Bogs Wholesale Strength Bright Spot In Weyco’s Q2

Weyco Group Inc. on Tuesday announced net sales for the second quarter were $60.5 million, down 1 percent compared to second quarter 2018 net sales of $60.9 million. Bogs wholesale sales grew 48 percent in the period due to sales volume increases across most major distribution channels

Earnings from operations were approximately $1.9 million in both the second quarters of 2019 and 2018. Net earnings attributable to the company were $1.5 million for the quarter, down 7 percent compared to $1.6 million in last year’s second quarter. Diluted earnings per share were $0.15 per share in both the second quarters of 2019 and 2018.

Net sales in the North American wholesale segment, which include North American wholesale sales and licensing revenues, were $46.1 million for the second quarter of 2019, up 1 percent compared to $45.6 million in the second quarter of 2018.

Within the wholesale segment, Bogs and Florsheim second quarter net sales rose 48 percent and 14 percent, respectively, due to sales volume increases across most major distribution channels. These sales increases were offset by lower sales of the Nunn Bush and Stacy Adams brands.

Nunn Bush sales declined 20 percent, as compared to the same period last year, due to lower sales to department stores and national shoe chains. Stacy Adams sales were down 6 percent for the quarter, due to lower sales to department stores.

Licensing revenues were $636,000 in the second quarter of 2019 and $472,000 in last year’s second quarter. Gross earnings for the North American wholesale segment were 35.1 percent of net sales in the second quarter of 2019, compared to 33.3 percent of net sales in last year’s second quarter.

Earnings from operations for the wholesale segment rose 27 percent to $2.2 million in the second quarter of 2019, from $1.7 million in last year’s second quarter, due to higher sales and gross margins.

The improvement in gross margins mainly resulted from stable pricing from the company’s overseas suppliers and selective price increases. 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 $5.4 million in the second quarter of 2019, up 17 percent compared to $4.6 million in the second quarter of 2018.

Same store sales (which include U.S. e-commerce sales) were up 14 percent for the quarter due to increased sales on the company’s websites. Retail earnings from operations rose to $401,000 this quarter, from $222,000 in last year’s second quarter, due mainly to higher online sales volumes. Other net sales, which include the wholesale and retail net sales of Florsheim Australia and Florsheim Europe, were $9.0 million in the second quarter of 2019, down 15 percent compared to $10.6 million in the second quarter of 2018.

This decrease was primarily due to a 10 percent decline in net sales at Florsheim Australia, caused mainly by the translation of the weaker Australian currency into U.S. dollars. Florsheim Australia’s net sales in local currency were down 3 percent for the quarter, with lower sales in both its retail and wholesale businesses.

Collectively, Florsheim Australia and Florsheim Europe had operating losses totaling $749,000 in the second quarter of 2019, compared to operating losses of $23,000 in the second quarter of 2018. The decline between years was primarily due to lower sales, lower overall gross margins, and higher operating costs at Florsheim Australia.

On August 1, 2019, it was announced that the U.S. would impose an additional 10 percent tariff on certain categories of consumer goods exported from China, including footwear. As the company sources a significant portion of its footwear from China, this tariff is expected to increase the overall cost of its footwear. At this time, the expected impact of the tariffs on the company’s gross margins, results of operations and overall financial statements is unknown.

“Our North American businesses had another good quarter, driven by strong performance of our Florsheim and Bogs brands at wholesale and on our websites,” stated Thomas W. Florsheim, Jr., the company’s Chairman and CEO. “The growth in these segments was offset by losses in our international businesses due to the soft retail environment overseas. As we move into the second half of the year, we remain focused on growing our brands domestically, as well as improving the profitability of our international businesses. Relating to the proposed tariffs, we intend to try to mitigate the overall impact of these cost increases through a combination of wholesale price increases and cost reductions from our suppliers.”

On August 6, 2019, the company’s Board of Directors declared a cash dividend of $0.24 per share to all shareholders of record on August 29, 2019, payable September 30, 2019.