Greetings, and welcome to the Wolverine World Wide, Inc. Second Quarter Fiscal 2021 Results Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions]. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Brett Parent, Vice President of Strategy and Investor Relations. Please go ahead, sir.

Good morning, and welcome to our second quarter 2021 conference call. On the call today are Blake Krueger, our Chairman and Chief Executive Officer; Brendan Hoffman, our President; and Mike Stornant, our Senior Vice President and Chief Financial Officer. Earlier this morning, we announced our financial results for the second quarter 2021. The release is available on many news sites and can be viewed on our corporate Web site at wolverineworldwide.com. If you’d prefer to have a copy of the news release sent to you directly, please call Allison Malkin at 203-682-8225. This morning’s press release and comments made during today’s earnings call include non-GAAP disclosures, which adjusts, for example, for the impact of environmental and other related costs, net of cost recoveries, costs related to the COVID-19 pandemic, including air freight costs, credit loss expenses, severance expenses, and other related costs and foreign exchange rate changes. These disclosures were reconciled in attached tables within the body of the release. I’d also like to remind you that statements describing the company’s expectations, plans, predictions and projections, such as those regarding the company’s outlook for fiscal year 2021 and 2022, growth opportunities and trends expected to affect the company’s future performance made during today’s conference call are forward-looking statements under U.S. securities laws. As a result, we must caution you that there are a number of factors that could cause actual results to differ materially from those described in the forward-looking statements. These important risk factors are identified in the company’s SEC filings and in our press releases. With that being said, I’d now like to turn the call over to Blake Krueger.

Thanks, Brett. Good morning everyone and thanks for joining us. I hope everyone on the call is safe and well. Our long-term strategic focus on our consumers, digital and DTC capabilities and product and design innovation, especially in performance categories is fueling robust demand for our market-leading brands. Earlier this morning, we reported strong financial results for the second quarter that significantly exceeded 2020 and our expectations, and also easily beat 2019. Revenue was approximately 632 million, a record high for Q2, representing growth of 81% versus 2020 and a double digit increase compared to 2019. The Wolverine Michigan Group's revenue was up 63% year-over-year, and the Wolverine Boston Group's revenue was up 111%. Both groups were up double digits compared to 2019. Adjusted earnings per share for the company was $0.67. Our order backlog remains at historically high levels and momentum in the business continues to accelerate, despite the macro COVID-related supply chain headwinds facing our industry and many others. Certainly, our proactive approach to combat these headwinds has been very effective and is also reflected in our strong Q2 results. Given the company's excellent performance and the trends in the business, we have again raised our outlook for fiscal 2021 and now expect revenue in a range that is $150 million higher than we anticipated in our original February guidance, delivering meaningful growth over 2019 at both the high and low ends of the range. Our brand portfolio strategy and international distribution base is also fueling accelerated momentum as the company is not dependent on any single geographic region, consumer group or distribution channel. We have positioned our consumers at the heart of our strategy, and that has changed the nature of our company with approximately two-thirds of our brand revenue now positioned in performance product categories like…

Thanks, Blake. In the second quarter, our two largest brands both drove significant growth and achieved all-time record quarterly revenue. Merrell revenue grew 88% year-over-year or nearly 30% compared to 2019, with DTC up nearly 40%. Merrell.com grew mid-single digits against last year's better than doubling of the business, translating to growth of more than 150% versus 2019. Merrell stores were up significantly compared to last year's Q2 revenue due to lockdowns and up high teens versus 2019, led by the robust growth of almost 180% in the U.S. Four of five regions contributed very strong double digit growth year-over-year for the brand. Merrell continues to focus on cultivating its well established product franchises while delivering innovation through key new products. The brand's performance category more than doubled in Q2, driven in large part by the launch of the all-new Moab Speed and Moab Flight, which build on the success of the world's number on hiker, the Moab and the brand's vision of faster, lighter footwear for the trail. Both collections quickly exceeded sell-through expectations, sold out on Merrell.com and became top sellers for the brand during the quarter. The Antora 2 and Nova 2 trail runners also continued to perform very well, more than tripling year-over-year. Merrell's lifestyle business also grew very strong double digits during Q2. The iconic Jungle Moc nearly doubled year-over-year and the newer Hydro Moc more than tripled. Merrell also introduced its 1TRL capsule collection on Merrell.com, which reinterpreted existing styles with fresh, trend-driven colorways and fashion-forward storytelling with great success. This collection is focused on younger, fashion-forward consumers demanding authentic outdoor influence style. Merrell is generating significant brand heat and consumer interest, and the brand slate of product and marketing stories for the back half of the year are poised to fuel continued strong…

Thanks, Brendan, and thanks to all of you for joining us. Let me start by reviewing the company's second quarter financial performance and some of the key drivers of our over-delivery, and then I will cover our improved outlook for 2021. Second quarter revenue of approximately $632 million represents growth of 81% compared to the prior year. While Merrell, Saucony and Sperry were the strongest performers, nearly all brands in the portfolio delivered substantial growth. All regions grew nicely in the quarter, with the U.S. and EMEA meaningfully beating expectations. Adjusted gross margin of 44.5% improved 230 basis points versus the prior year due to a favorable product mix and higher average selling prices. Merrell and Saucony both easily exceeded gross margin expectations in the quarter, another indication of their strength in the marketplace. Adjusted selling, general and administrative expenses of $201.8 million or $72 million more than last year and $35 million more than 2019, primarily due to increased revenue volume, increased marketing investment and more normalized incentive compensation costs. Most major expenses levered better than expected as a percent of revenue, including our increase in marketing investment. Adjusted operating margin was 12.6% for Q2, an improvement of 750 basis points over last year and 150 basis points versus 2019. Very strong leverage on the company's revenue growth resulting from gross margin expansion and healthy operating expense management. Adjusted diluted earnings per share were $0.67 compared to $0.08 in the prior year. Reported diluted earnings per share were $0.53 versus a loss per share of $0.02 last year and reflect specific COVID-related costs and certain litigation defense costs in both periods. Let me now shift to the balance sheet. At the end of the quarter, inventory was down approximately 14% compared to last year, a nice improvement compared to…

Thanks, Mike. Our accelerated growth and strong financial performance in Q2 are a testament to the company's strategic focus and increasing brand investments. Over the last several years, we've invested behind digital marketing, technology, talent and e-commerce as well as product innovation and design. These investments are paying off. Our brands have numerous growth opportunities in front of them. The company's balance sheet is strong, and we are confident as we plan for double digit growth in 2022. The advantageous position we find ourselves in today is a credit to our team's expertise and relentless work. The global marketplace continues to be dynamic and fast changing and our people and company are excelling in this environment. I'd like to close by thanking our team members around the world for their tremendous efforts in making this a pivotal year for the company. With that, I'll now turn the call back over to the operator. Operator?

Thank you. At this time, we’ll be conducting a question-and-answer session. [Operator Instructions]. Your first question comes from the line of Steve Marotta with CL King & Associates. Please proceed with your question.

Good morning, everybody. Thanks for taking my question. I appreciate it. Mike, can you talk a little bit about the current supply chain disruptions, the length of time, the difficulty in getting product here and how that affects your outlook for the second half sales and earnings cadence again from a quarterly basis? Thanks.

Sure. Yes, the industry is definitely dealing with this challenge across the board. Here at the company, I think we've done a great job of managing and being proactive where we can be to offset some of those risks as you're seeing in the outlook, which has improved here. In the back half of the year, we have a well known disruption in some of the Vietnamese factories that we're in. But even with some of that downside exposure, which is reflected in our outlook, as we mentioned, we feel confident that we can continue to deliver growth in the back half of the year. And I think as we look at the position we have with our inventory today, continues to improve. By the end of the year, we would expect our inventory positions to be up nicely over last year and over 2019 levels. And so I think, again, the aggressive position we're taking in terms of buying inventory and some of the tactics we've deployed have helped us kind of navigate what's been a really choppy supply chain situation.

That's helpful. Thank you. Brendan, you mentioned that you have indications that we're currently on the bubble of a new boat shoe trend. Can you talk a little bit about in detail what those indications are and how quickly you think that could touch fire? Thanks.

Yes. It's really exciting for us to see that with Sperry. We're really just seeing it on our own Web site. We're hearing it from our retail partners that they're seeing the uptick, seeing it really strong in men's right now and all the data points we get and the information we get from our CIMI group show [ph] as well. So really feeling confident that we're at the precipice here of that trend, which obviously only enhances everything we're doing with Sperry.

Yes, Steve, I'd also say that I think this was the second quarter in a row we saw that category increase in the market here in the U.S. where we get information.

I’ll jump back in queue. Thank you.

Your next question comes from the line of Jim Duffy with Stifel. Please proceed with your question.

Thank you. Good morning, everyone. Hope you guys are doing well?

Yes.

Mike, I wanted to focus for a moment on the SG&A just as it relates to potential for leverage with any revenue upside in the back half of the year versus 2019, your second quarter SG&A growth accelerated. You mentioned some incentive compensation and incremental marketing expense for modeling versus 2019. Should we expect leverage in the back half of this year? Is the incentive compensation all trued up to appropriate levels, or is there more of that to come in the back half of the year?

Yes, there's more of that to come, Jim, in the back half. We allocate and expense that over the full year and expect now, based on the performance of the business, which is obviously exceeding our expectations on the top line and the bottom line, that our incentive comp results will be very positive and more normalized. We're also investing pretty heavily in our e-commerce business and our direct-to-consumer businesses across the channels. So you're seeing a shift from 2019 to 2021 in the way that we're investing in the business, but also just the nature of the direct-to-consumer business model, right, which is at a much higher level, we've more than doubled it in the first half of the year. We're still on track to do that for the full year. So the shift in SG&A expense has a lot to do with our focus on direct-to-consumer and that business model requires a higher level of variable SG&A.

Understood. Thanks. Moving up to P&L as it relates to the gross margin outlook, some clear inflationary pressures. I joined the call late. Maybe you mentioned this in the prepared remarks, but did you speak at all to pricing power just given the demand strength that you're seeing across the industry?

Yes. Right now, frankly, we believe the consumer has been paying higher prices throughout most of this year. There's been significant less promotions across the industry. That has really seemed to have no impact on demand, at least the demand as we see it for our family of brands. So we think there's pricing power yet available. We think there will be price increases in the industry. Input costs going up. Obviously, logistics costs going up. We'll start to see some of those price increases yet this year. You're seeing it in some industries, like toys and some other consumer categories. And then you'll see some more selective price increases, judicious price increases in 2022.

Mike, do you have a view for product cost inflation from your channel partners as we look out to 2022?

We do. I think the -- on the product side, on the input cost side, I think we've been able to manage that pretty well, especially for the spring season, Jim, in that first half of the year. So good visibility to that. Obviously, the challenges and some of the cost pressures are coming more from the logistics side and distribution side of the supply chain, where we've seen pretty tremendous increases in freight rates, both inbound and outbound. So we're -- I think that's a cost pressure that we factored in as we start to plan our spring business and think about 2022. But on the input cost side or the product cost side, it's been managed very well.

Thank you very much, guys.

Thank you, Jim.

Your next question comes from the line of Jonathan Komp with Baird. Please proceed with your question.

Hi. Thank you. First, Mike, can I just clarify? I know the guidance for earnings is now adjusting for $0.35 of items. Can you just maybe highlight what's included in that currently?

Right. We have the litigation costs that we continue to have related to the legacy issue that we've spoken about in the past, and that continues to be included in our non-GAAP adjustment. And we've included mostly air freights, some other COVID-specific costs that we've adjusted out consistent with the last several quarters.

Okay. And the air freight, is it still -- I think you said 15 million to 20 million last call? And do you think that continues beyond this year at all or just current thoughts on the level and if it will continue?

It's hard to predict that right now, Jon. Obviously, we're seeing a demand for that this year and have provided a little bit more coverage for that, just given the uncertainty of the supply chain. But as far as how that plays out next year, it's hard to predict. I will say that I think our brands across the portfolio have taken a much harder position on inventory, a much stronger position, I should say, more aggressive to position us better for the spring demand and fall demand for next year. Supply chain teams are getting well ahead of that. I think that will be indicated in our strong year-end inventory position. So that will help take some pressure off of some of the air freight demand that we're seeing this year.

Okay, that's helpful color Thank you. And then I want to ask a broader question on the revenue outlook for this year. Q2 was up double digits against 2019. It looks like the second half you're assuming more low to mid-single digit growth versus 2019. So can you just maybe frame that up Q2, did you have some benefits from shipments that were going to happen in Q1 or any other factors as we think about the second half that's driving your outlook there? And maybe as a follow up, any more detail on how you're thinking about '22 given the comment about double digit growth? Thank you.

Yes, I'll take the first part of your questions. I think right now, we're in a normalized position. Pretty much what we predicted in Q1 occurred. We had pour over from Q1 into Q2 in about the same amount from Q2 into Q3. So Q2 really represents a very strong performance on a normalized basis. At this time, given some of the logistics issues, it's a little hard to predict exactly the split between Q3 and Q4, but we expect strong growth in the back half of the year. When we look ahead, we've been receiving orders much earlier from our wholesale partners and international distributors for 2022 product. So as a company, we're sitting today with a lot more insight and visibility into next year's business levels, demand by geographic regions and at the wholesale level. And so this is something that is a bit unusual. I think all retailers appreciate the fact that they need to place their orders a little bit earlier if they're going to be assured of product for the coming year, given some of this year's disruption. So that's really enabled us to with some confidence look at double digit growth next year.

And I think just -- that's also helping the last question on supply chain and air freight for next year. Getting these orders in earlier are allowing us to work with the retailers on new expedited ways to get goods to them, whether it be what we call the fast boat, whether it be door to dock where we're shipping it right to them. So I think as we look at 2022, we'll be much better prepared both from our side and their side to mitigate the cost we had to incur this year.

All right. Thank you very much.

Thanks, Jon.

Your next question comes from the line of Erinn Murphy with Piper Sandler. Please proceed with your question.

Great. Thanks. Good morning. I guess my question is still on the global logistics outlook. Could you share what your Vietnam exposure is currently? And then are you needing to shift production for some of the temporal factory closures, or are you just writing out the disruption? And then I have a couple of follow ups.

Yes. There's been some closures, as we all know, in Southern Vietnam around -- primarily around Ho Chi Minh City, and Vietnam is certainly a significant source for the industry as a whole and for us as well. At the moment, less than half of our Vietnam factories were closed. Factories are starting to reopen after the kind of two-week government shutdown. We don't know exactly what the future will hold, but we've factored all of our current outlook, all the current facts into our guidance for the rest of the year. And this is -- I guess the shutdowns in Vietnam are largely two weeks in nature. And so there wouldn't be -- with that kind of shorter timeframe of disruption or closure, there wouldn't be any significant shift in production to other countries or factories.

We have people on the ground there throughout Asia. So it's something we're managing every day right now.

And just to clarify. Is it similar footwear companies have somewhere between 25% and 40% exposure to Vietnam? Is that in the ZIP code for you guys as well?

Yes, probably at the high end. We'd be around 40% if you look back on a historical basis.

The good news there, Erinn, is we -- but we do source a lot of our products, right. So we're already in other factory locations and other factory -- in other countries for source of supply. So if this worsens, then we'll have dual source capabilities to manage through it.

Got it. And then maybe, Brendan, for you. You've been prioritizing e-commerce across the portfolio. Can you share a little bit over the next kind of 12 to 18 months other areas of investment you're focused on? I know that Merrell app is coming up soon. Any other kind of brands that you're really focused on kind of supercharging their e-commerce capabilities?

Well, I think from a brand standpoint, it's -- all of them will benefit by the investments we're making on replatforming technology, data collection, data mining. Certainly, Saucony right now is top of mind for us with their growth and some of the catch up there. They are doing a fantastic job on their e-commerce growth and really prioritizing Saucony.com and both performance and originals. So there, for sure, Sperry, a lot of their rebound is coming by being able to tell their story directly through Sperry.com and then have that cascade through their other partners. So I would -- and then in the work group, we're seeing huge growth there as well. So that's becoming a very viable channel. So I would really say, Erinn, it's pretty wide-based, which is exciting. And we'll continue to make investments to fuel that, both customer-facing and kind of behind the scenes with some of the technology.

Got it. And then just last question for me is around M&A. I'm curious how you both are prioritizing M&A as you look forward? Are you looking at a lot of deals? Just curious given where that balance sheet is right now and how you're prioritizing that versus organic growth opportunities ahead? Thanks.

Well, yes, of course, we're putting available cash, all that's necessary into the organic growth and paying down debt and returning capital to our shareholders. But we continue to be very active in the M&A as we have been historically. We have a pretty well established set of criteria we use. We are looking at not just potentially footwear brands, but also businesses that might bring some new strategic competencies like apparel, vertical integrated brands, digital brands. So we, frankly, remain pretty active in kicking the tires and taking a look at properties. We have a long track record of success in bringing brands into the company and growing them.

Thank you.

Thanks, Erinn.

Your next question comes from the line of Sam Poser with Williams Trading. Please proceed with your question.

Thanks for taking my question. Good morning, everybody. I was just wondering, in the back half of the year, you flowed through versus '19 in Q2 pretty dramatically. Your revenue was up 11% and your EPS was up like 28%. But the back half of the year isn't -- your guidance for the flow through doesn't seem to be near as good as it is in Q2. Can you give us some color on why that is? And what might change that? Because you mentioned that you were getting very good response to your digital marketing and so on and so forth.

Yes. I think the expectations for kind of the effectiveness of those investments still remains really strong, Sam. A lot of the flow through in the back half has to do with some of the supply chain costs that we've been talking about. And those are meaningful, and they're very much back half weighted too. So that's important. And there are some areas of conservatism built into that, because of the uncertainty. But overall, really when I think about the drivers here in the first half year performance versus the back half, it's really the back half weighting of the incremental supply chain costs.

And how many of those -- COVID-related air freight and stuff, how are you going to delineate what is regular operations versus one-time in nature there?

Yes, we've done that based on the outlook that we provided and the separation of those topics. But we have ocean freight, logistics, other logistics costs, distribution costs, several other costs related to supply chain that are having a heavier weight on the back half of the year, unrelated to air freight.

Thanks. And then just -- I was wondering if you could just give us -- I know it comes out in the Q, but if you could give us the channel information for the Michigan Group and the Boston Group prior to the Q coming out?

Yes. I don't have that in front of us, Sam, right now. I would tell you that we -- all of our channels, including wholesale, grew versus 2019. I don't have the split out between Michigan Group and Boston Group right in front of me. We can probably get you that information, but pretty solid performance across the board by channel and by geographic region as well.

And the profit flow through was very strong on both sides -- on both groups, because we saw growth from all the brands and we saw really nice leverage really across the board too there. So there's really no distinction between the two groups when it comes to profit performance or flow through.

And then lastly on the gross margin, so the air freight coming out of the margin. So how should we think about the gross for the back half or the full year given even what you're telling us? Is it going to be like 200 basis points less than what it was in the first quarter or first half of the year? How should we think about that?

Yes. Again, just to reiterate, like we said many times, we're only excluding what we're considering extraordinary air freight costs. We've got $10 million of air freight costs in the results that we're referring to. And I'd say for the full year, our gross margins will be down a little bit from the first half performance, which they typically are, based on just the gross margin performance in the fourth quarter, et cetera. But the margins for the full year we're expecting to be in that 43% to 43.5% range and operating margins approaching 12% for the full year.

And I think just it's not -- we're not changing the level of promotions. We're selling things at full price, as Blake said. That's continuing into the back half of the year. Just some of the input costs that hit margin more --

And a more normalized mix in the back half, which just changes the margin profile a little bit.

And just to confirm, you’re not expecting -- are you expecting things to normalize at all toward promotional activity, or how are you judging sort of the seasonal promotional activity in the back half versus what you saw in the front half?

We're selling things at full price. It will be an interesting Christmas without all the deep discounts that it's going to be a great pallet cleanser for the industry. So we're excited at the AURs we're seeing, both in our own channels and through our retail partners.

Okay. Thank you guys very much.

Thanks.

Your next question comes from the line of Mitch Kummetz with Pivotal Research. Please proceed with your question.

Yes. Thanks. I guess I've got a few. First off, I just wanted to follow up on Jon Komp's question earlier because he was asking about shifts. And previously, you were pretty specific about the slippage Q1 to Q2, Q2 to Q3. I think it was 40 million for each. Is that still kind of what you saw in the quarter and what's expected for the third quarter?

Yes. When I say it was basically a net wash, basically what we -- the information we gave you in Q1 came to fruition. So we had a little bit of a pour over from Q1 to Q2 and a similar pour over from Q2 to Q3. Our over performance in Q2 was fundamentally driven by accelerating demand and also a lot of the proactive steps we took in the supply chain area earlier in the year. So that really drove our performance.

Got it. Okay. And then -- so you raised your sales guidance by $100 million. I know it's 150 from earlier in the year. But from where it was last quarter, this quarter, it's gone up 100 million. How much of that 100 million was upside in the quarter versus a better outlook for the back half? And then with regard to upside in the quarter, can you maybe specifically say what surprised you positively compared to what you were anticipating internally?

I'd say that on the guidance, Mitch, it's about 50% what we over delivered in the quarter and 50% in the back half of the year, better outlook, better -- higher confidence in delivering on the supply chain. All the things that Blake mentioned about demand though, that continues to be the strongest metric. And order book has strengthened since the last call we had. So our outlook on demand is very strong. Where we have caution in the outlook is to do with the supply chain, as you would expect. But even with that, we have enough confidence to raise the outlook like we did. And then --

Okay. And then lastly -- go ahead, sorry.

No, that's all I had to say.

Okay. And then on Sperry, I know you gave kind of the two-year numbers on Merrell and Saucony. I'm not sure if you gave it on Sperry. I heard kind of a 40%, but I don't know if that was in reference to work boots or Sperry. What was the two-year growth on Sperry? And I'm curious how that compared to the first quarter?

Yes. In Q2, Sperry would have been down mid-teens compared to 2019. I'd have to look up Q1 and get back to you, Mitch.

That was a nice improvement in Q1, Mitch. And I think we're going to continue to see that gradually improve in the back half of the year as well.

Okay, that’s helpful. Thank you very much. Good luck.

Your next question comes from the line of Jay Sole with UBS. Please proceed with your question.

Super. Thanks so much. Mike, I just want to follow up on the comment you made I think a couple of times in the prepared remarks about double digit growth for 2022. Can you just maybe elaborate that a little bit more? Is that a number versus 2019? Is that a number versus the new updated guidance for 2021 that you just gave? And sort of what are going to be the main drivers? And are we talking about double digit being 10%? Is it more like 15%, 20%? Maybe can you frame that up for us a little bit more, that would be helpful. Thank you.

Well, I probably won't go beyond double digit this morning. But we have unprecedented visibility into our order book for next year right now, certainly at a greater level than we've ever had historically. And demand remains very strong across the portfolio, pretty much what we experienced in Q2. So with a high level of confidence, we're looking ahead with double digit growth versus 2020, not 2019 -- 2021, excuse me, but not the prior year. So it looks very strong right now, and it's across Merrell, Saucony, Sperry, across our work brand.

Got it. And just --

Go ahead.

No, please go ahead.

I was just going to add something on Sperry that relates also to the last question with 2019. In our own channels, we're up against 2019 in Sperry. So I think that's a board leading indicator because that's where we're able to tell the message and talk directly to consumer. I think the wholesale business will -- we're seeing that bounce back. And I think that's another positive sign as Blake talks about 2022 as the emergence of Sperry.

Got it. And then maybe if we can talk about sell-through a little bit, because obviously there's a lot of fiscal stimulus in March and April. But did you see the sell-through for the brands collectively improve throughout the quarter? And sort of what's your read on back to school? And what does that mean for, say, your kids business, your Keds business and obviously the portfolio overall?

Yes. I would say right now in general, I wouldn't bet against the consumer. Saving rates have tripled, stimulus money continues. The consumer has been locked up for 18 months. They want to travel. They want to, frankly, buy some stuff and experience some stuff that they haven't over the last 18 months. So right now, we see continuing strong demand. We see a strong back to school. It's hard to predict what the COVID situation is going to be like on back to school. But right now, it looks like in the United States, almost all K-12 children will be returning to in-classroom experience. And so we continue to see strong consumer demand.

Yes. And just on the kids, our e-commerce this month in our kids group is double last year. So that's a real strong sign of back to school is happening.

Got it. Great. Thank you so much.

Thanks, Jay.

Your next question comes from the line of Dana Telsey with Telsey Advisory Group. Please proceed with your question.

Good morning, everyone, and nice to see the progress on the results. As you think about the order book that you talked about, it sounds like there's an acceleration globally. Any way to expand on that what you're seeing overseas, what you're seeing in the U.S. and how you're thinking about the upcoming holiday season? Thank you.

Yes. I would say as we look at Q2, first of all, our growth was really evenly split between the USA and the international markets. As you know, Dana, about half of our pairs are marketed in international markets. So we are seeing strong demand across virtually every country and international market at the same time, including the U.S. So we think it's going to be a good back to school season. We think it's going to be a good holiday season for consumer soft goods and our brands in particular. So we're energized right now. The backlog would reflect that too, Dana. So when you look at the nice distribution of demand across the business for our distributor businesses and third party markets, our own businesses in Europe and Canada, so the backlog metrics or trends that we're seeing are very strong across the regions.

Got it. And then inventory levels, how do you think inventory levels and where do you see them being at the end of the third and the end of the fourth quarters?

Again, we're very excited about the fact that we're starting to turn that corner right now. We were down about 14% at the end of Q2, which frankly was a little bit lower than expected, but our revenue obviously outperformed, right. So we were able to really turn at the end of the quarter, turn around a lot of goods and get them out the door. So that was very positive. And our ability to service the business in Q2 was much stronger than Q1. We'd expect inventories to be up year-over-year at the end of Q3 and then by the end of the year, up strong double digits based on our current outlook. Supply chain can always impact those projections. But at this point, based on what we have on order, what's on the water and what we're already securing in the warehouses, we feel good that inventory positions are going to continue to strengthen throughout the balance of the year.

Thank you.

You’re welcome.

Your next question comes from the line of Susan Anderson with B. Riley FBR. Please proceed with your question.

Hi. Good morning. Nice job on the quarter. I'm curious on Sperry, just a follow up on all the comments. Thanks for all the details there. I'm just curious, like the last time you saw a strong boat trend, maybe if you could talk about when that last time was? And then just kind of the performance you saw on Sperry. And then also, it sounds like it's performing better at retail than wholesale, or are you seeing wholesalers yet start to indicate they want I guess more orders for the brand?

Yes, I'll take the second part first and then let Blake comment on the trends -- historical trends. My comment was our own channels are always going to be the leading indicator because we control those. We control the inventory. We control the messaging. We're seeing tremendous enthusiasm. It started -- I think I mentioned in the last call, started for holiday with the -- we added some new players in the Sperry team and the new product launches have gotten a tremendous reaction. So we're starting to see those online in our retail stores. And we'll see that lift the wholesale performance as we get to the back half of the year and certainly into 2022. But I'll let Blake comment.

Yes. If you look back, the U.S. has always had a boat shoe category resurgence from time to time. We're probably in the very early innings of that right now. Historically, that's lasted for several years when it starts. So we're trying to be there in the market with fresh boat shoe product like the Float and several other offerings from John Legend on down. And the early signs are good. We've had growth in the U.S. in the category the last couple of quarters. So that's also very encouraging.

Great. Thanks. And then also can you maybe talk a little bit about just the product offering for Sperry for this fall? Do you have anything new coming out or maybe talk about the boots for fall?

We have a lot of new product. Blake just mentioned Float. We have the co-lab with John Legend that launches in September. We're doing some really cool events and concerts around that. John and I did something with footwear news last month that was very well received. And we have Sperry Sport launching for holiday and spring of '22 as well as updates to the existing franchises. So I think the product line has never been stronger. I've gotten great responses from some of my industry friends about what they're seeing and some of the previews I've given them. As I mentioned, the wholesale accounts are really excited about what they're seeing for the back half of '21 and into '22, and I think it's a credit to the team and the product development pipeline.

Great. That sounds good. And then just one more question on the orders -- overall, the orders for fall. It sounds like you feel very good about that. I guess I'm curious, it sounds like they must have accelerated from the first half, particularly as a lot of wholesalers are seeing themselves stuck without product. Maybe if you could talk about just the magnitude I guess of the orders, if you could? And then are there any early reads for spring '22 orders?

Yes. I would say in general, we don't give out specific backlog information. But as we've said, demand built throughout Q2 has continued to build really throughout the first half of this year. Our order backlog continues to build for 2022, which gives us confidence to focus and plan today for a double digit increase next year. So it's extremely strong indications as reflected in our order backlog.

Yes. And I almost don't want to use the word accelerate, because I think it's the new normal. We've reached new levels of demand for a lot of our brands. So some of it's an acceleration, but a lot of it is just the new baseline that we're building off of.

Great. That sounds good. Thanks so much. Good luck in the back half.

Thank you.

Thank you, Susan.

Your final question comes from the line of Laurent Vasilescu with Exane BNP Paribas. Please proceed with your question.

Good morning. Thanks for squeezing me in. Mike, I wanted to ask about the full year guidance. The high end implies about 125 million incremental revenues over FY '19. And remind me, but I think e-commerce is going to reach -- your own e-commerce is going to reach 500 million effectively, let's say, about $250 million. Just trying to understand the puts and takes here on how are you thinking about the wholesale business for FY '21 versus FY '19? And any nuances would be appreciated by brand.

Again, I think for us, the focus on our digital business has been pretty prominent and that shift has been consistent over the last several months. So that growth in e-comm that you referenced is really important to the overall performance of our brands across really the whole portfolio. So that continues to be the case. We're seeing our wholesale trends continue to improve. And they were very strong in Q2, up low-single digits over 2019 levels in our own markets. And again, as the performance -- the strongest categories for us are the ones that we've mentioned here several times around outdoor performance, running and work. Those are going to continue to carry the day here for the balance of this year and be the strongest drivers of the overall growth versus 2019, but the lifestyle brands are closing the gap. So we're seeing progressive improvement in those brands from the first half of the year into the second half of the year and have higher, more positive outlook for that category in 2022.

That's very helpful. Thank you for that. And then following up on Erinn's question with regards to Vietnam, I think you do break out the range -- percentage range in your latest ESG report. But obviously, that's at the company level. Maybe can you give us some color on like which brands have a greater exposure to Vietnam? I would assume it's maybe some of the performance, but maybe you can give a little bit more color on that, that would be very helpful.

It's across the brands, Laurent. And again, we have a good amount of work boot business in Vietnam, along with those performance brands that you mentioned. So I would say that it doesn't necessarily impact any particular brand. But we're constantly monitoring that. And I would say, obviously, for our larger businesses, they're more exposed from a volume standpoint just because they're bigger, but not necessarily because we have more concentration of those constructions in Vietnam and other places. Again, I want to emphasize. We do have a nice diversification of sourcing supply outside of Vietnam right now. And we've moved some of our production back into China even in this year just to provide that dual sourcing capability and risk mitigation, and it's serving us pretty well right now. But we're keeping a very close eye on what's happening in Vietnam, and we'll continue to monitor that to the extent it impacts our outlook.

Very helpful. And then last question, great to hear about the double digit growth for FY '22. Just to make sure, is that just fully organic? That's not anticipating any M&A? Is that correct?

That is correct.

That’s great. Okay. Thank you, Blake. Best of luck.

Thanks, Laurent.

Ladies and gentlemen, we have reached the end of the question-and-answer session. And I would like to turn the call back to management for closing remarks.

On behalf of Wolverine World Wide, I’d like to thank you for joining us today. As a reminder, our conference call replay is available on our Web site at wolverineworldwide.com. The replay will be available until August 29, 2021. Thank you. And have a good day.

This concludes today’s conference. You may disconnect your lines at this time. Thank you all for your participation.