Weyco Group Inc. reported sales of Bogs fell 22 percent on a wholesale basis in the first quarter. Overall sales for Weyco, which also owns the Florsheim, Stacy Adams and Nunn Bush footwear brands, were down 14 percent.
In a statement, Weyco said the company’s operations and business experienced significant disruptions beginning in the second half of March 2020 due to the unprecedented conditions surrounding the COVID-19 pandemic. Government-mandated shutdowns of non-essential businesses resulted in the majority of retailers temporarily closing their stores, which significantly affected the company’s wholesale business. The company’s domestic retail locations closed on March 18, 2020, and remain closed due to government orders. Overseas, the company’s wholesale and retail businesses in Australia, Asia, South Africa, and Europe were similarly impacted by retail store closures and lockdowns requiring consumers to stay at home. These closings resulted in lower first quarter sales and earnings across all of the company’s businesses, and the company expects the shutdowns and global economic slowdown caused by the pandemic to continue to adversely impact its businesses during 2020.
Net sales for the first quarter of 2020 were $63.6 million, down 14 percent compared to first quarter 2019 net sales of $74.1 million. Earnings from operations were $1.3 million in the first quarter of 2020 compared to $5.1 million in the first quarter of 2019. Net earnings were $1.2 million in the first quarter of 2020 and $4.0 million in last year’s first quarter. Diluted earnings per share were $0.12 per share in the first quarter of 2020 and $0.40 per share in the first quarter of 2019.
Net sales in the North American wholesale segment, which include North American wholesale sales and licensing revenues, were $52.7 million in the first quarter of 2020, down 11 percent compared to $59.5 million in the first quarter of 2019. Within the wholesale segment, Stacy Adams, Bogs, and Nunn Bush first quarter net sales declined 23 percent, 22 percent, and 8 percent, respectively, with sales down in most major categories as a result of the retail shutdowns caused by the COVID-19 pandemic. These decreases were partially offset by a 4 percent increase in net sales of the Florsheim brand. Florsheim’s increase stems from strong sales in January and February before the retail shutdowns went into effect. Licensing revenues were $461,000 in the first quarter of 2020 and $707,000 in last year’s first quarter.
Gross earnings for the North American wholesale segment were 31.8 percent of net sales in the first quarter of 2020, compared to 34.3 percent of net sales in last year’s first quarter. The decrease in gross margins was largely due to the additional costs of the tariff on certain footwear imported from China. Earnings from operations for the wholesale segment were $2.8 million in the first quarter of 2020 compared with $5.2 million in the first quarter of 2019.
Net sales in the North American retail segment, which include sales from the company’s Florsheim retail stores and its e-commerce businesses in the United States, were $4.8 million in the first quarter of 2020, down 15 percent compared to $5.6 million in last year’s first quarter. Same store sales (which include U.S. e-commerce sales) were down 13 percent for the quarter, due primarily to retail store closings late in the quarter and decreased sales on the company’s websites. As a result, the retail segment had operating losses totaling $89,000 this quarter compared to operating earnings of $483,000 in last year’s first quarter.
Other net sales, which include the wholesale and retail sales of Florsheim Australia and Florsheim Europe, were $6.1 million in the first quarter of 2020, down 32 percent compared to $9.1 million in the first quarter of 2019. This decrease was due to lower net sales at both Florsheim Australia and Florsheim Europe resulting from retail shutdowns and government orders for consumers to stay at home. Collectively, Florsheim Australia and Florsheim Europe had operating losses totaling $1.3 million in the first quarter of 2020 compared to operating losses of $543,000 in the first quarter of 2019.
Other income (expense), net, totaled $407,000 of income in the first quarter of 2020, compared to $125,000 of expense in last year’s first quarter. The increase this quarter was primarily due to unrealized gains on favorable foreign exchange contracts held by Florsheim Australia.
“Our company has taken a long-term approach to the current situation,” stated Thomas W. Florsheim, Jr., chairman and CEO. “We believe that our strong balance sheet and operating expertise will allow us to manage our way through this crisis. Our distribution center and the majority of our supply chain continue to operate which allows us to continue shipping e-commerce orders while remaining ready to commence full operations when appropriate. Our distribution system allows us to quickly adapt to changes in customer demand, and we believe that our system is well-suited for adjusting to the future consumer landscape. However, since we do not know when our retail partners will reopen their stores, we cannot presently estimate the future impact of the COVID-19 pandemic, as well as the resulting global economic slowdown, on our business, but we do expect it to have an adverse effect on our business in 2020. We have strong brands that resonate well with consumers and we believe we are in a strong financial position to get through these challenges.”
Photo courtesy Bogs
