Wolverine World Wide's Struggling Turnaround: Can Hufnagel Deliver on Brand Revival?

In the world of consumer goods, few stories are as compelling as the struggle to reinvent a legacy brand. Wolverine World Wide, the 142-year-old footwear giant, has long been a symbol of American craftsmanship, but its recent performance has painted a far more complicated picture. CEO Chris Hufnagel, who took the helm in 2021, has embarked on a bold strategic overhaul to revive the company's fortunes. Yet, as the second quarter of 2025 unfolds, the question lingers: Can Hufnagel's playbook succeed in the face of persistent revenue declines, inventory overhangs, and a shifting retail landscape?

The State of the Empire

Wolverine's portfolio includes iconic brands like Saucony, Merrell, and Hush Puppies, but its financial health has been anything but iconic. In Q1 2025, the company reported a 4.4% year-over-year revenue increase to $412 million, driven largely by its Active Group segment, where Saucony and Merrell delivered double-digit growth. However, this progress is overshadowed by the Work Group's 17% revenue decline, a segment that once defined the company's identity. The Work Group's struggles stem from a combination of inventory missteps, reduced discounting, and a market that has shifted toward more premium and active lifestyle products.

Inventory management remains a critical issue. While the company has reduced total inventory by 23.6% year-over-year to $271 million—a positive step—its inventory turnover ratio of 3.57 in Q1 2025 still lags behind peers in the Consumer Discretionary sector. The average days sales of inventory (DSI) dropped to 102 days, but this improvement masks deeper challenges in the Work Group, where excess stock and slow-moving products continue to weigh on margins.

Hufnagel's Strategic Playbook

Hufnagel's strategy hinges on three pillars: inventory optimization, brand revitalization, and supply chain resilience. The CEO has taken a scalpel to inventory, prioritizing disciplined restocking and aggressive clearance of excess stock. This has already yielded results: a 47.3% gross margin in Q1 2025, up 140 basis points year-over-year, suggests improved pricing power and inventory efficiency.

The brand revitalization effort is centered on Saucony and Merrell, which have become the company's growth engines. Saucony's 30% revenue surge in Q1 2025 was fueled by premium-priced products like the Endorphin Elite 2 and SpeedArc platform, while Merrell's 13% growth reflects its expansion into hiking and trail-running categories. Hufnagel's plan to open 400+ new Saucony retail doors globally in 2025 is a bet on direct-to-consumer engagement, a move that could enhance brand loyalty and reduce reliance on wholesale partners.

On the supply chain front, Hufnagel is addressing U.S.-China trade risks by reducing Chinese sourcing to less than 10% by 2026. This dual-sourcing strategy, combined with price adjustments, aims to mitigate potential $30 million in annual tariff costs. However, the transition is not without pain: higher sourcing costs and lead times could pressure margins in the short term.

The Elephant in the Room: The Work Group

The Work Group remains a stubborn problem. Despite new product launches like the Rancho Pro and Vantage, the segment is still in a stabilization phase. Hufnagel has acknowledged the need for leadership changes, as current head Tom Kennedy prepares to retire. The question is whether new leadership can reverse a 17% year-over-year decline and rekindle demand in a market increasingly dominated by casual and active footwear.

The segment's struggles highlight a broader issue: Wolverine's ability to adapt to changing consumer preferences. The Work Group's focus on industrial and utility footwear clashes with the modern consumer's appetite for comfort, performance, and style. Without a clear value proposition, even aggressive product innovation may fail to attract a new generation of buyers.

The Analysts' Take and Market Sentiment

Investor sentiment is cautiously optimistic. Stifel and UBS have upgraded Wolverine's stock, citing strong performance in high-margin brands and improved leverage ratios. The company's net leverage is expected to fall below 3x by year-end 2025, a key metric for lenders and analysts. However, these upgrades are tempered by the Work Group's underperformance and macroeconomic headwinds.

A Feasible Turnaround?

Hufnagel's strategy is not without merit. The Active Group's momentum and inventory discipline suggest that the CEO is on the right track. However, the Work Group's decline and the company's reliance on a handful of high-margin brands introduce significant risks. For the turnaround to succeed, Hufnagel must:
1. Accelerate Work Group stabilization: This requires not just new products but a cultural shift in how the segment is marketed and managed.
2. Scale direct-to-consumer channels: Expanding Saucony's retail presence could insulate the company from wholesale volatility but requires substantial capital and operational expertise.
3. Navigate tariff uncertainties: The U.S.-China agreement offers temporary relief, but long-term supply chain stability remains a question mark.

Investment Advice

For investors, Wolverine presents a high-conviction opportunity with clear risks. The stock's current valuation (P/E of 18.6) is slightly above the sector median, reflecting optimism about the Active Group's growth. However, the Work Group's drag and inventory challenges justify a cautious approach. A buy rating is warranted for those who believe in Hufnagel's ability to execute his strategy, but with a stop-loss near $20 to protect against Work Group disappointments or macroeconomic shocks.

In the end, Wolverine's story is one of transformation—of a legacy brand trying to stay relevant in a world that no longer values work boots as it once did. Whether Hufnagel can deliver a winning playbook will depend not just on his strategies, but on the company's ability to embrace change as swiftly as the market demands.