WOLVERINE WORLD WIDE INC /DE/ (WWW)

ITEM 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following is a discussion of the Company’s results of operations and liquidity and capital resources. This section should be read in conjunction with the Company’s consolidated condensed financial statements and related notes included elsewhere in this Quarterly Report.

BUSINESS OVERVIEW

The Company is a leading global footwear and apparel company driven by a vision to Make. Every Day. Better. The Company’s brands are sold in approximately 170 countries and territories at July 4, 2026, including through owned operations in the U.S., Canada, the United Kingdom and certain countries in continental Europe and Asia Pacific. In other regions (Latin America, portions of Europe and Asia Pacific, the Middle East and Africa), the Company relies on a network of third-party distributors, licensees and joint ventures. At July 4, 2026, the Company operated 123 retail stores in the U.S., United Kingdom, Ireland and Italy and 38 direct-to-consumer eCommerce sites.

Known Trends Impacting Our Business

On February 20, 2026, the U.S. Supreme Court ruled that U.S. tariffs imposed under the International Emergency Economic Powers Act (“IEEPA”) on goods imported into the U.S. were unauthorized. In March 2026, the U.S. Court of International Trade ordered U.S. Customs and Border Protection (“CBP”) to suspend collection of the invalidated tariffs and to establish a process to refund IEEPA tariffs previously collected. The total amount of IEEPA tariffs paid by the Company as of the date of the ruling was $35.9 million. The Company has submitted refund claims through the portal established by CBP for $34.0 million, excluding interest. Beginning on July 20, 2026, the Company has received cash of $6.9 million for a portion of the refund claims, with applicable interest.

The Company elected to apply the gain contingency model in accordance with ASC 450-30, Gain Contingency, to account for potential refunds. As of July 4, 2026, the Company has not recognized any tariff refunds as the amount and timing of any recoveries was uncertain. The Company will continue to monitor changes to the import and export policies of the U.S. and other countries that could impact its financial position, results of operations and cash flows.

The Company’s revenue from sales to customers in the Middle East represents approximately 1% of total revenue and is managed by third-party distributors. The Company is closely monitoring the ongoing conflict in the Middle East to determine the potential impacts on the Company’s business, which may include a reduction in distributor revenue and an increase in product input costs and transportation costs associated with elevated oil costs.

2026 FINANCIAL OVERVIEW

•Revenue was $506.4 million for the second quarter of 2026, representing an increase of 6.8% compared to the second quarter of 2025.

•Gross margin was 46.5% in the second quarter of 2026 compared to 47.2% in the second quarter of 2025.

•The effective tax rates in the second quarters of 2026 and 2025 were 19.5% and 13.7%, respectively.

•Diluted earnings per share for the second quarter of 2026 was $0.37 compared to $0.32 for the second quarter of 2025.

•The Company declared cash dividends of $0.10 per share in the second quarters of both 2026 and 2025.

•Cash flow provided by operating activities was $3.4 million for the first two quarters of 2026 compared to cash flow used in operating activities of $39.2 million for the first two quarters of 2025.

•Compared to the second quarter of 2025, inventory as of the end of the second quarter of 2026 decreased $55.2 million, or 17.0%.

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RESULTS OF OPERATIONS

REVENUE

Revenue was $506.4 million for the second quarter of 2026, representing an increase of $32.2 million compared to the second quarter of 2025. The change in revenue reflected a $32.9 million, or 9.3%, increase from the Active Group, a $1.7 million, or 1.6%, decrease from the Work Group, and a $1.0 million, or 8.9%, increase from the Other category. The Active Group’s revenue increase was primarily driven by an increase of $17.6 million from Merrell® and $14.3 million from Saucony®. The Work Group’s revenue decrease was primarily driven by decreases of $2.3 million from Cat® and $1.9 million from Harley-Davidson®, partially offset by an increase of $2.5 million from Wolverine®. The increase in Other revenue was primarily driven by an increase in Hush Puppies® royalty revenue. Changes in foreign exchange rates increased revenue by $3.1 million during the second quarter of 2026. Direct-to-consumer revenue increased during the second quarter of 2026 by $0.1 million, or 0.1%, compared to the second quarter of 2025.

Revenue was $964.0 million for the first two quarters of 2026, representing an increase of $77.5 million compared to the first two quarters of 2025. The change in revenue reflected a $77.8 million, or 11.4%, increase from the Active Group, a $0.7 million, or 0.4%, decrease from the Work Group, and a $0.4 million, or 1.8%, increase from Other. The Active Group’s revenue increase was primarily driven by an increase of $40.4 million from Saucony® and $36.7 million from Merrell®. The Work Group’s revenue decrease was primarily driven by a decrease of $1.9 million from Cat®, partially offset by an increase of $1.5 million from Wolverine®. The increase in Other revenue was primarily driven by an increase in Hush Puppies® royalty revenue. Changes in foreign exchange rates increased revenue by $18.5 million during the first two quarters of 2026. Direct-to-consumer revenue increased during the first two quarters of 2026 by $3.0 million, or 1.4%, compared to the first two quarters of 2025.

GROSS MARGIN

Gross margin was 46.5% in the second quarter of 2026 compared to 47.2% in the second quarter of 2025. Gross margin was 47.0% in the first two quarters of 2026 compared to 47.4% during the first two quarters of 2025. The decrease in gross margin was primarily related to higher tariff costs, partially offset by price increases other tariff mitigation initiatives.

OPERATING EXPENSES

Operating expenses increased $4.7 million, from $183.3 million in the second quarter of 2025 to $188.0 million in the second quarter of 2026. The increase was primarily driven by higher selling costs ($5.1 million), higher legal settlement costs ($2.5 million), higher distribution costs ($2.0 million), and higher incentive compensation costs ($1.8 million), partially offset by lower general and administrative costs ($3.9 million), 2025 reorganization costs that did not reoccur in 2026 ($1.9 million), and lower advertising costs ($1.2 million).

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Operating expenses increased $13.5 million, from $358.4 million in the first two quarters of 2025 to $371.9 million in the first two quarters of 2026. The increase was primarily driven by higher selling costs ($10.6 million), higher advertising costs ($6.7 million), higher distribution costs ($4.2 million), higher incentive compensation costs ($2.7 million), higher legal settlement costs ($2.5 million), and higher product development costs ($1.0 million), partially offset by lower general and administrative costs ($8.3 million), 2025 reorganization costs that did not reoccur in 2026 ($3.7 million), and lower environmental and other related costs, net of insurance recoveries ($2.2 million).

INTEREST, OTHER AND INCOME TAXES

Net interest expense was $7.1 million in the second quarter of 2026 compared to $8.5 million in the second quarter of 2025. Net interest expense was $13.6 million in the first two quarters of 2026 compared to $16.5 million in the first two quarters of 2025. The decrease in interest expense for both the quarter-to-date and year-to-date periods is primarily due to lower average principal balances of variable rate debt.

Other income was $0.6 million in the second quarter of 2026, compared to other income of $1.4 million in the second quarter of 2025. Other income was $0.8 million in the first two quarters of 2026, compared to other income of $2.9 million in the first two quarters of 2025.

The effective tax rates in the second quarter of 2026 and 2025 were 19.5% and 13.7%, respectively. The effective tax rates in the first two quarters of 2026 and 2025 were 19.2% and 12.3%, respectively. The increase in the effective tax rates between 2026 and 2025 was primarily related to changes in the income mix among jurisdictions with differing tax rates and the decreased impact of discrete benefits on the tax rate in the current year due to higher pretax income.

REPORTABLE SEGMENTS

The Company’s portfolio of brands is organized into the following reportable segments.

•Active Group, consisting of Merrell® footwear and apparel, Saucony® footwear and apparel, Sweaty Betty® activewear, and Chaco® footwear; and

•Work Group, consisting of Wolverine® footwear and apparel, Cat® footwear, Bates® uniform footwear, Harley-Davidson® footwear and HYTEST® safety footwear.

The Company also reports “Other” and “Corporate” categories. The Other category consists of Hush Puppies® footwear and apparel, sourcing operations that include third-party commission revenues, multi-branded direct-to-consumer retail store and the Stride Rite® licensed business. The Corporate category consists of unallocated corporate expenses, such as corporate employee costs, corporate facility costs, IT costs, reorganization activities, and environmental and other related costs.

The reportable segment results are as follows:

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Item 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operations

OVERVIEW

BUSINESS OVERVIEW

The Company is a leading global designer, marketer and licensor of branded footwear, apparel and accessories. The Company’s strategic vision is to build and grow high-energy footwear, apparel and accessories brands that inspire and empower consumers to explore and enjoy their active lives. The Company seeks to fulfill this vision by offering innovative products and compelling brand propositions; complementing its footwear brands with strong apparel and accessories offerings; expanding its global direct-to-consumer footprint; and delivering supply chain excellence.

The Company’s brands are marketed in approximately 170 countries and territories at January 3, 2026, including through owned operations in the U.S., Canada, the United Kingdom and certain countries in continental Europe and Asia Pacific. In other regions (Latin America, portions of Europe and Asia Pacific, the Middle East and Africa), the Company relies on a network of third-party distributors, licensees and joint ventures. At January 3, 2026, the Company operated 128 retail stores in the U.S., United Kingdom, and Italy and 39 direct-to-consumer eCommerce sites.

Effective May 4, 2024, the Company entered into global multi-year licensing agreements of Merrell® and Saucony® kids footwear and Merrell® apparel and accessories.

Effective January 10, 2024, the Company completed the sale of the Sperry® business.

Effective January 1, 2024, the Company completed the sale of the Company’s equity interests in the Merrell® and Saucony® China joint venture entities.

The following discussion includes a comparison of the Company's results of operations and liquidity and capital resources for fiscal 2025 and 2024. A discussion of a comparison of the Company's results of operations and liquidity and capital resources for fiscal 2024 and 2023 has been omitted from this Form 10-K but may be found in Item 7. Management's Discussion and

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Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the fiscal year ended December 28, 2024, filed with the SEC on February 20, 2025.

2025 FINANCIAL OVERVIEW

•Revenue was $1,874.3 million for 2025, representing a increase of 6.8% compared to the prior year of $1,755.0 million.

•Gross margin for 2025 was 47.3%, compared to 44.3% in 2024.

•The effective tax rate in 2025 was 16.9%, compared to 15.9% in 2024.

•Diluted earnings per share in 2025 was $1.14, compared to $0.55 in 2024.

•The Company declared cash dividends of $0.40 per share in 2025 and 2024.

•Cash flow provided by operating activities was $140.0 million in 2025 and $180.1 million in 2024.

•Compared to the prior year, inventory increased $26.4 million, or 10.7%.

RESULTS OF OPERATIONS

The following is a discussion of the Company’s results of operations and liquidity and capital resources. This section should be read in conjunction with the Company’s consolidated financial statements and related notes, which are included in Item 8 of this Annual Report on Form 10-K.

REVENUE

Revenue was $1,874.3 million for 2025, representing an increase of 6.8% compared to the prior year's revenue of $1,755.0 million. The change in revenue reflected a $161.7 million, or 13.0%, increase from the Active Group, a $33.1 million, or 7.3%, decrease from the Work Group and a $9.3 million, or 17.4%, decrease from Other. The Active Group's revenue increase was driven by an increase of $126.6 million from Saucony® and $50.6 million from Merrell®, partially offset by decreases of $9.4 million from Chaco® and $6.1 million from Sweaty Betty®. The Work Group’s revenue decrease was driven primarily by a decrease of $17.4 million from Wolverine®, $5.2 million from Cat®, $4.3 million from HYTEST®, $3.5 million from Harley-Davidson®, and $2.7 million from Bates®. The decrease in Other revenue was primarily driven by decreases of $4.6 million from Sperry®, $3.3 million from joint venture and royalty revenue recorded at the corporate level, and $0.9 million from Hush Puppies®. International revenue represented 52.2%, and 49.1% of total reported revenues in 2025 and 2024, respectively. Changes in foreign exchange rates increased revenue by $14.0 million during 2025. Direct-to-consumer revenue decreased by $8.4 million, or 1.7% during 2025 compared to 2024.

GROSS MARGIN

For 2025, the Company’s gross margin was 47.3%, compared to 44.3% in 2024. The gross margin increase was primarily due to the benefit of product cost savings, a favorable mix shift toward more full-price sales, and the positive impact from recent price increases, partially offset by the impact of higher U.S. tariffs.

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OPERATING EXPENSES

Operating expenses increased $56.0 million in 2025, to $736.5 million. The increase was primarily driven by higher advertising costs ($17.8 million), higher selling costs ($17.8 million), higher environmental and other related costs, net of recoveries ($16.9 million), higher incentive compensation costs ($13.5 million), 2024 gains on the sale of businesses, trademarks, and long-lived assets ($8.5 million), and higher general and administrative costs ($5.4 million), partially offset by lower reorganization costs ($17.0 million) and lower impairment of long-lived assets ($9.3 million). Environmental and other related costs were $6.6 million and $15.6 million in 2025 and 2024, respectively. See Note 16 to the Company's Consolidated Financial Statements for further discussion of environmental remediation costs.

INTEREST, OTHER AND TAXES

Net interest expense was $32.8 million in 2025 compared to $42.7 million in 2024. Interest expense decreased in the current year due to lower average principal balances of variable rate debt and lower weighted average interest rates on variable rate debt.

Other income was $4.1 million in 2025 compared to $3.3 million in 2024.

The effective tax rate in 2025 was 16.9%, compared to 15.9% in 2024. The increase in the effective tax rate between 2025 and 2024 was primarily related to income mix between jurisdictions with differing tax rates.

REPORTABLE SEGMENTS

The Company’s portfolio of brands is organized into the following reportable segments.

•Active Group, consisting of Merrell® footwear and apparel, Saucony® footwear and apparel, Sweaty Betty® activewear, and Chaco® footwear; and

•Work Group, consisting of Wolverine® footwear and apparel, Cat® footwear, Bates® uniform footwear, Harley-Davidson® footwear and HYTEST® safety footwear;

Kids' footwear offerings from Saucony®, Sperry®, Keds®, Merrell®, Hush Puppies® and Cat® are included with the applicable brand.

The Company also reports “Other” and “Corporate” categories. The Other category consists of Hush Puppies® footwear, sourcing operations that include third-party commission revenues, multi-branded direct-to-consumer retail store, the Stride Rite® licensed business, Sperry® footwear, Keds® footwear, and apparel and the Company’s leather marketing operations. The Corporate category consists of gains on the sale of businesses and trademarks, unallocated corporate expenses, such as corporate employee costs, corporate facility costs, IT costs, reorganization activities, impairment of long-lived assets and environmental and other related costs.

The reportable segment results for years 2025 and 2024 are as follows:

Further information regarding the reportable segments can be found in Note 17 to the Company's Consolidated Financial Statements.

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Active Group

The Active Group’s revenue increased $161.7 million, or 13.0%, in 2025 compared to 2024. The revenue increase was driven by an increase of $126.6 million from Saucony® and $50.6 million from Merrell®, partially offset by a decrease of $9.4 million from Chaco® and $6.1 million from Sweaty Betty®. The Saucony® increase was driven primarily by strength in the US and EMEA wholesale channel and the Asia Pacific third-party distributor business. The Merrell® increase was primarily due to growth in the core Speed franchises and new product in the lifestyle category, particularly in the wholesale and international channels. The Chaco® decrease was primarily due to lower closeout and end of life inventory sales compared to the prior year and softer consumer demand. The Sweaty Betty® decrease was primarily due to a decline in the U.S., partially offset by growth within the EMEA market.

The Active Group’s operating profit increased $68.3 million, or 36.9%, in 2025 compared to 2024. The operating profit increase was due to revenue increases and a 300 basis point increase in gross margin, partially offset by a $47.8 million increase in selling, general and administrative costs. The increase in gross margin in the current year period was primarily due to the benefit of product cost savings, a favorable mix shift toward more full-price sales, and the positive impact from recent price increases, partially offset by the impact of higher U.S. tariffs. The increase in selling, general and administrative expenses in the current year period was primarily due to higher advertising costs, selling costs and employee costs.

Work Group

The Work Group’s revenue decreased $33.1 million, or 7.3%, in 2025 compared to 2024. The revenue decrease was primarily driven by a decrease of $17.4 million from Wolverine®, $5.2 million from Cat®, $4.3 million from HYTEST®, $3.5 million from Harley-Davidson®, and $2.7 million from Bates®. The Wolverine® decrease was primarily due to lower closeout sales compared to the prior year, lower demand in independent channels, and lower direct to consumer traffic. The Cat® decrease was primarily due to softer c

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