They take tremendous pride in the company and their brands and the fact that we’re the team to lead this 140-year-old company out of the current situation into better days is not lost in anyone here. But I’m very thankful and something we’re staying very close to.
Operator: Our next question is from Sam Poser with William Trading.
Samuel Poser: So Chris, you talked about the need to get back to a push model — pull model, excuse me, from a push model. And you talked about working with your major accounts to sort of to — for everybody to support what you’re doing. Now how do you — given where things stand today, how do you get — like isn’t it going to take like through next year to get to a pull model because you’re going to have to pull sort of way back to sort of find out what demand is rather than there are certain shoes you know to do well like the Moab. But where you really have to sort of figure out what that demand is and take that very cautiously moving forward so you can really get a pull model going. And then I would think that might come through just very strict product allocation, even though that might sound counterproductive at the beginning?
Michael Stornant: Yes. No, it’s a good question. That’s certainly not lost on us. And Sam, we’ve talked a lot over the years about managing brands in Wolverine Worldwide and how we manage the marketplace. Certainly, our envisioned future of the things that I’ve talked about and what we want to go do. Those things are going to take time. And we’re not going to wake up a quarter or 2 from now and saying we’ve somehow mysteriously created a pull model. But that ultimately is where the company has to get to and certainly, to be a great global brand builder, those are the efforts that we have to take. I think there are some easy things that we can do along the way to help us achieve that. And I think certainly, Sam, as we talk about the expectations for growth, I think we are approaching those things cautiously.
And that’s why you’ve seen us work so quickly on the cost structure to fundamentally improve the profit contribution that we have, at the same time, finding a balanced approach to reinvesting in our brands. I’ll tell you, over the last 91 days, I’ve had the privilege of talking to a lot of our top strategic accounts here in the US and talk to a lot of our partners around the world. And when I talk about global brand building and what we want to be great at and what we need from them, they are encouraged by that. We’re talking about building a more strategic relationship and being less transactional. At the same time, we’re reassured. We’re lucky. The Wolverine portfolio, the brands that we have, Merrell the #1 outdoor footwear brand in the world.
Saucony sort of a leader in performance run. Sweaty Betty a new entrant to a very fast growing category and there are portfolio work brands. Between Wolverine and Cat and the brands, we have a great portfolio. And when I talk to those partners, they talk about the strength of the portfolio and the consumers that come in and ask for them and the places that we hold in their assortments. So I think it’s not going to happen in a quarter or 2. That is certainly what the envisioned future is. But we’re starting today with that approach. And I think for us, fundamentally, we think that ultimately is the charge and mission for the organization.
Samuel Poser: I have two more things. One, I mean, doesn’t that — just a quick follow-up on that. Doesn’t that mean though that to sort of get where you have to get to from a brand strength and sanctity situation means that revenue in 2024, almost for the entire year has to be down, even though you might see some gross margin — some margin improvement on significant revenue decreases to improve the health of the brands? And then secondly, you talked — how do you — I mean, what are you going to do to measure demand? Because that product that ended up in the gray market, as you mentioned, had to be excess goods sold to somebody that — how do you prevent something like that from happening again? Or — and if you’re going to cut back distribution to get with the right partners, will you have to take those goods back to prevent more gray market situations. We’ve seen this from a few other brands as well.
Chris Hufnagel: Yes. Good question. We’re not giving any guidance in 2024. But as we’re sort of building our plans and building our models, we view 2024 as a low growth year, both in what we have to go do from the portfolio standpoint, and frankly, sort of just what we’re seeing on the horizon, which is what sure drove all of the work over the last handful of months to best position the company to dramatically improve the margin profile of the organization, both from a gross margin standpoint in which we’ve made tremendous progress on, and what we anticipate to happen from an operating margin standpoint, due to the SG&A work. So no guidance yet, but I think there is a cautious approach to how we’re viewing the year. And I’m really viewing 2024 as a bridge to ’25 and ’26.
We believe this company is capable of a mid-single-digit consistent revenue growth of achieving operating margins in the mid-teens, and we’re building plans towards that. As it relates to the gray market, those things have always sort of existed to a certain extent. It’s certainly worse for us right now sort of given the inventory challenges that were resulting of the supply chain issues as a result of COVID. But that is plaguing some of our brands today, and we’re seeing it obviously both in our own DTC performance. And I’m also getting very direct feedback from our wholesale partners about that. And we’re taking some aggressive action with how we better manage — actually how we monitor that and then how we manage that. And then the consequences when we do find a violator and what the consequences are.
So Sam, you talk a lot about how companies manage brands. I think about that through distribution choices we make allocations, managing supply and demand. But then certainly how our brands show up day to day, it’s critically important to ultimately becoming great brand builders.
Operator: Our last question is from Mauricio Serna with UBS.
Mauricio Serna: Great. I just wanted to — maybe if you could touch a little bit more on the 2 largest brands. It seems that Saucony is resonating in a better shape compared to Merrell. So maybe you could just provide a little bit more details about, I think you talked a little bit about the outdoor category facing headwinds from a demand perspective. Do you believe that, that is something that could inflect in ’24? Or do you think that’s like as a challenge. And on Saucony like how is — why do you think that brand is actually doing relatively better than Merrell. And also just on Sweaty Betty, just a point of clarification because I see the guidance for Q4 is a decline when Q3 revenues were actually up again. I just wanted to understand the dynamics happening there?
And then just lastly, on the savings for next year, $250 million I know you talked about the margins taking a little bit longer to get to the 12% EBIT margin, so not happening next year. Is that really more reflective of a slower top line growth for — slower top line expectations for next year? Or how should we think about the employed operating margin for fiscal year 2014?
Chris Hufnagel: Yes. Thanks, Mauricio. I think there’s 3 questions there, and I’ll answer a couple of them and turn it back to Mike. I’ll hit the operating margin question first. And then Mike can add on and then we’ll go back to Merrell and Saucony and Sweaty Betty. Obviously, the growth expectations that we currently see for 2024 will be more modest than what we initially thought. At the same time, I fundamentally think as a company, we have to balance — find the balance between operating margin expansion and sufficient investment in our brands to catalyze long-term sustainable growth. And certainly, we could do a lot of draconian things and achieve a higher operating margin next year. That would feel good for 1 year, but at the same time, would not best position the portfolio.
