Good day, and welcome to the Wolverine World Wide Inc. First Quarter 2024 Earnings Call. Please note, this event is being recorded. I would now like to turn the conference over to Alex Wiseman, Vice President of Finance. Please go ahead.

Good morning, and welcome to our first quarter fiscal 2024 conference call. On the call today are Chris Hufnagel, President and Chief Executive Officer; and Mike Stornant, Executive Vice President and Chief Financial Officer. Earlier this morning, we issued our earnings press release and announced our financial results for the first quarter of 2024. The press release is available on many news sites and can be viewed on our corporate website at wolverineworldwide.com. This morning's earnings press release and comments made during today's earnings call include non-GAAP financial measures. These non-GAAP financial measures were reconciled to the most comparable GAAP financial measures and attached tables within the body of the release. References made regarding financial results and outlook for 2024 and comparable results from 2023 in each case for our ongoing business exclude the impact of Keds, Wolverine Leathers and Sperry. I'd like to also remind you that statements describing the company's expectations, plans, predictions and projections such as those regarding the company's outlook for fiscal 2024, growth opportunities and trends expected to affect the company's future performance made during today's conference call are forward-looking statements under U.S. securities laws. As a result, we must caution you that there are a number of factors that could cause actual results to differ materially from those described in forward-looking statements. These important risk factors are identified in the company's SEC filings and in our press releases. With that being said, I'd now like to turn the call over to Chris Hufnagel.

Thanks, Alex. Good morning, everyone, and thank you for joining us on today's call. I'm pleased to report that we continue to make progress against our aggressive plan to turn around and transform Wolverine World Wide, executing our plan with tremendous pace to first stabilize the company, set a new foundation for a return to growth and ultimately deliver greater returns for our shareholders. Importantly, we are doing what we said we would do. In the first quarter, we exceeded revenue expectations with a balanced performance across the portfolio, led by beats to our plan for Merrell and Saucony. We exceeded earnings expectations while simultaneously investing more than we initially planned in brand marketing to capitalize on the momentum we're seeing in the business today, and to help build brand equity for the future. And we continue to strengthen the company's balance sheet, which we remain intently focused on, by further reducing our debt and inventory levels more than we anticipated going into the quarter. A good start to an important year for the company. While our transformation efforts have addressed nearly every aspect of our global operations, we've worked particularly hard to rapidly improve our brand's product pipelines and presentation in the marketplace. We've made good progress to date and the product launch calendar for 2024 and into 2025 is especially strong. We've also worked to cultivate a healthier marketplace. And at retail, we continue to see inventory levels decline and rogue seller activity abate. Because of our efforts, we're beginning to see sequential improvement in our selling trends. This is encouraging and provides the level of confidence that our strategies and tactics are beginning to gain traction. Average weekly replenishment orders from our wholesale partners accelerated materially from the fourth quarter of 2023 to the first quarter of 2024, and our own e-commerce demand has improved each month this year, most recently inflecting growth in March and accelerating further in April. At the same time, we've delivered a much healthier gross margin across the business, achieving an all-time record gross margin in the first quarter as a company, a testament to the good work we've done on supply chain costs, pricing, inventory and better managing the marketplace. We've said consistently that we believe our turnaround will be led by margin improvement, which we're seeing today, followed by our planned inflection to growth in the second half of the year. While we're motivated and encouraged by our progress and the proof points we're seeing, we acknowledge it's still very early days in our transformation. We still have a lot of work to do to hit our stride and realize the full potential of the company, and there's no doubt challenges beyond our control exist in the marketplace today. However, as we move forward, our vision remains the same, to become builders of great global brands, brands that make people's lives and the world better. Our brand building model is centered squarely on building awesome products, telling amazing stories and driving the business every day. To achieve our vision, we continue to invest in the capabilities that are necessary to execute this new model, strengthening our talent, insights, processes and tools. I'd like to spend a few minutes now providing an update on this important work and share some real-time examples of the momentum in the business today, our proof points, that we believe will ultimately lead to an inflection to growth and the successful turnaround of Wolverine World Wide. Starting with our #1 priority, designing awesome, style-led trend-right products that are not only innovative, but also priced right and placed right. As always, it begins with the consumer. Our brands are actively incorporating a stronger dose of market and consumer insights into their product development processes and becoming more externally focused, leveraging the recently established center of excellence for elevated trend, features and color forecasting as well as enhanced consumer testing. In addition, we're bolstering our talent and key brand product goals and modernizing our tool set with the rollout of a new best-in-class digital product line management platform, which remains on track to be deployed across our portfolio, after being piloted in Merrell. Now on to some examples of proof points on product. Saucony has moved quickly to advance and accelerate development in its product pipeline. The brand started to regain traction with the launch of its new Ride and Guide 17 franchises earlier this year, both of which have performed well at retail. These launches were quickly followed by the very successful introduction of new models in the brand's leading performance franchise, the Endorphin. Just last week, the brand launched the new Triumph 22, driving growth of over 80% for the franchise in its first week on saucony.com. At the Boston Marathon a few weeks ago, Saucony was the second-most worn brand and gained share year-over-year. The brand is also gaining momentum on the lifestyle side with its Retro Track collections, led by the ProGrid Omni, Shadow and Azure. It's been a good few months for the brand, resulting in upticks in brand heat and demand. This summer, the brand plans to launch the Hurricane 24, and we're already eager for the next additions of all these key franchises in 2025. The brand is supercharging its innovation pipeline and elevating its design, all while taking a more thoughtful and strategic approach to the many opportunities the brand has in a very attractive and growing category. The other brands in the portfolio are close behind. For Merrell, the Moab Speed 2, which was recently recognized as an ISPO award for the best new product in the hiking category, modernizes the trial by incorporating the beloved fit and comfort of the Moab into a faster, lighter and more athletic silhouette. It is the brand's biggest story this year and is driving strong sell-through today at key wholesale accounts and at merrell.com. This performance is helping generate increased interest in the marketplace and continued market share gains for the category leader. On the lifestyle front, Merrell's Wrapt Collection continues to outpace our expectations, selling out with each delivery of new inventory. Having improved the concept at merrell.com, we now plan to thoughtfully expand its distribution to our wholesale accounts, both in the U.S. and around the world. We're also fast-tracking new styles for Wrapt next year, especially for her, including Mules and the trend-right Mary Jane. Finally, Wolverine brands Trade Wedge, Rancher, and ReForce franchises are all performing well today, with both the Trade Wedge and Rancher consistently beating our sell-through forecasts, and the ReForce off to a solid start at wolverine.com. Going forward, the brand has plans to expand their product franchises, most notably introducing significant new innovations to the western category later this year as that is an important consumer trend. To win in today's market, brands need to do more than just build awesome products. They also have to tell amazing stories. We're focused on telling stories that excite consumers about our brands as well as our products. As with the product process, the consumer is at the center of our marketing approach. Our teams are utilizing consumer insight from the very start of creative development to create more compelling storytelling, and consumer testing is now being leveraged throughout the process, including evaluating creative effectiveness prior to campaigns launch. To lead our execution here, we have hired new consumer-focused marketing leaders for both Merrell and Sweaty Betty over the last 6 months, with plans to place a new market leader for Saucony shortly. In addition to leveraging the collective to ensure we share best practices and insights across the portfolio, we're also evolving towards a better full funnel approach to marketing investment and campaign objectives that balance functional product stories with brand building messages. It is vital that we build brand equity and deepen emotional connections with our consumers. We need to compete for both share of closet and share of mind to win in today's competitive marketplace. A few examples of how we're telling amazing stories in the market today. Sweaty Betty aims to empower women, and just last week, the brand launched its second iteration of the Wear the Damn Shorts campaign to encourage its community to be confident and comfortable with their bodies. Last year, the t-shirt featuring the campaign tagline was the brand's most requested t-shirt in its history. This year, the campaign has already driven a 63% increase year-over-year in shorts revenue and a 52% sell-through of the t-shirt since launch. The campaign has delivered over 30 million impressions and over 1.5 million video views. In total, Sweaty Betty has driven nearly a 40% increase in paid impressions globally year-to-date, and the brand continues to resonate with its core consumers. Saucony kicked off the spring with a successful Marathons campaign, which encouraged consumers to drop their phones and hit the pavement, driving over 1 billion impressions. More recently, the brand engaged its running community at the London Marathon through a host of events and activations, generating well over 1 million impressions and helping fuel all-time record search interest for the brand in the U.K. Year-to-date, global search for Saucony is up over 20% compared to 2023, and this is all ahead of Saucony being named the presenting sponsor for this year's London 10K, with our many activations planned to coincide with this significant partnership. Lastly, Merrell just launched its biggest campaign of the year, Good Things Await, inviting consumers to experience the simple power of being outside. This campaign meets the consumer where and when they want to be engaged, either in their social channels, on connected TV, print, or in-store. It's the most comprehensive marketing campaign in the brand's history, generating over 7 billion media impressions so far and helping drive strength and interest in the brand. As the global leader in hiking, it's incumbent upon the brand to drive innovation and heat in the category, and I'm encouraged by the progress we're making in Merrell. Finally, our teams are intent on driving the business each and every day. We have a renewed focus on strengthening our relationships with our global distribution network, both in the U.S. and around the world. We continue to hold strategic top shop meetings with our key domestic retail partners, and in March, 16 of our key international partners visited our campus here in Grand Rapids for a Strategic Planning Summit. This was the first of its kind event in our company's history and the first time we've hosted a group like this on campus since the pandemic. To further support our partners around the world and drive the business, just last week, we announced new license agreements for Merrell and Saucony Kids' Footwear, along with Merrell apparel and accessories. These new agreements will help us deliver better, fuller assortments and more effectively and efficiently realize the full potential of our brands globally. In collaboration with our long-time partner in Japan, Merrell opened its first-of-its-kind flagship store last fall in Harajuku in Tokyo, one of the very best and most influential retail districts in the world. The store has outperformed its plan since opening, leading to the opening of a new store in nearby Shibuya Scramble Square at the beginning of March, which successfully captured a younger consumer, driven a more balanced head-to-toe sales mix, and is significantly exceeding its plan since opening. The strategy in Japan is helping reposition, modernize, and energize Merrell, and we're taking these learnings to other brands and markets in the portfolio. Here in the U.S., Saucony is expanding into meaningful new lifestyle distribution over the course of the year, as a result of the heat it's generating with trend-right Retro Track designs from its archives. The brand is also opening its aperture to capture the broader global running life opportunity, well beyond niche elite offerings. In February, I said I was bullish on Saucony's future prospects, driven by much improved innovation pipeline, and I am even more excited today about the potential of the brand moving forward. We're also making important progress cleaning up the marketplace, spearheaded by our newly created brand protection team. To date, we've closed or restricted over 30 customers and partners and shuttered approximately 400 retail accounts. This will continue as we work to be great brand managers, coupled with a stronger focus on sell-through versus sell-in, and our brands better managing supply and demand in the marketplace. While often products and amazing stories are critical to building great brands, I'm equally focused on aligning and uniting the global teams to drive the business each and every day. Our team's good work is translating into important early proof points and helping to build a new firmer foundation for the future. Before I turn the call over to Mike, I'd like to comment on our other announcement this morning. After a comprehensive search, I'm pleased to announce that Taryn Miller will succeed Mike Stornant as the company's Chief Financial Officer. Taryn brings over 25 years of global functional and operational experience along with strategic thought leadership to Wolverine World Wide. I'm excited for her to join the executive team at this important moment in our transformation, and look forward to you all meeting and working with Taryn. She's a tremendous addition to our team. I'd also like to take this opportunity to personally thank Mike. He's dedicated nearly 3 decades of his life to the company, including the last 9 years as our CFO. Since I stepped into the seat last August, his deep knowledge of the business, drive and undeniable grip have been invaluable to me and the company as we work to stabilize and reimagine the company. No one is more passionate about Wolverine's success and no one works harder than Mike. Thank you, Mike, for everything you've done and for your commitment to a smooth and seamless transition moving forward over the next several months. I, along with everyone at Wolverine World Wide, wish you and Amy the very best in your coming retirement. It's well deserved, and we'll miss you. With that, I'm going to hand over to Mike to review our performance in the first quarter and expectations for the year in more detail. Mike?

Thank you for those comments, Chris, and good morning to everyone on the call. This morning, I'll start with a review of the first quarter, followed by our expectations for fiscal 2024. We are very encouraged by our first quarter results. We delivered or exceeded our key financial objectives and saw improvement across performance metrics that support the stabilization of the business. First quarter revenue for our ongoing business of $390.8 million was above our outlook of $360 million. Demand trends and selling executions continue to improve. Our wholesale performance in Europe was especially strong, thanks to actions taken by our global supply chain team to mitigate logistics delays related to the Suez Canal. Approximately $8 million of revenue shifted from Q2 into Q1 as a result. As a reminder, Q1 2023 included more than $75 million of revenue that did not repeat in the first quarter of this year, including excessive end-of-life inventory liquidation, the timing shift in international shipments and business model changes. Adjusted gross margin of 46.5% was better than our outlook of approximately 46%, and improved 540 basis points versus last year. A healthier sales mix, lower e-commerce promotions and the benefit from the supply chain cost initiatives executed last year all contributed to this record gross margin performance. As a reminder, first quarter gross margin was planned to be the highest of any quarter this year, due mostly to the lower mix of international distributor shipments in the quarter, which carry a lower gross margin. Adjusted SG&A expense of $162 million was in line with our expectations given the higher revenue and includes a $3 million year-over-year increase in investments for demand creation and technology. Adjusted operating margin of 5% exceeded our outlook for the quarter and adjusted diluted earnings per share for the quarter were $0.05, and better than expected. The health of our balance sheet continues to improve, and we exceeded our expectations for inventory, cash flow and net debt for the quarter. Inventory for the ongoing business was $354 million, down 40% from last year, as a result of continued progress on rightsizing inventory, nimble supply chain execution, and improved planning. Net debt was $685 million, down approximately $380 million versus last year. Bank-defined leverage was 3.1x at the end of the first quarter. Let me now provide details on our outlook for 2024. Our guidance reflects the expected performance of our ongoing business and now adjust for the recently announced licensing model for our Merrell and Saucony Kids business. This change in business model will further simplify our operations and leverage our newly established global licensing team. This change is expected to reduce 2024 revenue by approximately $20 million and will have a neutral impact on earnings in 2024 as we transition the business to our new partner. Fiscal 2024 revenue for our ongoing business is now expected in the range of $1.68 billion to $1.73 billion. This compares to 2023 revenue for our ongoing business of $1.99 billion and represents a decline of 14.4% at the midpoint of the range. Discrete items in 2023 totaling $165 million in revenue will not recur in 2024. These include approximately $70 million of extraordinary end-of-life inventory liquidation heavily weighted to the first half of the year; approximately $55 million in revenue prior to certain business model changes, including the transition of our China joint venture to a distributor model for Merrell and Saucony; and approximately $40 million in a timing shift of international distributor shipments that benefited Q1 in 2023. We expect the transition to a licensing model for Merrell and Saucony Kids will result in approximately $20 million of 2023 revenue that will not recur in 2024. Excluding these discrete items and licensing business model changes, the midpoint decline in full year revenue will be approximately 5.6%. Our revenue outlook for our groups and brands remains unchanged. As a reminder, we expect active group revenue to decline mid-teens. Merrell is expected to decline in the low double-digit range, with inflection to growth expected in the second half of the year. Saucony is expected to decline in the low 20% range, with sequential improvement as we move through the back half of the year. Sweaty Betty is expected to be approximately flat. Workgroup revenue is expected to decline high single digits, with the Wolverine brand expected to be down mid-single digits. Turning to gross margin. Adjusted gross margin is expected to be approximately 44.5% at the midpoint of the outlook range, up approximately 460 basis points compared to 2023 and a record for the company. We continue to expect significant reductions in supply chain and product costs, the benefit of healthier inventory, and a better mix of full price sales, partially offset by foreign currency headwinds that impact inventory costs. Adjusted selling and general administrative expenses are now expected to be approximately $640 million at the midpoint of the outlook range or 37.5% of sales compared to $716 million in 2023 or 36% of sales. The lower operating cost structure includes $95 million of savings from the 2023 restructuring and other profit initiatives, and $10 million from the model change for our Kids' business. This is partially offset by incremental investment for demand creation and modern systems, normalized incentive compensation expense and general inflation. Adjusted operating margin is expected to be approximately 7% at the midpoint of the outlook range compared to 3.9% in 2023. Interest and other expenses are projected to be approximately $40 million, down from $63 million in 2023 and benefiting from the significant debt reduction achieved to date. The effective tax rate is projected to be approximately 18%. As a result of these key assumptions, adjusted diluted earnings per share is expected to be in the range of $0.65 to $0.85, including a $0.10 negative impact from foreign currency exchange fluctuations. This compares to $0.15 in 2023 for our ongoing business. Working capital and cash flow optimization remain a priority in 2024. We now expect inventory to decline by at least $75 million during the year as we continue to work through specific areas of excess inventory. On this topic, as the industry faces new and evolving product regulations related to PFAS, we are taking a proactive approach. In partnership with our key retail partners and our own direct channels, we are responsibly working through this inventory. We expect to be compliant with PFAS restrictions when and where required in the future. Operating free cash flow is expected in the range of $110 million to $130 million. We now expect net debt to improve by $175 million to $565 million at year-end, with bank-defined leverage below 3x. Shifting to our outlook for the second quarter. We expect second quarter revenue of approximately $410 million, a decline of approximately 21%. As announced earlier this year, we are closing our Louisville Distribution Center and currently moving our Saucony inventory to our California distribution center. We expect this transition to result in a shift in revenue and profit from Q2 into Q3. Second quarter gross margin is expected to be approximately 43%, up 390 basis points from last year. This would result in first half gross margin slightly above 44.5%, which is in line with our outlook for the full year. We expect second quarter adjusted operating margin to be approximately 5% and adjusted diluted earnings per share to be approximately $0.10. The order book for our global wholesale and distributor businesses has developed as expected when we established our full year guidance in February, and the rate of replenishment orders has continued to improve. In addition, our e-commerce businesses are expected to inflect growth in the second quarter, with growth also expected in Q3 and Q4. As a result, we continue to expect sequential revenue improvement through the back half of the year, with year-over-year growth in Q4. We also expect second half gross margin and SG&A expense to be similar to the first half, which will drive positive SG&A and operating margin leverage in the second half of the year. Let me summarize the key points I hope you'll take away this morning. 2024 is a year of transition for the company as we expect significant gross margin expansion will precede an inflection to growth in the back half of the year, and we set our brands up to accelerate in 2025. We recognize that improved and sustainable gross margin is necessary to create capacity for consistent brand investment into the future. We are balancing the need for meaningful earnings and cash flow improvement with critical reinvestments required to modernize our systems, drive demand creation, and build other important capabilities. And finally, after a solid performance in Q1, we now have better visibility to future order demand, more stable operating trends, and strong consumer reaction to our new product introductions. This progress gives us further confidence in our outlook for the rest of the year. Before I turn the call back to Chris, I want to personally welcome Taryn Miller to Wolverine as our new CFO. She brings the valuable experience needed to help lead the ongoing transformation of this company, and she is a tremendous addition to our leadership team. I am fully committed to working with her and Chris during this important transition, and I'm excited to support the company in my new role over the coming months. Now I'll turn the call back to Chris.

Thanks, Mike. In closing, I'm encouraged by the progress we've made in just a few quarters, and even more excited that we're seeing early proof points that our strategy and execution are beginning to work. On our last call, I said 2024 would be a pivotal year for the company and that our teams were motivated by both the challenges and opportunities. I believe this is even more true today. There's no doubt we have more work to do, but I believe we've taken the right steps, and we're on the right path to transform Wolverine World Wide, all guided by becoming great brand builders and ultimately delivering greater returns for our shareholders. Thank you for taking the time to be with us this morning.

The first question comes from Mitch Kummetz with Seaport Research.

Mike, really enjoyed working with you over the years and wish you the best of luck. So let me start just on the quarter, it looks like you guys beat revenues, beat your plan by maybe $30-plus million. It sounded like maybe there was $8 million of pull forward in Europe. Can you say if there was any pull forward outside of Europe, like in the U.S.? And then what really drove the beat, by brand or by channel? Any more color there? And then I've got a follow-up.

Sure. Thanks, Mitch, for the comments. I'll say overperformance really across the board. I think that was an important theme for the first quarter, whether that be at the brand level or the regional level. The call out on the pull forward or the timing shift for the Europe wholesale business really had to do with how we planned or sort of hedged our bet a little bit on the timing of logistics issues with the Suez Canal. We overcame that, and we called that out as about an $8 million shift, say there may be $2 million or $3 million more across the business, nothing significant to call out, but a little bit more in terms of timing. Just not so much pulling forward shipments, but just the way we were able to move goods through the warehouse. And some of the demand that picked up later in the quarter, which we were able to satisfy with some early shipments. So nothing dramatic outside of that issue.

And then on the guide, you adjust for the $20 million in the licensing change on Kids. It looks like the sales guide is unchanged. Given some upside in the first quarter and particularly better replenishment trends, I'm curious why you didn't flow through more of the 1Q beat or kind of raise your outlook on the year based on those improving revenue trends. Can you address that? And also maybe talk about the impact or quantify the impact of the Saucony shift from 2Q to 3Q.

Sure. I'll take the first, and then Mike can talk about the timing thing. I think we certainly were encouraged by some acceleration in the trends as we move through the quarter. How we were thinking about how the quarter might play out and certainly how the year may play out. We've talked about increasing improvement in replenishment at wholesale. We've talked about an acceleration in our direct-to-consumer business, which leaves us all sort of encouraged that the work that we're doing is getting traction, and we're working on returning the company back to growth. At the same time, our year is predicated on a back half inflection, sequential improvement quarter-by-quarter, which we've talked consistently about. And now we're actually in the place, now we're beginning to chase inventory. We worked really, really hard. As you know, as part of the turnaround, we worked to better manage the inventory piece, and we've done a good job at that. And we've worked to maintain lean just because of where we have been and where we thought we needed to go. Now that we're seeing an inflection and some proof points of growth, we're beginning to chase inventories. We're still taking a conservative approach. I think hopefully, it came through in my prepared remarks that while the quarter was a beat to expectations, it was a relatively low bar. We still have work to do as a company to get back to where we need to be as an organization. But early proof points are encouraging, and we are certainly happy about the traction that we have. At the same time, we have a lot of the year left to go.

The second part of your question, Mitch, on the distribution center transition, that's just getting underway right now. And so obviously, we're being cautious on how that might impact the quarter. I would say just we didn't quantify it in the remarks, but we are kind of thinking in the range of $5 million to $10 million of potential revenue shifts there. But doing everything we can to mitigate that, and the teams are already making great progress on the transition. But just important to call it out because obviously, as we get through that over the coming 4 or 5 weeks, that could have some impact on the flow of goods and chasing some of the demand that Chris has been talking about. Having said that, really good coordination with our key accounts and planning this transition and good support from our customers in terms of how we're going to refill the goods, too.

Chris, you and your team have done a lot of heavy lifting over the last year. With divestitures and business model changes like the JV and the license business announced a couple of days ago, curious to know if you're contemplating any more changes over the next 6 months? Or if you've reached, do you think, a steady state point for the business to grow going forward?

Thank you, Laurent. Appreciate the question. We certainly have done a lot of heavy lifting over the past 9 months or so, really focused on stabilizing the business. And we've taken a very thoughtful sequential systematic approach to what we thought we needed to do to both turnaround and then ultimately transform the business. We have done a tremendous amount of things on the back office side in that effort. Are we done doing all of those things? I think we certainly have done a lot of them. Will we continue to contemplate other things? I think we will. I think we have to become very active, and it's a very fast-changing dynamic marketplace. And I think we can't afford to get comfortable. I think we have to keep optimizing the business, and we have to stay focused on what our fewest priorities are and really drive growth behind a handful of our brands and frankly, trying to do fewer things, but do those things better. I will tell you that it is refreshing now as we've done a lot of those hard activities and whether selling things or divesting things or restructuring the business, the conversations around here have really pivoted towards growth, and where our brands are in the marketplace, how we are chasing inventories, what’s working from a demand creation standpoint, how we are doing on DTC.

Very helpful, Chris. And then if I can zero in on Saucony. Saucony, I appreciate the slides, the 2Q guide. If Saucony implies 2H revenue to be down mid-teens, maybe can you unpack that a bit more? What are you seeing in terms of the order book? How is the one specialty channel doing? Are inventories clean there? Are you seeing growth in some of your Retro products? Any color there, Chris, would be very helpful for the audience.

Sure. Yes. Thank you, Laurent. Saucony is a fascinating story right now. I remain very encouraged and bullish on the prospects of Saucony. I mentioned that on the last call, and we certainly are seeing early proof points of the work that we've done. Really, first and foremost, really attacking the product pipeline, bringing innovation back, looking at what categories in which we play and thinking about color and materials, and then really using the archives as a growth vehicle. So there certainly are some really strong signs that we're seeing good momentum, really behind the Ride and Guide 17. The Endorphin Collection was an immediate shot in the arm when the brand dropped that a month or so ago. And then just last week, we dropped the Triumph 22, which is an awesome new shoe. So there is chatter in the important run specialty channel, and we are seeing our styles begin to pick up. There is a nice movement in search interest. For those of you that pay attention to Google search interest, I think we're up 23% year-to-date as a brand, which is encouraging. At the same time, we're working to clean up the business that Saucony is. So there are headwinds there around the close-up sales that we're anniversarying. We had a very low margin profile business in some of the family channel accounts that we have to work on that margin business. And we're working to be less promotional at dot-com as well. So I think you have to look under the covers of the Saucony business and not just at the top line, and understand how we're trying to rationalize that business, take a new strategic approach. We're anniversarying some things that are going to go away, but then I would encourage everyone to focus on the new products that we've dropped and the momentum we're driving, both behind performance and lifestyle run and then importantly, the Retro Track Collection, which is just an amazing gift we have in our archives.

I just want to follow up on the lifestyle product or the Retro product in Saucony, and then I got a couple of other questions. When you look at sort of the big growth driver over time, is this going to be more performance running? Or do you see it getting more scale across athlete specialty and so on?

Yes. Great question, Sam. And that has been sort of the big work that we've done in Saucony around strategy. And I think Saucony has an amazing opportunity in front of it. I think for a long time, the brand was potentially a little bit too myopic, focusing on the ends of the spectrum. The really Elite Run, which is beautiful innovative product, but the market size just isn't big enough. And then on the lifestyle side, really focused on the collaboration piece, the Sneakerhead piece that is very cool, but also doesn't have a lot of scale. So as we think about Saucony, we want to maintain great innovative product, which is why the Endorphin 4 Collection was so important. And we want to maintain an amazing credibility in Sneakerhead culture, which is why we're so glad that we won the collaboration of the year last year with Jae Tips. At the same time, the big commercial opportunity for Saucony moves a little bit towards the middle. That's as performance run as a lifestyle opportunity. And I think you have seen that pivot enough and us specifically in color and materialization and specifically the work around her. At the same time, the broader life opportunity around the original, specifically the Retro Track, which currently is in fashion right now. So I think us opening the aperture on Saucony, thinking about the greater market opportunity, maintaining the high ground in innovation, and coolness at the ends of the spectrum. At the same time, having a much stronger focus on the bigger commercial opportunities more towards the middle.

Sam, the guidance adjustment that we made to revenue was exactly the $20 million that we referenced, and it's solely related to the change in the business model. So early May, we announced the change. So we have revenue under the wholesale model in the first 4 months of the year and then a shift in the last 8. About $40 million. Yes. We had net interest, I think, last year of about $63 million. So coming down to about $40 million in our guidance right now, driven by the ongoing progress we've made in reducing the debt.

Congratulations, Mike.

Thank you, Sam.

Mike, good luck with the transition. Congratulations on your role change going forward.

Thank you, Jon.

And Mike, if I could follow up maybe just first with the gross margin drivers in the first quarter. I know you called out some mixed tailwind. So could you maybe just talk a little bit more about the drivers of the gross margin expansion? How you see that going forward? And then really just the second half operating margin inflection that you talked to, if you could review some of the drivers there?

Sure. I think that the good news on the gross margin performance in Q1, which was slightly ahead of our guidance for the quarter, was that we saw the benefit and the crystallization of a lot of the work that has been done over the last year to improve the supply chain performance but also the cost structure. Whether that be the reduction in the transitory costs that we had to contend with for 2023 and slightly previous to that. And obviously, the product cost initiatives that we put into place in the middle of '23. So those all came to fruition as we expected. The benefit from just a healthier inventory, having worked through a lot of that end-of-life inventory in 2023 as painful as it was, set us up for a much cleaner business this year. And starting in Q1, we saw the benefit of that. And then I would say, again, as we mentioned on the revenue side, all the elements of our gross margin contribution in the quarter were quite solid. Our full price margins held up to plan. We were able to drive a good amount of e-commerce improvement on our gross margins as well by being less promotional and driving a healthier business there. So all the things that we kind of laid out in our original guidance back in February really kind of came together in the first quarter, and we expect that trend and those benefits to continue throughout the balance of the year.

Okay. Great. And Chris, if I could just follow up on Merrell, the outlook to improve and inflect the growth later in the year. Could you just maybe talk about what you're seeing from the outdoor industry supporting that view? And some of the Merrell-specific drivers that you expect to support that inflection?

Yes, for sure, Jon. The outdoor category has been under pressure for quite some time, and it's the responsibility of the category leader to bring newness, excitement, and innovation to that space, which lies with Merrell. We are not anticipating a significant improvement in the outdoor category, so we are concentrating on what we can control. Encouragingly, Merrell continues to gain market share, which is great. There was a time when Merrell was losing share consistently, but we turned that around during COVID and have maintained that momentum. I'm pleased with our efforts to create lighter and faster, more athletic products, like the Moab Speed 2. Initial feedback on that launch is very positive, particularly regarding global acceptance, sell-through rates, replenishment, fit, style, and color. Meanwhile, the Moab 3 is also performing well. As we move past the challenging market conditions of excess inventory and erratic selling, we are optimistic that Merrell is well-positioned to take advantage of the situation. Merrell needs to expand beyond just its core hiking outdoor segment. To truly become a significant global brand, it must diversify beyond its core hiking business, which is why we've focused on trail running. We are gaining market share in trail running, which is promising. We have some incredible styles, like the Agility Peak 5 and the New Moab Flight, that we've not previously mentioned, receiving excellent reviews online and showing strong sell-throughs. Additionally, we need to branch into lifestyle products, especially for women. This is why we are optimistic about the Wrapt Collection, which we previewed at ICR in January. The sell-throughs have been impressive; each delivery sells out quickly with minimal marketing. Our capacity to leverage this franchise, market it effectively, and move beyond just the core silhouette will be crucial. The Wrapt is an exceptional shoe—visually striking, a great fit, and remarkably versatile. This versatility is where Merrell's potential lies as we look beyond just core hiking. I’m encouraged by the team’s efforts. We have a new Chief Marketing Officer, and we've conducted product and demand creation meetings with them. The new Good Things Await campaign has launched, generating a lot of impressions and positive feedback. While Merrell is still facing challenges in the outdoor sector, I believe we are taking the right steps to stabilize the brand and foster growth again.

Could you provide more details about the direct-to-consumer performance? I noticed in the release that the ongoing direct-to-consumer revenue was down 6%. How does that compare to the previous quarter? Additionally, there has been significant progress on inventory over the last couple of quarters, but it seems like there is still some work to do. Can you discuss whether there are areas of inventory that still need attention, or what the current status and competition of the inventory looks like?

Thank you for the question. I'll start, and then Mike will cover the last two points. Our main focus is on improving our online storytelling and how we present our brands, aiming to be less promotional. We've seen a reduction in promotional activities at our dot-com site, which is crucial for the health and perception of our brands in the marketplace. This shift toward less promotion has positively impacted our margins. In terms of performance, we experienced a decline in the mid-teens during the fourth quarter and around 6% in the first quarter, but we saw a turnaround with growth starting in March that continued into April, which is encouraging. New product launches drive our business, and we've seen strong consumer engagement with new releases such as the Endorphin 4 and Triumph 22 from Saucony, the Moab Speed 2 and Agility Peak 5 from Merrell, and continuous momentum from the Wrapt Collection and the 1TRL products. Additionally, Sweaty Betty's latest innovation, highlighted by the "Wear the Damn Shorts" campaign, resonates well with their audience. Overall, we're pleased with our DTC progress, effectively halting the decline and starting to see growth. I'm proud of our approach, focusing on less promotion, better storytelling, and consistently launching new and innovative products, which resonates in the market. While we’re not claiming victory just yet, we do see early signs that our strategy and execution are making headway.

Mauricio, regarding the inventory question, we have made continued progress. We finished the quarter better than we anticipated, thanks to strong sales of high-quality products and improved planning and management. As mentioned in our guidance, we expect to further reduce inventories this year by another $75 million year-over-year. This reduction is possible because we are focusing on specific core areas and being strategic about the timing of our sales. We believe we can achieve this, and we have slightly improved our guidance since February. We are seeing an overall enhancement in the quality of our inventory. While it's not yet where we want it to be, which is why we highlight the $75 million opportunity, the progress made so far is ahead of schedule.

Understood. I have a follow-up on SG&A. I want to clarify if you mentioned that SG&A expenses in the second half should be relatively similar to the first half. Is that correct? Should we expect that to be more weighted towards Q3 or Q4?

Well, we're not giving quarterly guidance on the back half yet, but just thought it would be helpful to kind of give some perspective on both the margin expectations for the back half of the year. Pretty much in line with what we've experienced so far in the Q1 plus the guidance we gave for Q2. And then similar sort of directional guidance on the SG&A for the full half of the year. So again, we did call out Mauricio, that we expect sequential improvement in revenue every quarter with growth in the fourth quarter. So that might help your model a little bit.

Mike, good luck in your next endeavors. First, I want to discuss your approach to pricing and promotions. How do you view the current environment, what changes have you observed, and what are your expectations moving forward? Regarding the wholesale order book and distribution channels, are you noticing any variations among different types of accounts by brand? Lastly, Chris, in terms of the ongoing transformation work, where do you currently stand organizationally in achieving your desired efficiencies, both at headquarters and beyond?

Yes, that’s a great question, Dana. I’ll address your last question first and then return to the earlier ones. Wolverine has experienced significant changes in the past nine months, particularly with the CEO transition last August. We quickly focused on stabilizing and restructuring the business, and while we've made considerable progress, there is still quite a bit of work that needs to be done. Currently, we are in the midst of relocating our distribution center, shutting down the one in Louisville and transferring operations to California. This undertaking requires extensive effort. We are also in the process of moving our Boston Brace and Saucony teams to Michigan, and we’re still on the lookout for some key leadership roles and brand talent in Saucony and other products. I’m pleased with the progress we’ve made and believe we have taken the right necessary steps. However, there is still work ahead. We are tackling our priorities with urgency and addressing the most critical tasks first. Regarding marketplace inventories, I’ve observed continued improvement, which is encouraging and has reduced the promotional pressure, especially in our online business. While there are still some areas that need improvement, and it varies by channel, the situation is getting better, though not yet perfect, and we continue to monitor it closely.

Overall, in the accounts or in the channels where we do get the information we're seeing, inventory coming down nearly 25% year-over-year, not to optimal levels yet, obviously, at retail, but that's an encouraging trend and sign. But at the same time, average selling price is increasing pretty dramatically for our big brands in those channels. So that's a really important proof point. We talked a little bit about the margin expansion in our e-commerce business and how that's been a very important focus for the teams. We're seeing that benefit, I think, a combination of a bit more discipline, but most importantly, just new product that's actually resonating with the consumers right now and driving more full-price business. So I think those are the two most important proof points right now, Dana, as we think about more confidence into the back half of the year. We're not giving guidance on Q3 or Q4 phasing or trends. But just know that some of the early positive wins we're seeing in the e-com side of the business are giving us some confidence points for sure.

Just first, can you talk about your decision to roll off the Merrell, Saucony Kids businesses into license? And then any plans you can share that you have to reallocate some of those resources you were previously using to support those?

Thank you for the question, Ashley. We value your interest. We are making significant decisions regarding Wolverine World Wide's future. Last year, we established a global licensing group and are being very strategic about its potential. We have an experienced leader heading this initiative, who brings a strong daily approach to our brands and partners, fostering profitable growth. We've created a center of excellence with the right leadership in place. We are assessing the global potential of our brands and identifying areas for both strength and improvement. I still believe in our brands' potential, especially Merrell and Saucony, and how we can leverage them fully. Regarding Merrell, we have tried apparel and accessories in the past without much success, but we have found a promising partner now. I recently met with them and will have another meeting soon. They are enthusiastic about the Merrell brand and have already built their team, seeing great potential for Merrell's apparel and accessories to enhance our global business offerings. We can't overlook the fact that outside the U.S., we operate numerous direct-to-consumer channels. By providing those locations with apparel and accessories alongside our footwear, we can create a substantial opportunity and enhance our narrative with consumers. I'm optimistic about this direction. For the kids' segment, we had a strong group previously, but partnering with an established licensing partner makes the most sense for us now. We have selected excellent partners for both Merrell and Saucony Kids, working under an effective leader within Wolverine World Wide. We are focused on prioritizing our business while remaining open to opportunities with best-in-class partners who can aid our growth without us having to do everything in-house. We are redeploying resources to strengthen our focus on our core strengths, which is a crucial step in our evolution.

Okay. Great. And then just quickly, one, any call-outs you could provide around which brands of products are kind of helping with that replenished rate improvement you're seeing? And then additionally, the product cadence as we get to the back half of the year and just how it compares to some of the innovation we're seeing now. As resources free up, should be seeing a little bit of acceleration in terms of launches? Or is the inflection of 4Q coming from existing products you released ramping in momentum?

Certainly, we have noticed an overall improvement in replenishment. Some areas are doing better than others. In our weekly discussions with the brand leadership and sales teams, we've observed a meaningful increase in replenishment orders, especially in certain brands, leading us to pursue more inventory. For instance, Saucony is gaining momentum, prompting us to actively seek out products due to our careful inventory management aimed at revitalizing the brand. Merrell is also performing well, particularly with the Moab Speed 2s, as we prioritize orders to support regions and channels that are experiencing growth. Additionally, in the work group sector, even where we haven't focused much today, we're pursuing products that are trendy or feature new innovations. It's clear that consumers have a strong desire for newness and innovation, and when we effectively present these, the products resonate well. I'm optimistic about our global brand-building approach and the advancements we've made in our product pipeline. While we have had successful launches, more products are set to be released this year. I'm particularly excited about the ReForce from the Boot Group and the Saucony Hurricane 24 scheduled to come out this summer, both of which are generating buzz. We continue to focus on the Endorphin and the Triumph, which are also positively received. There are some innovative new light hikers from Merrell expected to launch later this year into next year, marking a significant advancement for the brand in product disruption. We’ve made considerable efforts to speed up innovation in our pipeline, and our teams have responded well to promising early indicators from new products. The response we've seen during our account sell-ins has been very encouraging, and we look forward to each new product launch with excitement.

Really appreciate the color there. And best of luck to you, Mike, in your future endeavors.

Ladies and gentlemen, we will now end the question-and-answer session. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.