Wolverine World Wide, Inc. (WWW) Q4 2013 Earnings Report, Transcript and Summary

Kate McShane – Citigroup Mitch Kummetz – Robert W. Baird Molly Iarocci - Stifel Nicolaus Taposh Bari – Goldman, Sachs & Co. Edward Yruma – KeyBanc Christian Buss – Credit Suisse Erinn Murphy – Piper Jaffray Steve Marotta – C. L. King Christopher Svezia – Susquehanna Financial Group Danielle McCoy – Brean Capital Markets Sam Poser – Sterne Agee Welcome to Wolverine World Wide’s 2013 fourth quarter and full year earnings conference call. All participants will be in a listen-only mode until the question and answer session of the conference call. This call is being recorded at the request of Wolverine Worldwide. If anyone has any objections you may disconnect at this time. I would now like to introduce Ms. Christi Cowdin, Director of Investor Relations and Communications for Wolverine Worldwide.

Welcome to our fourth quarter and full year 2013 conference call. On the call today are Blake Krueger, our Chairman, CEO and President and Don Grimes, our Senior Vice President and CFO. Early this morning we announced our financial results for the fourth quarter and full year of 2013. If you did not yet receive a copy of the press release please call Jessica VanSolkema at 616-233-0500 to have one sent to you. The release is also available on many new sites or can be viewed from our corporate website at www.WolverineWorldwide.com. This morning’s press release included non-GAAP disclosures and these disclosures are reconciled with the cash tables within the body of the press release. Today’s comments during the earnings call will include some additional non-GAAP disclosures. There is a posting at our corporate website that will reconcile these non-GAAP disclosures to GAAP. To view the document, please go to our corporate website www.WolverineWorldwide.com, click on investor relations in the navigation bar, click on webcast at the top of the investor relations page, and then finally click on the link to the file called wwwQ42014ConferenceCallSupplementalTables which will be located below the webcast link. Before I turn the call over to Blake to comment on our results, I’d like to remind you that the predictions and projections made in today’s conference call regarding Wolverine Worldwide and its operations may be considered forward-looking statements by securities laws. As a result, we must caution you that as with any prediction or projection there are a number of factors that could cause results to differ materially. These important risk factors are identified in the company’s SEC filings and also in our press releases. With all of that being said, I would now like to turn the call over to Blake.

Thanks Christi. Good morning everyone and thanks for joining us today. Earlier this morning we reported our fourth quarter and full year 2013 financial results highlighted by record adjusted full year earnings per share and a fourth consecutive year of record revenue concluding an extraordinary year for the company. Our global brand building model established in 1959 when we took the Hush Puppies brand international, continues to deliver consistent top and bottom line results in virtually any economic or retail environment. For the full year we delivered solid revenue growth of 5.6% over the prior year’s pro forma revenue and growth of 64% versus the prior year’s reported revenue. For the full year our adjusted earnings per share were $1.43 on a post stock split basis representing growth of 25.4% versus our 2012 results. This year’s solid revenue growth and strong earnings performance are further evidence of the strength of the Wolverine portfolio, the diversity of our global business model, and our disciplined approach to managing the business. While our financial results were exceptional given the realities that exist in today’s marketplace, 2013 was a successful year for many other reasons as well. I’d like to just take a moment to walk you through some of the team’s accomplishments before we get into specifics related to our performance in the quarter and past year in addition to our outlook for 2014. For all intents and purposes the integration effort related to our acquisition of the Sperry Top-Sider, Saucony, Keds, and Stride Rite brands in October 2012 is complete and today our brands operate as one company on one global platform. As you can imagine the integration of about a billion dollar collection of brands is no easy task and I’m happy to report that this heavy work is behind us.…

Earlier this morning we reported our fiscal 2013 fourth quarter and full year financial results highlighted by record full year adjusted earnings per share and a fourth consecutive year of record revenue. I’d like to underscore Blake’s comments about this being a special year, one that saw us successfully integrate the largest acquisition in the company’s history by still delivering outstanding financial results. As we entered 2014 we positioned our portfolio, both established brands and those more recently acquired to deliver meaningful and sustainable growth whether it’s Wolverine, Merrell, Sperry, Hush Puppies, Keds or others our brands each have authentic heritage and global lifestyle appeal and our company has the operational expertise to succeeded in the global marketplace. I’m pleased to provide more color on both the quarter and full fiscal year ended December 28, 2013 and then I’ll wrap up my comments by outlining the company’s expectations for 2014 including the first fiscal quarter. Unless otherwise noted, all financial results discussed today have been adjusted for transaction and integration expenses related to the PLG acquisition, restructuring charges related to the exit from the company’s manufacturing operations in the Dominican Republic, non-cash retail store impairment charges, and expenses related to our very successful October 2013 debt refinancing. All references to earnings per share reflect the company’s two for one stock split that occurred this past November. As we preliminary reported last month, consolidated revenue in the fourth quarter was a record $740.8 million representing growth of 13.6% verses prior year reported revenue and growth of 0.6% versus prior year pro forma revenue. For the full year reported revenue was a record $2.69 billion, an increase of 64% versus the prior full year reported revenue and an increase of 5.6% versus the prior year pro forma revenue. Foreign exchange fluctuations negatively…

(Operator Instructions) Our first question will come from Kate McShane of Citi Research. Kate McShane – Citigroup: I was wondering if you could walk us through some of the impacts on Sperry in Q4. Can you tell us what was the biggest drag?

Probably in terms of dollars - and setting aside some of the macro issues that we can’t control, it would have been probably our fashion miss in the vulcanized arena in terms of overall dollars. We probably on the women’s side with hindsight went a little too much bling and sparkle and sequins in that whole category and missed out on an opportunity to grow it. We’ve since made those corrections. That would have been the largest kind of self-inflicted design miss. We also had an impact from, as Don mentioned, getting out of some family channel doors and listen, we had a tough compare to last year 35%. For all of our brands we noticed across our portfolio in the US only, it was a tough quarter for casual shoes and brown shoe brands. There’s no other way to put it. People seemed to go from sandals to boots in early September and they never got out of their boots. There were a number of factors but probably the miss we had in the vulcanized arena for Sperry was the biggest dollar impact. Kate McShane – Citigroup: My final question is on the international contribution that you mentioned in your prepared comments. I think that you mentioned it would be more of a revenue driver starting in the second half and then most certainly in 2015. Can you update us where you are with your distributor sign ups and what the brand composition is?

As I look over the portfolio in our percentage of sales in the US for our newly acquired brands for example, you’ve seen a pretty steep fall off in the overall percentage of – for Saucony for example, although still almost 70% of its business is anchored here in the United States but certainly much less than [closings] [ph], probably the same thing for Keds as well we’ve seen a fall off. To give you a little more detail maybe on Sperry today, we made tremendous progress this past year to past 18 months. We had international growth for Sperry, not on a huge base but a pretty good base in the 15% to 20% range for this past year. We would, on a bigger base, plan on that accelerating up 20% to 25% for the coming year. We signed 15 to 20 new contracts for Sperry. We still only have Sperry in about 67 countries around the world, for example. Most of our other more established brands, Cat Footwear, Hush Puppies, Merrell, we would have in at least twice the 2.5x that many countries. So it’s still very, very early in the development but we’re happy with the steady on growth we’re getting in the international arena.

Your next question comes from Mitch Kummetz of Robert Baird. Mitch Kummetz – Robert W. Baird: I guess on the sales guidance for the year is there any way you can kind of speak to it by operating group? You’ve got three groups, your guidance is for a 3% to 6% increase, if you can kind of get us to that 3% to 6% when you talk about it by group or even by brand Merrell and Sperry?

I’ll talk to it directly, we don’t really break the guidance down necessarily by brand or by operating group but within the lifestyle group we talked about kind of the full year flat performance by Sperry Top-Sider which is the biggest brand in the lifestyle group, obviously it’s going to impact the lifestyle’s group’s full year revenue growth probably offset by continued strong double digit growth out of Keds. But across the three operating groups the lifestyle group would probably be below the weighted average revenue growth for the fiscal year with the performance group and the heritage group being on the higher end of that range if you will. With some of the strongest growth coming out of the heritage group in particular for Cat Footwear which we’re counting on and we expect a nice growth from Cat in Europe with the stabilization of Europe off of a kind of lower base for 2013, so, clearly the performance group and the heritage group would deliver stronger growth for the full fiscal year than the lifestyle group. Mitch Kummetz – Robert W. Baird: Then I know you’re expecting stronger growth in the back half than the first half and some of that has to do with your international initiatives, but what visibility do you have on the back half at this point across your brands regarding fall orders? I would think fall orders on Sperry might be negatively impacted by the brand’s performance this past kind of fall holiday season given the weather, I would assume that maybe retailers are going to take - open the buy dollars away from casual and put it more towards boots. Is that not what you’re seeing in your order book?

No. I think overall in the US I think retailers after this past fall and listen, the first two months of this fiscal year, are kind of taking a little bit of a wait and see attitude. They’re a little bit cautious. Their inventories are pretty clean, they’re extremely clean with boots and cold weather product but they’re taking a little bit of a wait and see approach. We’ve got some of our order book obviously in for fall but we’ve also had meetings at the FFANY Show in New York 10 days ago and have had many meetings with all of our key retailers so they’ve made their preliminary, some final selections on fall product from Sperry, Merrell, and some of our other brands and that’s where our confidence comes, from that kind of direct feedback straight from the retailers.

I would say we’re getting better visibility into Q3 in particular, every week as orders are coming in for Q3 delivery. I will say we’re going to have an easier comp in Q4 this year obviously versus the 0.6% growth we had in Q4 fiscal 2013 except for comp in Q3, that revenue was up over 9% in Q3. But some of the visibility is quantitative in the form of orders coming in and some of the visibility we’re getting into the back half of the year, as Blake mentioned, is more qualitative, it’s based on feedback from retailers from the show that is taking place now. So we feel good about our revenue guidance but we do expect the growth to kind of accelerate sequentially during the course of the fiscal year and particularly Q4.

Your next question comes from Molly Iarocci of Stifel Nicolaus. Molly Iarocci – Stifel Nicolaus: I am just wondering if you could speak to the trends that you’re seeing at Sperry retail? Specifically, I’m looking for the traffic trends and what beyond the weather is contributing to the softness quarter-after-quarter?

To be honest with you I hate to keep mentioning weather, it is something that I really forbid our brand president and group presidents from doing even though I do it. But frankly, weather is still a factor. I mean, we’re seeing negative traffic trends not just in our stores but across the entire industry. The FDRA published index - comp store index is down almost 9% in the first seven or eight weeks of the fiscal year. That’s very unusual. I was trying to remember even back to ’08 and ’09 whether we had a two month period with that kind of comp store decrease across around 15,000 shoe doors in the United States. It’s clearly having an impact. I’m sitting here in Michigan looking at six inches of fresh snow and unfortunately I think we’re sending it all to the east coast and northeast once again over the next couple of days so it’s having an impact. I would also say on the fashion side although it was kind of a fall for boots, boots, boots, other than the clear boot trend which is attributable to a number of things, there isn’t a single dominate fashion trend that’s driving the consumer soft goods purchaser right now. We’re seeing mall traffic continues to be off when people can even get their vehicles to a mall and we would think it’s going to continue. There’s going to be a little warm up over the next week or two but then back to colder than normal temperatures for two thirds of the United States over the next three weeks so it is a pretty unusual year so far.

What I’ll add to that is in certain pockets of the country, as small as they might be, where warmer weather has already come or it’s stayed warmer most of the winter, the sell throughs of Sperry continue to be quite strong in those markets so that leads us to the conclusion that a lot of the softness in Q4 was weather driven and we’ll take our share of the lumps as it relates to the product shortfall on the vulcanized product. But I think a lot of it is driven by weather and our expectations of a soft start of the fiscal year are also driven by what we’re seeing right now which is a continuation of the cold weather. But where it has been warmer, the sell through has been quite strong.

The great thing about our portfolio is we’ve got a number of brands so we’ve got some brands, Merrell for example, that benefits from this unusual weather too so we’ve got to be, for the sake of full disclosure, mention that as well. Molly Iarocci – Stifel Nicolaus: I was wondering if you could update us on number of Sperry stores exiting 2013, any chance you could give us the fourth quarter comp and then number of stores you’re projecting to open in fiscal ’14? I know it’s an initiative going forward.

We had a few bright spots in our direct-to-consumer area. Certainly eCommerce overall for the company. Certainly Q4 Merrell specialty stores, high single digit comp stores as a significant bright spot for us. The rest of our fleet though was a negative comp certainly for Q4. As far as store numbers are concerned –

There are just under 50 Sperry stores at year end. That’s a combination of specialty and outlet and our expectations for 2014 are to open up probably in the low 20 range across the fleet with about half of those being Sperry stores.

Your next question comes from Taposh Bari – Goldman, Sachs & Co. Taposh Bari – Goldman, Sachs & Co.: I wanted to ask you just a question on the winter of a generation as you described it. I guess I’m a little confused is Saucony and Keds both which in my opinion were non-winter brands, it seemed like they performed pretty well in the fourth quarter so I’m just curious to know why that was the case?

First of all it always comes down to product, product, product, right? So, Keds has a very laser like focus marketing and strategic plan to take that brand back to where it should be in the $200 to $300 million range. That strategy with Taylor Swift, Hollister, Kate Spade, new product introduction is working. But, I will say, Keds was also in the US affected by the weather this fall. Keds had a pretty good fall but it could have been much, much better. Saucony on the other hand, when we closed the transaction, had over 80% of its business here in the United States, closed the year with less than 70%. Saucony had a pretty good Q4 in other areas of the world frankly. EMEA is up to almost 20% of its total business and that run specialty channel tends to be a little less volatile and a little less weather related. Certainly Saucony, like several of our brands, could use a little more spring. The whole industry could probably use a little more spring right now but Saucony weathered the storm very well.

I would say for Keds, we made the investment to overcome the challenging weather and for Saucony it was more about geographic diversification. Taposh Bari – Goldman, Sachs & Co.: Then just kind of a multipart question on Sperry. You talked about distribution clean up this past year, can you tell us when that began, how much that hurt ’13 revenue growth for the brand, and then the second part of that question is as you think about [tale of few halves] for the Sperry brand in 2014, I guess my impression is that it’s somewhat of a spring/back-to-school brand, I’m curious to know why first half in aggregate would be slower? How do we think about what the growth rate of that brand ends like as we kind of look forward into the back half of 2014? I’m just trying to get a better view on the run rate of that business.

First of all let me address the latter questions first. For the first half of this past year Sperry is going to be going up against increases last year of around 30% for each of the first two quarters. So, you’ve got to take their planned growth this year into that context. We certainly have the weather that’s continuing, the switch of Easter. The encouraging thing from our standpoint is retail sell throughs at some of our good customers are three of four times greater in those areas that have received the warm weather. Sperry this year is going into spring and certainly in the fall with a more diversified product mix, espadrilles, casual products, flats, and certainly more boots for next fall and even some boots for spring. I think we’re working hard to kind of level out the seasonality of the Sperry brand in business. It has that kind of emotional suck with the consumer. The consumer is certainly picking up those styles that go beyond boat at this point and we’re looking to accelerate that.

Your question suggested or implied that we communicated that we expect back half revenue to be more than the front half. Sperry still is more of a spring/summer brand than a fall/winter brand although they’ve done a good job of kind of balancing that out more over the last couple of years. But what our comments were is that we expect the year-over-year growth for the second half of the year to be stronger than the year-over-year growth in the first half of the year.

Your next question comes from Edward Yruma of KeyBanc. Edward Yruma – KeyBanc: I was kind of wondering about the 8.5% long term revenue growth rate that you’ve outlined for 2018 in light of how you guided for ’14? I know there are a lot of puts and takes but how do you think about that longer term revenue growth and how it relates to the longer term earnings for the target?

I will say that something we developed at the long range projections leading up to the investor day that we hosted in October, we didn’t anticipate the kind of flattish revenue growth in Q4 or the tough start to fiscal 2014 that we’re expecting in Q1. What I will say, as it relates to our earnings growth potential and we haven’t updated the five year model, we’re not sharing new numbers here today, but I remain confident in our ability to deliver the earnings growth we talked about in October. I think that we have a number of ways to deliver the earnings growth via more aggressive growth margin expansion and better management of our SG&A. You are right, the revenue guidance for fiscal 2014 forces out even greater than 8.5% revenue growth in fiscal years ’15 through ’18 which may or may not occur. But I do feel more confident in our ability to deliver the earnings that we talked about in October. Edward Yruma – KeyBanc: You had held up Sperry as an example of a brand that was able to kind of been placed in different channels that [inaudible] of the brand. Obviously you started to rationalize the distribution footprint so I guess two quick ones, what’s the incremental drag from rationalizing I guess the family channel in ’14 and then two, how does that impact or I guess what were your test results for Merrell? I know you attempted to put in the family channel and I guess how do you think about a change in distribution or that brand longer term?

I think just to quantify the 2014 impact it could be in the $20 million range for Sperry.

A few percentage points of growth.

At least a few percentage points of growth and it didn’t have really so much to do with the channel itself, it really had to do with the behavior and promotional cadence one or two retailers within that channel that was really inconsistent with the long term growth in the brand. For Merrell the family channel remains a very, very minute portion of its overall business. They’re doing that through product segmentation and pretty strict disciplines. I would say the family channel remains a very small portion of the overall Merrell business here in the US.

Going back to the previous question if I can just for a second there was only a very modest impact to that distribution rationalization in the fourth quarter 2013 and most of the impact will be felt on a year-over-year basis in 2014.

Your next question comes from Christian Buss of Credit Suisse. Christian Buss – Credit Suisse: I was wondering if you could provide some color on how you expect the international expansion of the PLG brands to contribute in 2014?

I provided a little detail a little bit earlier with regard to the Sperry brand, just I think there’s a big opportunity for Sperry, Saucony, and Keds, probably a slower growth rate potential for Stride Rite children’s group at this point but we’re very excited. It’s hard to quantify right now but we expect increased percentage growth over the next several years, certainly accelerated growth in Sperry because we have the ability to let our distributor partners to open up lifestyle stores as opposed to footwear only stores. The Keds brand right now is hot, all of our international people frankly travel to the United States and look at what’s happening and that brand has a lot of potential especially given price point levels of that product for the global consumer and Saucony just continues to roll. Internationally its performance shoes performed but also we’ve seen the beginnings of a Saucony’s Originals trend. We’ve see it in some other brands throughout the industry on the athletic side but we’re also seeing that for Saucony.s

What I’ll add to that is the growth rate that we’re forecasting outside the US for the four PLG brands in 2014 is probably pretty obvious to everybody, significantly in excess of the overall revenue growth that we’re guiding for the company, it’s strong double digit growth. But what I’ll say, without giving a specific number for those four brands combined, the rate of growth that we expect to get in 2015 and ’16 would be a multiple of the growth rate that we have had in 2014. So as we’ve alluded to in previous earnings calls and I know we’ve spoken off line, it’s somewhat of a slow build, you had to get the distributors signed up, get the distributors educated on the brand, get the initial orders for the initial season in place and then when distributors start opening up retail stores things tend to accelerate. That’s the same pattern we saw with Hush Puppies back many years ago, with Merrell more recently than that and so that’s the way the model tends to play out. Christian Buss – Credit Suisse: As a follow up could I ask, in the past you’ve been very controlled with the SG&A spending, given the difficult start to the year from a revenue standpoint are there any SG&A management initiatives under way?

There always are. I mean, we look at all the SG&A and given the challenges on the top line we’ve asked the brand teams to look at what expenses can be deferred to the second half of the year in order to protect earnings for the full fiscal year as well as deliver what we can in the first and second quarter. But, we’re not going to delay making the right investments to fuel growth either in the back half of the year or in 2015 so we recognize this is a branded business, as important as product is it’s also important to talk to your consumers and so we expect to continue to invest in marketing behind our brands.

Your next question comes from Erinn Murphy of Piper Jaffray. Erinn Murphy – Piper Jaffray: I just wanted to know if you could elaborate a little bit more on some of the regional trends you’ve seen in Europe as you think about that as a return to growth market in 2014? Then just following up on the last question as it relates to the international expansion of some of the PLG brands, can you just address where brand awareness is for Sperry in particular both in Europe and Asia?

I’ll talk about Europe a little bit to begin with. It’s been no secret the UK has had its coldest and wettest spring and winter in 250 years. The UK market where we have a significant portion of our business is kind of also struggling with its own weather woes. Business has been fairly steady on with growth in central and northern Europe. We’ve seen strong growth in Russia and several other ancillary markets and we expect that to continue. I think you have to remember that the current forecast GDP growth next year for the Euro region is 1.4%. While that’s an improvement, that kind of GDP growth for the Euro zone doesn’t lead to slingshot growth. With respect to international awareness for Sperry, I would say it’s still relatively low. We view that as an upside. I say it’s low in regards to the consumer. When you talk about distributors who operate in our industry, they’re all aware of Sperry’s success, the number one casual footwear brand position here in the United States. They all travel to the United States, they all shop the United States and that’s one of the reasons they’re so enthusiastic about the brand. But, from a consumer standpoint relatively low awareness in most regions, maybe a little bit more in China with our new distributor there rolling out stores and shops in shops and in a few others, in Australia for example. Relatively little penetration at this point in Europe. For Sperry itself our two biggest growth regions next year internationally would probably be Asia Pacific and Latin America. For Saucony though, for example, you’d probably have to put the EMEA region as its number one growth region so a pretty balanced approach across our four new brands.

Going back to the Sperry brand awareness question, what I would say in response is that Sperry’s brand awareness outside the US is stronger and better today than Merrell’s was back in the year 2000 when we really missed it when we started the international push for Merrell. So, I think we’re at a better starting point for Sperry than we were for Merrell, for example, 14 years ago and look what we’ve done with Merrell in the last decade and a half.

Your next question comes from Steve Marotta of C. L. King. Steve Marotta – C. L. King: I just have one question, Don just to verify you mentioned that Sperry sales are expected to be flat in 2014 and that includes incremental gains from international distribution?

That’s correct.

Your next question comes from Christopher Svezia of Susquehanna Financial Group. Christopher Svezia – Susquehanna Financial Group: Not to beat a dead horse here, but just on Sperry my first question, did you indicate that you expected revenue growth down 10% in the first quarter? And maybe if you can just talk about the difference between the shift in Easter, weather, and some of the product miss queues in terms of the impact on that first half business?

Let me address the latter portion. We had some design miss queues in the vulcanized arena that really frankly hurt us in Q4 more on the women’s side than the men’s side, but still some hurt on the men’s side as well. We’ve corrected those, we’ve added in some new design and product development talent there so we think we’ve got that handled. The early reads from retailers that have had a little bit of warm weather confirm that, the sell through information that we get. On the Easter I would say just generally the impact on our brand varies from brand-to-brand. But, when you take the Stride Rite children’s group three weeks is going to probably have a much more significant impact on that children’s business. It will have some impact on frankly kind of all of our brands maybe with the exception of our work and pure boot brands, but the biggest impact is going to be on the Stride Rite children’s group, although it will have some impact a little bit on our other brands as well.

I’ll go back to the first part of your question, we did not say down 10% in Q1 or the first half but in my comments I said likely down in the first half with stronger growth in the second half resulting in flattish for the full year. I mean, flat could be low single digit growth, it could be flat, somewhere in that ballpark. Christopher Svezia – Susquehanna Financial Group: Switching gears just on Merrell any comments you can make between the three buckets which mean the athletic piece, the outdoor piece, and the lifestyle piece about just sort of what you’re seeing out there, where the opportunity is, what’s kind of going on?

Clearly, Merrell had a very good Q4, had an excellent Q4 in the US business. It’s by far its largest business. We saw really good performance in hiking and extended hiking styles but also across the whole performance outdoor category it was pretty good. We have some new introductions coming in the outside athletic category. What I will call the barefoot component of that category has stabilized at retail. Merrell has and continues to have a large chunk of that business which is very good but Merrell is also extending its range to include many more styles with additional and more cushioning. Active lifestyle, as you know, we had stumbled over a period of a couple of years with Merrell in the active lifestyle arena casual shoes and those shoes have seen a noticeable pickup not only in Q4 but the new talent and direction we put into the design and product creation team is also having a beneficial impact, we believe, on 2014. We would look to 2014 to grow on all three of those channels. Maybe our growth might be greatest right now in the performance outdoor channel which Merrell dominates.

Your next question comes from Danielle McCoy of Brean Capital Markets. Danielle McCoy – Brean Capital Markets: Just with Keds, can you give us a little bit more color on some things we can expect to see next year? Some new product innovations, maybe some extensions of categories in order to continue to gain traction and spread awareness?

Just a focus on fall. But as you know, Keds has been a vulcanized brand in the $30 to $60 range for most of its brand life. We’re seeing a good pick up from retailers for Keds’ boots for example, really the first $100 product on waterproof boots that Keds has ever had in its line. Keds is continuing its affiliations and collaborations with Kate Spade, Hollister, and Taylor Swift. They’re staying in front of their consumer, they’re staying relevant to their consumer, they’re extending the product range. They are still focused on the women’s women’s category and we expect the accelerated growth frankly to continue. We’ve got a new partner for some key countries in Europe for Keds. We’ve got some new partners that have some pretty aggressive plans in really the whole Asia region for Keds. We’re excited about the international opportunities but it’s still a largely, at this point, about an 80% USA brand as we look back at 2013. But, Keds had very strong double digit growth for Q4 despite the weather conditions and also for the full fiscal year.

Your next question will come from Scott Krasik of BB&T Capital Markets.

In terms of just the gross margin outlook for the year, could you talk about the cadence as it relates to H1 versus H1 particularly in Q1 given the headwinds with your higher margin businesses now going up against the M-Connect launch last year, the difficulties with Sperry in the first half and also given direct-to-consumer [inaudible] a little bit?

We expect a slight full year gross margin expansion. We would expect more of that to come in the back half of the year than the first for the reasons that you cited which you’re spot on but also because of the benefit from the Dominican Republic restructuring is a back half benefit because that’s when we will be selling footwear sourced from a lower cost producer than what we produce ourselves in the Dominican Republic in late 2013. So more a second half gross margin expansion than a first half.

Then just as it relates to SG&A throughout the year, could you quantify the magnitude of the pension expense benefit and kind of [inaudible] with the growth rate would be ex that?

The pension benefit year-over-year is just over $20 million but if you take that into context of the expected higher tax rate and expected higher share count and expected higher incentive comp expense, and the incentive comp expense by the way is not just because we’re paying each other more it’s also the second year of our new Boston based colleagues being on some of the Wolverine incentive plans which is driving that incremental incentive comp. If you net the higher tax rate, higher share count, and the impact of incentive comp expense it kind of washes out with the lower pension expense which is a quite sizeable year-over-year reduction in pension expense.

Then just lastly, I know we talked about the bookings as it looks for fall for Sperry, could you give us a little bit more color on Merrell given that Q4 was actually obviously a very strong quarter and are you seeing any difference in how retailers are looking to take orders for fall maybe a little bit earlier than they have been the last couple of years?

Not really for Merrell. I think it’s fundamental improvements in product creation and a fresh product that is driving the Merrell success. You have to remember that Merrell is a performance brand, they have performance features whether it’s casual footwear and the active lifestyle category, or outside athletic category, or certainly their dominate performance outdoor category so that is – the current conditions at retail and the weather conditions have certainly played to Merrell’s strengths. But it’s fundamentally just bringing more exciting product to market.

Your next question comes from Sam Poser of Sterne Agee. Sam Poser – Sterne Agee: I was just wondering a couple of things, you talked about a lot of the other brands for the fourth quarter sales, can you talk about Merrell’s fourth quarter sales, what kind of increase that was?

We can’t give you specifics but it certainly, as we mentioned, beat our expectations. It was higher than Merrell’s growth rate for all of 2013 which was maybe upper single low single digits or lower mid single digit range, so it was certainly above that overall. From my standpoint seeing the very strong performance of Merrell’s specialty stores in Q4 is a sign of momentum for the brand as well as just their overall high single digit growth rate in Q4 in the USA which is the largest market. We see the overall global momentum for the Merrell brand continuing to build. Sam Poser – Sterne Agee: Then two other things, one can you give us some backlog numbers for Merrell and Sperry or percentages and can you talk about how you’re thinking about the outside athletic business for Merrell over the long term? Is that something that you could just let Saucony do a lot of that business because they’re really an outdoor running brand? Somebody said to me that a lot of the outdoor retailers are starting to look to the running brands for more of the outdoor product for running knowledge versus the outdoor brands now and that’s a big change in the way some of these luxury retailers are looking at things.

As you know, we don’t talk about order backlog any more or give any kind of specific percentages there. I will say that Merrell has a long heritage in trail running from the very inception of the brand and so they are looking not at just hiking and performance outdoor, they are looking at trail and to a lesser extent road running as big opportunities for the brand. There are a number of outdoor brands that play in that category as well as traditional athletic brands but they are focused on that and certainly focused on that beyond what we all refer to as the barefoot subcategory.

I would say that I agree with what Blake said obviously, that Merrell’s DNA for the outside athletic is in trail running but I don’t think we would expect Merrell to secede the road running business to Saucony just because Saucony is so much bigger in road running than Merrell. I think there is an opportunity for both. Having said that, I will say that I don’t think the brand team views road running as the biggest source of growth going forward, but I don’t think the plan is to exit that part of the business either.

Ladies and gentlemen this will conclude our question and answer session. I would like to turn the call back over to Ms. Christi Cowdin for her closing remarks.

On behalf of Wolverine Worldwide I would like to thank everyone for joining us today and as a reminder, our conference call replay is available on our website www.WolverineWorldwide.com and that replay will be available until April 11, 2014. Thanks and good day.

Ladies and gentlemen the conference has now concluded. We thank you for attending today’s presentation. You may now disconnect.