Weyco Group Inc.’s net sales for the third quarter ended September 30 were $79.1 million, a decrease of 13 percent as compared to third quarter 2015 net sales of $91.2 million. Earnings from operations were $7.3 million in the third quarter of 2016, compared to $9.1 million in the third quarter of 2015. Net earnings attributable to the company were $4.6 million in the third quarter of 2016, compared to $5.5 million in last year’s third quarter. Diluted earnings per share were 44 cents per share in the third quarter of 2016 and 51 cents per share in the third quarter of 2015.
Net sales in the North American wholesale segment, which include North American wholesale sales and licensing revenues, were $62.2 million for the third quarter of 2016, down 17 percent from $74.6 million in the third quarter of 2015. Within the wholesale segment, net sales of the Florsheim brand were up 7 percent for the quarter, mainly due to higher sales to national shoe chains. This increase was offset by lower sales of the Stacy Adams, Nunn Bush and Bogs brands. Stacy Adams net sales were down 6 percent for the quarter compared to last year, primarily due to lower sales to off-price retailers.
Nunn Bush sales declined 22 percent this quarter compared to last year. While its sales were down across a number of distribution categories due to a slowdown in consumer spending on soft goods, Nunn Bush was most affected by its reduced sales in the department store trade channel. Mid-tier department stores are facing a challenging environment as consumer buying shifts to the internet. Bogs third-quarter net sales were down 31 percent from the same period last year. Due to last year’s mild winter, retailers are carrying over Bogs inventory, which impacted shipments this year and also caused retailers to be conservative with their orders for fall 2016.
Gross earnings for the North American wholesale segment increased to 32.2 percent of net sales in the third quarter of 2016, from 31.4 percent in last year’s third quarter. Earnings from operations for the wholesale segment were $6.3 million in the third quarter of 2016, down from $8.2 million in the same period last year. The decrease was primarily due to lower sales volumes.
Net sales in the North American retail segment, which include sales from the company’s Florsheim retail stores and its internet business in the U.S., were $4.7 million in the third quarter of 2016, down 1 percent as compared to $4.8 million in 2015. Same-store sales (which include U.S. internet sales) were up 2 percent for the quarter. There were two fewer domestic retail stores operating during the third quarter of 2016 than there were in last year’s third quarter, as three stores were closed and one store opened during the quarter. Earnings from operations for the retail segment were $313,000 in the third quarter of 2016, compared to $401,000 in 2015. The decrease was mainly due to lower operating earnings in the internet business resulting from higher marketing costs.
Other net sales, which include the wholesale and retail net sales of Florsheim Australia and Florsheim Europe, were $12.2 million in the third quarter of 2016, up 3 percent as compared to $11.9 million in 2015. The increase was due to higher net sales at Florsheim Europe. Florsheim Australia’s net sales were flat for the quarter. In local currency, Florsheim Australia’s net sales were down 4 percent for the quarter. Earnings from operations of Florsheim Australia and Florsheim Europe were $731,000 in the third quarter of 2016, up from $578,000 in the same period last year. The increase between years was driven by higher sales volumes and operating earnings at Florsheim Europe.
Other income (expense) for the third quarter of 2016 was $113,000 of income, compared to an expense of $524,000 in the same period last year. This quarter’s other income included foreign currency transaction gains of $102,000 compared to $340,000 of losses in the third quarter of 2015. These gains and losses resulted mainly from the revaluation of inter-company loans between the company’s North American wholesale segment and Florsheim Australia.
“This was a difficult quarter for our North American wholesale segment,” stated Thomas W. Florsheim, Jr., the company’s chairman and CEO. “Not only did we see a large reduction in Bogs orders following last year’s mild winter, we were also affected by a soft retail environment and changes in consumer buying patterns, which contributed to the loss of sales for two of our other major wholesale brands this quarter. While the retail landscape remains uncertain, we remain confident in the strength of our brands, and believe that each is well positioned in its respective market for growth when conditions improve.”
On November 7, 2016, the company’s board of directors declared a cash dividend of 21 cents per share to all shareholders of record on December 5, 2016, payable January 2, 2017.
Photo courtesy Bogs
