Wolverine World Wide Inc – Brand Positioning Amid Retail
Apparel & Footwear Recovery – 25 June 2021
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Specialist:
Title:
Moderator: Nyree Hinton (NH), Third Bridge Sector Analyst
Gene McCarthy (GM)
Former President, The Merrell Brand at Wolverine World Wide Inc
Agenda:
1. Wolverine World Wide (NYSE: WWW) portfolio update across branded footwear, apparel and
accessories
2. Supply chain obstacles
3. Inventory management
4. E-commerce sales outlook
Contents
Q: Could you outline the background trends and drivers playing out across the key footwear and apparel
subcategories that Wolverine plays in?
3
Q: Could you elaborate on the emergence of lifestyle brands? What does it mean to successfully market to or
innovate within comfort?
4
Q: What are the key challenges facing the footwear industry, given you noted it’s slightly recession-proof? 4
Q: Could you break down Wolverine’s business by geographies and categories?
Q: How has Wolverine’s performance amid the pandemic compared to footwear industry peers? Do you
think the company was disproportionately impacted due to its portfolio positioning, or did it fare alright?
Q: How should we frame Wolverine’s promotional activity, as we consider its offerings and customers?
Q: How would you characterise Wolverine’s innovation? You suggested it’s a manufacturing company in its
roots. How has it tried to innovate, and what has it reverted to when it’s been trying to recapture customers,
whether buying brands or seeking outside help?
4
5
5
6
Q: How would you grade Wolverine’s ability to secure a higher price point with premium, higher-end
athletic shoes? How would you describe its presence here, perhaps drawing upon your background at Nike? 6
Q: Could you outline Wolverine’s brand leadership in any of the categories it operates in, and how its brand
affinity has changed over the years? Is the company continuing to lose share and name recognition? Is it at a
standstill or are you bullish on the opportunity given its leather capabilities?
7
Q: Do any specific brands across the portfolio stand out as critical to Wolverine’s future success? Conversely,
7
which brands might not make strategic sense within the company’s capabilities?
Q: Could you describe Wolverine’s international presence, particularly in Asia? How would you characterise
its ability to think outside North America? How should we frame this strategy and its success?
8
Q: How has the distribution landscape evolved over the years? What are companies or brands doing to keep
up with the changing distribution landscape, and are they keeping up successfully?
8
Q: You referenced Nike pulling out of some bricks-and-mortar stores such as DSW, but you also suggested
Wolverine won’t necessarily be able to increase its shelf space there. Could there be an opportunity for
smaller, strategically savvy brands and upstarts to fill the void left by Nike?
Q: Are there any wholesale customers Wolverine must maintain a relationship with? If it were to recognise
the distribution shift and adjust accordingly, would it be too entrenched in some partnerships to exit?
9
9
Q: You said some of the best footwear companies are essentially marketing companies that sell sneakers on
the side. How has Wolverine utilised marketing spend in comparison to peers with low marketing budgets? 10
Q: What’s the right way to engage with today’s consumer and keep up with some of the trendier brands?
10
Q: How has the digital advertising shift impacted barriers to entry into the categories Wolverine plays in? 11
Q: What other low-cost in-house initiatives could Wolverine potentially utilise, such as leveraging data to
understand consumers? How would you frame its attitude or ability to have a strong data-centred strategy? 11
Q: We’ve discussed the notable core challenges Wolverine faces. Do you think management recognises the
weaknesses in bricks-and-mortar, innovation, e-commerce and international, or is it business as usual?
11
Q: What are the industry implications of Nike cutting off wholesalers and focusing on strict D2C? Might
other brands follow suit? Are any brands successfully building an innovative approach in their own right? 12
Q: Many companies and brands – even some top-tier fashion companies such as Capri Holdings or Tapestry
– seem to be slow to position themselves correctly for the new digital landscape. Why are some players so
slow to adapt to these consumer trends when the core crux of their business is to be on-trend?
12
Q: You suggested outlet shopping is a profit model disguising itself as discount model to consumers. Can you
discuss the false narrative of there being a different consumer for every channel, rather than the same
consumer shopping across each? How might that inform distribution strategy changes?
13
Q: What will be the key characteristics of brand preservation in the new digital age? What do brands need to
13
do to stay competitive, maintain leadership or even grow market share?
Wolverine World Wide Inc – Brand Positioning Amid
Retail Apparel & Footwear Recovery
Transcription begins at 00:00:00 of the recorded material
NH: Welcome to Third Bridge Forum’s Interview entitled Wolverine World Wide Inc – Brand Positioning
Amid Retail Apparel & Footwear Recovery. I’m Nyree Hinton and I will be facilitating today’s Interview with
Mr Gene McCarthy, former President of the Merrell brand at Wolverine World Wide Inc.
Gene, before we get started with today’s Interview, please state I agree or I disagree to the following statement:
You understand the definition of material non-public information and agree not to disclose any such
information or any other information which is confidential, during this Interview.
GM: I agree.
NH: Thank you, Gene. Could you start with a brief overview of your background and the various roles you’ve
held in the industry?
GM: Thank you for having me. I’m Gene McCarthy. I actually have been in the athletic and outdoor industries
for over 40 years. I had 21 years at Nike at the beginning of my career, including four years with the Jordan
brand. I ran the product engine, meaning product creation, for both Reebok and Under Armour in footwear. I
was the Co-president of Timberland and, as was mentioned by Nyree, I was the President of Merrell, which is a
holding of Wolverine, and my most recent run was President and CEO of Asics Americas.
[00:01:19]
Q: Could you outline the background trends and drivers playing out across the key footwear and apparel
subcategories that Wolverine plays in?
GM: The one thing about the industry, let’s call it the footwear industry first, because that’s Wolverine’s main
focus, the industry, obviously, has been slightly, and I emphasise the word slightly, recession-proof over the
years. People just have an absolute love for their footwear. I’m sure people on the call can agree with that.
Footwear, every pair of shoes has a name, T-shirts don’t have names, so footwear is an interesting entity. The
one thing about North America mostly, as well as in Europe, is that the distribution model is shifting quite a
bit. There has always been a focus on bricks-and-mortar wholesale. There is the ever-so-slow emergence of e-
comm and direct-to-consumer, and a lot of brands either are very traditional in how they handle that
transition or are stubborn about it. That’s one thing. The other thing about the industry and the categories is
that while athletic shoes are exactly that, athletic shoes, anywhere from 60% to 80% of athletic shoes are worn
for casual and for comfort. Because of this, fashion industries now have leaned over into this world of, let’s call
it, sneakers and casual footwear, because the dynamic of the office uniform has changed immensely over the
last decade or so. We used to have two wardrobes, a work one and a play now. Now, it’s merged into one, work
and play. Footwear, right now, even though athletic is very dominant in the industry, most athletic footwear is
casual and for fashion or style.
One other thing that I think is important and probably will be a theme throughout this call today is that
comfort has always been immeasurably successful. However, it’s important to note that comfort is very, very
personal, and one person’s definition of comfort is different than another. This is all accelerated due to
COVID, where people became comfortable, needed to be comfortable, and that’s why footwear, even though
there were pullbacks during COVID, many of the brands did okay during COVID because comfort became
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much more pronounced in the consumer’s mind and eyes.
[00:04:09]
Q: Could you elaborate on the emergence of lifestyle brands? What does it mean to successfully market to or
innovate within comfort?
GM: I think there’s this thing about lifestyle brands. Let’s face it, every brand, including Nike and Adidas, all
the big brands, they’re lifestyle brands. They happen to be rooted in athletic and rooted in performance and
some form of technology, but everything is a lifestyle brand. I think that also expands to the brown shoe world,
which is more of the focus of Wolverine. Most of their brands are brown shoe, except for Saucony, which is a
speciality running. I think what’s happened is I think there are a lot of companies that try to be lifestyle, try to
be fashionable when the reality of it is it’s a consumer universe and the consumer decides what lifestyle and
what fashion is. Crocs is a great example. Crocs was started as a gardening shoe and now is just a comfort
shoe. The consumer made that transition, not Crocs. Ugg was to keep Australian surfers, men surfers, their
feet warm when they got out of the water, and it turned into a fashion brand, particularly for women. Lifestyle
is kind of an ambiguous topic and it can mean many different things to many different brands, as well as to
many different consumers.
[00:05:46]
Q: What are the key challenges facing the footwear industry, given you noted it’s slightly recession-proof?
GM: I think some of the challenges, I’ll go two ways, one is from the marketplace. One of the challenges is that
consumers make up their own minds and they have a very, very low attention span. Trying to convince them to
join your brand has become much, much more difficult than it was 10-20 years ago. The other side, big
challenge, for the marketplace or for the industry, is that while right now many investors are enjoying rising
prices in footwear in the marketplace, that’s really due to the overall economy and not necessarily for the cost
of footwear. The problem is is that sustainable? Then the second issue going into the marketplace, and a
concern, is what will the supply chain go through over the next year to three years, particularly where
manufacturing is done in some countries where health has been an issue, China being one and now it’s spread
to other countries where manufacturing is? I think there’s an uncertainty there.
The last thing I would say is that the demise of bricks-and-mortar, it’s been eroding for years. Some of it was
accelerated due to COVID. If you look at Nike as a core example of the marketplace, Nike just had a big lay-off
about six months ago, hundreds and hundreds of people, including executives. That wasn’t because they’re
doing badly, if you look at their number today that was announced on the stock market, it was because they’re
rightsizing the business, not downsizing it. They will be a direct-to-consumer brand in the next 2-3 years and
going forward, and the wholesale part of their business will become diminished. Without Nike in some of these
stores, particularly Nike is most famous for pulling out of DSW in the United States, that’s going to affect the
casual brands because the foot traffic will then be decidedly lower. If there’s no Nike, then there are no
consumers. Those are some big issues that I see.
[00:08:22]
Q: Could you break down Wolverine’s business by geographies and categories?
GM: Wolverine, of course, is a very long-standing company. I believe it was 1883 when it was founded and it
was founded as a manufacturer. I’ll get back to that in a minute, why that’s important. They’re obviously quite
successful and do the bulk of the business in the United States, North America, but they do have an excellent
presence with some of their brands in Europe, particularly in the UK, and then also in Southeast Asia. The
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categories that they’re in, the entire company focuses on casual. The acquisition of a few brands, the Boston
brands they were called, several years ago, which included Saucony, so Saucony is maybe the one anomaly, but
it is a brown leather source of footwear through many different brands. They also focus on, what I call
industrial, which could include the military but also could include work, so people who are in construction,
labourers or what we call the blood-and-grease business, people who work in restaurants and also in hospitals.
There’s a little bit of fashion in the portfolio of Wolverine, very little. It’s not their core strength, it’s not their
core competency, but they do have some mild successes with it, just because, as I said, the consumers make
that decision. Then, as I mentioned, there’s also one very nice diamond in the rough called Saucony, which is a
speciality name.
[00:10:11]
Q: How has Wolverine’s performance amid the pandemic compared to footwear industry peers? Do you think
the company was disproportionately impacted due to its portfolio positioning, or did it fare alright?
GM: I think I would put them in the category of just above survival. They would tell you they did better
because they had what they thought were robust sales on their e-commerce, but all that really was was just a
shift in the transaction. That wasn’t because it acquired new business or, all of a sudden, people flocked to
their website because it was a cool place to, quote, hang out. I think the big thing with Wolverine is, and I
mentioned manufacturing before, the company operates with a manufacturing mentality. For example, just
internally, the idea of measuring finances is usually done on a weekly basis, even though, yes, they report
quarterly. The reason it’s done on a weekly basis is because that’s how factories operate, on a weekly basis.
There’s some cultural, there’s an inbred part of the culture that focuses on manufacturing when some of the
best brands in the marketplace today are really marketing companies that make shoes on the side. I don’t
think it’s a grand disadvantage for Wolverine, but it certainly didn’t give them a chance, during the pandemic,
to accelerate. If you look at some brands, they just survived the pandemic, some didn’t. If you look at
Wolverine, they did good because they have diversity in their business model. They also did well because
comfort is a part of their core competency, and that, again, was why consumers flocked to comfort brands.
I will say this, Q1 numbers for just about all brands looked really good or pretty good. I’d be cautioning about
that, because, first of all, it was against COVID year, and then, second of all, we’re going to see if the high
prices, which means higher profit margins, will continue. We also have to see this, this is a very important
trend out there as well, there were a lot of people that migrated to brands looking for comfort during the
pandemic that may have never been with those brands before. It’s more so with the running brands. You see a
lot of people who were out, where fitness was replaced by wellness. People were running and jogging for their
mental health as much as their physical wellbeing. I think we don’t know if those consumers are a one-time
purchase, will they be with these brands, including the Wolverine brands, a year from now? I’m a bit cautious
about the longer term, so a year from now.
[00:13:09]
Q: How should we frame Wolverine’s promotional activity, as we consider its offerings and customers?
GM: That was the other thing that I was watching. Whenever you see promotional activity high, that is the by-
product of two things, product that was either poorly designed or not market-right or the second one is the
inventories are too high. I think promotional activity is also very much a part of the marketplace, that’s why
the outlet business model, which Wolverine is pretty well-established in, is actually a profit model but it’s
disguised as a discount model because that’s how consumers shop and that motivates consumers. I would say
this, Wolverine is incredibly well-sourced in Asia, particularly in China and Vietnam, so their relationships
there are strong. When there was a shift in manufacturing because of COVID and those countries were shut
down and didn’t make product, I think Wolverine was smart enough to leverage whatever they had to make
sure when they opened back up, that they got what they needed. Back to the promotional activity, and I
mentioned earlier about inventories, there was a problem, when stores closed, nothing sold, so that means all
Private and confidential 5
businesses, including brands, had high inventory. Then, when stores opened up again, those inventories went
down, but the question is were they the right inventories, were they the right colours, were they seasonally
right, and all that? You can’t change your inventory quality while it’s just sitting there. That’s part of the supply
chain flow. I think with their promotional activity, it’s always been a part of how they do business, but they
also, internally, they run themselves financially quite well.
[00:15:16]
Q: How would you characterise Wolverine’s innovation? You suggested it’s a manufacturing company in its
roots. How has it tried to innovate, and what has it reverted to when it’s been trying to recapture customers,
whether buying brands or seeking outside help?
GM: First of all, Wolverine is not necessarily aligned with the idea of technology or innovation. Those are two
different things by the way. Where they have been successful over the years, and I’m curious if it will continue
is that they are also the manufacturer of leathers. That has always been a point of differentiation for
Wolverine. While it’s not a technology or an innovation, the fact that they can use leathers in very interesting
ways, as well as control the cost of leathers compared to many of their competitors, that has been an advantage
for them.
The other thing about Wolverine, I think this is really important, is they’re based in Michigan. Unlike, I’ll use
the athletic industry as an example, you have Portland, Oregon that has Nike, Adidas, as well as tons of small
companies. Columbia is there, a whole bunch of companies are there. Boston, Massachusetts has a ton of
brands. Saucony is there, New Balance, my company, since I moved it there for that reason. They’re a lone
wolf in Michigan. One of the problems is recruiting talent that can maybe help them take a leapfrog out of this
casual business into a much more contemporary view of selling casual footwear. Casual footwear, right now,
young people are not gravitating to brown shoes, even companies like Allbirds, who entered the market just a
few years ago, they’ve completely taken off, and their selling point is their athletic-feeling and athletic-looking
and they have a very simple construction. I think that would be something that Wolverine should really work
on, is how can they build design, and maybe not use Michigan as a hub, but let design live where it needs to be.
The world has become smaller, why wouldn’t they do that? They’re very proud of Michigan and I understand
why, I lived there for several years, it’s a beautiful place, but I think it’s a competitive disadvantage.
[00:17:53]
Q: How would you grade Wolverine’s ability to secure a higher price point with premium, higher-end athletic
shoes? How would you describe its presence here, perhaps drawing upon your background at Nike?
GM: That’s a great question. When I referenced Allbirds, whether Wolverine acknowledges it or not, Allbirds
is a competitor. They make casual comfort, and that’s what Wolverine did. The difference is that Wolverine
has always ensconced itself in being a leather manufacturer, so they also tend to compare themselves to other
brands that are leather manufacturers like Johnston & Murphy, for example, which is a holding of Genesco. If
you look at the broad-based footwear market, whether it’s athletic or not, it’s mostly young people making
multiple purchases a year. By young people, of course there are kids, but I’m talking also 18-39 is a big
category, and those kids look at leather as something that their dad or their grandad wore. I don’t see them as
a competitor, but I do say this, their product is very, very well-made and the craftsmanship is exceptional. I
think that’s what they charge for. Really going forward is people aren’t buying materials any more, they’re
buying the idea of footwear on their feet. They’re buying the idea that it’s comfortable. Even if it looks
comfortable and maybe it’s not, if it looks comfortable, it will sell. I just think leather is not going to be the
future.
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[00:19:52]
Q: Could you outline Wolverine’s brand leadership in any of the categories it operates in, and how its brand
affinity has changed over the years? Is the company continuing to lose share and name recognition? Is it at a
standstill or are you bullish on the opportunity given its leather capabilities?
GM: I think having come from a marketing company myself, like Nike, and then coming to Wolverine,
Wolverine considers itself a company. Nike considers itself a brand, and brands have an ongoing dialogue with
their consumers and people belong to brands, want to hang out with brands. Wolverine still believes itself as a
company and they operate, particularly within the industry and not necessarily to consumers, but within the
industry as a portfolio of brands. It’s that diversity that they think is their strength. The company has never
been, and even when I was there, it doesn’t have marketing know-how. It doesn’t know to how to make those
translations. I will say though, within the Wolverine portfolio, Saucony does have a loyal consumer. Merrell,
which I was the President of for several years, definitely has a loyal consumer. Sperry’s consumer, and also like
Merrell’s, is ageing, but there is a consumer there where the name recognition does mean something. Then, it’s
a small business, but it’s an important business, and that’s Bates, which is well-known among the military.
Even when people are discharged, Bates still is important to them and Wolverine is important to them because
they’re familiar with it from the military. Wolverine has to make up its mind. Does it have several brands that
go to seven different consumer segments or does Wolverine itself just consider itself a company, a brand, if
you note the difference?
[00:22:09]
Q: Do any specific brands across the portfolio stand out as critical to Wolverine’s future success? Conversely,
which brands might not make strategic sense within the company’s capabilities?
GM: That might be easier to answer than the first part. I do think Saucony is important. Maybe things are
changing, but when I was there, I always thought Wolverine could leverage some of Saucony’s running
technologies with comfort and different types of materials into the other brands. I haven’t really seen that
happen. I think Chaco is a niche brand. They make sandals. For those who know the Grateful Dead, the people
who love Chaco somehow have a fondness for the Grateful Dead too. I think that’s a great brand. I don’t see
that as growing leaps and bounds over the years, but it will be a good, steady small-growth brand with modest
profits. I think Keds is hit or miss, as is Hush Puppies. There was a time when Hush Puppies were quite
popular, but that was more of a fad than it was sustainable.
Of course, Merrell, I think the biggest challenge with Merrell is it’s a wildly popular brand, they still rely
heavily on several styles, like the Jungle Moc, that have been in their arsenal for, Jesus, over two decades, I
mean over a decade anyway. I just think that brand needs to really focus on how to become more youthful. I
also think that that brand, instead of being casual outdoor footwear, I think they should really, and they’re
trying to, so I give them credit for that, they’re trying to switch into light hiking, which is something that
popped up during the pandemic but I think is a trend we’re seeing that is going to stay for a while. I hope that
answers your question. I look at Hytest, it’s industrial, it’s not hurting anything. The question is, it takes just as
much to run a small brand as it does to run a big brand, I often wonder if just the infrastructure to run these
brands is taking away from their core brands, which I believe to be Merrell, Saucony, Chaco, in a small way,
and Sperry, if they get it right.
I’d like to add one thing to that. I’m remiss by not mentioning Caterpillar and Harley-Davidson. Harley-
Davidson, it’s a licensed brand, so it’s third party, they do have a stronghold in middle America. You can
certainly understand which customer that is, it’s Harley-Davidson, but then Caterpillar, which has virtually
has no real acceptance in America, it’s a fashion brand in Europe and particularly in the UK. I think that shows
you the diversity of the marketplaces and it also shows you how brands can reinvent themselves in different
parts of the world. I think it’s important to note that.
Private and confidential 7
[00:25:24]
Q: Could you describe Wolverine’s international presence, particularly in Asia? How would you characterise
its ability to think outside North America? How should we frame this strategy and its success?
GM: I’ll say this too, just for context for the listeners, there’s something called global brands, meaning your
brand is global, you know who they are, the Nikes of the world, etc. Then, there are international companies.
Asics is another one that I worked for that is an international company, and I put Wolverine in that category.
By that, I mean what they do is they invent things very locally, for Asics, it’s Japan, for Wolverine, it’s the US,
and they try to export them. They’re trying to export Americana, where global brands try to leverage their
product but also have a local flavour and feel. Look what Toyota does in America to Japanese car companies.
They don’t have their television ads in Japanese. I don’t think Wolverine is very, very good at that. They are
very good at selecting partners in different parts of the world, but all those partners really end up doing is
coming to a big trade show twice a year in Michigan, picking out an assortment of products, and then going
back to their country and selling them and then market them on their own. Asia, I think, is a slow burn. I don’t
believe, as my opinion, that thinking out of the box is a core competency of Wolverine. The high level of
executives are from the legal world, not necessarily from the marketing or the product world. I think they just
look at Asia as a place with lots of feet and then the opportunity to get a piece of the pie, and then drive dollars
that way, rather than being innovative and unique on how they approach those markets.
[00:27:41]
Q: How has the distribution landscape evolved over the years? What are companies or brands doing to keep
up with the changing distribution landscape, and are they keeping up successfully?
GM: I have to use North America as the most important market for Wolverine but also to answer that
question. They’re very, very deeply entrenched in the wholesale bricks-and-mortar business, and, of course,
those businesses also have their ability to do e-commerce. For example, if you sell to Dick’s Sporting Goods,
which is a big customer for Wolverine, Dick’s Sporting Goods also has Dickssportinggoods.com. What’s
happened is, while they have these great relationships and you can see the size of the businesses and they grow
ever so slightly each year, they maintain their profitability with these bricks-and-mortar partners, when you go
online, it’s absolutely chaotic because if you were to google a Merrell shoe, for example, Wolverine won’t even
pop up in the beginning. Wolverine just seems okay with just getting the sale, even if it’s through Dick’s, which
I don’t think it’s a bad thing, but it’s not the future. They’re heavily reliant on one segment or two big segments
of distribution. One is called family footwear, which I would liken to what we call sit and fit, where the guy sits
on a stool and measures your foot, puts you in a shoe. Probably the same place your parents took you to, that’s
where you’re now taking your kids to. That breed of retailer is dying. They can’t afford to pay their workers’
medical, etc, so that’s dying. Wolverine is so codependent on that channel, they don’t know how to make the
transition and the shift.
The second one I mentioned earlier, and it’s another version of family footwear, is more of the mass channel,
so when you look at Famous Footwear, DSW, some of those big box chains. That dynamic is changing a lot.
Take DSW, which used to be just more about fashion. It then migrated, because that’s what the consumer
wanted, into comfort, and comfort meant athletics, so the athletic brands who were reluctant to play at DSW
went there in a big way. Now Nike is pulling out. I don’t see Adidas pulling out anytime soon. My point is does
it create an opportunity for Wolverine to get more shelf space? Not necessarily, because the consumer is not
asking for more Wolverine. They’re just going to follow Nike wherever Nike went. I think bricks-and-mortar is
going to be an issue for them. During my time, there was a real tug of war internally, because the question was
was e-commerce a separate business and should it be run as a corporate function rather than have it
embedded in each of the brands? For example, I had the Merrell site, which my team was responsible for
populating with product, but it was a core group of people that ran e-commerce for Wolverine that managed
the front page. The problem is, if I didn’t like the front page and my sales went down, they didn’t care because
they weren’t held accountable for that. My point is they’re all thumbs when it comes to e-commerce.
I don’t mean to use Nike, but I do think it’s something that people really reference. The new CEO, John
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Donahoe, he came from eBay and he’s transitioning this company into a direct-to-consumer company. I think
every brand has to do that, not because Nike does it, because that’s the way the world has got to be. COVID
was a great example to really overinvest in the infrastructure of your e-commerce while divesting, either
organically or deliberately, from some of the less profitable bricks-and-mortars that you were dealing with. It
remains to be seen if Wolverine made any of those sharp decisions.
[00:32:04]
Q: You referenced Nike pulling out of some bricks-and-mortar stores such as DSW, but you also suggested
Wolverine won’t necessarily be able to increase its shelf space there. Could there be an opportunity for smaller,
strategically savvy brands and upstarts to fill the void left by Nike?
GM: Yes, there’s no question. I think that’s right. However, I would caution that, let’s say the smaller brands
go and they get the shelf space that Nike has vacated. After six months, if that product doesn’t sell, either
because the product wasn’t right for that environment or because foot traffic has been affected, then those
brands won’t be there six months later. It could be a revolving door with that shelf space. I would be cautious
about just really going after this vacated shelf space. Is it right for the venue, as I said, and will there be foot
traffic?
The smaller brands are the ones to keep an eye on, and I have referenced, for example, I’ll give you a fashion
brand name, Steve Madden. Steve Madden, in some regards, is a competitor. Even though they focus more on
young girls than anything else, they’re a competitor of Wolverine. They went, during COVID, and purchased a
brand called Greats, which actually is an athletic brand. They see that as cultivating the future for them.
They’re going to see a winding down in their brown shoe business, if you will, and it will move more to the
white shoe business. They’ve invested in that. I would think Wolverine, that’s a great idea for Wolverine to do,
is maybe look at maybe another brand that they could get, not start,but a brand that they could acquire.
Another one that will be a great industry indicator is Skechers. Skechers, of course, has their own stores. They
are terrific genuises when it comes to manufacturing, that’s why their prices are the way they are, and they are
much more nimble in switching mid-crisis, mid-market, whatever it may be, where Wolverine plods along. It’s
really hard to turn that entire steamship, mostly because there are a dozen brands in the portfolio, so they’ve
got a bunch of tugboats rather than one big steamship, like a Skechers. Skechers could also feel some market
share out there right now because they have always focused on comfort. They were successful before COVID
and I think they’re going to continue to grow.
[00:34:48]
Q: Are there any wholesale customers Wolverine must maintain a relationship with? If it were to recognise the
distribution shift and adjust accordingly, would it be too entrenched in some partnerships to exit?
GM: They do have good relationships and good partnerships. The chairman, Blake Krueger, is very well-
known in the athletic footwear industry. I sat with him on several boards in the industry and that prominence
within the industry is really important to him but also to Wolverine as a company, and because of that too, I
think it also puts blinders on those in the industry. Everybody is very transactional, doing business with the
people that sit on the boards with you, including DSW was on some of the boards we were on, and Kohl’s and
JCPenney, God bless them, were on these boards. I think these relationships, when business is good and the
economy is good, the relationships matter. When it’s time to make a fundamental shift in how to do business, I
believe that Wolverine, it would behove them to spend time with some of their critical partners like DSW, like
Famous Footwear, all of those, there are a whole bunch of them out there like that, and try to figure out more
creative ways on doing business, rather than, “Okay. We’re going to sell you product twice a year. We’re going
to ship it to you twice a year. You’re going to sell off what you can. What you can’t, you’ll send back to us.” I
think the dynamic of doing business, it needs a refresher.
I will also add, if you look at some of these small brands that are starting, like an Allbirds, like Greats, which
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Steve Madden bought, they’re not even considering bricks-and-mortar. They’re definitely all about direct-to-
consumer. What they also have to realise, Wolverine, is, if DSW makes a sale for Merrell, while that looks nice,
it would be much more profitable and it would be better for the brand if Merrell made that sale. I do think it’s
a very volatile situation with the large bricks-and-mortar partners right now.
[00:37:07]
Q: You said some of the best footwear companies are essentially marketing companies that sell sneakers on
the side. How has Wolverine utilised marketing spend in comparison to peers with low marketing budgets?
GM: Yes, the marketing budgets seem to be incredibly low. They are still using traditional means of
marketing. For example, I was watching the US track and field Olympic trials to other night, and there was a
Merrell TV ad. Television advertising is not the modern-day to market. While they have a presence on social
media, it’s not compelling. Social media is a very, very inexpensive way to market. You can make USD 1 spend
like USD 3 on social media. Again, this goes back to Michigan and this maybe being a little outdated in their
approach, they do print advertising. I don’t who even read magazines, never mind looks at the ads. I just think
that’s a great way to take their brands, several of their brands and really get it out there. I think that the big
thing that any brand has to do right now is not convince their current loyal consumers to buy more, I think
they need to grow the pie, they need to expand the pie in order to grow the pie. They need to start to talking to
new consumers. One of the things I tried to do, and it was hard to do with a very small marketing budget, how
do I get younger, fresher product to younger, fresher people? The average age of the consumer was going up.
She, as I like to say, was in her late 40s, and, if I’m not mistaken, in a couple of years she’s going to be in her
early 50s. I think marketing is not just to advertise, quote, a shoe and sell a shoe. Marketing is how do you get
people interested in your brand?
I also think Wolverine has some things that they’re very good at, so the old thing about doing well and doing
good, meaning you could do well on a quarterly and grow your dividends for your shareholders, but you have
to do well too, meaning how do you give back to the community? Timberland has always outpaced the other
casual outdoor brands in this. Right now, I think any consumer that is intrigued or interested in a brand,
they’ll always say to you, “We don’t care about your brand and we know what your brand cares about.” I don’t
think Wolverine does a good job of that. I think that is, unfortunately, the way it’s got to be in the future.
[00:39:58]
Q: What’s the right way to engage with today’s consumer and keep up with some of the trendier brands?
GM: I think the consumer has to feel like there is an element of discovery to it and not that they were hit over
the head a thousand times with a brand. We used to call it at Nike, in the very early days, we called it the word-
of-foot advertising. That’s the other thing, how do you just get to critical local heroes in each community and
get them to be brand advocates and brand ambassadors? I think that’s one way. I don’t think they’re very good
at that. I think the other thing too, with getting your name out there, is doing something good and getting
recognition for it. I think old-time marketers would just be like, “We’re going to advertise this shoe,” and then
a week later they’d go, “How many pairs did we sell?” I think right now is, “We’re going to go do something
that’s out of the box.” I went to Sundance Film Festival and did a project with Oculus Rift, which, at the time,
had just been purchased by Facebook. It was to take a virtual trip through the hills, and I did it at Sundance
Film Festival because that’s what movies do, they distort your reality. The whole reason of doing it wasn’t to
sell shoes, I wasn’t chastised for not having shoes to sell at that event, it was more just to get eyeballs and
interest in this brand. I think if I had only one person to hire next year, it wouldn’t be a designer, it wouldn’t be
a leather guy who knows how to work with tanneries, it would be a very, very modern 21st-century marketer.
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[00:41:43]
Q: How has the digital advertising shift impacted barriers to entry into the categories Wolverine plays in?
GM: If you look at the categories, they’re just in the same categories they were in 10 years ago, and if you’ve
ever been to the outdoor industry shows, the one they have every year in Salt Lake City, it’s moved around a bit
but all the brands look exactly the same. It’s a very, very chummy, almost fraternal-type atmosphere in that
part of the industry. Everybody’s just kind of okay with, “Yes, we grew 2%. Isn’t that awesome?” I think that
plagues that industry. The athletic industry is not that way at all. It is cut-throat, and it is highly competitive.
The industry just tries to out-brown itself, everything’s brown. For some reason, plaid is the official colour of
the outdoor industry and the casual industry. I don’t know what plaid has to do with the outdoors, but go look
at any brand, they always have plaid. Everybody tries to out-plaid one another, and I think this idea of just
being in this little circle of outdoor brands is not what global brands do. They play in that arena, obviously.
That’s where they come from, so that’s where your target consumer is, but how do you go out and convert the
consuming target, because there’s a bigger world out there than the one they play in? I don’t know, it’s an
intriguing problem. It does come with money, marketing has never been a priority from a dollars perspective,
and, again, second thing is, how do you make USD 1 spend like USD 3, you have to because the budgets are so
small, that’s not deployed as well.
[00:43:33]
Q: What other low-cost in-house initiatives could Wolverine potentially utilise, such as leveraging data to
understand consumers? How would you frame its attitude or ability to have a strong data-centred strategy?
GM: First of all, it’s a very competent company. Don’t get me wrong. They do have data at their disposal. I
think data is only as good as the way you read it. Data should give birth to an insight. If you’re just looking at
how many pairs of shoes you sold last week, that’s not a good use of your data, and because of that, they’re just
trying to replicate the past and hope that it gets better in the future. Do they have the capability and the
infrastructure? Yes. I never found it, while I was there anyway, to be a place where, “Data is going to give us an
insight that’s going to help us make very bold decisions about being not only in the future but staying ahead of
the industry rather than chasing it.” The competence, meaning the data is there, how you read it is an art form
and I don’t recall that being part of the company culture.
[00:44:57]
Q: We’ve discussed the notable core challenges Wolverine faces. Do you think management recognises the
weaknesses in bricks-and-mortar, innovation, e-commerce and international, or is it business as usual?
GM: They just appointed a new CEO, so I think the jury is out. There are very, very smart people, the current
president in the organisation, the president of Merrell, who I passed in the night. He was leaving Under
Armour when I joined, and when I got to Wolverine, he was there. He’s now the president of Merrell. He’s a
very, very bright guy and does understand this modern way of thinking. I think what has to happen is every
brand needs to operate with some level of independence, as opposed to having a responsibility back to the
portfolios. For example, when I was at Merrell, and we were a large part of the entire portfolio and we also
contributed a lot of profit to the portfolio, some of the decision-making was based on contributing to the
portfolio rather than maybe taking some of that profit and investing it in the future of the brand. I hope the
new CEO will take some of these brands and literally put them on an island, and let them operate in a way
that’s good for the brand, still with some responsibilities and things they have to give back to the parent
company.
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[00:46:27]
Q: What are the industry implications of Nike cutting off wholesalers and focusing on strict D2C? Might other
brands follow suit? Are any brands successfully building an innovative approach in their own right?
GM: Yes, I can answer that a couple of ways. First of all, the reason I referenced Nike, and I’m glad you did
too, is because Nike operates in a stratosphere that’s way above the industry. It’s in another solar system. It’s
up there with Apple and brands like that. Yes, of course, it’s of this industry and they’ve made decisions.
Whether you make Jimmy Choo and make high heels or whether you’re making casual hiking shoes like
Wolverine, the lessons to be learned from Nike and the things that Nike has done to lead the industry have to
be very well-noted. Nike’s whole idea with e-commerce, I remember when I was at Nike, Nike was very slow
getting into e-commerce because they didn’t trust it, and, sure enough, there was the famous dot-com bubble
that burst. Nike is very, very astute at listening to consumers, watching what’s going on. Yes, they get to dictate
the market to a certain degree, but they also give people what they want. Heidi O’Neill, who is in charge of
director-to-consumer for Nike, said the idea behind Nike.com is to create a place where people get to hang out
with Nike. Sure, there’s going to be many purchases, but Nike’s not transactional. It’s just, “Hey, I’m going to
go on Nike today and see what’s going on.” It doesn’t mean you’re going to buy something, but the likelihood
of you buying something in the future has just been heightened because you came to check out something else.
Other brands, I mentioned earlier some of the smaller brands. I have been counselling some young start-ups.
They have no interest whatsoever in going into bricks-and-mortar, and if they do, they eventually will do it
only to have a showcase, just a footprint to show off their brand, rather than to treat it as a place to make a
transaction. I think that dynamic of company-owned stores is shifting for many brands, and Wolverine also is
heavily leveraged there. They have quite a few outlet stores. As an example of how Wolverine has also maybe
looked at it from a portfolio perspective, there was a time when there were hybrid stores in outlet centres
where you could buy Sperry and you could buy Saucony. It’s fascinating because it’s not like Yum! Brands
owning Taco Bell and Pizza Hut, where food is food. People who buy exceptional running shoes are never
usually looking for boating shoes, etc. I think Wolverine, I would take a year of profitability and put it into
building a killer infrastructure on going direct-to-consumer, but have it be a platform to communicate with
consumers as well as to sell the product or, said another way, let them buy your product as a privilege.
[00:50:13]
Q: Many companies and brands – even some top-tier fashion companies such as Capri Holdings or Tapestry –
seem to be slow to position themselves correctly for the new digital landscape. Why are some players so slow
to adapt to these consumer trends when the core crux of their business is to be on-trend?
GM: If you wake up every morning for a long time and have a cup of coffee, it’s really hard to switch to tea.
Even though you know the benefits of tea are there, you’re still going to get up and drink your coffee. I just
think it’s like an industry stubbornness. It’s also some companies are afraid that they might have to take two
steps back in order to go two steps forward, and because of that, they’re reluctant to make those changes.
Some of their early measures of success in bricks-and-mortar, one would be foot traffic. Foot traffic is down
everywhere, including Whole Foods. The other one would be dollars per square foot, that was a measure. That
doesn’t matter any more because rents are rising and you can’t raise the price of your goods at the same rate as
rent is rising. Then the other measurable is conversion. Oddly enough, conversion is slightly up for many of
these bricks-and-mortar guys because people have made their buying decisions either outside the store, on
their phone, on a device, at home, and then they come in and they just pick up what they want and they leave,
so conversion is misleading.
Bricks-and-mortar, I remember we had a trade show twice a year, and the trade show was basically to
showcase our brand to retailers that already bought the product from us, so I don’t know what we had the
trade shows for. We did that religiously because of the commitment to the industry. Then, if we wanted to
open a store, say in New York, as a showcase to the world, it took an act of God to get the store open. I always
treated a store as a trade show, but instead of it being open for four days, it’s open for 363. There are people
going by all the time looking at your brand and occasionally they may buy something, which lowers your cost. I
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think there’s a mentality shift that has to happen with bricks-and-mortar. The other thing is that many
companies have this internal struggle where the e-comm guys are competing with the bricks-and-mortar guys.
It’s ridiculous because the consumer is going to buy the product regardless. There’s not a win-win going on
there. I saw that that at Under Armour and some of the other brands I worked at. What it does is it stunts the
growth of e-comm, because we feel there’s this thing that’s embedded in us that we feel like if we sell it at a
store, it’s a much more important purchase than if somebody bought it online. I think a lot of it is just cultural,
and when you watch all these small brands coming up right now, you’re going to hear about them online, they
have great Instagram pages, Instagram is a great place to sell things right now and a lot of these brands are
just not going there.
[00:53:31]
Q: You suggested outlet shopping is a profit model disguising itself as discount model to consumers. Can you
discuss the false narrative of there being a different consumer for every channel, rather than the same
consumer shopping across each? How might that inform distribution strategy changes?
GM: It’s interesting you bring that up. You just answered the question yourself, so it is this misnomer that
outlet has one type of consumer, and then there’s some guy locked in his grandmother’s basement shopping
online, and then there’s somebody else shopping on the high street. It is all the same consumer. That goes
back to my earlier point about really taking your brands and highlighting and showcasing your brand, because
consumers are loyal to brands, not to channels of distribution. Within brands, there are products, and
consumers because loyal to products. Give Wolverine credit, they do have products like the Jungle Moc at
Merrell, which it’s a religion to have Jungle Mocs, but it’s one marketplace. There are consumers, people,
places, and things. There are consumers, there are things, the shoes that we sell, and there are only two places
to buy them, in a store or on a device, but there’s only one consumer, not two. I just think that lack of
fundamental, I wouldn’t even say it’s an understanding, I think we’d like to think there are just separate
marketplaces because then it gives us more leverage to push or pull when we need a number at the end of a
quarter, but it’s not really true. You said it yourself better than I did.
[00:55:23]
Q: What will be the key characteristics of brand preservation in the new digital age? What do brands need to
do to stay competitive, maintain leadership or even grow market share?
GM: It used to be that all you had to do was make a better mousetrap. All Toyota had to do was have,
whatever it is, the Civic competes against the Corolla, whatever, and they have a bigger cup holder. That’s not
the way it works any more. There are four elements for just being able to enter this marketplace today. One is
what’s in a name? Wolverine is very lucky that Saucony, Chaco, within its scope, Merrell, of course, Sperry
Top-Sider, they’ve got some great names so they don’t have to build recognition. What they do have to build is
brand heat, so name is very, very important. That’s an advantage for them. Number two, I mentioned earlier in
the call, nobody cares about your brand until they know what your brand cares about. I don’t think Wolverine
does a good enough job with that. Saucony was very lucky, they did an excellent job in a horrible circumstance,
with the Boston Marathon bombing, of actually coining the phrase “Boston Strong” and really jumping on it. I
think Saucony has a recognition for caring for something, but some of the other brands don’t. The third one is,
I mentioned the mousetrap, what problem are you trying to solve for? I think what’s happened here,
Wolverine started in 1883 making shoes and every year year they just tried to make the shoes a little bit better.
What problem are you trying to solve for? What consumer need is out there that you’re trying to fill? I don’t
think they view their business that way, but I think that’s important for them and any brand.
Then the last one, of course, is culture. It’s not just culture within your corporate confines, but every brand has
a culture and that culture is hugely important. If you run a modern business, rather than your typical
hierarchical managers and directors and vice presidents, and you empower the younger people in your
organisation, you’ll be able to advance your cause because those people are also out in the consumer world and
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they also have eyes and ears that they bring back to the brand. The other thing about culture, and why it’s
really important, is it’s tough to build a culture when you’re in a place like Michigan. I could say the same
about Timberland, when I was there. They were in New Hampshire. I would say people didn’t love
Timberland, they loved New Hampshire, and I would say the same for Michigan. I don’t think people love the
brands they work for, they just love Michigan, and so there’s more of, “How do I achieve my goals within my
HR perspective so that I can maintain my employment, because I love to live in Michigan?” I think they need
to expand their culture to be a lot more diverse, and I’m not talking about diversity in the traditional sense. I’m
just talking about diversity in thinking, diversity in design, diversity in innovation and marketing.
Then on the other hand, if you don’t pay attention to your culture, Nike has wrestled with culture issues
internally for a while now, and so has Adidas recently. That’s been well-documented in the press. I always said,
somebody asked me at Cornell University when I spoke, they said, “Will Adidas ever pass Nike? Will it ever
beat Nike?” I said, “The only thing that’s going to beat Nike is its culture.” I think Wolverine can build the
culture, but the culture has to be about consumers. I’ve had a mantra for years that says, I did this at the
Jordan brand, “We don’t own this brand. Kids do. We just manage it for them.” I think their culture has to
shift. All of these things are very possible and doable. A lot of it is mindset, it’s not necessarily just
infrastructure, so I just hope that they would wake up and start realising there are things they can do quickly
and then there are things they need to do just to survive.
[00:59:39]
NH: We’ll end today’s Interview. Let me close by saying thank you, Gene, for your input. Fantastic Interview
and we got through a lot of content. Thank you, clients, for joining Third Bridge Forum’s Interview today. If
you would like to speak to Gene in a private call or meeting, please let your relationship manager know.
GM: Bye-bye.
Transcription ends at 00:59:54 of the recorded material
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