Wolverine World Wide, Inc.

views updated May 11 2018

Wolverine World Wide, Inc.

9341 Courtland Drive N.E.
Rockford, Michigan 49351-0001
U.S.A.
Telephone: (616) 866-5500
Toll Free: (800) 789-8586
Fax: (616) 866-0257
Web site: http://www.wolverineworldwide.com

Public Company
Incorporated: 1906 as Hirth-Krause Company
Employees: 4,426
Sales: $827.1 million (2002)
Stock Exchanges: New York Pacific
Ticker Symbol: WWW
NAIC: 316213 Men's Footwear (Except Athletic) Manufacturing; 316214 Women's Footwear (Except Athletic) Manufacturing; 316213 House Slipper Manufacturing; 316110 Leather and Hide Tanning and Finishing; 448210 Shoe Stores; 454111 Electronic Shopping; 533110 Lessors of Nonfinancial Intangible Assets (Except Copyrighted Works)

Wolverine World Wide, Inc. is one of the world's leading producers and marketers of nonathletic footwear, including casual, work, and outdoor shoes and boots as well as moccasins and slippers. The company sells more than 37 million pairs of footwear per year, under such brands as Wolverine (work, outdoor sport, and rugged casual categories), Bates (uniform), Hy-Test (work), Merrell (hiking, rugged outdoor, and outdoorinspired casual), and the famous Hush Puppies (casual). Wolverine produces additional lines under brands licensed from other firms, including Caterpillar, Coleman, Harley-Davidson, Karen Neuburger, and Stanley. More than 90 percent of the company's revenues are generated from the sale of branded footwear. The company's products are sold worldwide through department stores, footwear chains, specialty and independent retailers, and international licensees and distributors. More than 20 percent of sales originate outside the United States, the vast majority coming from Europe and Canada. Other Wolverine businesses contribute about 10 percent of revenues; these include a pigskin tannery in the company's headquarters city of Rockford in west Michigan; a licensing operation through which the Wolverine and Hush Puppies brands appear on non-footwear products produced by other companies, including apparel, eyewear, watches, and plush toys; and a retailing business, which operates more than 60 factory outlet stores under the Hush Puppies and Family name as well as a couple of Track 'n Trail mall-based stores. The company also maintains several web sites selling its footwear directly to consumers. On the manufacturing side, 85 percent of the company's shoes are sourced via third-party manufacturers mainly located in the Asia-Pacific region and Central and South America; the balance are produced at company-owned facilities in Michigan, Arkansas, the Dominican Republic, and Mexico.

Family-owned from its inception in 1883 until 1965, Wolverine struggled to compete with athletic and imported shoes in the 1970s and 1980s. A combination of shrewd marketing, fresh-yet-retro design, and pure luck contributed to the company's spectacular comeback in the early 1990s. More recent developments have included acquisitions of the Hy-Test and Merrell brands in 1996 and 1997, respectively; the 1990s launching of footwear lines under licensed brands, including Caterpillar and Harley-Davidson; and the overhaul of the company's global sourcing and manufacturing operations, begun in 2000.

The Late 19th and Early 20th Centuries

Wolverine was established in 1883 by G.A. Krause and his uncle, Fred Hirth, and named the Hirth-Krause Company. The son of Prussian immigrants, Krause brought a two-century heritage of leather tanning to the enterprise. The company originally sold leather, buttonhooks, lacing, and soles at wholesale, and purchased finished shoes for retail sale.

Krause began to consolidate vertically after the turn of the century, placing his sons in independent, but related, shoemaking and leather tanning businesses. In 1903, he established a shoe manufacturing business in Rockford, Michigan. His eldest son, Otto, who had a degree in engineering from the University of Michigan, operated this arm of the family enterprise, which supplied finished footwear to the Hirth-Krause retail outlets. Five years later, G.A. and younger son Victor created the Wolverine Tanning Company, also based in Rockford, to supply leather to the shoemaking business.

Victor, whose postsecondary education had included apprenticeships in tanning, would be a driving force behind Wolverine's establishment as a premiere American shoe company. In 1909, he traveled to Milwaukee, Wisconsin, to study a chrome tanning and retanning process developed by master tanner John Pfingsten. By 1914, Victor's own experiments had resulted in a tanning process for "shell horsehide," a cheap, durable, but heretofore unworkably stiff section of hide taken from the horse's rear. The company soon stopped using cowhide in favor of their unique new material.

Promoted as "1,000 mile shoes," sales of the heavy-duty Wolverine boots helped increase corporate earnings almost 700 percent from 1916 to 1923. A centennial company history noted that "Wolverine boots and shoes became one of rural and small-town America's most popular brands."

In 1921, Hirth-Krause and the Rockford shoe factory—which had previously merged under the name Michigan Shoe Makers—were united with Wolverine to form Wolverine Shoe and Tanning Corporation. The company acquired a glovemaking business that same year and began manufacturing horsehide work gloves. Over the course of the decade, Wolverine built its first warehouse, created an employee profit-sharing plan, launched a nationwide advertising campaign, and erected its first consolidated headquarters.

Depression and World War Spark Innovation

Although Wolverine survived the Great Depression intact, the accelerating transition from horse-drawn transportation to gasoline-powered transport severely diminished the need for horses in the United States. As a result, the company was compelled to turn to less reliable international markets for its hides.

When the United States entered World War II, the federal government's War Production Board assigned Wolverine to manufacture gloves for the troops and suggested that the company try pigskin as a raw material. It seemed like a fine idea until the company discovered the inadequacy of pigskinning methods, which were not satisfactory to either the tanners or the meat processors. Not only was it difficult to remove the skin without taking some of the flesh with it, but separating all the flesh from the skin often damaged the hide. Sometimes the only useful pieces were barely large enough to make a glove. A company history quoted one employee in the project who remarked, "It looked like these pigs didn't care to be skinned." Nevertheless, Wolverine did manage to manufacture enough gloves to keep the military happy and its books in the black throughout the war years.

But when the global conflict ended, demand for pigskin gloves fizzled and Wolverine was forced to revert to cowhide, which was in steadier supply than horsehide and in more reliable condition than pigskin. Then Chairman Victor Krause was convinced that pigskin could be a viable alternative to cowhide; it was softer than either cowhide or horsehide, widely available, woefully underused, breathable, and easy to dye and clean. He became so obsessed with "the pigskin processing dilemma" that he resigned Wolverine's chairmanship to dedicate his full attention to the question. His son, Adolph, advanced to corporate leadership.

Working as an unpaid consultant, Victor Krause assembled a team of engineers who spent two years designing a device that separated the pigskin from the flesh without damaging either product. Wolverine patented the machine, which was created to fit neatly into the pig production process. By the early 1980s, Wolverine would have one of the world's largest pigskin tanneries.

When tanned, pigskin was soft and flexible, but it was not tough enough to be used in Wolverine's traditional work boots and shoes. In a radical departure from the company's historical emphasis, Krause designed a pair of casual shoes from the pigskin and presented them to Wolverine's board of directors. The board was not particularly enthusiastic about the new product, but decided that market research would determine whether and how to proceed.

According to corporate legend, the genesis of the Hush Puppies brand name came at a southern-style fish fry where deep-fried nuggets of dough commonly known as "hush puppies" were served. When Wolverine Sales Manager Jim Muir asked his host about the origins of the strange name, he was told that farmers used the treats "to quiet their barking dogs." That conversation reminded Muir of another colloquial meaning for "barking dogs": sore feet. It occurred to him that Wolverine's new shoes worked on sore feet just like hush puppies worked on yelping dogs, so he proposed the name as a new trademark. In 1957 Wolverine President Adolph Krause, son of Victor Krause, chose the canine name and basset hound logo from a field of ten possibilities.

Company Perspectives:

Our vision is to be recognized as "The World's Premier Non-Athletic Footwear Company." To reach this goal, the entire organization has embraced the following strategic principles designed to generate stockholder value through consistent and growing economic returns: build the strongest brand portfolio in the industry; accelerate our growth in the women's segment of the market; create an environment that enables the Company to attract and retain the best people in the industry; ensure the entire organization is following a market-driven and consumer-focused operating philosophy; provide "Best in Class" service to our customers.

After a brief period of test marketing, the company launched a national advertising campaign in 1958 that was unprecedented in the shoe industry. Hush Puppies proved a timely innovation in footwear. With workers moving from farms to offices and from the countryside to the suburbs, Wolverine faced a decline in the sale of heavy-duty work shoes, but looked forward to a boom in more casual shoes. Hush Puppies became the footwear phenomenon of the late 1950s and early 1960s. Wolverine took the brand international via licensing agreements, the first of which was sold to Canada's Greb Shoes, Ltd. in 1959. Renamed Wolverine World Wide, Inc. in 1966, the parent company's sales nearly quintupled from 1958 to 1965, when it made its initial public offering on the New York Stock Exchange.

Decline in the 1970s and 1980s

Hush Puppies put Wolverine at the top of the casual shoe industry, but the branded shoes could not keep it there very long. Sales flattened in the late 1960s, as Hush Puppies' core market matured and the brand failed to win younger customers. The company attempted to diversify via acquisition during this period, acquiring Bates, Frolic, and Tru-Stitch shoes and slippers. In spite of these efforts, however, Wolverine World Wide's nearly 90 years of Krause family management came to an end after the company experienced a net loss in 1972. Wolverine appeared to recover in the later years of the decade, as sales increased from about $125 million in 1975 to about $250 million in 1980.

But the new decade brought increased competition from imported and athletic shoes that seriously undermined the already weakened business. In 1981 the Reagan administration dropped import quotas in favor of freer trade, prompting a deluge of inexpensive shoes from Asia and Latin America. Rita Koselka of Forbes magazine noted in a 1992 article that, "Among U.S. industries, few have been hit harder by foreign competition than shoemaking." Half of the country's footwear manufacturers went bankrupt over the course of the 1980s, as the imports share of the U.S. market grew from 50 percent to 86 percent. During the same period, consumers began to turn from Hush Puppy-type shoes to athletic shoes for casual wear, further eroding Wolverine's potential market.

Unlike so many of its compatriots, Wolverine survived the 1980s, but not without its share of fits and starts. Under the direction of Thomas Gleason from 1972 to 1992, the company struggled to meet the challenge by diversifying its footwear lineup, expanding its direct retail operation, leveraging the Hush Puppies brand via licensing, and moving some production overseas.

Wolverine World Wide had launched its own chain of "Little Red Shoe House" specialty stores, which emphasized children's shoes, in 1976. Acquisitions and internal growth expanded the company's retail operation to more than 100 stores by 1983. The well-known Hush Puppies logo was licensed to manufacturers of clothing, umbrellas, luggage, hats, and handbags, and could be found in 56 countries by 1987.

From its well established base in work shoes and "career casual" footwear, Wolverine diversified via acquisition and internal development. The company entered the athletic market with the 1981 purchase of Brooks Shoe Manufacturing Co., a struggling maker of running shoes. Wolverine acquired Town & Country and Viner Bros. shoes in 1982 and added Kaepa duallaced, split-vamp specialty athletic shoes the following year. The company also developed its own new shoes, including the Body Shoe, which featured an ergonomic "comfort curve," and Cloud 10 shoes, with special cushioning for the ball of the foot. Wolverine hoped that its expanded line of comfortable yet fashionable footwear would attract more 30- to 45-year-olds to its stores.

Key Dates:

1883:: G.A. Krause and his uncle, Fred Hirth, found the Grand Rapids, Michigan-based Hirth-Krause Company, selling leather and shoe accessories at wholesale and purchasing finished shoes for retail sale.
1903:: Krause establishes a shoe factory in nearby Rockford, placing his eldest son, Otto, in charge; Hirth-Krause and the shoe factory are later operated under the name Michigan Shoe Makers.
1908:: Krause and younger son Victor create Wolverine Tanning Company, also based in Rockford, to supply leather to the shoemaking business.
1921:: Michigan Shoe Makers and Wolverine Tanning are united to form Wolverine Shoe and Tanning Corporation.
1958:: The Hush Puppies brand of casual shoes is launched nationally.
1965:: Company goes public with a listing on the New York Stock Exchange.
1966:: Company is renamed Wolverine World Wide, Inc.
1972:: Leadership reign of the Krause family comes to an end.
1976:: Company enters specialty retailing with the launch of the Little Red Shoe House chain.
1981:: Wolverine enters the athletic shoe sector with the purchase of the Brooks brand.
Late 1980s:: Company begins making hiking and outdoor boots under both the Wolverine and the licensed Coleman brand.
Early 1990s:: Retailing operations are scaled back and the Brooks brand is divested, with the company intent on focusing on the Wolverine and Hush Puppies brands.
1993:: More than 100 retail outlets are closed; the remaining 60 are revamped into factory outlets.
1994:: Wolverine acquires the worldwide license to market footwear under the Caterpillar name.
1996:: The Hy-Test line of industrial work boots is acquired.
1997:: Wolverine purchases the Merrell brand of performance-outdoor footwear.
1998:: Another license deal leads to the debut of the Harley-Davidson footwear line.
2000:: Major restructuring of manufacturing operations involves the closure of five plants and a workforce reduction of 25 percent.
2003:: Wolverine agrees to acquire Sebago Inc., maker of penny loafers and docksiders boat shoes.

But in spite of these apparently well-thought-out efforts, Wolverine's bottom line continued to show signs of stress: net income slid from $15.5 million in 1981 to $2.1 million in 1984. After a slight recovery in 1985, the company suffered a $12.6 million loss on sales of $341.7 million. The shortfall sparked a restructuring and reorganization that included the closure of five U.S. factories, the sale of two small retail chains and shuttering of 15 other outlets, the spinoff of Kaepa, and divestment of a relatively new West German footwear manufacturing and 105-store retail operation. The domestic factory closings helped increase the proportion of Wolverine's shoes manufactured overseas to about 50 percent.

Analysts found plenty to blame at Wolverine. Some said that the company's new casual and career-oriented brands—Town & Country, Harbor Town of Maine, and Wimzees Casuals—were cannibalizing Hush Puppies' sales. One analyst told Footwear News in September 1985 that top executives "have lost their direction in recent years and can't get either manufacturing or retailing back on track." Another said the company had grown "too big to run effectively." Thomas Jaffe of Forbes was more direct, blaming "impulsive management, silly diversification, and finally, the flood of cheap imports that has knocked the socks off most of the U.S. shoe industry." Analyst Sheldon Grodsky told Business Week 's Keith Naughton, "Dullness permeated the company and they just missed the entire 1980s."

In 1987, the company hired Geoffrey B. Bloom, a marketing and product development expert with 12 years of experience at Florsheim Shoe Co., as president and chief operating officer. In the waning years of the decade, Wolverine made another attempt at revitalization. The company leveraged its basic lines of work shoes and boots, dress shoes, and casual footwear to fit the multiple fashion and function demands of younger customers. For example, the company's 100-plus years of expertise in making durable work boots gave it insight into the development of hiking and outdoor boots. Wolverine used its own venerable brand and licensed the Coleman name for this new venture. The company hired new designers to update its athletic and casual shoes, and it even contracted with a Michigan State University laboratory for new footwear innovations.

Although Wolverine World Wide's net income rose to $7.7 million on sales of $324 million by 1988, other nagging problems stole the spotlight from this modest recovery. Most infamous of these was a 1989 lawsuit charging that Wolverine and Fred Goldston, a pigskin and cowhide broker, had conspired to steal cowhide from Southwest Hide Co. Goldston had been hired by Wolverine to raise the quantity and quality of pigskin rinds to supply the company's tannery. Southwest originally accused Goldston of exchanging their high-grade cowhides with lower-quality skins, but when Goldston went bankrupt, the plaintiff added partner Wolverine to the suit. Faced with a jury verdict of more than $39.3 million, Wolverine elected to settle the suit for $8.5 million in cash and bonds in 1992. CEO Gleason continued to assert his company's innocence in spite of the settlement, telling Forbes 's Rita Koselka, "We were just the deep pockets around." Wolverine was also plagued with quality control and inventory problems in the late 1980s.

Dramatic Recovery in the Early 1990s

In the fall of 1990, Wolverine announced another restructuring, including plans to scale back its retail operations, shutter a manufacturing plant, and eliminate certain shoe lines. After multiple reorganizations, infrequent profitability, and sliding market share, the company elected to divest its Brooks athletic shoe division to Rokke Group, a U.S.-Norway joint venture, in 1992. The restructuring shrunk Wolverine's overall revenues from more than $320 million in 1990 to $282.9 million in 1992, but allowed it to concentrate on its Wolverine and Hush Puppies brands, which made near miraculous recoveries in the early 1990s.

Wolverine's revitalization after more than a decade of lackluster performance came about through a combination of rejuvenated designs, savvy marketing, strict cost controls, and a healthy dose of good luck. From 1990 to 1995, Geoffrey Bloom, who succeeded Thomas Gleason as chief executive officer in 1993, closed more than 100 of the company's retail outlets, designating the remaining 60 as factory outlets. He also consolidated Wolverine's 16 divisions into five streamlined operating units, thereby increasing productivity (measured in revenue per employee) by nearly one-fourth from 1992 to 1994.

Taking a cue from fashion designer John Bartlett, newly hired designer Maggie Mercado revived 1950s-era styles such as the "Wayne" (nee Duke) oxford and "Earl" slip-on, offering the waterproof suede shoes in a rainbow of new colors such as Pepto-Bismol pink and Day-Glo green. Both Bartlett and designer Anna Sui featured the shoes in their 1995 collections. Hush Puppies soon began to turn up on the famous feet of stars such as Jim Carrey, Sharon Stone, David Bowie, Tom Hanks, and Sylvester Stallone. Hush Puppies also benefited from the trend toward dressing-down at work, filling the fashion gap between tennis shoes and dress shoes. Wolverine sent videotapes with tips for casual dressing at work to 200 businesses throughout the United States. In the ultimate retro coup, the company revived the "We invented casual" tagline that had launched Hush Puppies in 1958. By 1995, tony stores such as Barneys in New York and Pleasure Swell in California struggled to keep the shoes in stock.

While its Hush Puppies conquered the world of fashion, Wolverine World Wide's work boots and hikers tackled more mundane markets. In spite of steadily declining employment in American construction and manufacturing sectors, sales of Wolverine work boots reached record levels in 1991. The hightech, relatively lightweight footwear featured DuraShock shock absorbers and slip-resistant treads. Smart new ads told prospective customers that they could "hunt 'til hell freezes over." Coleman hiking boots gave Wolverine entree into the mass market via distribution in Wal-Mart stores. In 1994 Wolverine added another licensed brand to its stable when it acquired the worldwide license to market footwear under the Caterpillar name from Caterpillar Inc., the manufacturer of earthmoving equipment. Leveraging Caterpillar's rugged image, Wolverine promoted the new line as "walking machines, the toughest equipment on earth." Annual sales of the Caterpillar line reached nearly eight million pairs by 1997—eclipsing sales of the Wolverine brand—with sales being made in more than 100 countries. According to one Wolverine executive, the Caterpillar boots had become a trendy item with younger consumers looking for "funky" footwear.

A focus on international growth increased the geographic distribution of the company's sales to about 50 percent international by 1995. Wolverine was the only American shoemaker to achieve a comprehensive contract in Russia. It had also established a Hush Puppies store in China, and its branded shoes were offered in more than 60 countries around the world. By mid-1995, Forbes had declared Wolverine "a dog no more." Sales had risen by more than 46 percent from $282.9 million in 1992 to $414 million in 1995, and net income more than tripled from $4.7 million to $24.1 million during the same period.

Expanding the Brand Portfolio in the Late 1990s

In 1996 Bloom was rewarded for his remarkable turnaround achievement by being named chairman. He also remained CEO but relinquished the presidency to Timothy O'Donovan, who was named chief operating officer as well the following year. O'Donovan had held a series of marketing, sales, and management positions since joining Wolverine in 1969, and as president of the Hush Puppies Company from 1992 to 1996, he played a key role in the turnaround led by Bloom.

Expansion was clearly still on the agenda for Bloom and O'Donovan in the later years of the 1990s. Wolverine paid $22.8 million in cash to the Florsheim Shoe Company in 1996 for the Hy-Test line of industrial work boots. That fall a line of Hush Puppies men's and women's slippers began reaching store shelves. The company's stable of outdoor footwear brands was augmented via the October 1997 acquisition of Merrell, a brand of performance footwear designed for backpacking, day hiking, and everyday use. Wolverine's aggressive drive into foreign markets continued in 1997 with the introduction of the Hush Puppies brand into Russia, China, France, and Scandinavia and the Caterpillar line into Russia, China, Brazil, and India. During 1998 the company began producing a Harley-Davidson line of motorcycle, casual, fashion, and western footwear for men, women, and children under a license agreement with the Harley-Davidson Motor Company. The next year Wolverine launched its first full line of children's shoes and boots, including the Hush Puppies, Caterpillar, Harley-Davidson, and Coleman labels.

The growth initiatives helped revenues and profits increase smartly in 1996 and 1997, but the company managed only marginal increases in 1998 because of a weak fourth quarter. The economic crisis that erupted in Russia that year battered Wolverine's nascent moves into that market. The company took the difficult decision of closing down its Russian subsidiary, taking a $14 million charge in 1999 to do so, which in turn led to a decline in profits for the year.

Restructuring in Early 2000s

In April 2000 Bloom handed over the CEO reins to O'Donovan, with Bloom continuing as chairman. A month later Wolverine announced that it had entered into a license agreement with the Stanley Works, the famous U.S. toolmaker, to develop a line of Stanley brand work boots. In a first for Wolverine, the line, which was to be value priced at under $60 per pair, was to be sold through Payless ShoeSource, Inc., operator of the biggest chain of shoe stores in the United States.

O'Donovan next faced the challenge of implementing a major restructuring of the company's global sourcing and manufacturing operations. Aiming to reduce operating costs by $10 million per year, Wolverine closed five of its manufacturing plants in New York, Missouri, Canada, Puerto Rico, and Costa Rica, shifting production to its remaining seven plants. Nearly 1,400 employees were cut from the payroll by the time the restructuring was complete in mid-2001, representing onequarter of the workforce. In the end, the initiative substantially shifted more of the company's production outside the United States, a shift that many other U.S. footwear makers had made in the 1990s. Prior to the restructuring, 40 percent of Wolverine's shoes and boots were made in the United States, but by 2003 this figure was down to 5 percent.

Wolverine recorded $28 million in restructuring charges during 2000, resulting in a net income figure for the year of just $10.7 million. Revenues for the year, however, increased a respectable 6 percent thanks in large part to phenomenal sales of the Merrell brand. Wolverine sold nearly 4.5 million pairs of Merrell shoes in 2000, doubling the previous year's total, and the brand garnered sales in excess of $100 million, an increase of 80 percent. Driving these stellar results was Merrell's move beyond hiking boots. In late 1998 Merrell invented a new footwear category when it began selling "aftersport" shoes—comfortable moccasins or sandals with all-weather treads. As O'Donovan told the Grand Rapids Business Journal in 2001, "We found that after these hardcore users of Merrell products got off the ski slopes or mountain bikes, or finished trail running, we had an opportunity to sell them another pair of footwear they could wear after all those activities. That was the concept." In 2002 Wolverine sold more than seven million pairs of Merrell footwear, which was now distributed in more than 130 countries. Revenues for the brand reached $180 million.

Wolverine World Wide recorded its third straight year of record revenues in 2002, with sales increasing 14.9 percent that year, to $827.1 million. Profits increased 7.5 percent, reaching a record $47.9 million. That year Wolverine reached a license agreement with Karen Neuburger to develop a line of slippers and casual footwear for women under the name of the lifestyle designer. The company purchased the rights to the Track 'n Trail name, which had been the name of a shoe store chain before it declared bankruptcy in 2001. Wolverine's two existing mall-based retail outlets, which had been called UpFootgear, were rebranded Track 'n Trail. Wolverine also acquired its CAT (the Caterpillar line) and Merrell distribution businesses in Europe during 2002.

Continuing to seek new avenues for growth, Wolverine reached an agreement in July 2003 to acquire Sebago, Inc., a privately held footwear maker based in Portland, Maine. This acquisition would expand Wolverine into more preppy footwear given Sebago's output of penny loafers and its flagship product, docksiders boat shoes. Concurrently, workers at the Wolverine tannery in Rockford went on strike that same month, the first such action at the plant in 23 years. The workers were mainly concerned about their jobs being subcontracted out or shifted to China as the company wanted them to agree to contract language giving Wolverine just those rights. Ironically, Wolverine was in the process of buying a company that made 75 percent of its shoes in two plants in Maine and that prominently touted many of its brands as "Made in the USA." Sebago was known for the high quality of its shoes, which were handcrafted and handstitched.

Principal Subsidiaries

Aguadilla Shoe Corporation; Brooks France, S.A.; BSI Shoes, Inc.; Dominican Wolverine Shoe Company Limited (Cayman Islands); Hush Puppies Canada Footwear Ltd.; Hush Puppies Retail, Inc.; Hush Puppies (U.K.) Ltd.; Hy-Test, Inc.; Merrell Europe B.V. (Netherlands); Merrell (Europe) Limited (U.K.); Spartan Shoe Company Limited (Cayman Islands); Wolverine de Costa Rica, S.A.; Wolverine de Mexico S.A. de C.V.; Wolverine Design Center, Inc.; Wolverine Europe Limited (U.K.; 95%); Wolverine International GP, LLC; Wolverine International, L.P. (Cayman Islands); Wolverine International S.a.r.l. (Luxembourg); Wolverine International, S.L. (Spain); Wolverine Outdoors, Inc.; Wolverine Procurement, Inc.; Wolverine Russia, Inc.; Wolverine Slipper Group, Inc.; Wolverine Sourcing, Inc.; Wolverine World Wide Europe Limited (U.K.).

Principal Divisions

Wolverine Footwear Group; Merrell Performance Footwear Group; CAT Footwear Group; Hush Puppies Company; Wolverine Slipper Group; Global Operations Group; Wolverine Leathers Division.

Principal Competitors

The Timberland Company; Red Wing Shoe Company, Inc.; R. Griggs Limited; C&J Clark International Ltd.; L.L. Bean, Inc.; Reebok International Ltd.; The North Face, Inc.; Rocky Shoes & Boots, Inc.; LaCrosse Footwear, Inc.

Wolverine World Wide Inc.

views updated May 23 2018

Wolverine World Wide Inc.

9341 Courtland Drive
Rockford, Michigan 49341
U.S.A.
(616) 866-5500
Fax: (616) 866-0257

Public Company
Incorporated: 1906
Employees: 5,586
Sales: $413.96 million (1995)
Stock Exchanges: New York Pacific
SICs: 3143 Men’s Footwear Manufacturers Except Athletic; 3144 Women’s Footwear Manufacturers Except Athletic; 5661 Shoe Stores; 5139 Shoes & Footwear, Wholesalers & Manufacturers; 6794 Patent Owners & Lessors Services

Wolverine World Wide Inc.’s success has hinged on its ability to cling tenaciously to a cache of well-known footwear brands. Family-owned from its inception in 1883 until 1965, the company and its best-known brand, Hush Puppies, struggled to compete with athletic and imported shoes in the 1970s and 1980s. A combination of shrewd marketing, fresh-yet-retro design, and pure luck contributed to the company’s spectacular comeback in the early 1990s. In 1995, Wolverine World Wide capped a four-year string of rising sales and earnings with awards from Footwear News, whose industry poll ranked it “Company of the Year,” and the Council of Fashion Designers of America, which named Hush Puppies the ’ ’Accessory of the Year.” In 1995, Hush Puppies generated about 45 percent of annual sales and Wolverine brand work boots brought in another 40 percent. The remaining sales were divided among private label and licensed brand footwear and the company’s tanning business.

The Late 19th and Early 20th Centuries

Krause began to consolidate vertically after the turn of the century, placing his sons in independent, but related, shoe-making and leather tanning businesses. In 1903, he established a shoe manufacture in Rockford, Michigan. His eldest son, Otto, who had a degree in engineering from the University of Michigan, operated this arm of the family enterprise, which supplied finished footwear to the Hirth-Krause retail outlets. Five years later, G.A. and younger son Victor created the Wolverine Tanning Company to supply leather to the shoe-making business.

Victor, whose postsecondary education had included apprenticeships in tanning, would be a driving force behind Wolverine’s establishment as a premiere American shoe company. In 1909, he traveled to Milwaukee, Wisconsin, to study a chrome tanning and retanning process developed by master tanner John Pfingsten. By 1914, Victor’s own experiments had resulted in a tanning process for “shell horsehide,” a cheap, durable, but heretofore unworkably stiff section of hide taken from the horse’s rear. The company soon stopped using cowhide in favor of their unique new material.

Promoted as “1,000 mile shoes,” sales of the heavy-duty Wolverine boots helped increase corporate earnings almost 700 percent from 1916 to 1923. A centennial company history noted that “Wolverine boots and shoes became one of rural and small-town America’s most popular brands.”

In 1921, Hirth-Krause and the Rockford shoe factory— which had previously merged under the name Michigan Shoe Makers—were united with Wolverine to form Wolverine Shoe and Tanning Corporation. The company acquired a glovemaking business that same year and began manufacturing horsehide work gloves. Over the course of the decade, Wolverine built its first warehouse, created an employee profit-sharing plan, launched a nationwide advertising campaign, and erected its first consolidated headquarters.

Company Perspectives

Quality products, fiscal management and steady growth marked the firm’s early years. Tanning and manufacturing technology laid the groundwork for one of the industry’s most famous success stories—the worldwide popularity of Hush Puppies Brand casual shoes. Founded by a family of hard-working, skilled craftsmen, Wolverine World Wide, Inc., has evolved into an international enterprise well positioned for a future of growth and success.

Depression and World War Spark Innovation

Although Wolverine survived the Great Depression intact, the accelerating transition from horse-drawn transportation to gasoline-powered transport severely diminished the need for horses in America. As a result, the company was compelled to turn to less reliable international markets for its hides.

When the United States entered World War II, the federal government’s War Production Board assigned Wolverine to manufacture gloves for the troops and suggested that the company try pigskin as a raw material. It seemed like a fine idea until the company discovered the inadequacy of pigskinning methods, which were not satisfactory to either the tanners or the meat processors. Not only was it difficult to remove the skin without taking some of the flesh with it, but separating all the flesh from the skin often damaged the hide. Sometimes the only useful pieces were barely large enough to make a glove. A company history quoted one employee in the project who remarked, “It looked like these pigs didn’t care to be skinned.” Nevertheless, Wolverine did manage to manufacture enough gloves to keep the military happy and its books in the black throughout the war years.

But when the global conflict ended, demand for pigskin gloves fizzled and Wolverine was forced to revert to cowhide, which was in steadier supply than horsehide and in more reliable condition than pigskin. Then Chairman Victor Krause was convinced that pigskin could be a viable alternative to cowhide; it was softer than either cowhide or horsehide, widely available, woefully underused, breathable, and easy to dye and clean. He became so obsessed with “the pigskin processing dilemma” that he resigned Wolverine’s chairmanship to dedicate his full attention to the question. His son, Adolph, advanced to corporate leadership.

When tanned, pigskin was soft and flexible, but it was not tough enough to be use in Wolverine’s traditional work boots and shoes. In a radical departure from the company’s historical emphasis, Krause designed a pair of casual shoes from the pigskin and presented them to Wolverine’s board of directors. The board was not particularly enthusiastic about the new product, but decided that market research would determine whether and how to proceed.

According to corporate legend, the genesis of the Hush Puppies brand name came at a southern-style fish fry where deep-fried nuggets of dough commonly known as “hush puppies” were served. When Wolverine World Wide Sales Manager Jim Muir asked his host about the origins of the strange name, he was told that farmers used the treats “to quiet their barking dogs.” That conversation reminded Muir of another colloquial meaning for “barking dogs”: sore feet. It occurred to him that Wolverine’s new shoes worked on sore feet just like hush puppies worked on yelping dogs, so he proposed the name as a new trademark. In 1957, Wolverine President Adolph Krause, son of Victor Krause, chose the canine name and basset hound logo from a field of ten possibilities.

After a brief period of test marketing, the company launched a national advertising campaign that was unprecedented in the shoe industry. Hush Puppies proved a timely innovation in footwear. With workers moving from farms to offices and from the countryside to the suburbs, Wolverine faced a decline in the sale of heavy-duty work shoes, but looked forward to a boom in more casual shoes. Hush Puppies became the footwear phenomenon of the late 1950s and early 1960s. Wolverine took the brand international via licensing agreements, the first of which was sold to Canada’s Greb Shoes, Ltd. in 1959. Renamed Wolverine World Wide Inc. in 1966, the parent company’s sales nearly quintupled from 1958 to 1965, when it made its initial public offering on the New York Stock Exchange.

Decline in the 1970s and 1980s

Hush Puppies put Wolverine at the top of the casual shoe industry, but the branded shoes could not keep it there very long. Sales flattened in the late 1960s, as Hush Puppies’ core market matured and the brand failed to win younger customers. The company attempted to diversify via acquisition during this period, acquiring Bates, Frolic, and Tru-Stitch shoes and slippers. In spite of these efforts, however, Wolverine World Wide’s nearly 90 years of Krause family management came to an end after the company experienced a net loss in 1972. Wolverine appeared to recover in the later years of the decade, as sales increased from about $125 million in 1975 to about $250 million in 1980.

But the new decade brought increased competition from imported and athletic shoes that seriously undermined the already-weakened business. In 1981, the Reagan administration dropped import quotas in favor of freer trade, prompting a deluge of inexpensive shoes from Asia and Latin America. Rita Koselka of Forbes magazine noted in a 1992 article that, “Among U.S. industries, few have been hit harder by foreign competition than shoemaking.” Half of America’s footwear manufacturers went bankrupt over the course of the 1980s, as the imports share of the U.S. market grew from 50 percent to 86 percent. During the same period, consumers began to turn from Hush Puppy-type shoes to athletic shoes for casual wear, further eroding Wolverine’s potential market.

Wolverine World Wide had launched its own chain of “Little Red Shoe House” specialty stores, which emphasized children’s shoes, in 1976. Acquisitions and internal growth expanded the company’s retail operation to more than 100 stores by 1983. The well-known Hush Puppies logo was licensed to manufacturers of clothing, umbrellas, luggage, hats, and handbags, and could be found in 56 countries by 1987.

From its well-established base in work shoes and “career casual” footwear, Wolverine diversified via acquisition and internal development. The company entered the athletic market with the 1981 purchase of Brooks Shoe Manufacturing Co., a struggling maker of running shoes. Wolverine acquired Town & Country and Viner Bros, shoes in 1982 and added Kaepa dual-laced, split-vamp specialty athletic shoes the following year. The company also developed its own new shoes, including the Body Shoe, which featured an ergonomic “comfort curve,” and Cloud 10 shoes, with special cushioning for the ball of the foot. Wolverine hoped that its expanded line of comfortable yet fashionable footwear would attract more 30- to 45-year-olds to its stores.

But in spite of these apparently well-thought-out efforts, Wolverine’s bottom line continued to show signs of stress: net income slid from $15.5 million in 1981 to $2.1 million in 1984. After a slight recovery in 1985, the company suffered a $12.6 million loss on sales of $341.7 million. The shortfall sparked a restructuring and reorganization that included the closure of five U.S. factories, the sale of two small retail chains and shuttering of 15 other outlets, the spin-off of Kaepa and divestment of a relatively new West German footwear manufacturing and 105-store retail operation. The domestic factory closings helped increase the proportion of Wolverine’s shoes manufactured overseas to about 50 percent.

Analysts found plenty to blame at Wolverine. Some said that the company’s new casual and career-oriented brands—Town & Country, Harbor Town of Maine, and Wimzees Casuals—were cannibalizing Hush Puppies’ sales. One analyst told Footwear News in September 1985 that top executives “have lost their direction in recent years and can’t get either manufacturing or retailing back on track.” Another said the company had grown “too big to run effectively.” Thomas Jaffe of Forbes was more direct, blaming “impulsive management, silly diversification, and finally, the flood of cheap imports that has knocked the socks off most of the U.S. shoe industry.” Analyst Sheldon Grodsky told Business Week’s Keith Naughton, “Dullness permeated the company and they just missed the entire 1980s.”

In 1987, the company hired Geoffrey B. Bloom, a marketing and product development expert with 12 years of experience at Florsheim Shoe Co., as president and chief operating officer. In the waning years of the decade, Wolverine made another attempt at revitalization. The company leveraged its basic lines of work shoes and boots, dress shoes, and casual footwear to fit the multiple fashion and function demands of younger customers. For example, the company’s 100-plus years of expertise in making durable work boots gave it insight into the development of hiking and outdoor boots. Wolverine used its own venerable brand and licensed the Coleman name for this new venture. The company hired new designers to update its athletic and casual shoes, and it even contracted with a Michigan State University laboratory for new footwear innovations.

Although Wolverine World Wide’s net income rose to $7.7 million on sales of $324 million by 1988, other nagging problems stole the spotlight from this modest recovery. Most infamous of these was a 1989 lawsuit charging that Wolverine and Fred Goldston, a pigskin and cowhide broker, had conspired to steal cowhide from Southwest Hide Co. Goldston had been hired by Wolverine to raise the quantity and quality of pigskin rinds to supply the company’s tannery. Southwest originally accused Goldston of exchanging their high-grade cowhides with lower-quality skins, but when Goldston went bankrupt, the plaintiff added partner Wolverine to the suit. Faced with a jury verdict of more than $39.3 million, Wolverine elected to settle the suit for $8.5 million in cash and bonds in 1992. CEO Gleason continued to assert his company’s innocence in spite of the settlement, telling Forbes’ Rita Koselka, “We were just the deep pockets around.” Wolverine was also plagued with quality control and inventory problems in the late 1980s.

Dramatic Recovery in the Early 1990s

In the fall of 1990, Wolverine announced another restructuring, including plans to scale back its retail operations, shutter a manufacturing plant, and eliminate certain shoe lines. After multiple reorganizations, infrequent profitability, and sliding market share, the company elected to divest its Brooks athletic shoe division to Rokke Group, Seattle, a U.S.-Norway joint venture, in 1992. The restructuring shrunk Wolverine’s overall revenues from more than $320 million in 1990 to $282.86 million in 1992, but allowed it to concentrate on its Wolverine and Hush Puppies brands, which made near-miraculous recoveries in the early 1990s.

Wolverine’s revitalization after more than a decade of lackluster performance came about through a combination of rejuvenated designs, savvy marketing, strict cost controls, and a healthy dose of good luck. From 1990 to 1995, Geoffrey Bloom, who succeeded Thomas Gleason as chief executive officer in 1993, closed more than 100 of the company’s retail outlets, designating the remaining 60 as factory outlets. He also consolidated Wolverine’s 16 divisions into five streamlined operating units, thereby increasing productivity (measured in revenue per employee) by nearly one-fourth from 1992 to 1994.

Taking a cue from fashion designer John Bartlett, newly-hired designer Maggie Mercado revived 1950s-era styles like the “Wayne” (nee Duke) oxford and “Earl” slip-on, offering the waterproof suede shoes in a rainbow of new colors like Pepto-Bismol pink and Day-Glo green. Both Bartlett and designer Anna Sui featured the shoes in their 1995 collections. Hush Puppies soon began to turn up on the famous feet of stars like Jim Carrey, Sharon Stone, David Bowie, Tom Hanks, and Sylvester Stallone. Hush Puppies also benefited from the trend toward dressing-down at work, filling the fashion gap between tennis shoes and dress shoes. Wolverine sent videotapes with tips for casual dressing at work to 200 businesses around America. In the ultimate retro coup, the company revived the “We invented casual” tagline that had launched Hush Puppies in 1958. By 1995, tony stores like Barneys in New York and Pleasure Swell in California struggled to keep the shoes in stock.

While its Hush Puppies conquered the world of fashion, Wolverine World Wide’s work boots and hikers tackled more mundane markets. In spite of steadily declining employment in American construction and manufacturing sectors, sales of Wolverine work boots reached record levels in 1991. The high-tech, relatively lightweight footwear featured DuraShock shock absorbers and slip-resistant treads. Smart new ads told prospective customers that they could “hunt ’til hell freezes over.” Coleman hiking boots gave Wolverine entree into the mass market via distribution in Wal-Mart stores.

A focus on international growth increased the geographic distribution of the company’s sales to about 50 percent international by 1995. Wolverine was the only American shoemaker to achieve a comprehensive contract in Russia, it established a Hush Puppies store in China, and its branded shoes were offered in more than 60 countries around the world.

By mid-1995, Forbes had declared Wolverine “a dog no more.” Sales had risen by more than 46 percent from $282.86 million in 1992 to $413.96 million in 1995, and net income more than tripled from $4.7 million to $24.07 million during the same period. CEO Geoffrey Bloom told Forbes, “For Wolverine the best is yet to come.”