates. Wolverine is transitioning out of its military contracts as they expire and will otherwise continue its present course of action. The firm raised its estimates by a penny per share for the entire year (to $1.60-$1.64). Analysts polled by Thompson Financial expect to see an average of $1.64 per share on revenue of approximately $1.2 billion.

For 2008, the company's goals are revenue of $1.25 billion to $1.28 billion and generating earnings of $1.78 to $1.84 per share. Analysts are expecting $1.85 on revenue of $1.3 billion.

It should be noted that Wolverine's return on equity has improved from averaging 14.8% over the previous five years to come in at 18.4% last year. For a stock that appears to be very conservative, it has done quite well over the last few years. Over the last two years it has risen from the low $20s to the high $20s. Five years ago it was trading at roughly $9 per share.

Bottom Line
Let's think about this business for a minute. While shoes are not nearly exciting as fighter jets or the latest biotech gadget, when you need a pair of shoes, you absolutely have to get a pair. Unless you plan on going barefoot, there is no other alternative. That simple fact may help explain why Wolverine has been so consistently successful, and why it may continue to be successful in the future.

Looking to cook up a market-stomping stock portfolio? Check out our FREE report "7 Ingredients to Market Beating Stocks" and get started right now!

Related Articles
  1. Stock Analysis

    Allstate: How Being Boring Earns it Billions (ALL)

    A summary of what Allstate Insurance sells and whom it sells it to including recent mergers and acquisitions that have helped boost its bottom line.
  2. Options & Futures

    Cyclical Versus Non-Cyclical Stocks

    Investing during an economic downturn simply means changing your focus. Discover the benefits of defensive stocks.
  3. Investing Basics

    How to Deduct Your Stock Losses

    Held onto a stock for too long? Selling at a loss is never ideal, but it is possible to minimize the damage. Here's how.
  4. Economics

    Is Wall Street Living in Denial?

    Will remaining calm and staying long present significant risks to your investment health?
  5. Stock Analysis

    When Will Dick's Sporting Goods Bounce Back? (DKS)

    Is DKS a bargain here?
  6. Investing News

    How AT&T Evolved into a Mobile Phone Giant

    A third of Americans use an AT&T mobile phone. How did it evolve from a state-sponsored monopoly, though antitrust and a technological revolution?
  7. Stock Analysis

    Home Depot: Can its Shares Continue Climbing?

    Home Depot has outperformed the market by a wide margin in the last 12 months. Is this sustainable?
  8. Stock Analysis

    Yelp: Can it Regain its Losses in 2016? (YELP)

    Yelp investors have had reason to be happy recently. Will the good spirits last?
  9. Stock Analysis

    Is Walmart's Rally Sustainable? (WMT)

    Walmart is enjoying a short-term rally. Is it sustainable? Is Amazon still a better bet?
  10. Stock Analysis

    GoPro's Stock: Can it Fall Much Further? (GPRO)

    As a company that primarily sells discretionary products, GoPro and its potential falls right in line with consumer trends. Is that good or bad?
  1. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  2. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  3. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  4. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  5. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  6. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>

You May Also Like

Trading Center