Weyco Group Inc. reported wholesale sales of the Bogs brand in North America were down 5 percent for the fourth quarter due to lower sales in Canada as a result of the mild start to the winter.
Overall, net sales in the North American wholesale segment, which include North American wholesale sales and licensing revenues, were $68.8 million in the fourth quarter of 2019, a decrease of 3 percent compared to $70.8 million in the fourth quarter of 2018. Among other brands, net sales of the Stacy Adams brand were down 11 percent due mainly to lower sales with national shoe chains and department stores. Net sales of the Nunn Bush brand were down 7 percent due primarily to lower sales to department stores, partially offset by higher sales to e-commerce retailers. These sales decreases were partially offset by a 9 percent increase in sales of the Florsheim brand due to increases across most major distribution channels. Licensing revenues were $1.1 million in the fourth quarter of 2019 and $734,000 in last year’s fourth quarter.
Gross earnings for the wholesale segment were 40.4 percent of net sales in the fourth quarter of 2019 compared to 40.0 percent of net sales in the fourth quarter of 2018. Despite the decrease in fourth-quarter sales, wholesale earnings from operations increased 5 percent to $10.9 million for the quarter, compared to $10.4 million in last year’s fourth quarter. This increase was largely the result of lower selling and administrative expenses.
Companywide, net sales for the fourth quarter of 2019 were $86.9 million, down 3 percent compared to fourth quarter 2018 net sales of $89.6 million. Earnings from operations were $11.5 million in the fourth quarter of 2019, down 3 percent compared to $11.9 million in the fourth quarter of 2018. Net earnings attributable to the company totaled $8.8 million for the quarter, a decrease of 8 percent compared to $9.6 million in last year’s fourth quarter. Diluted earnings per share were $0.90 per share in the fourth quarter of 2019 and $0.93 per share in the fourth quarter of 2018.
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 $9.1 million in the fourth quarter of 2019, up 11 percent compared to $8.2 million in last year’s fourth quarter. Same-store sales (which include U.S. e-commerce sales) were up 9 percent for the quarter due to higher sales on the company’s websites. The increase in web sales can be attributed to the company’s investments in e-commerce marketing software. Despite the increase in sales, retail earnings from operations decreased to $1.5 million in the fourth quarter of 2019 from $1.9 million in the fourth quarter of 2018. This decrease was due to lower operating results at the company’s brick and mortar locations, as a result of lower foot traffic, and higher advertising costs from the company’s e-commerce businesses.
Other net sales, which include the wholesale and retail net sales of Florsheim Australia and Florsheim Europe, were $9.0 million in the fourth quarter of 2019, down 15 percent compared to $10.6 million in the fourth quarter of 2018. This decrease was primarily due to a 15 percent decline in net sales at Florsheim Australia, with sales down in both its wholesale and retail businesses, due to the challenging retail environment in Australia and Asia. 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 10 percent for the quarter. Collectively, Florsheim Australia and Florsheim Europe had operating losses totaling $854,000 for the quarter, compared to operating losses of $333,000 in the same period last year. The decline between periods was primarily due to lower sales and higher operating costs in Florsheim Australia’s retail businesses. In the fourth quarter of 2019, Florsheim Australia’s operating expenses included approximately $500,000 of costs to exit unprofitable stores.
Full Year 2019
Overall net sales were $304.0 million in 2019, an increase of 2 percent compared to $298.4 million in 2018. Earnings from operations were $27.0 million in 2019, up 6 percent compared to $25.5 million in 2018. Net earnings attributable to the company rose 2 percent to $20.9 million in 2019, from $20.5 million in 2018. Diluted earnings per share were $2.10 per share in 2019, up from $1.97 per share in 2018.
Net sales in the North American wholesale segment were $242 million in 2019, up 4 percent compared to $233 million in 2018. Within the wholesale segment, net sales of our Florsheim and Bogs brands were up 17 percent and 8 percent, respectively, with increases across most major distribution channels. Stacy Adams net sales decreased 3 percent for the year due mainly to lower sales with off-price retailers, partially offset by higher sales to e-commerce retailers. Net sales of the Nunn Bush brand were down 9 percent due primarily to lower sales to department stores, partially offset by higher sales to e-commerce retailers. Licensing revenues were $3.0 million in 2019 and $2.5 million in 2018.
North American wholesale segment gross earnings as a percent of net sales were 36.6 percent in 2019 and 35.6 percent in 2018. Wholesale earnings from operations were $27.8 million in 2019, up 20 percent compared to $23.1 million in 2018, due mainly to higher sales and gross margins.
In the North American retail segment, net sales were $25.2 million in 2019, up 11 percent compared to $22.7 million in 2018. Same-store sales were up 10 percent for the year, due mainly to increased sales on the company’s websites. The increase in web sales can be attributed to the company’s investments in e-commerce marketing software. Earnings from operations for the retail segment were $2.8 million in 2019, up 2 percent from $2.7 million in 2018, due mainly to the higher e-commerce sales.
The company’s other businesses had net sales of $36.7 million in 2019, down 13 percent compared to $42.3 million in 2018. The decrease was primarily due to lower net sales at Florsheim Australia. Florsheim Australia’s net sales were down 12 percent for the year, with lower sales in both its wholesale and retail businesses, due to the challenging retail environment in Australia and Asia. 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 5 percent for the year. Collectively, Florsheim Australia and Florsheim Europe had operating losses totaling $3.5 million in 2019, compared to operating losses of $379,000 in 2018. The decrease between years was primarily due to lower sales and gross margins, and higher selling and administrative expenses at Florsheim Australia. In 2019, Florsheim Australia’s operating expenses included $940,000 of costs to exit unprofitable stores. Additionally, these stores generated $350,000 of Florsheim Australia’s operating losses in 2019.
In 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 Florsheim, Stacy Adams, and Nunn Bush brands, took effect on September 1, 2019, and was subsequently reduced to 7.5 percent on February 14, 2020. The tariff on rubber and other non-leather footwear, which primarily impacts the Bogs brand, was expected to take effect on December 15, 2019, but never commenced as the U.S. government suspended it indefinitely. For the fourth quarter and full-year 2019, the tariff on leather footwear did not have a material impact on the company’s results of operations because most of the inventory sold in 2019 was received before the tariff took effect. For 2020, 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.
“Our North American wholesale business had strong earnings growth in 2019, fueled by record sales of our Florsheim brand,” stated Thomas Florsheim, Jr., the company’s chairman and CEO. “The Bogs brand also delivered strong results for the year, contributing to the overall success in this segment. At retail, our sales and earnings improved due to the growth of our domestic e-commerce websites. Gains in our North American businesses were partially offset by losses at Florsheim Australia, due to the challenging retail environment overseas. We have been working hard to turn these businesses around in an effort to improve Florsheim Australia’s bottom line in 2020.”
Photo courtesy Bogs
