Footwear manufacturer Wolverine World Wide Inc.'s stock price fell after its Aug. 5 earnings report after reporting a 38.6% year-over-year drop in second-quarter revenues, S&P Global Market Intelligence data shows. A closure of stores linked to COVID-19 was offset by a 96% year-over-year rise in e-commerce sales "at accretive margins," according to CFO Michael Stornant.
Panjiva data shows that U.S. seaborne imports associated with Wolverine have fallen 57.0% year over year in the second quarter, likely from combined pandemic pressures and inventory management programs mentioned on the earnings call. It is worth noting, though, that inventory days rose to 174 days from 105 a year earlier and 133 days in the first quarter. Wolverine is not alone in the apparel sector in facing such trends, as discussed in Panjiva's research of June 17.
Wolverine's downturn has had an impact across its supplier base. Shipments from Vietnam to the U.S. dropped by 60.9% year over year in the second quarter while those from China declined by 71.5%. Shipments from other sources fell by less but are focused on a smaller range of specialty items.
Wolverine's sourcing illustrates the differing approaches companies are taking in combating trade uncertainty, as discussed in Panjiva's Q3 Outlook. Wolverine has been slowly drawing down their China presence, but maintained an even split in sourcing in 2019 with 38.7% each of U.S. imports combined from China and Vietnam. Wolverine may be experiencing rising labor costs in China that are offset by the cost of moving established factories.
Other footwear manufacturers are following a similar dual-sourcing approach. U.S. seaborne imports linked to sports-focused manufacturer PUMA SE is similar to Wolverine with an even split between China and Vietnam with 27.6% and 24.6%, respectively, in 2019.
Steven Madden Ltd. and Deckers Outdoor Corp., competitors with Wolverine in separate segments, have used China heavy strategies, with 74.9% and 68.7% of imports, respectively, coming from China. They differ with each other in their short-term response to the pandemic with Deckers aggressively shifting sourcing from China to Vietnam in July. Steve Madden has moved more slowly and has used sourcing other than Vietnam to diversify away from China. That may be a response to capacity restraints in Vietnam itself.
Eric Oak is a researcher at Panjiva, which is a business line of S&P Global Market Intelligence, a division of S&P Global Inc. This content does not constitute investment advice, and the views and opinions expressed in this piece are those of the author and do not necessarily represent the views of S&P Global Market Intelligence. Links are current at the time of publication. S&P Global Market Intelligence is not responsible if those links are unavailable later.