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Table of Contents

Company Overview:................................................................................................... 2
Competitors Overview:.............................................................................................. 2
Comparative Performance Analysis............................................................................ 2
Management Effectiveness:.................................................................................... 2
Profitability Analysis................................................................................................ 2
Activity/Efficiency Analysis...................................................................................... 3
Liquidity Analysis..................................................................................................... 3
Solvency Analysis.................................................................................................... 4
Valuation Analysis:.................................................................................................. 4
Recommendations................................................................................................... 4
Appendix.................................................................................................................... 5
References................................................................................................................ 14

Company Overview:
Wolverine World Wide Inc. (WWW) is a designer, manufacturer and seller of footwear,
apparels athletic footwear and apparel, industrial boots and formal shoes as well. It falls
under consumer cyclical sector and industry is footwear & accessories. It current market cap
is $2.3b and current share price is $23.39.

Competitors Overview:
Skechers USA Inc. (SKX) is designer and seller of lifestyle and performance footwear for
men, women and children. It also comes under consumer cyclical sector and similar industry
of footwear and accessories. The market cap is $3.5b and current price is $22.09.

Comparative Performance Analysis


We have analyzed performance of both companies on their own, with each other and against
industry average metrics. First we will analyze performance of WWW vs SKX, individually and
comparatively then with industry average. Study period is 2011-2015. Chart for each ratio is
given in appendix.

Management Effectiveness:
This measures how effectively management is utilizing the owners capital in value creation.
It is determined by analyzing return on asset and equity. ROA analysis shows, over the time
WWW return on assets has decreased while SKX ROA shows a positive trend. ROA analysis
also reveals that SKX is better at efficient utilization of firms assets as compared to WWW. It
also tells that WWW is more assets intensive and it will need more cash to keep revenue
generation.
Return on equity, ROE measure return on cash invested by owners/ shareholders. Over the
time, ROE for WWW has remained positive but trend is declining, while SKX shows positive
trend across time. WWW has performed well since its ROE has remained resilient, showing

successful internal cash generation but focus needs to be on trend also. On average, WWW
has better ROE and ROA than industry and SKX.

Profitability Analysis
Analysis based on gross margin show, WWW is clearly lagging behind SKX both in terms of
growth and trend. WWW also has lower average margin than industry which could mean firm
is under-pricing.
Though the trend in operating margin of WWW is somewhat declining, yet comparatively, it
is better in growth than SKX and industry on average. Just like operating margin, net margin
for WWW is also resilient but SKX margin has rising trend, much better than WWW. However,
WWW has on average, better net margin than SKX and industry both, showing better
management performance and cost control. On average, WWW has better margins than
industry and SKX.

Activity/Efficiency Analysis
Total asset turnover for WWW is not much promising both on trend and growth basis,
individually as well as comparatively vs SKX and industry alike. Its average figure is much
less than industry, meaning WWW isnt using assets efficiently and there can be
management or production problems.
On average, WWW has low account receivable turnover than SKX and industry, meaning it
may be facing problems in collection or either being too lenient in credit policy, whatever
the reason is, WWW is bearing an opportunity cost for long collection period.
Inventory turnover ratio is however, satisfactory for WWW vs SKX and industry both. It may
be interpreted as effective inventory management however it can also be due to low
inventory levels which can cause production disruptions.

Liquidity Analysis
Current ratio result of WWW has remained positive and higher than industry and SKX on
average but the trend is declining. This trend can be a cause of concern for lenders of WWW

but for shareholders, lower ratio is preferable since with lower ratio more of the firms assets
can be used for business growth.
Though, quick ratio has remained above SKX and industry in average but its trend is
declining. It means if this trend continues than there might be some problem in paying short
term liabilities in worst case scenario.
On average, WWW cash cycle is higher than SKX and industry both, which means it is short
in working capital, more cash tied up in inventories and receivables, which arises the need
for short term borrowing.

Solvency Analysis
All solvency measure for WWW show, higher debt level than SKX and industry, since the
average debt/equity and long term debt/ equity for WWW is above one while SKX and
industry has below one average. Higher debt levels are much riskier for Wolverine in long
term; it also shows that firms shareholders dont feel it profitable to invest in the companys
projects, so creditors are financing firms operation. New creditors should be cautious since in
case of liquidation junior creditors get less, usually. Higher equity multiplier for WWW means
creditors have invested more than investors in companys assets.

Higher multiplier also

means, creditors own more than investors of firms assets.

Valuation Analysis:
On average, WWW has lower PE than SKX and industry, which depicts poor health of
company in current and future expectations.

Less PE also means less attraction for

investors.

Recommendations
Wolverine has performed well in profitability, liquidity and return wise analysis but serious
measure needs to be taken to bring effectiveness and efficiency in managing inventory and
receivables. Debt level must also be bring in control since it will pose serious threat to
companys long term existence, plus Wolverine is relying on more expensive source of

financing. These deficiencies are ultimately reflecting in share price and PE ratio as well.
Investors may shun Wolverine if these measures are not taken in future.
Skechers on the other hand, needs to improve in profitably, and liquidity but it is performing
well in activity and solvency side plus it is offering better future investment prospects as
reflected in higher PE ratio.

Appendix

ROA
20.00%
15.00%
WWW

10.00%

SKX

5.00%
0.00%
1

-5.00%
-10.00%

ROE
WWW

SKX

21.31%
12.54%

16.86%

14.19%
12.24%

11.93%

12.66%

5.59%
1.03%
1

-7.56%

GPM
48.00%
46.00%
44.00%
42.00%
40.00%
38.00%
36.00%
34.00%
1

3
WWW

SKX

OPM
15.00%
10.00%
5.00%
0.00%
1

-5.00%
-10.00%
WWW

SKX

NPM
10.00%
8.00%
6.00%
4.00%
2.00%
0.00%
1
-2.00%

-4.00%
-6.00%
WWW

SKX

Asset T/O
1.8
1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0
1

3
WWW

SKX

Current Ratio
4.5
4
3.5
3
2.5
2
1.5
1
0.5
0
1

3
WWW

SKX

Quick Ratio
3.00
2.50
2.00
1.50
1.00
0.50
-

3
WWW

SKX

Cash Conversion Cycle


160
140
120
100
80
60
40
20
0
1

WWW

SKX -

Total Debt/Equity
3.5
3
2.5
2
1.5
1
0.5
0
1

3
WWW

SKX

Equity Multiplier
4.5
4
3.5
3
2.5
2
1.5
1
0.5
0
1

3
WWW

SKX

Long term Debt/Equity


2
1.5
1
0.5
0
1

3
WWW

SKX

10

P/E
120.00
100.00
80.00
60.00
40.00
20.00
-

1
(20.00)

3
WWW

No. of Years
Wolverine
Skechers

SKX

2011

2012

2013

2014

2015

vs

Avg.

Industry
Average

5.78
%

Management Effectiveness
Return on Assets
%
WWW
SKX

14.48
%
5.27
%

3.09
%

3.83
%

5.31
%

5.02
%

6.35%

0.71
%

3.89
%

8.29
%

11.33
%

3.79%

21.31
%
7.56
%

12.54
%

11.93
%

14.19
%

12.66
%

14.53
%

1.03
%

5.59
%

12.24
%

16.86
%

5.63%

39.18
%
45.45
%

39.34
%
43.70
%

Return on Equity
%
WWW
SKX

11.3
8%

Profitability Analysis
Gross Margin %
WWW
SKX

39.51
%
39.12
%

38.80
%
44.05
%

39.84
%
44.58
%

39.38
%
45.29
%

40.2
7%

EBIT Margin %
11

WWW
SKX
Net
Margin %

12.08
%
5.37
%

9.43
%

9.00
%

9.85
%

8.87
%

9.85%

1.42
%

5.05
%

8.76
%

11.11
%

4.19%

8.75
%
4.18
%

4.92
%

3.73
%

4.82
%

4.56
%

5.36%

0.61
%

2.95
%

5.82
%

7.34
%

2.51%

4.39
%

Income

WWW
SKX

2.10
%

Activity Analysis
Total
Turnover

Asset

WWW
SKX

1.654
55
1.258
75

0.946
78
1.195
55

1.027
8
1.349
03

1.077
15
1.548
03

1.087
71
1.697
36

6.406
08
9.167
1

5.721
43
8.043
96

7.160
04
8.434
64

7.768
99
9.584
17

8.801
83
10.25
62

3.677
86
4.338
51

2.877
33
3.102
11

3.620
3
2.947
79

3.974
83
3.215
88

3.717
69
3.208
9

7.697
71
4.097
3

11.69
38
4.054
2

11.10
84
3.971
84

8.460
19
3.986
9

3.059
2.540
87

2.869
52
2.721
72

1.16

2.10
507

1.41

Accounts
Receivable
Turnover
WWW
SKX

7.17

19.0
466

9.10

Inventory
Turnover
WWW
SKX

3.57

2.80
195

3.36

Payable Turnover
WWW
SKX

9.74

4.03

Liquidity Analysis
Current Ratio
WWW
SKX

4.267
58
2.876
66

3.366
43
3.214
29

3.395
08
3.269
51

3.39

1.96
226

2.92

Quick Ratio
WWW
SKX

2.71

1.91

2.09

1.84

1.55

2.02

0.53
593

12

2.14

2.06

2.12

1.64

1.65

56.97
71
39.81
63

63.79
53
45.37
57

50.97
74
43.27
39

46.98
16
38.08
37

41.46
86
35.58
84

99.24
25
84.13
04

126.8
54
117.6
62

100.8
2
123.8
22

91.82
79
113.4
99

98.17
92
113.7
46

47.41
67
89.08
31

31.21
32
90.03
01

32.85
79
91.89
69

43.14
32
91.54
97

143.2
32
73.95
46

120.5
84
77.06
55

105.9
52
59.68
59

96.50
46
57.78
47

1.92

Avg. Days Sales


Out.
WWW
SKX

19.2
575

52.04
40.43

Avg.
Days
Inventory Out.
WWW
SKX

1
03.38

130.
488

1
10.57

Avg.
Days
Payable Out.
WWW
SKX

51.6
03

38.66
90.64

Avg.
Cash
Conversion Cycle
WWW
SKX

1
16.57

98.1
43

67.12

Solvency Analysis
Total Debt/Equity
WWW
SKX

0.471
79
0.436
25

3.061
52
0.458
2

2.116
47
0.437
43

1.670
04
0.476
86

1.520
99
0.488
23

0.085
75

1.896
54
0.139
83

1.303
42
0.118
88

0.910
55
0.013
3

0.828
19
0.050
11

1.471
79
1.436
25

4.061
52
1.458
2

3.116
47
1.437
43

2.670
04
1.476
86

2.520
99
1.488
23

1.77

0.51
947

0.46

LT Debt/Equity
WWW
SKX

1.23

0.40
371

0.08

Equity Multiplier
WWW
SKX

2.77

1.46

Valuation Analysis
P/E
WWW
SKX

1
2
3
2
1
4.03
4.69
3.62
2.16
3.70
21.64
102.8 30.66 20.24 19.86
8.782 33
67
18
84
32.97

22.7

13

References

www.morningstar.com
www.yahoo.finance.com
www.strategiccfo.com

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