This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Wolverine Growing Under a Pile of Debt

Stocks in this article: WWW NKE DECK

In January 2013, Wolverine started reporting its results in three segments: Performance, Lifestyle and Heritage. Wolverine now owns more than a dozen different brands in these segments. Before the acquisition, Wolverine counted about 43% of its revenues from Performance Group, 40% from Heritage Group and just around 11% from Lifestyle Group. Now the company gets around 41% of its revenues from the Lifestyle Group, 36% from Performance Group and just 20% from Heritage Group.

This is a significant shift from last year. Growth in the previous quarter was led by these two segments that reported a double-digit year-over-year revenue increases. On the other hand, the Heritage segment could only manage an 0.8% increase in revenues. The stark contrast between the growth numbers of the new and improved segments and its Heritage business highlights a key point; nearly all of Wolverine's growth has come as a result of the PLG acquisition.

As mentioned earlier, PLG came with a price tag of $1.25 billion, equivalent to 60% of Wolverine's market cap in October last year. The acquisition was financed through long term debt, which now stands at a massive $1.1 billion, up from zero in the same quarter last year. The company's long-term-debt-to-equity ratio, or D/E ratio, has swelled to 144%, which means that Wolverine has considerably more debt than its equity.

This is far from ideal; the industry's average is just 6%. Although Wolverine's financial health has been improving as its D/E ratio has dropped from 190% in December 2012, which clearly shows that the business has been moving in the right direction, but it still has a long way to go.

The adverse impact of this debt came in the form of a significant increase in interest expense which rose from just $1 million for the nine months ending Sept. 8, 2012, to nearly $37 million for the corresponding period in 2013. Some of its refinancing measures will cause a meaningful reduction in the interest expense, by as much as $8 million in the next year, but unlike 2012, the interest expense will continue to drag the company's earnings in the coming years.

2 of 3

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 18,053.71 +23.50 0.13%
S&P 500 2,088.77 +6.89 0.33%
NASDAQ 4,806.8590 +33.3870 0.70%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs