Weyco Group Inc. reported net sales for the third quarter of 2019 were $82.5 million, an increase of 5 percent compared to third quarter 2018 net sales of $78.4 million. Earnings from operations increased 5 percent to $8.5 million in the third quarter of 2019, up from $8.0 million in the third quarter of 2018. Net earnings attributable to the company rose 5 percent to $6.6 million in the third quarter of 2019, up from $6.3 million in last year’s third quarter. Diluted earnings per share were $0.66 per share in the third quarter of 2019 and $0.60 per share in the third quarter of 2018.
Net sales in the North American wholesale segment, which include North American wholesale sales and licensing revenues, were $67.8 million in the third quarter of 2019, up 7 percent compared to $63.2 million in the third quarter of 2018. Within the wholesale segment, Florsheim and Bogs third quarter net sales rose 22 percent and 12 percent, respectively, due to sales increases across most major distribution channels. These sales increases were offset by lower sales of the Stacy Adams and Nunn Bush brands. Stacy Adams sales were down 5 percent, due mainly to a decrease with off-price retailers, partially offset by higher sales to e-commerce retailers. Sales of the Nunn Bush brand were down 2 percent, primarily due to lower sales to department stores. Licensing revenues were $630,000 in the third quarter of 2019, up from $531,000 in the third quarter of 2018.
Gross earnings for the North American wholesale segment increased to 35.9 percent of net sales in the third quarter of 2019, up from 34.4 percent of net sales in last year’s third quarter, as a result of stable pricing from the company’s overseas suppliers and selective price increases. Earnings from operations for the wholesale segment were $9.5 million in the third quarter of 2019, up 25 percent compared to $7.6 million in the same period one year ago. The increase in operating earnings was primarily due to higher sales and gross margins.
Net sales in the North American retail segment, which includes sales from the company’s Florsheim retail stores and its e-commerce businesses in the United States, were $5.2 million in the third quarter of 2019, up 4 percent compared to $4.9 million in the third quarter of 2018. Same store sales (which includes U.S. e-commerce sales) were up 3 percent for the quarter due to increased sales on the company’s websites. Retail earnings from operations were $365,000 in the third quarter of 2019 and $428,000 in the third quarter of 2018. While operating earnings from the company’s e-commerce businesses increased, this increase was more than offset by lower operating results at the company’s brick-and-mortar locations.
Other net sales, which include the wholesale and retail net sales of Florsheim Australia and Florsheim Europe, were $9.5 million in the third quarter of 2019, down 7 percent compared to $10.3 million in the third quarter of 2018. The decrease was primarily due to a 9 percent reduction in net sales at Florsheim Australia, which was caused mainly by the translation of the weaker Australian currency into U.S. dollars. Florsheim Australian’s net sales in local currency were down 3 percent for the quarter, due to lower sales in its wholesale businesses. Collectively, Florsheim Australia and Florsheim Europe had operating losses totaling $1.4 million in the third quarter of 2019, compared to operating earnings of $7,500 in last year’s third quarter. The decline between years was due to lower sales, lower overall gross margins, and higher retail expenses. Expenses included approximately $350,000 of one-time costs to exit an underperforming retail store in Australia.
In August 2019, 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 company’s Florsheim, Stacy Adams, and Nunn Bush brands, took effect on September 1, 2019. The tariff on rubber and other non-leather footwear, which primarily impacts the Bogs brand, is expected to take effect on December 15, 2019. In an effort to mitigate the overall impact of the tariff cost increases, the company negotiated wholesale price increases with many of its customers and price reductions from many of its Chinese suppliers. While the tariff had a minimal impact on the company’s third quarter 2019 financial results, the ultimate future impact of the tariff on the company’s gross margins, results of operations, and overall financial statements is unknown at this time.
“Strong sales of the Florsheim and Bogs brands continue to drive earnings growth in our North American wholesale segment,” stated Thomas W. Florsheim, Jr., the company’s Chairman and CEO. “We are pleased with this performance and look forward to building on this momentum as we move into the winter selling season. Overseas our businesses continue to struggle in a sluggish retail environment. We are working hard to cut costs and improve gross margins in order to generate profits in this region.”
On November 5, 2019, the company’s Board of Directors declared a cash dividend of $0.24 per share to all shareholders of record on November 29, 2019, payable on January 2, 2020.
