By Thomas J. Ryan
Continuing to benefit from progress reducing its reliance on winter boots, Bogs’ sales were up 12 percent in North America on a wholesale basis in the third quarter, according to its parent, Weyco Group.
The gains were driven by sales increases across most major distribution channels.
“Bogs continues to make significant progress diversifying its line into lighter insulated active footwear as well as into work boots. Both categories are less dependent on inclement weather,” said Tom Florsheim, Jr., chairman and CEO, on a conference call with analysts. “While we are still very happy when there is snow in the forecast across the country, we feel better positioned in the event of a mild winter.”
The improvement in the third quarter builds on gains of 48 percent seen in the second quarter and 23 percent in the first quarter. In 2018, sales were up 10 percent with the benefit of cold winter weather. Warmer winters, however, led to a 9 percent decline for Bogs in 2017 and 23 percent in 2016.
Companywide, sales were $82.5 million in the period, up 5.2 percent. Among its other brands, sales on a wholesale basis grew 22 percent at Florsheim and declined 5 percent at Stacy Adams and 2 percent at Nunn Bush.
Among segments, sales in North American wholesale, which include North American wholesale sales and licensing revenues, were $67.8 million, up 7 percent.
The North American retail segment, which includes sales from the Florsheim stores and e-commerce businesses in the U.S., reached $5.2 million, or 4 percent. Other net sales, which include the wholesale and retail sales of Florsheim Australia and Florsheim Europe, were $9.5 million, down 7 percent.
Net earnings rose 4.9 percent to $6.6 million, or 66 cents a share. The improvement was attributed to higher sales and higher gross margins.
Overall gross margins improved to 39.2 percent from 38.8 percent a year ago. Florsheim said stable pricing from its factory base, and selective price increases, helped improve gross margins in the quarter; however, with tariffs on footwear arriving, Florsheim said Weyco has worked with its Chinese suppliers to get discounts and have raised pricing to customers to offset some of the impacts from the additional duties. Weyco is also working to transfer some products and further diversify its supply chain moving forward.
Weyco noted that on August 23 the U.S. government announced it would impose an additional 15 percent tariff on footwear sourced from China. The tariff on leather footwear, which primarily impacts the Florsheim, Stacy Adams and Nunn Bush brands, took effect on September 1. The tariff on rubber and other non-leather footwear, which primarily impacts Bogs, is expected to take effect on December 15.
Florsheim added, “The ultimate impact this will have on our 2020 results is not known at this time.”
As of September 30, inventories were up 35 percent to $81 million, primarily due to efforts to bring in as much product ahead of the dates where additional duties are imposed on Chinese footwear.
“On leather upper shoes, the effective date for the initial 15 percent duty was September 1, and we were able to cover much of our 2019 needs on leather shoes at the old rate of 8.5 percent,” said Florsheim. “The additional 15 percent duty for Bogs rubber boots is set to go into effect December 15. We are covering much of our needs for 2020 on core boots by bringing these in early as well. The cost of carrying the extra inventory is much cheaper with an additional 15 percent tariff.”
Photo courtesy Bogs