PSS Collective Brands, Inc.

Wolverine World Wide Inc. (WWW), one of the leading designers, manufacturers and marketers of branded footwear and apparel, announced the offering of $375 million worth of senior notes.

The company stated that the issue will have the guarantee of its certain domestic subsidiaries, and is scheduled to mature in 2020.

The announcement reflected the company’s strategic approach to utilize the proceeds from the debt offering to fund its acquisition of the Performance + Lifestyle Group business (the "PLG Business") of Collective Brands Inc (PSS). Moreover, the company intends to repay loans under its credit facility with the amount.

Earlier in May, Wolverine announced the acquisition of Collective Brands’ Performance + Lifestyle Group (PLG) unit. The PLG unit sells footwear and related products, both wholesale and retail, for children and adults under popular brands including Stride Rite, Sperry Top-Sider, Saucony, and Keds. 

Moreover, after its dismal second quarter results, it is encouraging to observe the company’s focus on enhancing its portfolio of brands, as the deal will provide ample opportunities to boost its profitability.

The company posted lower-than-expected second-quarter 2012 results, however management maintained its earnings guidance for the current fiscal. Wolverine expects fiscal 2012 earnings between $2.70 and $2.80 a share, representing a growth of 8.9% to 12.9% from the prior year.

Further, Wolverine expects total revenue in the range of $1.46 billion to $1.50 billion for fiscal 2012, reflecting a year-over-year growth of 3.6% to 6.4%.

For the third quarter of 2012, the company expects revenues to be in the low-to-mid-single-digit range, while earnings are expected to remain flat year over year.  

Currently, we are maintaining a long-term ‘Neutral’ recommendation on the stock. However, Wolverine, which competes with Deckers Outdoor Corporation (DECK) and Skechers USA Inc. (SKX), has a Zacks #4 Rank that translates into a short-term ‘Sell’ rating as secular headwinds act as short-term deterrents.

 
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