Weyco Group Inc. reported sales of Bogs sales declined 10 percent for the fourth quarter, mostly due to lower sales to outdoor and online retailers.
Fourth Quarter
Net sales for the fourth quarter of 2017 were $80.3 million, a decrease of 2 percent compared to fourth quarter 2016 net sales of $82.1 million. Earnings from operations were $10.3 million in the fourth quarter of 2017, up 17 percent compared to $8.8 million in the fourth quarter of 2016. Net earnings attributable to the company were $8.1 million in the fourth quarter of 2017, compared to $8.2 million in last year’s fourth quarter. Earnings for the fourth quarter of 2017 included an adjustment to reduce the company’s income tax provision due to the change in the federal corporate tax rate which resulted from the passing of the Tax Cuts and Jobs Act (“TCJA”) signed into law on December 22, 2017. Earnings for the fourth quarter of 2016 included a charge for the impairment of long-lived assets of $1.8 million ($1.1 million after tax), offset by a $3.1 million adjustment to reverse the deferred tax liability on corporate-owned life insurance policies. Without these non-recurring adjustments, earnings from operations would have been down 3 percent for the quarter, and net earnings attributable to the company would have been up 8 percent for the quarter.
Diluted earnings per share were $0.79 per share in the fourth quarter of 2017, compared to $0.78 per share in the fourth quarter of 2016. Without the non-recurring adjustments described above, diluted earnings per share on an adjusted basis would have been $0.65 per share in the fourth quarter of 2017 and $0.58 per share in the fourth quarter of 2016.
Net sales in the North American wholesale segment, which include North American wholesale sales and licensing revenues, were $61.4 million in the fourth quarter of 2017, compared with $61.7 million in the fourth quarter of 2016. Within the wholesale segment, BOGS net sales declined 10 percent for the quarter, due mostly to lower sales to outdoor and online retailers. Net sales of the Nunn Bush brand were down 5 percent this quarter, primarily due to lower sales to department stores. These sales decreases were mostly offset by higher sales of the Florsheim and Stacy Adams brands. Florsheim net sales were up 12 percent for the quarter, driven by higher sales to national shoe chains. Stacy Adams net sales were up 10 percent this quarter, due mainly to higher sales to online retailers and national shoe chains. Licensing revenues were $724,000 in the fourth quarter of 2017 and $1.1 million in last year’s fourth quarter.
Gross earnings for the North American wholesale segment were 37.4 percent of net sales in the fourth quarter of 2017, compared to 34.7 percent of net sales in last year’s fourth quarter. Earnings from operations for the wholesale segment were $8.3 million in the fourth quarter of 2017, up 38 percent compared to $6.0 million in 2016. Wholesale operating earnings for the fourth quarter of 2016 included an impairment charge of $1.8 million related to the Umi trademark. Without this non-recurring adjustment, wholesale earnings from operations would have been up 7 percent for the quarter, due mainly to higher wholesale gross margins.
Net sales of the North American retail segment, which includes sales from the company’s Florsheim retail stores and its internet business in the United States, were $6.9 million in the fourth quarter of 2017, down 7 percent compared to $7.4 million in last year’s fourth quarter. Same-store sales (which include U.S. internet sales) were down 3 percent for the quarter, due mainly to lower sales on the company’s websites. Retail earnings from operations were $1.1 million in the fourth quarter of 2017 and $1.3 million in last year’s fourth quarter.
Other net sales, which include the wholesale and retail sales of Florsheim Australia and Florsheim Europe, were $12.0 million in the fourth quarter of 2017, down 8 percent compared to $13.1 million in 2016. This decrease was primarily due to lower net sales at Florsheim Australia. Florsheim Australia’s net sales were down 7 percent for the quarter. In local currency, Florsheim Australia’s net sales were down 9 percent for the quarter, with lower sales in both its retail and wholesale businesses. Earnings from operations of Florsheim Australia and Florsheim Europe were $800,000 this quarter, down from $1.4 million in the same period last year. This decrease was primarily due to lower sales.
Full Year 2017
Overall net sales were $283.7 million in 2017, a decrease of 4 percent compared to $296.9 million in 2016. Earnings from operations were $23.4 million in 2017, up 3 percent compared to $22.8 million in 2016. Net earnings attributable to the company were flat at $16.5 million in both 2017 and 2016. Earnings for 2017 included an adjustment to reduce the company’s income tax provision due to the change in the federal corporate tax rate which resulted from the passing of the TCJA. Earnings for 2016 included a charge for the impairment of long-lived assets of $1.8 million ($1.1 million after tax), offset by a $3.1 million adjustment to reverse the deferred tax liability on corporate-owned life insurance policies. Without these non-recurring adjustments, earnings from operations would have been down 5 percent for the year, and net earnings attributable to the company would have been up 4 percent for the year.
Diluted earnings per share were $1.60 per share in 2017, compared to $1.56 per share in 2016. Without the non-recurring adjustments described above, diluted earnings per share on an adjusted basis would have been $1.45 per share in 2017 and $1.36 per share in 2016.
Net sales in the North American wholesale segment were $217.3 million in 2017, down 5 percent from $227.5 million in 2016. Within the wholesale segment, net sales of the Nunn Bush brand were down 11 percent for the year, due mainly to lower department store sales. BOGS net sales declined 9 percent for the year, primarily due to lower sales with outdoor retailers. Stacy Adams net sales were down 2 percent for the year, due mostly to lower sales with department stores, partially offset by increased sales to online retailers. These sales volume losses were partially offset by a 5 percent increase in Florsheim sales this year. Florsheim’s net sales were up mainly with national shoe chains and department stores. Licensing revenues were $2.5 million in 2017 and $2.8 million in 2016.
North American wholesale segment gross earnings as a percent of net sales were 33.6 percent in 2017 and 32.1 percent in 2016. Wholesale earnings from operations were $20.2 million in 2017, up 13 percent compared to $17.9 million in 2016. Last year’s wholesale operating earnings included an impairment charge of $1.8 million related to the Umi trademark. Without this non-recurring adjustment, wholesale earnings from operations would have been up 3 percent for the year, due to higher wholesale gross margins and lower wholesale selling and administrative expenses.
In the North American retail segment, net sales were $20.9 million in 2017, down 5 percent compared to $21.9 million in 2016. Same-store sales (which include U.S. internet sales) were down 5 percent for the year, due mainly to decreased sales on the company’s websites. Earnings from operations for the retail segment were $1.4 million in 2017, down from $2.1 million in 2016. This decrease was mainly due to lower website sales.
The company’s other businesses had net sales of $45.6 million in 2017, down 4 percent compared to $47.5 million in 2016. The decrease was primarily due to lower net sales at Florsheim Australia. Florsheim Australia’s net sales were down 3 percent for the year. In local currency, Florsheim Australia’s net sales were down 6 percent, with lower sales in both its wholesale and retail businesses. Earnings from operations at Florsheim Australia and Florsheim Europe were $1.8 million in 2017, down from $2.7 million last year. This decrease was primarily due to lower sales.
In the first quarter of 2017, the company retrospectively adopted a new accounting rule that required the company to reclassify the non-service cost components of pension expense from selling and administrative expenses to other expense, net, in the Consolidated Condensed Statements of Earnings and Comprehensive Income (Unaudited). The decrease in other expense, net, was primarily due to a $1.1 million decrease in the non-service cost components of pension expense this year. Pension expense decreased in 2017 as a result of freezing benefits under the pension plan, effective December 31, 2016.
“Our efforts to control costs and improve gross margins helped generate earnings growth for our wholesale business this year,” stated Thomas W. Florsheim, Jr., the company’s chairman and CEO. “Despite the challenging retail environment, we feel we ended the year with better, more efficient operations. As we turn to 2018, our focus will continue to be on investing in and growing our brands, and maximizing shareholder value.”
On March 6, 2018, the company’s Board of Directors declared a quarterly cash dividend of $0.22 per share to all shareholders of record on March 16, 2018, payable March 30, 2018.
