Wolverine World Wide Inc. Business Information, Profile, and History

Company Perspectives:

Quality products, fiscal management and steady growth marked the firm's early years. Tanning and manufacturing technology laid the groundwork for one of the industry's most famous success stories--the worldwide popularity of Hush Puppies Brand casual shoes. Founded by a family of hard-working, skilled craftsmen, Wolverine World Wide, Inc., has evolved into an international enterprise well positioned for a future of growth and success.

History of Wolverine World Wide Inc.

Wolverine World Wide Inc.'s success has hinged on its ability to cling tenaciously to a cache of well-known footwear brands. Family-owned from its inception in 1883 until 1965, the company and its best-known brand, Hush Puppies, struggled to compete with athletic and imported shoes in the 1970s and 1980s. A combination of shrewd marketing, fresh-yet-retro design, and pure luck contributed to the company's spectacular comeback in the early 1990s. In 1995, Wolverine World Wide capped a four-year string of rising sales and earnings with awards from Footwear News, whose industry poll ranked it "Company of the Year," and the Council of Fashion Designers of America, which named Hush Puppies the "Accessory of the Year." In 1995, Hush Puppies generated about 45 percent of annual sales and Wolverine brand work boots brought in another 40 percent. The remaining sales were divided among private label and licensed brand footwear and the company's tanning business.

The Late 19th and Early 20th Centuries

Wolverine was established in 1883 by G.A. Krause and his uncle, Fred Hirth, and named the Hirth-Krause Company. The son of Prussian immigrants, Krause brought a two-century heritage of leather tanning to the enterprise. The company originally sold leather, buttonhooks, lacing, and soles at wholesale, and purchased finished shoes for retail sale.

Krause began to consolidate vertically after the turn of the century, placing his sons in independent, but related, shoemaking and leather tanning businesses. In 1903, he established a shoe manufacture in Rockford, Michigan. His eldest son, Otto, who had a degree in engineering from the University of Michigan, operated this arm of the family enterprise, which supplied finished footwear to the Hirth-Krause retail outlets. Five years later, G.A. and younger son Victor created the Wolverine Tanning Company to supply leather to the shoemaking business.

Victor, whose postsecondary education had included apprenticeships in tanning, would be a driving force behind Wolverine's establishment as a premiere American shoe company. In 1909, he traveled to Milwaukee, Wisconsin, to study a chrome tanning and retanning process developed by master tanner John Pfingsten. By 1914, Victor's own experiments had resulted in a tanning process for "shell horsehide," a cheap, durable, but heretofore unworkably stiff section of hide taken from the horse's rear. The company soon stopped using cowhide in favor of their unique new material.

Promoted as "1,000 mile shoes," sales of the heavy-duty Wolverine boots helped increase corporate earnings almost 700 percent from 1916 to 1923. A centennial company history noted that "Wolverine boots and shoes became one of rural and small-town America's most popular brands."

In 1921, Hirth-Krause and the Rockford shoe factory--which had previously merged under the name Michigan Shoe Makers--were united with Wolverine to form Wolverine Shoe and Tanning Corporation. The company acquired a glovemaking business that same year and began manufacturing horsehide work gloves. Over the course of the decade, Wolverine built its first warehouse, created an employee profit-sharing plan, launched a nationwide advertising campaign, and erected its first consolidated headquarters.

Depression and World War Spark Innovation

Although Wolverine survived the Great Depression intact, the accelerating transition from horse-drawn transportation to gasoline-powered transport severely diminished the need for horses in America. As a result, the company was compelled to turn to less reliable international markets for its hides.

When the United States entered World War II, the federal government's War Production Board assigned Wolverine to manufacture gloves for the troops and suggested that the company try pigskin as a raw material. It seemed like a fine idea until the company discovered the inadequacy of pigskinning methods, which were not satisfactory to either the tanners or the meat processors. Not only was it difficult to remove the skin without taking some of the flesh with it, but separating all the flesh from the skin often damaged the hide. Sometimes the only useful pieces were barely large enough to make a glove. A company history quoted one employee in the project who remarked, "It looked like these pigs didn't care to be skinned." Nevertheless, Wolverine did manage to manufacture enough gloves to keep the military happy and its books in the black throughout the war years.

But when the global conflict ended, demand for pigskin gloves fizzled and Wolverine was forced to revert to cowhide, which was in steadier supply than horsehide and in more reliable condition than pigskin. Then Chairman Victor Krause was convinced that pigskin could be a viable alternative to cowhide; it was softer than either cowhide or horsehide, widely available, woefully underused, breathable, and easy to dye and clean. He became so obsessed with "the pigskin processing dilemma" that he resigned Wolverine's chairmanship to dedicate his full attention to the question. His son, Adolph, advanced to corporate leadership.

Working as an unpaid consultant, Victor Krause assembled a team of engineers who spent two years designing a device that separated the pigskin from the flesh without damaging either product. Wolverine patented the machine, which was created to fit neatly into the pig production process. By the early 1980s, Wolverine would have one of the world's largest pigskin tanneries.

When tanned, pigskin was soft and flexible, but it was not tough enough to be use in Wolverine's traditional work boots and shoes. In a radical departure from the company's historical emphasis, Krause designed a pair of casual shoes from the pigskin and presented them to Wolverine's board of directors. The board was not particularly enthusiastic about the new product, but decided that market research would determine whether and how to proceed.

According to corporate legend, the genesis of the Hush Puppies brand name came at a southern-style fish fry where deep-fried nuggets of dough commonly known as "hush puppies" were served. When Wolverine World Wide Sales Manager Jim Muir asked his host about the origins of the strange name, he was told that farmers used the treats "to quiet their barking dogs." That conversation reminded Muir of another colloquial meaning for "barking dogs": sore feet. It occurred to him that Wolverine's new shoes worked on sore feet just like hush puppies worked on yelping dogs, so he proposed the name as a new trademark. In 1957, Wolverine President Adolph Krause, son of Victor Krause, chose the canine name and basset hound logo from a field of ten possibilities.

After a brief period of test marketing, the company launched a national advertising campaign that was unprecedented in the shoe industry. Hush Puppies proved a timely innovation in footwear. With workers moving from farms to offices and from the countryside to the suburbs, Wolverine faced a decline in the sale of heavy-duty work shoes, but looked forward to a boom in more casual shoes. Hush Puppies became the footwear phenomenon of the late 1950s and early 1960s. Wolverine took the brand international via licensing agreements, the first of which was sold to Canada's Greb Shoes, Ltd. in 1959. Renamed Wolverine World Wide Inc. in 1966, the parent company's sales nearly quintupled from 1958 to 1965, when it made its initial public offering on the New York Stock Exchange.

Decline in the 1970s and 1980s

Hush Puppies put Wolverine at the top of the casual shoe industry, but the branded shoes could not keep it there very long. Sales flattened in the late 1960s, as Hush Puppies' core market matured and the brand failed to win younger customers. The company attempted to diversify via acquisition during this period, acquiring Bates, Frolic, and Tru-Stitch shoes and slippers. In spite of these efforts, however, Wolverine World Wide's nearly 90 years of Krause family management came to an end after the company experienced a net loss in 1972. Wolverine appeared to recover in the later years of the decade, as sales increased from about $125 million in 1975 to about $250 million in 1980.

But the new decade brought increased competition from imported and athletic shoes that seriously undermined the already-weakened business. In 1981, the Reagan administration dropped import quotas in favor of freer trade, prompting a deluge of inexpensive shoes from Asia and Latin America. Rita Koselka of Forbes magazine noted in a 1992 article that, "Among U.S. industries, few have been hit harder by foreign competition than shoemaking." Half of America's footwear manufacturers went bankrupt over the course of the 1980s, as the imports share of the U.S. market grew from 50 percent to 86 percent. During the same period, consumers began to turn from Hush Puppy-type shoes to athletic shoes for casual wear, further eroding Wolverine's potential market.

Unlike so many of its compatriots, Wolverine survived the 1980s, but not without its share of fits and starts. Under the direction of Thomas Gleason from 1972 to 1992, the company struggled to meet the challenge by diversifying its footwear lineup, expanding its direct retail operation, leveraging the Hush Puppies brand via licensing, and moving some production overseas.

Wolverine World Wide had launched its own chain of "Little Red Shoe House" specialty stores, which emphasized children's shoes, in 1976. Acquisitions and internal growth expanded the company's retail operation to more than 100 stores by 1983. The well-known Hush Puppies logo was licensed to manufacturers of clothing, umbrellas, luggage, hats, and handbags, and could be found in 56 countries by 1987.

From its well-established base in work shoes and "career casual" footwear, Wolverine diversified via acquisition and internal development. The company entered the athletic market with the 1981 purchase of Brooks Shoe Manufacturing Co., a struggling maker of running shoes. Wolverine acquired Town & Country and Viner Bros. shoes in 1982 and added Kaepa dual-laced, split-vamp specialty athletic shoes the following year. The company also developed its own new shoes, including the Body Shoe, which featured an ergonomic "comfort curve," and Cloud 10 shoes, with special cushioning for the ball of the foot. Wolverine hoped that its expanded line of comfortable yet fashionable footwear would attract more 30- to 45-year-olds to its stores.

But in spite of these apparently well-thought-out efforts, Wolverine's bottom line continued to show signs of stress: net income slid from $15.5 million in 1981 to $2.1 million in 1984. After a slight recovery in 1985, the company suffered a $12.6 million loss on sales of $341.7 million. The shortfall sparked a restructuring and reorganization that included the closure of five U.S. factories, the sale of two small retail chains and shuttering of 15 other outlets, the spin-off of Kaepa and divestment of a relatively new West German footwear manufacturing and 105-store retail operation. The domestic factory closings helped increase the proportion of Wolverine's shoes manufactured overseas to about 50 percent.

Analysts found plenty to blame at Wolverine. Some said that the company's new casual and career-oriented brands--Town & Country, Harbor Town of Maine, and Wimzees Casuals--were cannibalizing Hush Puppies' sales. One analyst told Footwear News in September 1985 that top executives "have lost their direction in recent years and can't get either manufacturing or retailing back on track." Another said the company had grown "too big to run effectively." Thomas Jaffe of Forbes was more direct, blaming "impulsive management, silly diversification, and finally, the flood of cheap imports that has knocked the socks off most of the U.S. shoe industry." Analyst Sheldon Grodsky told Business Week's Keith Naughton, "Dullness permeated the company and they just missed the entire 1980s."

In 1987, the company hired Geoffrey B. Bloom, a marketing and product development expert with 12 years of experience at Florsheim Shoe Co., as president and chief operating officer. In the waning years of the decade, Wolverine made another attempt at revitalization. The company leveraged its basic lines of work shoes and boots, dress shoes, and casual footwear to fit the multiple fashion and function demands of younger customers. For example, the company's 100-plus years of expertise in making durable work boots gave it insight into the development of hiking and outdoor boots. Wolverine used its own venerable brand and licensed the Coleman name for this new venture. The company hired new designers to update its athletic and casual shoes, and it even contracted with a Michigan State University laboratory for new footwear innovations.

Although Wolverine World Wide's net income rose to $7.7 million on sales of $324 million by 1988, other nagging problems stole the spotlight from this modest recovery. Most infamous of these was a 1989 lawsuit charging that Wolverine and Fred Goldston, a pigskin and cowhide broker, had conspired to steal cowhide from Southwest Hide Co. Goldston had been hired by Wolverine to raise the quantity and quality of pigskin rinds to supply the company's tannery. Southwest originally accused Goldston of exchanging their high-grade cowhides with lower-quality skins, but when Goldston went bankrupt, the plaintiff added partner Wolverine to the suit. Faced with a jury verdict of more than $39.3 million, Wolverine elected to settle the suit for $8.5 million in cash and bonds in 1992. CEO Gleason continued to assert his company's innocence in spite of the settlement, telling Forbes' Rita Koselka, "We were just the deep pockets around." Wolverine was also plagued with quality control and inventory problems in the late 1980s.

Dramatic Recovery in the Early 1990s

In the fall of 1990, Wolverine announced another restructuring, including plans to scale back its retail operations, shutter a manufacturing plant, and eliminate certain shoe lines. After multiple reorganizations, infrequent profitability, and sliding market share, the company elected to divest its Brooks athletic shoe division to Rokke Group, Seattle, a U.S.-Norway joint venture, in 1992. The restructuring shrunk Wolverine's overall revenues from more than $320 million in 1990 to $282.86 million in 1992, but allowed it to concentrate on its Wolverine and Hush Puppies brands, which made near-miraculous recoveries in the early 1990s.

Wolverine's revitalization after more than a decade of lackluster performance came about through a combination of rejuvenated designs, savvy marketing, strict cost controls, and a healthy dose of good luck. From 1990 to 1995, Geoffrey Bloom, who succeeded Thomas Gleason as chief executive officer in 1993, closed more than 100 of the company's retail outlets, designating the remaining 60 as factory outlets. He also consolidated Wolverine's 16 divisions into five streamlined operating units, thereby increasing productivity (measured in revenue per employee) by nearly one-fourth from 1992 to 1994.

Taking a cue from fashion designer John Bartlett, newly-hired designer Maggie Mercado revived 1950s-era styles like the "Wayne" (nee Duke) oxford and "Earl" slip-on, offering the waterproof suede shoes in a rainbow of new colors like Pepto-Bismol pink and Day-Glo green. Both Bartlett and designer Anna Sui featured the shoes in their 1995 collections. Hush Puppies soon began to turn up on the famous feet of stars like Jim Carrey, Sharon Stone, David Bowie, Tom Hanks, and Sylvester Stallone. Hush Puppies also benefited from the trend toward dressing-down at work, filling the fashion gap between tennis shoes and dress shoes. Wolverine sent videotapes with tips for casual dressing at work to 200 businesses around America. In the ultimate retro coup, the company revived the "We invented casual" tagline that had launched Hush Puppies in 1958. By 1995, tony stores like Barneys in New York and Pleasure Swell in California struggled to keep the shoes in stock.

While its Hush Puppies conquered the world of fashion, Wolverine World Wide's work boots and hikers tackled more mundane markets. In spite of steadily declining employment in American construction and manufacturing sectors, sales of Wolverine work boots reached record levels in 1991. The high-tech, relatively lightweight footwear featured DuraShock shock absorbers and slip-resistant treads. Smart new ads told prospective customers that they could "hunt 'til hell freezes over." Coleman hiking boots gave Wolverine entree into the mass market via distribution in Wal-Mart stores.

A focus on international growth increased the geographic distribution of the company's sales to about 50 percent international by 1995. Wolverine was the only American shoemaker to achieve a comprehensive contract in Russia, it established a Hush Puppies store in China, and its branded shoes were offered in more than 60 countries around the world.

By mid-1995, Forbes had declared Wolverine "a dog no more." Sales had risen by more than 46 percent from $282.86 million in 1992 to $413.96 million in 1995, and net income more than tripled from $4.7 million to $24.07 million during the same period. CEO Geoffrey Bloom told Forbes, "For Wolverine the best is yet to come."

Principal Operating Units: Bates; Caterpillar; Coleman; Hush Puppies; Tru-Stitch; Wolverine Boots & Shoes; Wolverine Leathers; Wolverine Wilderness.