To Our Shareholders

Blake W. Krueger
Chairman of the Board,
Chief Executive Officer and President

Our world is more dynamic and fast-paced than ever, and consumer behavior is evolving at an unprecedented pace. With change comes opportunity, and Wolverine Worldwide – a global leader in the industry – is well positioned to win in today's marketplace and to build on its long history of success. Our portfolio of authentic brands, with over 1,000 years of brand equity, enables us to compete in almost every footwear category, and the global reach of our brands – spanning approximately 200 countries and territories – positions our brands for growth in both emerging and mature markets. Our formidable operational platform and deep and talented team continue to propel the Company forward.

With our foundation firmly in place, we are intently focused on driving innovation, just as our brands have done since 1883. Sperry invented the boat shoe in 1935, Merrell transformed hiking with the introduction of athletic design and performance to outdoor footwear in the 1980s, and Saucony broke new ground nearly sixty years ago with its first performance running shoes. Through innovative products and compelling storytelling, our mission today is simple: to empower, engage and inspire our consumers – every step of the way.

2016 in Review

We set an ambitious agenda for the Company entering 2016, confident in the opportunities ahead of us, and I'm pleased with our team's strong progress. To fuel future growth, we started with our consumers – more than doubling our investment in consumer insights. We also reconfigured key product design teams and intensified the organization's focus on product innovation, all with a goal of creating a robust product pipeline for the future. Speed is incredibly important in everything we do, and consumers and retailers are buying closer to need. To meet this new market reality, we have focused on optimizing the product development process and entire supply chain for increased speed and efficiency to shorten lead times and improve alignment with consumers' demands. As a result, we have significantly strengthened our product engine for the future.

This past year, we also tackled a host of operational excellence initiatives to make the Company more efficient, a major effort that resulted in significant improvements to our product sourcing operations, producing a faster and more focused supply chain. In step with changing consumer behavior, we also continued to invest in our eCommerce operations, driving accelerated growth of this highly profitable business, and began to execute an aggressive plan to address unprofitable brick-and-mortar stores – an effort expected to improve future operating profits by approximately $20 million on an annualized basis. We also reviewed our portfolio of businesses to identify strategic alternatives for components that do not meet our future revenue or profit growth goals. These efforts led to the divestiture of our Robeez brand, with several other businesses still under review as we focus resources on our biggest and most profitable brands and opportunities. In addition, we further streamlined the Company by reorganizing our Direct-to-Consumer, Apparel and Accessories, EMEA, and Canadian operations. Finally, we improved our capital structure, adding capacity, lowering future interest expense by an estimated $30 million through 2020, and creating more flexibility for use of cash. This past year, we focused on controlling what we could control in a volatile global retail environment, and I couldn't be more pleased with what the team accomplished and our position for the future.

In 2016, the Company generated $296.3 million of cash from operations, a 37% increase despite the tepid macroeconomic climate – a testament to the Company's consistent ability to deliver strong cash flow in any environment. Other highlights from the past year include:

  • Delivering revenue of approximately $2.5 billion, in line with our expectations entering the year. Revenue declined 7.3% on a reported basis and 4.9% on an underlying basis, when adjusting for foreign exchange, the exit of the Cushe® brand, and store closures.
  • Achieving reported diluted earnings per share of $0.89 and adjusted diluted earnings per share of $1.36, which was also in line with our original expectations.
  • Reducing inventory at year-end by 25.3% to $348.7 million.
  • Returning value to shareholders through $0.24 per share in cash dividends and approximately $62 million in share repurchases.
  • Refinancing debt and finishing the year with net debt of approximately $451 million – $165┬ámillion lower than at the end of 2015.


Entering 2017, we announced the WOLVERINE WAY FORWARD, a holistic, enterprise-wide business initiative designed to transform the Company to compete and win in the fast-changing global consumer retail environment. This transformation effort builds on our strong brand and operational foundation and is intended to align the organization with today's consumer to drive future growth and profitability.

The WOLVERINE WAY FORWARD is comprised of four critical work streams:

  • Innovation and Growth – Driving sustained, organic growth across the portfolio is the number one priority for the Company. We are committed to building great brands by creating spectacular products and telling compelling stories. Moving forward, we plan to increase our investments in product innovation, consumer insights, demand creation, and the digital/social space. We will also focus on key international growth markets, as we continue to leverage our global footprint.
  • Operational Excellence – Today's ultra-competitive global marketplace requires a highly agile organization. We already benefit from one of the best operating platforms in the industry, but today's environment demands continuous improvement. We made important progress in 2016, and we will continue on this path to make the organization more efficient, less complicated, and faster.
  • Portfolio Management – We remain committed to optimizing the Company's brand portfolio to focus our time, energy, and attention on our biggest opportunities. We also remain vigilant for opportunities that will enhance future shareholder value. Our business model sets up well to acquire and integrate new brands, and we are well positioned financially and organizationally for a meaningful acquisition.
  • People and Teams – In any business, the team with the best players wins, and we're committed to being the best place in the industry to work. We're recruiting new talent to the organization and, perhaps more importantly, have accelerated programs to develop the great talent that we already have on the field.

We have a robust set of objectives for the WOLVERINE WAY FORWARD. Financially, our near-term goal is to deliver 12% adjusted operating margin by the end of 2018.

Throughout Wolverine's history, the Company has constantly evolved to meet and exceed the needs and demands of the marketplace. We have a rich history of transformation and success. The WOLVERINE WAY FORWARD is the next chapter in the Wolverine story, and I couldn't be more excited about the road ahead.

In Closing

Combining best-in-class product innovation and compelling storytelling with our authentic brands is a powerful catalyst. The Company possesses a diverse portfolio of brands, expansive global footprint, and exceptional operational platforms – all key elements that we believe will drive future growth.

I would like to sincerely thank our team of nearly 6,000 associates located around the world, whose passion for our consumers and dedication to driving Wolverine Worldwide forward have positioned us to meet the challenge of today's dynamic retail environment. On behalf of the team, I would also like to thank you, our shareholders, for your continued support of Wolverine Worldwide.

Blake W. Krueger
Chairman of the Board,
Chief Executive Officer and President
Wolverine Worldwide