Wolverine Worldwide is undergoing a profound corporate-level reflection.

Three months after firing its former CEO, Wolverine announced earlier this month that it would restructure its global workforce in response to a 23.7% decline in annual revenue for the third quarter. The company said this move, along with other key initiatives, is expected to result in $215 million in annualized cost savings.

"We are taking decisive steps to stabilize the business, including divesting non-core assets, paying down debt, reducing inventory, and adjusting our cost structure," said President and CEO Chris Hufnagel in the restructuring announcement. "At the same time, we are redesigning the organization to become an excellent global brand builder."

In February, Wolverine sold Keds to Designer Brands, the parent company of footwear retailer DSW, for $123.3 million. Another lifestyle asset, Hush Puppies, was licensed to Designer Brands in the U.S. and Canada effective July 1. Wolverine also sold all its Hush Puppies trademarks, patents, copyrights, and domain names in China to licensee Beijing Jiaman Clothing Co., Ltd. in August for approximately $58.8 million. Meanwhile, its U.S. leather business was sold to New Balance.

The move to find a new home for the heritage boat shoe brand is part of Wolverine's larger restructuring. Previously, the company had placed Sperry in a "drifting" state within its lifestyle division.

In the press release about the sale of Hush Puppies and the leather business, Wolverine Executive Vice President and Chief Financial Officer Mike Stornant said these actions are the latest in the company's "ongoing reshaping of its portfolio and focusing on the most meaningful opportunities," adding that Wolverine will continue to streamline the organization to "be more efficient, thereby directing more resources to growth brands, paying down debt, and enhancing long-term shareholder value."

Hufnagel echoed similar sentiments in the third-quarter earnings statement: "We continue to reshape our portfolio, reduce inventory, and redesign the company," he said, adding that the company is "taking the necessary steps to revitalize our brands."

As part of this reshaping process, Sperry is now metaphorically on the "for sale shelf." Wolverine said in May it was "exploring strategic alternatives" for the brand, a statement repeated in every subsequent earnings report.

Meanwhile, analysts are examining who should acquire the 88-year-old brand.

Data at a Glance

  • $46.2 million: Sperry's reported revenue for the period ended September 30, 2023
  • $78.9 million: Sperry's reported revenue for the period ended October 1, 2022
  • $79.9 million: Sperry's reported revenue for the period ended October 1, 2021

Small but Critical

Matt Powell, senior advisor at BCE Consulting and founder of marketing and merchandising consultancy Spurwink River, believes a bidding war for the brand is unlikely. He doesn't expect a "fierce contest," but rather the brand will fall into the hands of a buyer "taking a more strategic approach to entering a different type of footwear business, or simply entering the footwear business."

Powell said this is because Sperry is relatively small among footwear brands. "Whoever acquires it, this won't be a game-changer for them," he said. "And I don't think (Wolverine) will get a very high price because Sperry's current trend situation is poor."

In recent years, consumers have gradually moved away from the boat shoe brand. In its 2022 annual report, Wolverine said its lifestyle group's revenue decline was mainly due to a $33.4 million decrease from Sperry, and Sperry's third-quarter revenue was $46.2 million, down 41.4% year-over-year. The company also reported $2 million in Sperry store closure costs.

"If I had a few million dollars, I would buy it myself."

— Ben Smithee, CEO of business consulting firm The Smithee Group

However, the revenue decline and retail setbacks haven't affected Sperry's inherent potential, said Benjamin Smithee, CEO of The Smithee Group. "If I had a few million dollars, I would buy it myself," Smithee said. "This is a brand that brands don't know how to handle. But if it were in a fund portfolio, I'd say it contains a lot of 'alpha'."

Smithee noted that Sperry has high brand awareness in the U.S. and appeals to a broad range of fashion consumers. "There are so many things I could do with this brand," he said.

However, Smithee believes Sperry needs to move away from its heritage marketing. "Brands that go the heritage route today rely on that too much," he said. "It becomes their main selling point. They almost think they deserve to exist and deserve your wallet share because they've been around. Very few brands can demand that."

Instead, Smithee said Sperry needs to position itself as a wardrobe essential. "I'd want it to be more like Chuck Taylors, Vans slip-ons, Nike Air Force One, or Nike Air Max," he said. "You know, everyone should have a pair."

But to achieve that, Powell said Sperry needs help. "They've never really been able to diversify away from their core boat shoe category," he said. "They've done other styles, some sold well, but they've never gained real momentum in that area."

Not an Ideal Target for Authentic or Designer

If Wolverine attracts a buyer, it likely won't be Authentic Brands Group — a company known for acquiring distressed brands, Powell said. "I think ABG is more of a brand harvester than a brand builder," he said. "They tend to take brands at the end of their life cycle — Reebok is an exception — and then extract the last bit of value from the brand."

He added that ABG doesn't invest much in marketing and product development, except for Reebok. "If they treated Sperry that way, it might work," he said. "But overall, that's not ABG's core competency."

Smithee agreed: "I don't think Sperry is at the life cycle stage where Authentic would make a move."

Powell also sees some obstacles for Designer Brands acquiring Sperry, though they aren't insurmountable. "With the recent Keds acquisition, they might say, 'Let's get Keds right first, then think about the next one,'" he said. "Because Keds is also a brand that needs a turnaround. On the other hand, opportunities like this don't come around often. So in a way, if you're looking for targets, you have to strike when you see one. I think Designer Brands could be the most logical buyer."

Hitching a Ride with Vans?

VF Corp. — owner of Vans, The North Face, Timberland, and Dickies — could also be a good fit because the company has brand-building capabilities, Smithee said. "North Face is an iconic brand," he said. "Timberland is also iconic. (VF) understands footwear and understands the outdoors. They know how to build brands while maintaining margins and even sustaining premium pricing."

Brian Ehrig, partner in the consumer practice at strategy and management consultancy Kearney, also sees this move as potentially logical. "They have footwear expertise, a global distribution network, and the ability to manage smaller brands," he said in emailed comments to sister publication Fashion Dive. "Their challenge is their low market cap. They'd have to figure out financing, and I think equity financing would be difficult, while debt financing would be expensive."

Additionally, there are the activist investor issues VF has faced recently, Powell said. "They have an activist investor who wants them to stop acquiring and start divesting," he said. "And that investor sounds quite forceful. My gut feeling is they'll be busy reaching a settlement with that investor before considering new acquisitions. I also think it's not a great fit. Most of their products, except for Vans, are performance-driven or performance-related, and I'm not sure Sperry fits that portfolio."

Potential 'Dark Horse' Buyers

On the list of companies unlikely to rescue Sperry, Ehrig places Skechers at the top. "I think they'd create a sub-brand called 'Skerry' first rather than acquire Sperry," he said.

Powell said PVH Corp., which owns Calvin Klein and Tommy Hilfiger, is also unlikely to make a move. "We're seeing a lot of brands considering diversification away from their core businesses," Powell said. "I could see Sperry complementing Tommy and Calvin." However, he said, "They haven't shown interest in entering the footwear space, so I think that's also unlikely."

A possible 'dark horse' is Deckers Brands — owner of Hoka and Ugg, Ehrig said. "It has a portfolio of lifestyle brands like Ugg and Teva, the scale to drive margin improvements, an innovation track record like Hoka, and top-tier distribution capabilities that could help address Sperry's current demand generation issues."

"There are very few brands in American fashion approaching 90 years of history, and Sperry is one of them."

— Brian Ehrig, partner in the consumer practice at Kearney

Private equity is another option. "Besides ABG, there are other harvesting firms, though none with their financial muscle," Powell said. "Caleres owns brands and has been acquiring brands. Would they participate? Maybe."

Powell added that a lot of private equity money is "sitting on the shelf, not being used anywhere, and you might see someone make a move on that side."

Ehrig also believes private equity firms could be very interested in the brand. "There are very few brands in American fashion approaching 90 years of history, and Sperry is one of them," he said. "For the right buyer at the right price, the brand has value to turn it around and reignite growth."

Staying with Wolverine?

Powell said he believes Wolverine will sell Sperry regardless. "Part of the reason Wolverine is eager to divest these companies is to reduce the distraction of owning all these brands, and those that lack synergies with each other," he said. "I think that attitude still exists. The only scenario where I could see them not selling (Sperry) is if the offer is so ridiculously low that they'd be criticized for selling the product or asset at too low a price."

Smithee said that, in any case, Wolverine may not be the best home for Sperry. "They haven't done much direct-to-consumer marketing," he said. "It's mostly trade marketing, so in terms of marketing to consumers, millennials, Gen Z, and Gen Alpha, I don't know if they've done that. I'm not saying they can't; I'm just saying I'm not aware of what they've done in that area. That's why they're in trouble. Even if it's not a funding issue, it's an attention share issue at corporate headquarters."

Nevertheless, Ehrig said Wolverine still has a chance to turn Sperry around. "Why not?" he asked. "Sperry is an iconic American brand. Right now, sneakers and casual shoes are the most popular styles, but if we know fashion, we know that if you hold on long enough, it will come back into style. Look at Crocs. If they can do it, why can't Sperry?"