Weyco Group Inc. reported wholesale revenues at Bogs jumped 34 percent in the fourth quarter. Overall sales were $89.6 million, an increase of 12 percent compared to fourth quarter 2017 net sales of $80.3 million.
Earnings from operations were $11.9 million in the fourth quarter of 2018, up 16 percent compared to $10.3 million in the fourth quarter of 2017. Net earnings attributable to the company rose 19 percent to $9.6 million in the fourth quarter of 2018, from $8.1 million in last year’s fourth quarter. Diluted earnings per share were $0.93 per share in the fourth quarter of 2018, up from $0.79 per share in the fourth quarter of 2017.
Net sales in the North American wholesale segment, which include North American wholesale sales and licensing revenues, were $70.8 million in the fourth quarter of 2018, an increase of 15 percent compared with $61.4 million in the fourth quarter of 2017. Within the wholesale segment, Bogs and Florsheim fourth quarter net sales rose 34 percent and 23 percent, respectively, due to increases across the majority of distribution channels. Stacy Adams net sales were up 6 percent this quarter, due primarily to higher sales to department stores and national shoe chains. Net sales of the Nunn Bush brand were down 2 percent for the quarter. Licensing revenues were $734,000 in the fourth quarter of 2018 and $724,000 in last year’s fourth quarter.
Gross earnings for the North American wholesale segment were 40.0 percent of net sales in the fourth quarter of 2018, compared to 37.4 percent of net sales in last year’s fourth quarter. Earnings from operations for the wholesale segment were $10.4 million in the fourth quarter of 2018, up 24 percent compared to $8.3 million in the fourth quarter of 2017, as a result of higher sales and gross margins.
Net sales in the North American retail segment, which include sales from the company’s Florsheim retail stores and its internet businesses in the United States, were $8.2 million in the fourth quarter of 2018, up 19 percent compared to $6.9 million in last year’s fourth quarter. Same store sales (which include U.S. internet sales) were up 21 percent for the quarter, due mainly to higher sales through the company’s websites. Driven by higher online sales, retail earnings from operations rose to $1.9 million in the fourth quarter of 2018, from $1.1 million in last year’s fourth quarter.
Other net sales, which include the wholesale and retail net sales of Florsheim Australia and Florsheim Europe, were $10.6 million in the fourth quarter of 2018, down 11 percent compared to $12.0 million in the fourth quarter of 2017. This decrease was due to lower net sales at Florsheim Australia. Florsheim Australia’s net sales were down 14 percent for the quarter, with lower sales in both its retail and wholesale businesses, as a result of the challenging retail environment. The weaker Australian dollar relative to the U.S. dollar also contributed to the decrease, as Florsheim Australia’s net sales in local currency were down 8 percent for the quarter. Collectively, Florsheim Australia and Florsheim Europe had operating losses totaling $333,000 for the quarter, compared to operating earnings of $787,000 in the same period last year. The decrease between years was primarily due to lower sales at Florsheim Australia.
Effective January 1, 2018, the Tax Cuts and Jobs Act lowered the U.S. federal tax rate from 35 percent to 21 percent, which reduced the company’s fourth quarter 2018 income tax provision by $1.2 million and increased diluted earnings per share by $0.12. In 2017, the company remeasured its deferred tax balances to reflect the new lower tax rate, which reduced its fourth quarter 2017 income tax provision by $1.5 million and increased its 2017 diluted earnings per share by $0.15.
Full Year 2018
Overall net sales were $298 million in 2018, an increase of 5 percent compared to $284 million in 2017. Earnings from operations were $25.5 million in 2018, up 9 percent compared to $23.4 million in 2017. Net earnings attributable to the company rose 24 percent to $20.5 million in 2018, from $16.5 million in 2017. Diluted earnings per share were $1.97 per share in 2018, up from $1.60 per share in 2017.
Net sales in the North American wholesale segment were $233 million in 2018, up 7 percent compared to $217 million in 2017. Within the wholesale segment, net sales of our Florsheim and Bogs brands were up 20 percent and 10 percent, respectively, with increases across the majority of distribution channels. Stacy Adams net sales increased 5 percent for the year, due mostly to higher sales to department stores and national shoe chains. Net sales of the Nunn Bush brand were down 3 percent for the year, primarily due to lower sales to national shoe chains and department stores, partially offset by higher sales to online retailers. Licensing revenues were $2.5 million in both 2018 and 2017.
North American wholesale segment gross earnings as a percent of net sales were 35.6 percent in 2018 and 33.6 percent in 2017. Wholesale earnings from operations were $23.1 million in 2018, up 14 percent compared to $20.2 million in 2017, due to higher sales and gross margins.
In the North American retail segment, net sales were $22.7 million in 2018, up 9 percent compared to $20.9 million in 2017. Same store sales were up 13 percent for the year, due mainly to increased sales through the company’s websites. Earnings from operations for the retail segment were $2.7 million in 2018, up from $1.4 million in 2017, due mainly to higher sales through the company’s websites.
The company’s other businesses had net sales of $42.3 million in 2018, down 7 percent compared to $45.6 million in 2017. The decrease was due to lower net sales at Florsheim Australia. Florsheim Australia’s net sales were down 10 percent for the year, with lower sales in both its wholesale and retail businesses, due to the challenging retail environment. The weaker Australian dollar relative to the U.S. dollar also contributed to the decrease, as Florsheim Australia’s net sales in local currency were down 7 percent for the year. Collectively, Florsheim Australia and Florsheim Europe had operating losses totaling $379,000 in 2018, compared to operating earnings of $1.8 million in 2017. The decrease between years was primarily due to lower sales at Florsheim Australia.
During the third quarter of 2018, as previously disclosed, the company purchased the remaining 45 percent interest in Florsheim Australia for $3.7 million, and the company now owns 100 percent of Florsheim Australia.
Other expense totaled $638,000 in 2018 compared to $248,000 last year. The increase in expense was primarily due to foreign exchange losses recognized from the revaluation of intercompany loans between the company’s North American wholesale segment and Florsheim Australia.
The lower U.S. federal tax rate in 2018 reduced the company’s 2018 income tax provision by $3.2 million and increased diluted earnings per share by $0.31. In 2017, the company remeasured its deferred tax balances to reflect the new lower tax rate, which reduced its 2017 income tax provision by $1.5 million and increased its 2017 diluted earnings per share by $0.15.
“Our North American businesses bounced back in 2018, posting impressive sales and earnings growth for the quarter and year,” stated Thomas W. Florsheim, Jr., the company’s Chairman and CEO. “These results were largely driven by the strong performances of our Florsheim and Bogs brands within our wholesale business and on our websites. Also contributing to our growth in 2018 was the performance of our Stacy Adams brand, which achieved record sales in 2018. While we are proud of these achievements, our international businesses continued to struggle in a sluggish retail environment.”
