Greetings, and welcome to the Wolverine Worldwide Third Quarter Fiscal 2020 Results Call. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Brett Parent, Vice President of Strategy, Investor Relations. Thank you, sir. You may begin.

Good morning, and welcome to our third quarter 2020 conference call. On the call today are Blake Krueger, our Chairman and Chief Executive Officer; Brendan Hoffman, our President; and Mike Stornant, our Senior Vice President and Chief Financial Officer. Earlier this morning, we announced our financial results for the third quarter 2020. The release is available on many news sites and can be viewed on our corporate website at wolverineworldwide.com. If you would prefer to have a copy of the news release sent to you directly, please call Francesca Filandro at (646) 677-1814. This morning's press release and comments made during today's earnings call include non-GAAP disclosures. These disclosures will reconcile and be attached tables within the body of the release. During our call, we are providing non-GAAP financial results, for example, which adjust for the impacts of environmental and other related costs, net of cost recoveries, costs related to the COVID-19 pandemic, including severance, credit loss expenses, certain inventory reserves, and other related costs and foreign exchange rate changes. I'd also like to remind you that predictions and projections made during today's conference call regarding Wolverine Worldwide and its operations are forward-looking statements under U.S. securities laws. As a result, we must caution you that as with any prediction or projection there are a number of factors that could cause actual results to differ materially. These important risk factors are identified in the company's SEC filings and in our press releases. With that being said, I'd like to turn the call over to Blake Krueger.

Thanks, Brett. Good morning, everyone, and thanks for joining us. I hope everyone is safe and well. Earlier this morning, we reported third quarter revenue of approximately $493 million, adjusted earnings per share of $0.35 and operating cash flow of over $96 million, all significantly exceeding our expectations entering the quarter. The company continues to successfully execute our digital and DTC-first strategy and the game plan we put in place at the outset of the pandemic earlier this year. While the environment remains uncertain and challenging, it has enabled us to dramatically advance our global growth agenda, which is focused on: one, accelerating our digital DTC offense by engaging consumers with pinnacle brand experiences, product newness and compelling storytelling; two, driving innovation in all aspects of our business model, especially our product creation engines; and three, accelerating growth in global markets by enhancing the positioning of our brands to capitalize on current trends and product categories consumers are craving. Upfront, I'd like to recognize our dedicated global team. Thanks to them we now enter the next phase of the pandemic from a position of strength, with deep financial resources and the operational ability to service our consumers and retail customers. Over the last eight months, the team has operated to improve liquidity, controlled discretionary spending, managed inventories and generated substantial cash flow, all with an overriding focus on protecting our employees and customers. I am truly grateful for their efforts. For several years, we have been investing to strengthen our digital and DTC capabilities, and this has allowed us to accelerate and optimize the global online channel. These investments dovetail perfectly with the once in a generation change in consumer behavior that we are witnessing. Our owned e-commerce business nearly doubled in Q2 and continued its robust growth in Q3, up over 56%. In addition, the online channel of our customers has now also become our largest U.S. wholesale channel. Together, our owned e-commerce business and the online business of our wholesale partners accounted for over 40% of our revenue in the U.S. during the quarter. We expect our global online business will be the largest source of growth in 2021. From a brand perspective, we have become increasingly optimistic about the momentum in our brand portfolio as this unusual year has unfolded. Our brands are well positioned in high demand categories and distribution channels, and forward demand signals are healthy, both at wholesale and in our direct-to-consumer business. We have doubled down on new product and innovation during the pandemic, and we're seeing consumers respond favorably to newness and our fresh product offerings. As a company, we are clear on our strategic investment priorities to fuel future growth. Our strong brands sit at the center of the most relevant product categories trending with today's consumers: active and athletic, including running, outdoor, at home, and work and work lifestyle. Saucony continues to sprint ahead, driving strong growth in Q3. This momentum is fueled by Saucony's original fashion product as well as its award-winning product innovation in the running category, a support and activities that is experiencing a resurgence in the current environment. In outdoor, Merrell remains the number one hiking brand in the U.S., offering consumers a broad range of products across many outdoor categories. We also have several work brands that are trending, including Wolverine, which remains the number one work brand in the U.S. market. To briefly discuss how our pivot to digital and DTC will accelerate brand growth, I'd like to introduce Brendan Hoffman, our new President. Brendan brings a strong consumer focus and a wealth of experience in merchandising, digital marketing, and e-commerce, having served as the CEO on the retail, e-commerce, and brand side. His background and experience will help us accelerate our transition to a DTC-first and digital organization.

Thanks, Blake. It's an honor to join such a seasoned management team and family of global brands, with such a great record of success and tremendous growth potential ahead. In my first two months with the company, I have focused on meeting our people, learning the nuances of each brand's business, and reviewing future growth strategies with the brand teams. Any one of our brands represents an exciting opportunity on its own. But I am particularly energized by the collective power of the company's portfolio, which is supported by centers of excellence that enable each brand to focus on the consumer and cross-pollinate best practices. I could not be more optimistic about our future and thrilled to be part of it. Blake spoke about the advantageous positioning that many of our brands enjoy, highlighted by Saucony, Merrell, and Wolverine. I also believe Sperry, a brand that I literally learned to walk in, possesses tremendous potential as an iconic American brand as we move beyond the near-term headwinds. Each of these brands is poised for significant growth, which is only accelerated by the channel migration to e-commerce. Over the last eight months, we have witnessed a dramatic shift in consumer behavior, with many years of change compressed into a short period of time. Consumers' heightened digital engagement provides an opportunity for our brands to speak to them directly through our websites, emails, and social media. We must create a constant dialogue and forge an emotional connection, rooted in our leadership positioning in areas they care about, to drive growth, especially in active and athletic, outdoor, at home, and work. The digital and DTC channels have been a strategic investment priority in recent years, and we plan to increase our future spending in these areas to maximize the potential of our brand. We are setting an aspirational target to achieve $500 million of revenue in our global O&E commerce business next year, more than doubling its 2019 revenue. As more of our business is done through our own branded sites, we will use the consumer insights we are able to gather to make better and quicker decisions, which will help not only our own DTC business, but also benefit our retail partners and their omnichannel efforts. I've already met some of you on today's call virtually via Zoom and look forward to the time when we can meet in person. With that, back over to Blake.

Thanks, Brendan. I'll now provide a brief recap of our brand group's Q3 performance and some additional detail on our largest brand. For the Wolverine, Michigan Group, reported revenue was down 9.9% to the prior year and down 10.2% on a constant currency basis, reflecting a significant sequential improvement despite the continued impact of the pandemic. Merrell and Wolverine performed well, with revenue down mid-single digits and high single digits, respectively. Chaco also outperformed, growing nearly 30% as a result of the outdoor category tailwind, the brand's high digital penetration, and the continued success of its Chillos product introduced earlier this year. For the Wolverine Boston Group, reported revenue was down 19.7% to the prior year and down 20.3% on a constant currency basis. This was a substantial improvement over Q2 and reflects growing strength in the face of the pandemic headwinds. Saucony continued its resurgence, driving low teens growth in the quarter, while Sperry, as expected, was down around 45%, reflecting challenges in the lifestyle fashion footwear generally. DTC e-commerce once again was the primary driver of growth across the brands. Merrell's strong performance was led by merrell.com, which grew nearly 80% in the quarter. The brand's digital marketing has now driven almost 3.5 times as many social media engagements year-to-date compared to 2019. Owned stores also performed well, down only mid-single digits, despite significant traffic declines related to the pandemic's impact on physical shopping trends. For Merrell, the performance category delivered solid growth due to a strong mix of trend-relevant icons and compelling new collections. The industry-leading Moab collection delivered high-teens growth and fresh merrill.com exclusives, like the Honey Stinger collaboration, fueled revenue and consumer buzz. The Merrell product pipeline is full. At the end of the quarter, Merrell launched the Antora two and Nova 2, continuing to build equity behind these important trail running franchises. And the exclusive on guide collection, the brand's most sustainable collection to date, is off to a strong start. Starting in the spring of 2021, Merrell plans to launch faster, lighter, and more athletic offerings in the Moab line, harnessing current momentum and innovating on the brand's biggest franchise. The brand also plans to further capitalize on the easy on-off trend, expanding on its iconic Jungle Moc and its newer hydro Moc and hut Moc styles, all of which are seeing a strong response. To support these launches and elevate digital content and storytelling at an accelerated pace moving forward, Merrell is focusing the majority of its global marketing spend on consumer-facing digital content and execution, which will include a new mobile app to elevate the consumer experience on mobile devices. During Q3, demand for the Wolverine brand outpaced our expectations as the work and rugged outdoor categories continue to trend. Wolverine.com's revenue doubled in Q3, and so did the brand's engagements in social media. Wolverine continues to evolve the work category with innovation that integrates lightweight athletic technology with rugged durability. The brand launched the Dura Spring technology earlier this year with the Shift Plus workout offering, and then built on this technology with the July launch of the Health Cat collection, powered by Ultra Spring. The Health Cat immediately became the top-selling style on wolverine.com and is now on track to become the brand's third-largest franchise in its first year. Looking ahead to 2021, Wolverine plans to introduce a new version of its largest franchise, the Radar collection, in addition to expanding on the success of the Health CAD offering. Saucony's strong growth in the third quarter was driven by award-winning product innovation and exceptional digital activation that resonated with consumers. Saucony is just beginning to realize its potential as a lifestyle brand. While Europe has a fast-growing Saucony Performance business, it is also the foundation for our significant and growing Saucony Originals business, which is based on heritage retro running styles that are featured in top-tier fashion and apparel accounts. The leading market for Originals is Italy, one of the world's most prominent and important fashion markets. Saucony is using the Italian success and business hub, which includes product creation and marketing leadership and capabilities, to expand this highly profitable lifestyle business in other global markets, including China, the U.S., and additional European countries. The Originals lifestyle business is already significant in terms of size for Saucony, but it's still in its early days, and we are confident that the global opportunity is large and trend right.

Thanks, Blake, and thanks to all of you for joining us. Let me start by providing further insight on the company's third quarter results and then share an update on current business trends. Revenue for the third quarter exceeded our expectations and finished at $493.1 million, down 14.1% compared to last year. Our own e-commerce business continued to outperform with robust revenue growth of over 56% and operating margin expansion of nearly 300 basis points. Our owned stores also performed relatively well, down less than 12% in Q3 and improving each month in the quarter. Wholesale reorder trends, a key indicator of sublevel city at retail, were better-than-expected and up nearly 10%. As Blake detailed, Merrell and Saucony continued to outpace the macro environment and helped drive a solid sequential improvement in EMEA, highlighted by mid-single-digit growth in our own business there. Asia Pacific and North America also drove meaningful improvement, both down mid-teens for the quarter, followed by Latin America, which improved despite facing the most significant regional headwinds from the pandemic and finished down less than 40%. Gross margin was 41% in the quarter, at the high end of our expectations, down from last year. Healthy gross margin expansion from product and elevated DTC mix was more than offset by lower royalties in our international business, more closeout volume resulting from the reopening of this retail channel, and the impact of higher tariffs. Adjusted selling, general and administrative expenses of $151.5 million were lower than the prior year by $11 million, reflecting $18 million in cost reductions from actions taken earlier this year, with $7 million redeployed toward digital and e-commerce marketing. Adjusted operating margin was 10.6%, down from last year due to lower revenue, but well ahead of our expectations entering the quarter. Net interest expense was up $4.6 million versus last year as a result of the proactive liquidity measures taken earlier this year in response to the uncertain market conditions. The effective tax rate of 28.5% was up nearly 800 basis points versus last year due to certain discrete items and some impact from changes in geographic revenue mix. Adjusted diluted earnings per share of $0.35 significantly exceeded our expectations entering the quarter. I will now shift to the balance sheet. Inventory management has been an operational priority this year, and inventory was down 22% in Q3 versus last year. We are entering Q4 with a lean inventory position for some key items as a result of stronger demand in Q2 and Q3 that have outpaced projections made earlier in the year when inventory commitments were set. Our supply chain has already adjusted quickly, and we expect the availability of goods will improve to meet the projected strong demand for the first quarter of 2021. Cash generated from operating activities in the quarter was $96.5 million, much higher than expected and over $84 million more than last year. We've generated over $210 million in cash from operating activities during what might be the two most challenging quarters in the company's history, a testament to our diversified portfolio and nimble operating model. We now expect cash from operations to exceed $250 million for the full year as we remain disciplined in managing our working capital and operating costs during this volatile time. During Q3, we paid off the $125 million balance on our revolver and made a discretionary $21 million term loan payment. As a result, we finished the quarter with $57 million less debt than we had at this time last year. Total liquidity at the end of Q3 was more than $1.1 billion, including $342 million of cash on hand and $794 million of revolver capacity. Our bank-defined leverage ratio continued to improve, finishing the quarter at two times, well below the 4.5 times ratio required by our credit facility. We are encouraged by the company's performance in this challenging environment. Many of our brands continue to resonate with consumers as evidenced by an increase in wholesale orders, continued success in our owned e-commerce business, and better DTC store performance. In Q4, we expect these trends to continue, and we are off to a very good start. October revenue was nearly flat to last year, partially a result of earlier sell-in due to a lengthened holiday selling season. But other order trends also remain solid. However, there are certain factors that will negatively impact Q4 revenue later in the quarter, including lower December sales to our international distributors for spring 2021 product due to the heavy carryover of inventory from spring 2020 and a partial shift of deliveries into Q1, a planned timing shift in key franchise launches for Saucony from Q4 2020 to Q1 2021, some pockets of lean inventory for certain brands, due to the stronger-than-expected revenue during the last two quarters, and finally, a resurgence of the pandemic that has started to impact certain global markets and could create headwinds for our U.S. business. Based on these factors, we project Q4 revenue to be down no more than 25%. We currently expect Q4 gross margin of approximately 41%, reflecting a decline in royalty income from the lower international distributor demand previously mentioned. We also expect a sequential increase in SG&A expense from Q3 to Q4 of $15 million to $20 million, related mostly to higher DTC mix and the extra week in this fiscal quarter. After a few months of consistent market conditions, the pandemic is now entering a new disruptive phase, making it a bit more challenging to project the business beyond Q4. However, we are seeing very encouraging trends that support our growing confidence in returning to meaningful year-over-year growth in Q1 2021. Our digital business remains strong, and we continue to develop and invest in our capabilities there. The product franchise launches and other product introductions for Saucony and Merrell are robust for Q1. Finally, wholesale customers and global distributors are choosing to rely more heavily on brands and companies like Wolverine, who have proven to be especially relevant and resilient during the last eight months. For our business, this has translated to a substantial increase in global order demand for Q1 compared to last year. Our early proactive response to the challenges of the pandemic is now paying dividends and setting our brands up for growth in 2021. Many of our brands are now benefiting from the strong consumer trends and tailwinds related to the pandemic. We have many opportunities in front of us and a balance sheet to provide flexibility and capacity to invest in our biggest 2021 growth initiative. I'm now going to hand it back over to Blake to conclude our remarks.

Thanks, Mike. Before concluding, I'd like to share some perspective on the macro environment and our position looking ahead to 2021. While the global environment remains uncertain, we have a much better understanding of the marketplace and a stronger handle on consumer behavior and the shift in category tailwinds attributable in part to the pandemic. We expect the impact of the pandemic to persist into 2021, but shifting consumer behavior and trends have also created some opportunities for our brand portfolio. The company is poised to perform in the new environment that has emerged, and as Mike mentioned, we currently expect a strong start to 2021. We expect the acceleration of online purchasing to continue, and this channel could account for almost 50% of our U.S. business in 2021. We also expect consumers will continue to covet product newness, especially in the active and athletic, outdoor, at home, and work categories. These consumer trends have been significantly accelerated by the work from home and social distancing experiences of the last eight months, and we expect these trends will continue beyond the pandemic horizon. This is great news for us as our portfolio includes brands that offer industry-leading products in all of these categories. We have prioritized our focus on the consumer, our product pipeline, and our digital capabilities, investing in digital tools to help us move faster, continuously engage with our consumers, and deliver more innovative products. We have also invested in people and talent, especially digital product design and merchandising talent. The past year has been challenging, but the team has responded in an incredible way, helping to catapult the company forward on our strategic path. I continue to be incredibly proud of their hard work, dedication, and adaptability, which has enabled the company to navigate the pandemic and position us for future growth, all while supporting our communities along the way. With that, I'll now turn it back over to the operator.

Our first question comes from Jim Duffy with Stifel.

Thank you, and good morning, everyone. Blake, a few questions on the DTC business. $7 billion more investment, but yet your EBIT margin improved by 300 basis points from understanding that correctly. What's behind the margin improvement? Is it more full-price selling, or is that just leverage of the expense base? And then I have some follow-ups.

A little bit of both, Jim, but primarily just an increase in full-price selling and increased demand from the consumer for some of our higher-priced products like the Saucony Endorphin, for example.

Okay. And then the $500 million aspirational goal for next year, what type of growth does that represent off of 2021? And then given the strength you've seen in your DTC business, do you have any statistics you can share on customer acquisition this year for those DTC customer files? I'm curious how you're planning to improve communication with that audience. And then you mentioned making incremental investments. Can you be more specific about where those dollars are being allocated to the DTC platform?

Yes. When we consider digital direct-to-consumer, we are investing in talent, tools, and the ability to connect directly with consumers. These are some of the broader categories of our focus. Digital marketing is a significant area of investment. The incorporation of big data and AI is also important, along with personalization and additional digital content. We have been investing in this area for several years and intend to keep that momentum going. Regarding our ambitious goal for next year, we aim for about a 50% increase in our owned e-commerce business. The owned e-commerce business, combined with the online operations of our wholesale customers, would be considerably larger. While I don’t have the exact statistics, some of my models indicated that social engagements for brands like Merrell and Saucony increased between 65% and 100%. We can provide more statistics in our follow-up.

Our next question comes from the line of Jonathan Komp with Baird.

Hi. Good morning, thank you. I wanted, first, just to ask a little more about the fourth quarter. Mike, I know you mentioned October revenue close to flat. I guess I just wanted to see if you would maybe unpack some of the assumptions for the balance of the quarter to get down to the revenue outlook you gave in the quarter? And then how should we think about the moving pieces? Like how much is lower demand on the international piece versus how much might shift kind of one-for-one into that first quarter of '21?

Sure. We feel very good about the start to the quarter. We anticipated both the future order demand and the reorder trends we've been observing in Q3 would continue. The biggest impact for the quarter will occur in December due to the international shift we're discussing, which involves about $60 million of third-party distributor sales being recognized in this quarter, particularly in December. However, $5 million to $10 million of that may shift into Q1. Overall, our distributors currently have strong carryover inventory and solid end-market demand, but they don’t require new merchandise at this time. Therefore, we expect a one-time impact of approximately $50 million to $60 million for the quarter, but this won’t affect us until December. This is the primary shift. We're also working on inventory for some of our key brands, which has become more significant in Q4 as we outperformed our expectations in Q2 and Q3. Additionally, Saucony has decided to launch some of their best franchise updates in Q1 to align with the running season instead of in Q4 as they have in previous years. This intentional shift could result in around $15 million moving to Q1 as well. These are the main headwinds for the quarter. Otherwise, our order book remains strong, business trends are holding up well, and we are set for substantial improvement in Q1 as we enter the New Year.

Okay. That's really helpful. And maybe one follow-up, thinking more broadly about 2021, especially given some of the comments on the macro piece, Blake. But how are you thinking about the overall recoverability of your business? And then when you think about both on the cost side, some of the actions you've taken, and then the mix shift toward your own digital business, how should we think about the revenue levels that you might need to get back toward your 11% to 12% operating margin that you've had in the past?

Yes. I mean, when we look at 2021 right now, we're pretty bullish, even though we're in the midst of what appears to be a global second wave with respect to the pandemic. Frankly, we kind of separate the pandemic in the international market, the U.S. market. The international markets have addressed the pandemic on a country-by-country basis. That's obviously not what we've done here in the U.S. Europe right now is shutting down hard again, but they're doing that so that they can have a normal December. Europe snapped back much quicker than normal. So we're hopeful with respect to Europe, which has been one of our strongest international markets here over the last couple of quarters. So overall, we feel pretty bullish. We like where our order book is positioned. Certainly, we're benefiting from some of the tailwinds in outdoor, athletic, and active that have been created or accelerated by the pandemic.

It was operating margin. Yes, if you think about the improvements we've made to the cost structure this year regarding some of the restructurings we've done and the healthier mix in the business, not just through the DTC channels but also just improvements in our better, more profitable brands. I think that we would feel comfortable getting back to 2019 operating margin levels at a relatively modest revenue level, so lower than 2019 revenue levels, just based on some of the improvements in the overall cost structure and leverage that we can get out of the growth we're seeing.

Our next question comes from the line of Chris Svezia with Wedbush.

Good morning, everyone. Thank you for taking my questions. Great job on the quarter. I have two questions regarding Q4. First, what are your expectations for the European business given the lockdown? Have you considered that in your planning? Second, with the extra week, looking back to 2014, the business was quite different then and primarily retail-focused. Now, you have a very profitable e-commerce business and stores are improving. How should we think about the impact of the extra week in Q4? That's my first question.

Sure, I'll address your last question first. We don't expect the extra week this year to have a typical positive impact on our top line due to the current circumstances. Most of the online shopping activity is likely to remain at a similar level overall. It may just be distributed over an additional week for returns or exchanges, but we don’t foresee a significant impact given our store base, which has fewer than 100 owned locations. The first part of your question was...

I believe it pertains to Europe in the fourth quarter. Given the positive start to the quarter, we are somewhat cautious about the markets we operate in, particularly Italy and the U.K. Although the business began strongly and the sell-ins have been encouraging, part of our cautious outlook for Q4 stems from this situation. So far, we are not observing a significant impact, but it's still early. Overall, we are exercising caution due to the uncertainties. We do anticipate some effect from the strict European shutdown in November, but most countries have indicated that they are implementing this to enable a quick recovery in December and during the holiday season.

Sure. Regarding Saucony, could you share your thoughts on its growth trajectory this year? It seems it might become your fastest-growing large brand heading into next year. Can you help us understand the visibility into this growth and how the originals business might contribute to it, particularly in the U.S.? Additionally, what is the margin profile for the brand at this point? With the Originals business coming in, I assume it has a high margin; how does that factor into your stocking strategy for next year?

Saucony is set to gain from its strong performance initiatives, which include industry-leading colors, technology, and new models. Additionally, the brand will benefit from its Originals line, which may sound surprising, but some of these shoes were worn in marathons 25 to 30 years ago and are now trending as fashionable. We see Saucony as having a strong advantage in this area. The Originals business is particularly strong in Europe, with Italy being the largest market due to its fashion and luxury reputation. We are expanding the Originals line based on the success in Italy throughout Europe and plan to implement this model globally. Currently, we have a small presence in China and the U.S., as well as other key markets, which we consider to be significant growth potential. The Saucony Originals business is highly profitable for the brand. On the performance side, with upcoming products like the Endorphin and other updates scheduled for the first half of next year, we are optimistic about Saucony's growth. We anticipate that Saucony will be our fastest-growing brand next year in terms of revenue percentage growth.

Okay. All right, thank you very much. All the best.

Our next question comes from the line of Matthew Degulis with KeyBanc Capital Markets.

Good morning. And congrats on a really nice quarter. So Sperry has built up such a strong rainbow business over the last couple of years. Can you comment on your expectations for Sperry and other weatherized boots in your portfolio for the fourth quarter? Any callouts positive or negative? And how do I shift any businesses? How would the shift in that business affect AURs and margins for the quarter? Thanks.

Yes. I think the Sperry boot business is probably one of the areas where we got caught with some lean inventory with the shutdown and some of the order inventory adjustments and order cancellations in Q1 and Q2. I would say our Sperry boot business remains very strong, but we are limited by lean inventory. Some of it in the more fashion product in that line. I know that Sperry has gained market share in the rain boot category, where it has the number one position by far. So we feel bullish about that category for Sperry going forward. And Matt, you mentioned the impact on AURs and margins. In both cases, that's the strongest category. The boot category is the strongest category for Sperry. Q4 will be the best-performing quarter for Sperry this year. They've had some challenges, obviously, given the headwinds from the pandemic. But the Q4 performance for Sperry will be relatively the strongest. And they don't have the international exposure that would relate to some of these spring-related timing shifts that we talked about either. So all in all, I think that we'll deliver a decent quarter in Q4 for Sperry.

Absolutely. We are continuing to be very diligent about managing our cash and working capital. We have done an excellent job this year, and the team has really exceeded expectations. We are not easing up at all. I consistently remind our teams that while we are in a better position, we are not completely out of the woods yet. That said, we are investing significantly in inventories to return to a more normalized level, which is essential to support the business as we move into next year. This will negatively impact cash flows in the early part of the year, but it is crucial for us to invest in the new programs highlighted by Blake. Regarding other priorities, we have reduced our debt to a more manageable level, with our leverage ratio in a good spot. We plan to keep that at two times or better. We are always looking for opportunities to pursue growth initiatives for Sperry, Merrell, Saucony, and our work brands right now. Additionally, as Brendan mentioned, we will be investing heavily in our direct-to-consumer capabilities for next year. Organic growth remains a top priority for us. These will be our main focus areas for the time being.

Our next question comes from the line of Dana Telsey with Telsey Advisory Group.

Good morning, everyone. Brandon, welcome. It's certainly been a short time that you've been at Wolverine. And from your experience as a digital-first executive, what do you see as the implications, both quantitatively and qualitatively for Wolverine? And then just I wanted to confirm on the operating cash flow, Mike, is it still guidance for $200 million to $250 million for the year, or is there an adjustment there?

Now that the operating cash flow for the full year will be a $50 million and as we continue to really manage the inventory flow and maybe bring in some inventory a little bit earlier for some of the spring shipments. That might be the only headwind that we're seeing. But fundamentally, we'd expect to exceed $250 million.

And Dana, thanks for the welcome. Yes, it's been a great two months here so far, as I said in my remarks. And as I mentioned, it's great to be able to put a stake in the ground for next year's e-commerce business to aim for $500 million, which Blake said would be almost another 50% increase. I think it's very doable and achievable based on what I've seen in my short time here. I think these brands lend themselves to the pivot to e-commerce. I think they've been doing a great job getting the message out and really leaning into some of the categories that, as Blake mentioned, are so important during the pandemic, whether it's Outdoors, Athletic, or Work. So I think that gives us a lot of tailwinds to continue to accelerate our pivot into e-commerce. I think the team has already been on that path prior to me getting here, and Blake and the Board have tee'd that up very nicely, and my coming on to help provide some additional leadership, I think, will allow us to continue on that path and hopefully a little bit faster. I'm thrilled that the company has the ability to make some investments and do things quickly. So Blake mentioned the mobile app that we're going to be launching in Merrell in early 2021. I mean, that's something I've been championing since even before I got here, and to see how quickly we're going to be able to get it up and executed. And hopefully, as a test for the other brands as a way to not just communicate regularly with our customer, but to also help facilitate the conversion on our websites. Almost 70% of our traffic comes through a mobile device, the phone, I should say. So I think having something like the mobile app for a big brand like Merrell is going to be exciting to help facilitate the growth.

Next question comes from the line of Susan Anderson with B. Riley FBR.

Hi, good morning. Alec Legg, on for Susan. Thank you for taking our questions. Just quickly on the Work category, did that grow this quarter? And if so, what were the key drivers of that performance?

Yes. We had a pretty good quarter for Work in Q3. Fundamentally, growth is being driven by exciting new product and product innovation, the Hellcat collection, for example, in the Wolverine brand. I would say one other thing we've seen in Work here over the last couple of quarters is a significant incremental shift to soft to work product, not steel toe, not composite toe. Our research has indicated a lot of that is being driven by the pandemic at home environment. People are working around the yard, people are working at home, people are working at their cottages, their vacation homes, and so I think the work category is also benefiting from consumers that may not be in the traditional work consumer class. So we expect work will continue to do that from not just the pandemic, but it's really, for us, being driven by new product and new product creation.

Perfect. Thank you. And then I guess just a follow-up. I know you've mentioned before that back-to-school is not really a big portion of your business. But with this year being pretty unprecedented, have you seen any maybe different trends related to the back-to-school season?

No, no different than you've heard, frankly, from other brands and companies. Back-to-school started soft. It didn't have a normal bell curve to it, given the pandemic situation and the fact that K-12 and universities across the United States, at least, are all operating on different models. Some virtually, some in combination of in-class and virtual, and some totally in class. So I think it was a muted back-to-school season overall for consumer soft goods and for footwear. But as you know, back-to-school is not that important of a time period for our company or brands.

Our next question comes from the line of Mitch Kummetz with Pivotal Research.

Hi, thanks for taking my questions. I guess to start with Mike on Q4. I'm just trying to understand if you adjust for the shifts, which, I guess, the big ones are international and then Saucony and maybe even adjust for that extra week, is the underlying growth rate kind of the normalized growth rate that you're expecting for Q4? Are you getting that to be better than Q3 or worse than Q3? And to what extent is the pandemic sort of factored in?

I believe the pandemic is always part of our current outlook. It's incorporated as much as we can assess, and we aim to be conservative. However, I think that without the significant factors we've identified, the improvement from Q3 to Q4 would be notable. We can't always overlook those factors, though I wish we could. The business fundamentals remain strong, and order demand is solid. If we had all the core styles we desired for Q4, we could meet that demand at a higher level than we currently will. This situation is set to improve in Q1, which is positive, but for Q4, we are facing some rating issues that will impact the quarter significantly. Yes. If we look back at Q2, which marked the beginning and peak of the pandemic, we experienced nearly 100% growth in our owned e-commerce. This growth has gradually decreased over the past two quarters, with an increase of just over 56% in Q3. Typically, Q4 is a peak demand quarter, especially now when many consumers are still hesitant to visit regional malls or shopping centers. Therefore, we expect solid performance in Q4. We believe that significant shifts in consumer behavior have taken place over the last six to eight months and will continue. While I can't predict the future with certainty, our goal is to achieve 50% growth in 2021. As some states and countries face renewed shutdowns, we may see a further shift toward online purchasing. The situation is dynamic and challenging to forecast accurately, but digital and direct-to-consumer sales will remain a primary focus for us moving forward.

Great. Thanks. Good morning. I guess I have two questions. First, just on holiday, with retailers setting the holiday early this year, are you actually seeing the consumer come out and shop differently than they have in the past? And then what are you seeing as it relates to shipping surcharges? And how are you kind of procuring or securing excess capacity to meet kind of the online demand?

Yes. The situation regarding the holidays is somewhat uncertain. I've come across consumer surveys that present mixed results. Overall, there seems to be a trend of decreased spending during the holiday season, while some surveys indicate an increase. I anticipate that this year’s shopping will be more spread out, and I don’t expect to see the high peak we’ve had in previous years. This might be partly due to Amazon moving its Prime Day to October and effectively starting the holiday season early. Additionally, it’s clear that Black Friday and Cyber Monday are no longer limited to just a few days. We will likely see gradual growth in consumer activity. There has been communication from shippers and Amazon advising consumers to place their orders early due to potential shipping and delivery constraints as the key holiday dates approach. Consumers should not assume that orders placed on December 20 will arrive by Christmas, which has been a common expectation in the past. Regarding costs, there is noticeable congestion at port entries and some limitations on inland shipping, which we expect to persist throughout the holiday season. When we began preparations in May, we took proactive steps to ensure we remained operational. Our team effectively adapted our supply chain, which gives us an advantage over smaller brands. Currently, the footwear supply chain is in relatively good condition, possibly better than others. Although we are facing some challenges with a few collections, the overall situation is manageable. Smaller brands may be struggling more to align their supply with demand.

Just to play off what Blake said, Erinn, on Prime Day, I mean, I was particularly encouraged by the outsized growth we had on Prime Day, far exceeding what I saw Amazon quoting. Some of the brands that we don't always talk about were front and center for us. Our team did a great job leaning in with Amazon to ensure we were ready to go, and I think it gives me even greater confidence across our portfolio of brands, how well they lend themselves to e-commerce, and having the right inventory and the right messaging could be explosive for even some of the brands we don't always talk about.

We have reached the end of our question-and-answer session. I'd like to turn the call back over to Brett Parent for any closing remarks.

On behalf of Wolverine Worldwide, I'd like to thank you for joining us today. As a reminder, our conference call replay is available on our website at wolverineworldwide.com. The replay will be available until December 5, 2020. Thank you, and have a good day.

Thank you, this concludes today's teleconference. You may now disconnect your lines at this time. Thank you for your participation. Have a wonderful day.