WWW Bolsters Our Bullish Call

Takeaway: WWW hires the most eligible bachelor in global footwear. There is no other way to slice this than hugely positive. WWW remains a top pick.

This note was originally published August 23, 2013 at 13:16 in Retail

Don’t overlook WWW’s announcement today that it hired Gene McCarthy as President of the Merrell brand. It’s a very material announcement, and one that bolsters our bullish call on WWW.

WWW Bolsters Our Bullish Call - merr5 

  1. McCarthy is one of the most successful footwear executives in the world, with a pedigree stretching from Nike, to Reebok, to Timberland, and UnderArmour. WWW is extremely lucky to have nabbed him.
     
  2. Merrell is about $550mm in revenue, or 20% of WWW’s total sales. Yes, it is WWW’s biggest division, and we think that he will have a meaningful impact given that Merrell has been a drag on WWW’s results. It needs the help. He is the kind of individual that can take this to being a $1bn brand, instead of someone that will be content with 3-5% growth annually.
     
  3. But we think that WWW brought McCarthy in with much bigger plans in mind -- whether they are saying it or not (watch what they do, not what they say). Keep in mind that he was brought in to fix the Yellow Boot business at Timberland in April 2006. But by December 2007 he was already Co-President of the parent company. The guy ‘gets it’ when it comes to brand building, and it was a waste for TBL to isolate his talent on only a quarter of the company’s business.
     
  4. But then why did he seemingly fail at UA?  We thought it was a big deal when Kevin Plank hired McCarthy away from Timberland to run UA’s footwear business. But in the end, it did not really work, and we were proved wrong.  We think the problem was two-fold. A) The footwear business at UA needs more capital. It needs more R&D, and more distribution resources both inside and outside of the US. WWW has that already. B) The chemistry between Plank and McCarthy simply did not work. They’re both very ‘type A’, and there was definitely a clash – especially when it came to arguing as to whether the company needed more resources to make the footwear business work

 

Unless WWW paid an ungodly sum of money to get McCarthy on board them team, which is unlikely, there is no way to slice this announcement other than overwhelmingly positive.

WWW Bolsters Our Bullish Call - mcgough

 


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