Weyco Group Inc. (Nasdaq:WEYS) reported that net sales of its once high-flying Bogs footwear brand plummeted 47 percent in the second quarter and it expects the brand’s sales to be down 25 percent this year.
The period, which ended June 30, is Bogs’ smallest quarter, representing less than 10 percent of the annual revenues. Still, because of the mild winter last year, retailers carried over inventory, which impacted shipments in the quarter and caused retailers to be conservative with orders for fall 2016.
Looking forward to the second half of 2016 for Bogs, backlogs for the brand remain down and the company estimates Bogs annual sales will be down approximately 25 percent.
Bogs was the poorest performing of Weyco Group’s brands in the wholesale channel during the quarter, when the company reported sales of $56.9 million, a decrease of 11 percent compared to 2015 net sales of $63.9 million.
North American Revenues Off Double Digits Net sales in the North American wholesale segment, which include North American wholesales and licensing revenues, reached $41.5 million, down 14 percent from $48.1 million in the same period last year. Within the wholesale segment, net sales of our Stacy Adams, Nunn Bush and Florsheim brands were down 5 percent, 17 percent and 5 percent, respectively, mainly due to soft consumer spending in the footwear and apparel segments.
Gross earnings for the North American wholesale segment increased to 32.6 percent of net sales in the second quarter of 2016, from 31.0 percent in last year’s second quarter. Earnings from operations for the wholesale segment were $1.0 million in the second quarter of 2016, down from $2.2 million in the same period last year. This decrease was primarily due to lower sales volumes in the second quarter of 2016.
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 second quarter of 2016, down 6 percent compared to $5.0 million in 2015. Same store sales (which include U.S. internet sales) were down 2 percent for the quarter. There were two fewer domestic retail stores operating during the second quarter of 2016 compared to last year’s second quarter. Earnings from operations for the retail segment were $228,000 in the second quarter of 2016, compared to $489,000 in 2015. The decrease in retail segment operating earnings for the quarter was mainly due to the lower sales and earnings performance of brick and mortar stores.
Other net sales, which include the wholesale and retail net sales of Florsheim Australia and Florsheim Europe, were flat at $10.7 million.
Consolidated earnings from operations were $1.6 million, compared to $3.3 million in the year-earlier quarter. Net earnings attributable to the company were $1 million in the second quarter of 2016, compared to $2 million in last year’s second quarter. Diluted earnings per share were 9 cents in the second quarter of 2016 and 19 cents per share in the second quarter of 2015.
“Our second quarter was challenging,” stated Thomas W. Florsheim, Jr., the company’s chairman and CEO. “In addition to the reduced demand for our Bogs product following last year’s mild winter, our retail partners saw a slowdown in traffic and a weaker sales trend, which resulted in a general concern about inventory levels, which impacted our other three brands. We feel these conditions may continue in the back half of 2016, but believe our brands are well-positioned for future growth when the retail environment for footwear improves.”
