Blake Krueger, chairman and CEO, and Brendan Hoffman, president, of Wolverine Worldwide
No one has been immune to the effects of the Covid-19 pandemic. Every company has been forced to react, adapt and pivot amid the radicalized new normal being ushered in at warp speed. Startups to multi-branded conglomerates—even ones with roots dating back 138 years like Wolverine Worldwide—are charting a course through this unknown storm and onto a (hopefully soon) steadier, post-vaccine world. Companies have been making this journey with varying degrees of success along with, sadly, plenty of casualties. As for Wolverine Worldwide, an aircraft carrier of 12 brands with ports of distribution in 170 countries, CEO Blake Krueger reports, all things considered, the company is in shipshape condition.
Now just how is that possible during the most tumultuous time in industry history? First, Krueger assures it hasn’t all been smooth sailing; the company has faced never-before-seen challenges and changed tack repeatedly. “We’ve had to act with real decisiveness and speed, and make hard decisions along the way,” he says. “It’s tested everybody’s ability to be flexible, adapt, acquiesce, make decisions…and if you make a bad one, course correct, because operating at a normal pace and historical timetable certainly has not worked during the last nine months.” Such proactiveness, Krueger says, has been key to weathering the storm. “One of our internal mottos during the past year was, ‘Do not waste 2020. Use it as an opportunity to get ready for 2021,’ and I think our team did that pretty well,” he adds.
But Krueger cites another big advantage as to why Wolverine has come through this pandemic relatively unscathed: He believes the company has had a couple of years head start, thanks to its Wolverine Way Forward initiative, introduced in 2017. The companywide transformation plan set it on a consumer-centric course guided by two pillars, product innovation and ecommerce. Both have dovetailed seamlessly with the way many consumers have been shopping since the pandemic hit.
The latter might seem like a no-brainer because that shift was well underway, but no one foresaw the massive spike in online shopping that occurred this past year. Even so, Wolverine’s portfolio was much better prepared, thanks to its ramped-up DTC channels and established online partners. As for the rewards reaped from a focus on product innovation, Krueger admits that’s been a “happy” surprise. “We initially thought this would be a time when consumers would fall back on brands and products that they knew but, throughout the pandemic, the consumer has been doing things they’ve never done before, exploring new brands and trying out new products,” he says. “Our decision early on in the pandemic to keep the pedal to the floor on product innovation, freshness and bringing something new to market has really paid off for us.”
It helps that Wolverine’s portfolio aligns well with several macro lifestyle trends that have been enhanced by the pandemic. The company stable leans heavily on the outdoor, work and comfort spaces, which parallel the current pursuits and needs of millions of consumers. “This big shift to wanting to be outdoors (hiking), running and nesting, plus the need to still work, has created some great tailwinds for a number of our brands,” Krueger affirms. “Those categories have been exceptionally strong, and studies show a very high percentage of people who started hiking or running are going to continue that activity in the future.”
Recent evidence includes the third quarter’s double-digit revenue growth by Saucony and Chaco as well as strong gains by Merrell, Wolverine, Cat and Bates that, overall, has contributed to near a record amount of liquidity. “I’m very proud of the team, as we generated almost record amounts of cash, which is something that’s been almost unheard of in consumer softgoods this past year,” Krueger says. In addition, Wolverine’s DTC sales grew 56 percent over the prior year period and the company stated a bold goal of hitting $500 million in such sales in 2021—just over double what it achieved in 2019. Helping the company hit that target is recent hire Matt Blonder as president of Global Ecommerce. Blonder has 20 years of digital merchandising and marketing experience, most recently as Global Head of Digital for Reebok. “He’s already making a difference,” Krueger enthuses. He expresses similar excitement about the addition of Hoffman as president and CEO-in-waiting in August (most recently he was CEO of Vince Holding Corp. and prior to that he headed up Bon-Ton Stores and Lord & Taylor) and the naming of 23-year company veteran Jim Zwiers to president, Global Operations Group last month. “Brendan brings a fresh view and skillset to the business and Jim is exceptionally knowledgeable,” he says. “We like our team, and I believe we have one of the best and deepest in the industry.”
Krueger credits his team of heavy hitters for helping power through the pandemic. Such proactiveness, he says, has been another key to the company’s success this past year. “We just try and stay humble and bring on people who are better than us. If we do that, then they’re going to help us with future success,” he says. Adds Hoffman, “We’ve been very focused on what needed to get done—that includes the safety and security of our people—but also recognizing there’s opportunity that comes out of this crisis and making sure we took advantage amid their acceleration as we reimagine what this will look like on the other side.”
Going forward, Krueger envisions continued great transformation that shows no signs of slowing. “I think five years of consumer change has been compressed into nine months, and that’s going to continue,” he says. “Certainly, as a company, we’re not planning on any kind of return to a historical norm or the good old days. It will be a time of great continuing change—at the consumer, company, political and global levels.” Still, Krueger believes opportunity abounds—within Wolverine’s existing portfolio as well as in possible additions. The team did the work to get through 2020, and that puts them in a position for growth and potential acquisitions. “A lot of our people spent a huge chunk of time dealing with the pandemic in the day-to-day sense, but there was another group that always had its eye on 2021 and beyond,” Krueger says. “So as tough as the year has been, I’m optimistic about our future.”
In fact, Krueger’s downright bullish on Wolverine’s prospects over the next five years. “It’s clear we’ll have some $1 billion brands—Merrell, Saucony and Sperry,” he says. “Our business overall will be twice as big and hopefully twice as successful.” For his part, Hoffman is relishing the opportunities that await Wolverine. “Anyone of these brands on their own would have been a great opportunity, but to have them all under one roof and our eyes open to opportunities to add, I’m a kid in a candy shop.”
Is this pandemic the ultimate challenge you’ve faced in your careers?
BK: Well, I’m old, so I’ve seen a lot. I was around on Black Monday for the ’87 financial crash. I saw a number of countries’ currencies collapse in the late ’90s. In fact, I was in Moscow and over night the Ruble went from 6 to 1 to the U.S. dollar to 24 to 1! Image the panic that caused. Then there was the dotcom burst, the Great Recession…but this is probably, on a global basis, one of the toughest challenges that I’ve faced.
BH: It is, and that’s with the appreciation of living through 9/11, too. This is a once-in-a-century pandemic and just the dramatic way it’s changed all our lives…I don’t think anyone would have believed it ahead of time.
Is there a light at the end of this tunnel?
BK: There is, and there’s one word for it: vaccine. I’ve been on a statewide committee (Michigan) of medical experts and CEOs for nine months trying to provide guidance to companies, and it’s pretty clear to me that if we were going to go through the next six to nine months without a vaccine, it would be doubly horrible. So I would advise people that if you get the offer for a vaccine, take it.
What are your goals for this year, despite all the uncertainty that remains?
BK: First off, we quickly got through the survive phase in 2020, and that enabled us to focus on thriving with an eye on 2021. So we think we have lots of opportunities across our portfolio. While we know there will be challenges with consumers and retail on a global basis, we view this year as an opportunity to deliver some accelerated growth for our brands. We’re lucky to have brands in hiking, running, work and health and wellness that have real tailwinds now. That’s what we’re focused on.
So you’re optimistic about 2021 for the company as a whole?
BK: I feel very optimistic. I’ve always tended to be a glass is half full guy, but when I look at how the consumer is evolving and how dynamic the global marketplace will be, there are just lots of opportunities for our brands. Plus, one of the big benefits of a business like ours is we run a portfolio of 12 brands. While it makes for a very complex business model—half of our pairs are sold outside of North America in 170 countries around the world—it also takes risks out of the equation in a macro sense. We’re not dependent on any single brand, consumer trend or geographic territory to deliver for our stakeholders. That’s why, for us, it’s really a time of huge opportunity.
BH: I couldn’t be more excited about the future of Wolverine and our brands. We’ve come through the pandemic well, and what Blake and our board already put into motion prior with the pivot to DTC and product innovation has only been accelerated through the pandemic. So this shift from having to worry about survival to thinking about the future…Wolverine was able to do earlier than most and given us a nice head start. So I’m super excited about what it means for Wolverine as we get through the pandemic and beyond.
Is there one particular region of the world that bodes well for growth?
BK: Of course, the Asia-Pacific region is one, but the recovery from the pandemic is very varied country by country. Some are still under severe lockdown while others are doing pretty well. But if you just look at the consumer base and consumption of luxury goods, then you have to be focused on that region. A pleasant surprise for us in 2020 was our European operations. Despite the early challenges with several countries going into lockdown, we had an excellent year. We think that is going to continue. Latin America, however, has been severely challenged, not just with the pandemic but a number of countries have shifted to the left, and historically that hasn’t been good for the people or business in general. The recovery there might take a little bit longer.
Will the new administration make a big difference?
BK: In the short-term, not much. We have 50 states that are trying to roll out the vaccine with 50 slightly different approaches and even different approaches within states. But I think everyone is getting smarter and has the best intentions, and we’ll eventually get there. Personally, I believe the new administration is going to move to the center, and whenever that’s happened, it’s been pretty good for the country overall.
For starters, it should improve trade relations with China, no?
BK: There’s some overriding issues with China where trade has been the tool. Whether it’s dealing with 5G for the world or with the theft of intellectual property, those are the bigger issues some companies have with China. The trade war that has gone on, which I don’t really agree with certain aspects of, is just a means to try and deal with some bigger societal issues. But we started shifting production out of China five years ago, mainly because you can’t have that many of your eggs in one basket. I’d say it’s fallen by more than 50 percent as we’re now sourcing a lot of from Vietnam as well as Bangladesh, Indonesia, Malaysia and a few sources in the Western Hemisphere, like Turkey. It makes for a much more complicated supply chain that, due to the pandemic, is currently under a lot of stress. Getting that a smooth, functioning asset again has been a little bumpier than most people expected. For us, fortunately, being in multiple factory groups in multiple countries has made it a little bit easier. But I think it’s going to be a little while before the industry supply chain gets back to what I would call normal. And it’s not just the footwear industry. If you look at the fleet of ships that are currently at anchor outside of Long beach, CA, trying to get goods into the United States…it’s like a small navy.
Are retailers, by and large, in need of inventory, because I hear extremes of too afraid to buy anything to some wholesalers recently reporting their best (regional) show in years. Which is it?
BK: My belief is inventory overall is a little light at retail now. What’s more, I think over the last nine months the consumers’ interest in fresh product and innovation has been extremely strong, which took some in the industry by surprise. Some retailers have woken up to the fact that, ‘Boy, I do need some newness, freshness, color, innovation…that’s what my consumers are clamoring for.’ Now, to be fair, many retailers were working through the survival phase. How much cash do we have? How long will my stores, or some of them, be closed? Those are difficult questions. That said, I believe there’s some pent-up demand right now, especially for some newness and freshness.
Taking into account the explosion in online shopping, what might the future be for physical stores?
BK: I think stores are going to remain very important. There will be fewer overall and they’ll have to evolve, depending on the brand or the brands that they carry, but the consumer above all is expecting a seamless experience across all platforms. Whether it’s catalogs, stores, online…consumers want a seamless experience. In the meantime, I believe there are still plenty of consumers, like me, that can’t wait to walk the mall again.
BH: I think stores in the right categories will still be important. I also certainly think an appropriate number of physical stores alongside DTC enhances that relationship with the customer.
At the very least, there’s an opportunity to welcome consumers back and, therefore, an opportunity to enhance that in-store experience?
BH: You are seeing it now—retailers are throwing a lot up against the wall to see what sticks. Some of the specialty retailers in the athletic and the farm and fleet spaces have gained a lot of momentum with different ways to interact with their customers, be it online and pickup in-store, curbside pick-up, endless aisles, etc. I think those are the retailers that are going to continue to win.
BK: Fundamentally, retailers are going to have to start serving up the dog food that the dogs want to eat. For example, we’ve got a great retail partner in DSW that’s made a dramatic shift from a large percentage of dress and dress/casual into athletic and comfort. They did that fundamentally because that’s what their customer is interested in, and probably will be to a greater degree into the future. I think you’ll see retailers trying a number of new things and number of new categories—focused always on the consumer.
Is how consumers live day to day the biggest change due to the pandemic?
BK: The biggest change is in consumer behavior, for sure. People going online and expecting their groceries to be delivered. Order and pickup. Consumers, right now, shy away from crowded places. There have just been a number of trends accelerated in consumer behavior that impact everything, and that is going to continue. I think the consumer responded very quickly, and maybe not always unexpectedly, but it’s going to continue. It’s a time of great change, great stress and also great opportunity. Everything is just transformed, and change is here to stay.
BH: The way we work and travel will be forever changed as well. I never would’ve imagined, for example, how productive we’ve been working remotely. While we’re desperate to get the offices fully open when it’s safe, Zoom has transformed the way we work and travel. For example, the company did a great job pivoting its global brand conference last spring from this massive, in-person event to completely digital and replicated that even better in the fall. And while we look forward welcoming our partners from around the world again, there’s no question there have been aspects that we’ve been able to accomplish digitally that we’ll enable us to be nimbler in the future.
Yet you want employees to return. What’s missing in working remotely?
BH: You can be productive on Zoom, but you miss the informal meetings at the water cooler and the cafeteria line. You just don’t have the same body language on Zoom. I also think it’s hard to mentor younger people if it’s all on Zoom. What’s going to happen to that next generation if it’s all remote? I remember how much I was influenced when I started 30 years ago by the people a generation older than me, and I just don’t know if you are able to accomplish that in a remote world.
BK: While I don’t think we’ll ever get back to having as many people in the office as we used to, I agree with Brendan that for our industry the physical interaction in the creative areas—marketing, product development and innovation—is hard to do as efficiently and effectively on Zoom. So some functions will have to come back. My big fear—and I’ve read lots of articles and spoken with lots of people who say we never need an office again, we don’t need to be together, everything can be done on a computer pad…but I’m concerned about culture. I think when everybody is working remotely for this extended period of time it starts to chip away at your culture.
What about the indsutry coming together at trade shows?
BK: Probably, it’s still important, but less important than before. I believe trade shows are good overall. I’ve never been to one where I didn’t see or learn something new. It’s like walking retail, right? Every time I’ve spent time in stores, I’ve always come back with a couple of new ideas—and once in a while some of them even good! I think trade shows are like that. But are they going to be the end-all? Or are they going to morph into something else? I think they probably will morph.
Do you envision any consumer normalcy coming back this year, provided the vaccine rollout is successful?
BK: I’m not sure if normal is going to exist again. I think we’re going to continue in this time of extended and accelerated change. It is what it is and, five years from now, we’ll look at whatever that new normal is.
Do you envision adding to the brand portfolio?
BK: We’ve had great success over the years bringing brands into the company and plugging them into our international distributor network and letting them benefit from our centralized centers of excellence. When we bought Merrell, for example, it was a $23-million business that was losing money. Today, it’s over $600 million and growing rapidly. We have a lot of liquidity right now, so we’ll probably continue to be active in the acquisitions market, certainly kicking tires and taking a look at businesses and brands.
Do you feel like the management team is pretty set set for the next few years?
BK: Well, when you operate 12 brands, I don’t need one great head of product, I need 12 great heads of product! The same for marketing, international leaders, etc. But one of the nice advantages we have on the people side is you can come into our company and spend your whole career here, working in different geographies, for different brands, take on new responsibilities, etc. You can advance your career without ever having to leave, and I think that’s been a key advantage for us. We’ve got a great team of people now—one that I can’t wait to bring back together on a regularly basis.
Blake, your personal five-year plan is?
BK: Eventually Brendan is going to succeed me as CEO. We don’t have an exact timetable on that, but when the time is right, the time will be right. I will continue to be with the company in some role for a period years after that. In the meantime, Wolverine and the industry are going to go through a lot of change these next five years, and I’ll be here to help out in any way I can. My ultimate goal is to make Brendan more successful than me. Nothing would make me happier five years from now if people said, “Who was Blake? We have Brendan…”
Well, perhaps they’ll be referring to you as a successful children’s book author by then. (See side bar, p. 12)
BK: That would make me very happy! It’s hard to believe, but I’ve been CEO since early 2007, and that’s twice as long as each of my two predecessors. But I’ve never had so much fun, and I still enjoy coming into the office every day, which I’ve done pretty much throughout the pandemic, by the way. I love product and I’ve always have. What I also love about this wonderful industry is the people that I’ve gotten to know through Two Ten Foundation, FDRA, the FFANY board and across the industry. The friendships that have been formed over the last 30 years as I have travelled the world are very special.
BH: So far, the people I’ve met here, albeit mostly on Zoom, have been fantastic. I’m really excited about the way they’ve welcomed me and I’m enthusiastic to get to know them and our partners around the world. Normally, as Blake mentioned, we would’ve flown around the world twice already to meet with them, but I can’t wait to work with them closely on such great brands. •
A Time of Opportunity
Blake Krueger, chairman and CEO, and Brendan Hoffman, president, of Wolverine Worldwide