Wolverine World Wide Inc: Form 10-Q for the period ended Apr 4, 2026

The following is a discussion of the Company’s results of operations and liquidity and capital resources. This section should be read in conjunction with the Company’s consolidated condensed financial statements and related notes included elsewhere in this Quarterly Report.

BUSINESS OVERVIEW

The Company is a leading global designer, marketer and licensor of branded footwear, apparel and accessories. The Company’s strategic vision is to build and grow high-energy footwear, apparel and accessories brands that inspire and empower consumers to explore and enjoy their active lives. The Company seeks to fulfill this vision by offering innovative products and compelling brand propositions; complementing its footwear brands with strong apparel and accessories offerings; expanding its global direct-to-consumer footprint; and delivering supply chain excellence.

The Company’s brands are marketed in approximately 170 countries and territories at April 4, 2026, including through owned operations in the U.S., Canada, the United Kingdom and certain countries in continental Europe and Asia Pacific. In other regions (Latin America, portions of Europe and Asia Pacific, the Middle East and Africa), the Company relies on a network of third-party distributors, licensees and joint ventures. At April 4, 2026, the Company operated 126 retail stores in the U.S., United Kingdom, Ireland and Italy and 38 direct-to-consumer eCommerce sites.

Known Trends Impacting Our Business

On February 20, 2026, the U.S. Supreme Court ruled that U.S. tariffs imposed under the International Emergency Economic Powers Act (“IEEPA”) on goods imported into the U.S. were unauthorized. The total amount of IEEPA tariffs paid by the Company as of the date of the ruling was approximately $36 million. While the process for reimbursement became available on April 20, 2026, the timing and amount of any potential refunds for previously collected tariffs remains uncertain and may be subject to further legal and regulatory developments. At this time, no loss recovery of any IEEPA tariffs paid has been recorded in the Company’s first quarter condensed consolidated financial statements. The Company will continue to monitor changes to the import and export policies of the U.S. and other countries that could impact its financial position, results of operations and cash flows.

The Middle East represents approximately 1% of total revenue and is managed by third-party distributors. The Company is closely monitoring the ongoing conflict in the Middle East to determine the potential impacts on the Company’s business, which may include a reduction in distributor revenue and an increase in product input costs and transportation costs associated with elevated oil costs.

2026 FINANCIAL OVERVIEW

• Revenue was $457.6 million for the first quarter of 2026, representing an increase of 11.0% compared to the first quarter of 2025.
• Gross margin was 47.6% in the first quarter of 2026 compared to 47.6% in the first quarter of 2025.
• The effective tax rates in the first quarters of 2026 and 2025 were 18.8% and 8.9%, respectively.
• Diluted earnings per share for the first quarter of 2026 was $0.24 compared to $0.15 for the first quarter of 2025.
• The Company declared cash dividends of $0.10 per share in the first quarters of both 2026 and 2025.
• Cash flow used in operating activities was $83.2 million for the first quarter of 2026 compared to $83.8 million for the first quarter of 2025.
• Compared to the first quarter of 2025, inventory as of the end of the first quarter of 2026 increased $1.1 million, or 0.4%.

RESULTS OF OPERATIONS

(In millions, except per share data)

REVENUE

Revenue was $457.6 million for the first quarter of 2026, representing an increase of $45.3 million compared to the first quarter of 2025. The change in revenue reflected a $44.9 million, or 13.7%, increase from the Active Group, a $0.9 million, or 1.2%, increase from the Work Group, and a $0.5 million, or 4.6%, decrease from the Other category. The Active Group’s revenue increase was primarily driven by an increase of $26.1 million from Saucony® and $19.1 million from Merrell®. The Work Group’s revenue increase was primarily driven by increases of $0.9 million from HYTEST® and $0.8 million from Harley-Davidson®, partially offset by a decrease of $1.0 million from Wolverine®. The decrease in Other revenue was primarily driven by a decrease in Hush Puppies® royalty revenue. Changes in foreign exchange rates increased revenue by $15.4 million during the first quarter of 2026. Direct-to-consumer revenue increased during the first quarter of 2026 by $2.9 million, or 3.0%, compared to the first quarter of 2025.

GROSS MARGIN

Gross margin was 47.6% in the first quarter of 2026 compared to 47.6% in the first quarter of 2025. Higher tariff costs in the first quarter of 2026 were offset by price increases and by a favorable mix shift toward more full-price sales.

OPERATING EXPENSES

Operating expenses increased $8.8 million, from $175.1 million in the first quarter of 2025 to $183.9 million in the first quarter of 2026. The increase was primarily driven by higher advertising costs ($8.0 million), higher selling costs ($5.5 million), higher distribution costs ($2.2 million), and higher incentive compensation costs ($0.9 million), partially offset by lower general and administrative costs ($4.4 million), lower environmental and other related costs, net of insurance recoveries ($1.9 million) and 2025 reorganization costs that did not reoccur ($1.8 million).

INTEREST, OTHER AND INCOME TAXES

Net interest expense was $6.5 million in the first quarter of 2026 compared to $8.0 million in the first quarter of 2025. The decrease in interest expense is primarily due to lower average principal balances of variable rate debt.

Other income was $0.2 million in the first quarter of 2026, compared to other income of $1.5 million in the first quarter of 2025.

The effective tax rates in the first quarter of 2026 and 2025 were 18.8% and 8.9%, respectively. The increase in the effective tax rate between 2026 and 2025 was primarily related to changes in the income mix among jurisdictions with differing tax rates and the decreased impact of discrete benefits on the tax rate in the current year due to higher pretax income.

REPORTABLE SEGMENTS

The Company’s portfolio of brands is organized into the following reportable segments.

• Active Group, consisting of Merrell® footwear and apparel, Saucony® footwear and apparel, Sweaty Betty® activewear, and Chaco® footwear; and
• Work Group, consisting of Wolverine® footwear and apparel, Cat® footwear, Bates® uniform footwear, Harley-Davidson® footwear and HYTEST® safety footwear.

The Company also reports “Other” and “Corporate” categories. The Other category consists of Hush Puppies® footwear and apparel, sourcing operations that include third-party commission revenues, multi-branded direct-to-consumer retail store and the Stride Rite® licensed business. The Corporate category consists of unallocated corporate expenses, such as corporate employee costs, corporate facility costs, IT costs, reorganization activities, impairment of long-lived assets and environmental and other related costs.

The reportable segment results are as follows:

(In millions)

Further information regarding the reportable segments can be found in Note 16 to the consolidated condensed financial statements.

Active Group

The Active Group’s revenue increased $44.9 million, or 13.7%, in the first quarter of 2026 compared to the first quarter of 2025. The revenue increase was primarily driven by increases of $26.1 million from Saucony® and $19.1 million from Merrell®. The Saucony® increase was primarily driven by strength in the EMEA wholesale channel and international third-party distributor business growth. The Merrell® increase was primarily driven by growth in the core Moab Speed franchises and new product in the lifestyle category, particularly in the wholesale channel.

The Active Group’s operating profit increased $8.3 million, or 14.3%, in the first quarter of 2026 compared to the first quarter of 2025. The operating profit increase was due to revenue increases, partially offset by an 80 basis point decrease in gross margin and a $10.9 million increase in selling, general and administrative expenses. The decrease in gross margin in the current year period was primarily due to increased U.S. tariff costs and unfavorable product mix. The increase in selling, general and administrative expenses in the current year period was primarily due to higher advertising and selling costs.

Work Group

The Work Group’s revenue increased $0.9 million, or 1.2%, in the first quarter of 2026 compared to the first quarter of 2025. The Work Group’s revenue increase was primarily driven by $0.9 million from HYTEST® and $0.8 million from Harley-Davidson®, partially offset by decreases of $1.0 million from Wolverine®. The HYTEST® increase was primarily due to increases in consumer demand and higher closeout sales. The Harley-Davidson® increase was primarily due to increased consumer demand in the U.S. wholesale channels and new retail distribution. The Wolverine® decrease was primarily due to softer consumer demand within apparel and accessories and declines in international EMEA and Latin America markets due to a transition from third-party distributors to third-party licensees.

The Work Group’s operating profit decreased $0.6 million, or 8.5%, in the first quarter of 2026 compared to the first quarter of 2025. The operating profit decrease was due to a $2.1 million increase in selling, general and administrative expenses, partially offset by a 160 basis point increase in gross margin. The increase in selling, general and administrative expenses in the current year period was primarily due to higher advertising costs. The increase in gross margin in the current year period was primarily due to a favorable product mix within the international third party channel, partially offset by higher U.S. tariffs.

Other

The Other category’s revenue decreased $0.5 million, or 4.6%, in the first quarter of 2026 compared to the first quarter of 2025. The revenue decrease was primarily driven by a decrease in Hush Puppies® royalty revenue.

Other operating profit decreased $0.4 million, or 5.3%, in the first quarter of 2026 compared to the first quarter of 2025. The operating profit decrease in the first quarter of 2026 was primarily due to lower Hush Puppies® royalty income.

Corporate

Corporate expenses decreased $5.6 million in the first quarter of 2026 compared to the first quarter of 2025, primarily due to lower corporate general and administrative costs ($2.7 million), lower environmental and other related costs ($1.9 million), lower reorganization activities ($1.8 million), lower bad debt expense ($0.7 million), partially offset by higher incentive compensation costs ($0.9 million).

LIQUIDITY AND CAPITAL RESOURCES

(In millions)

(1) Amounts are net of both borrowings, if any, and outstanding standby letters of credit in accordance with the terms of the revolving credit facility.

Liquidity

Cash and cash equivalents of $119.6 million as of April 4, 2026 were $13.1 million higher compared to March 29, 2025. The increase is due primarily to cash provided by operating activities of $140.6 million, proceeds from the exercise of stock options of $12.1 million, and proceeds from company owned life insurance of $2.2 million, partially offset by net repayments of debt of $73.0 million, cash dividends paid of $33.5 million, purchases of common stock of $14.5 million, employee taxes paid under stock-based compensation of $11.1 million, additions to property, plant and equipment of $8.6 million, and cash used in other investing activities of $1.5 million. The Company had $492.9 million of unborrowed under the Revolving Facility as of April 4, 2026. Cash and cash equivalents located in foreign jurisdictions totaled $92.9 million as of April 4, 2026.

Cash flow from operating activities is expected to be sufficient to meet the Company’s working capital needs for the foreseeable future. Any excess cash flow from operating activities is expected to be used to fund organic growth initiatives, reduce debt, pay dividends and for general corporate purposes.

The Company did not repurchase shares of its common stock during the first quarter of both 2026 and 2025.

A detailed discussion of environmental remediation costs is found in Note 15 to the consolidated condensed financial statements. The Company has established a reserve for estimated environmental remediation costs based upon an evaluation of currently available facts with respect to each individual affected site. As of April 4, 2026, the Company had a reserve of $25.5 million, of which $11.1 million is expected to be paid in the next 12 months and is recorded as a current obligation in other accrued liabilities and the remaining $14.4 million is recorded in other liabilities and is expected to be paid over the course of up to 25 years. The Company's remediation activity at its former Tannery site and sites where the Company disposed of Tannery byproducts is ongoing. It is difficult to estimate the cost of environmental compliance and remediation given the uncertainties regarding the interpretation and enforcement of applicable environmental laws and regulations, the extent of environmental contamination and the existence of alternative cleanup methods.

Developments may occur that could materially change the Company’s current cost estimates. The Company adjusts recorded liabilities as further information develops or circumstances change.

Financing Arrangements

On September 24 2025, the Company entered into a 2025 Replacement Facility Amendment and Reaffirmation Agreement (the “Credit Agreement”) to replace the existing revolving credit facility and term loan A facility. The Credit Agreement provides for a revolving credit facility (the “Revolving Facility”). The maturity date of the loans under the Revolving Facility is September 24, 2030. The Credit Agreement provides for a debt capacity of up to an aggregate debt amount (including existing revolver commitment amounts in addition to permitted incremental debt) not to exceed $850.0 million. The Revolving Facility allows the Company to borrow up to an aggregate amount of $600.0 million.

The Company’s $550.0 million 4.0% senior notes issued on August 26, 2021 are due on August 15, 2029. Related interest payments are due semi-annually. The senior notes are guaranteed by substantially all of the Company’s domestic subsidiaries.

As of April 4, 2026, the Company was in compliance with all covenants and performance ratios under the credit agreement.

The Company’s debt at April 4, 2026 totaled $638.9 million compared to $621.7 million at January 3, 2026. The Company expects to use the current borrowings to fund organic growth initiatives and for general corporate purposes. The increased debt position is due to higher borrowings under the Revolving Facility mainly resulting from operating cash outflows, partially offset by lower cash balances.

Cash Flows

The following table summarizes cash flow activities:

(In millions)

Operating Activities

The principal source of the Company’s operating cash flow is net earnings, including cash receipts from the sale of the Company’s products, net of costs of goods sold.

For the first quarter of 2026, an increase in net working capital represented a use of cash of $115.2 million. Working capital balances were unfavorably impacted by a decrease in other operating liabilities of $55.0 million, a decrease in accounts payable of $35.5 million, an increase in accounts receivable of $21.4 million, an increase in inventories of $7.6 million, partially offset by a decrease in other operating assets of $4.3 million. Operating cash flows included adjustments for stock-based compensation expense of $5.8 million, depreciation and amortization expense adjustment of $5.2 million, environmental and other related costs, net of cash payments and recoveries received, cash outflow of $1.9 million, and deferred income taxes of $0.2 million.

Investing Activities

The Company made capital expenditures of $1.7 million and $7.6 million in the first quarter of 2026 and 2025, respectively, for corporate headquarters building improvements, eCommerce site and information system enhancements, and store openings.

Financing Activities

The current year debt activity includes net borrowings under the Revolving Facility of $17.0 million. The Company paid $2.5 million in principal payments associated with its long-term debt during the first quarter of 2025. The Company paid $8.1 million and $7.7 million during the first quarter of 2026 and 2025, respectively, in connection with shares or units withheld to pay employee taxes related to awards under stock incentive plans. The Company received cash proceeds from the exercise of stock options of $0.2 million and $0.3 million during the first quarter of 2026 and 2025. The Company did not repurchase its shares in the first quarter of 2026 or 2025.

The Company declared cash dividends of $0.10 per share during the first quarter of 2026 and 2025. Dividends paid in the first quarter of 2026 and 2025 totaled $8.7 million and $8.5 million, respectively. A quarterly dividend of $0.10 per share was declared on May 6, 2026 to stockholders of record on July 1, 2026.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of the Company’s consolidated condensed financial statements, which have been prepared in accordance with accounting principles generally accepted in the U.S. ("U.S. GAAP"), requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. On an ongoing basis, management evaluates these estimates. Estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Historically, actual results have not been materially different from the Company’s estimates. However, actual results may differ materially from these estimates under different assumptions or conditions.

The Company has identified the critical accounting policies used in determining estimates and assumptions in the amounts reported. For information regarding our critical accounting policies refer to Part II, Item 7: “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s 2025 Form 10-K. Management believes there have been no material changes in those critical accounting policies.

The Company faces market risk to the extent that changes in foreign currency exchange rates affect the Company’s foreign assets, liabilities and inventory purchase commitments. The Company manages these risks by attempting to denominate contractual and other foreign arrangements in U.S. dollars. The Company does not believe that there has been a material change in the nature of the Company’s primary market risk exposures, including the categories of market risk to which the Company is exposed and the particular markets that present the primary risk of loss to the Company. As of the date of this Quarterly Report on Form 10-Q, the Company does not know of any material change in the near-term in the general nature of its primary market risk exposure.

Under the provisions of Financial Accounting Standards Board Accounting Standards Codification Topic 815, Derivatives and Hedging, the Company is required to recognize all derivatives on the balance sheet at fair value. Derivatives that are not qualifying hedges must be adjusted to fair value through earnings. If a derivative is a qualifying hedge, depending on the nature of the hedge, changes in the fair value of derivatives are either offset against the change in fair value of the hedged assets, liabilities or firm commitments through earnings or recognized in accumulated other comprehensive income (loss) until the hedged item is recognized in earnings.

The Company conducts wholesale operations outside of the U.S. in Canada, continental Europe, the United Kingdom, Hong Kong, China and Mexico where the functional currencies are primarily the Canadian dollar, euro, British pound, Hong Kong dollar, Chinese renminbi and Mexican peso, respectively. The Company utilizes foreign currency forward exchange contracts to manage the volatility associated primarily with U.S. dollar inventory purchases made by non-U.S. wholesale operations in the normal course of business as well as to manage foreign currency translation exposure. As of April 4, 2026 and March 29, 2025, the Company had outstanding forward currency exchange contracts to purchase primarily U.S. dollars in the amounts of $302.6 million and $255.3 million, respectively, with maturities ranging up to 538 and 538 days, respectively.

The Company also has sourcing locations in Asia, where financial statements reflect the U.S. dollar as the functional currency. However, operating costs are paid in the local currency. Revenue generated by the Company from third-party foreign licensees is calculated in the local currencies but paid in U.S. dollars. Accordingly, the Company’s reported results are subject to foreign currency exposure for this stream of revenue and expenses. Any associated foreign currency gains or losses on the settlement of local currency amounts are reflected within the Company's consolidated condensed statement of operations and comprehensive income (loss).

Assets and liabilities outside the U.S. are primarily located in the United Kingdom, Canada and the Netherlands. The Company’s investments in foreign subsidiaries with a functional currency other than the U.S. dollar are generally considered long-term. As of April 4, 2026, a stronger U.S. dollar compared to certain foreign currencies decreased the value of these investments in net assets by $7.7 million from their value as of January 3, 2026. As of March 29, 2025, a weaker U.S. dollar compared to certain foreign currencies increased the value of these investments in net assets by $7.7 million from their value as of December 28, 2024.

The Company is exposed to interest rate changes primarily as a result of interest expense on any borrowings under the Revolving Facility. The Company’s total variable-rate debt was $92.0 million at April 4, 2026.

The Company does not enter into contracts for speculative or trading purposes, nor is it a party to any leveraged derivative instruments.

An evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on, and as of the time of such evaluation, the Company’s management, including the Chief Executive Officer and Chief Financial Officer, concluded that the Company’s disclosure controls and procedures, as defined in Securities Exchange Act Rule 13a-15(e), were effective as of the end of the period covered by this report. There have been no changes during the quarter ended April 4, 2026 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

In addition to the other information set forth in this report, you should carefully consider the risks and uncertainties discussed in Part I, Item 1A. “Risk Factors” in the Company’s 2025 Form 10-K, which could materially adversely affect our business, financial condition, or future results. There have been no material changes in the assessment of the Company’s risk factors from those set forth in the Company’s 2025 Form 10-K.