While the economic impact of the Covid-19 pandemic has rocked many retailers, American footwear manufacturer Wolverine World Wide has reported a boost in its online sales "as consumers adjust their lifestyles for social distancing" in its latest business update.
In order to conserve capital, the company said it has used its "nimble supply chain to significantly reduce inventory receipts to adjust for lower demand" while temporary store closures and restrictions are in place. Currently, Wolverine's supply chain, logistics, and distribution centers are operational.
The company has also taken steps to reduce capital outflows by delaying most capital projects and suspending share repurchases and has significantly reduced operating expenses to respond to a conservative outlook for the rest of the year.
Wolverine said it expects these precautions to result in up to $500 million of cash savings for the remainder of this year, with much of the benefit expected in the next two quarters, and allow the company to generate over $150 million of positive operating cash flows in 2020.
Wolverine announced the temporary closure of its physical stores on March 19, but smooth operations have led to positive e-commerce performance. Through its owned and third-party online channels, which make up nearly 40% of total U.S. sales, the company has driven mid-teens e-commerce growth in the first quarter, and said recent trends in this channel are "very encouraging."
In particular, the company's footwear brands in the run, hike and walk categories have performed well online during the Covid-19 outbreak, as well as those brands in the company's work boot category, which represents 15% of overall revenues.
“The unprecedented Covid-19 outbreak brings new information each day," said Blake Krueger, Wolverine’s chairman, CEO, and president.
"We are fully operational and have proactively positioned our business to navigate through this uncertain time and emerge stronger."
"Our prompt liquidity measures, significant expense reductions, and heightened inventory discipline are expected to allow the company to deliver positive cash flow in 2020, and we will continue to protect the safety of our teams and partners while stepping up to serve our communities.”
The company maintains a credit facility with a total capacity of $1.75 billion that expires in December 2023, which includes an $800 million revolving line of credit. In order to bolster liquidity, the company has drawn down the remainder of its revolving credit line, bringing the company's cash-on-hand up to approximately $450 million.
In addition, Wolverine has uncommitted incremental borrowing capacity of approximately $760 million under the credit facility, subject to certain specified conditions.
Last week, Wolverine became one of the latest companies to assist in Covid-19 relief by donating approximately 25,000 protective masks to a local hospital group in its home state of Michigan, and plans to supply more masks in Michigan as well as Boston. The company has also provided aid by donating footwear to healthcare and first responders.
In late February, Wolverine announced a slight increase in its fourth-quarter sales, but plummeted into loss, as expenses related to environmental litigation took their toll on its bottom line.
Wolverine said it will provide more information during its first-quarter earnings call.