Weyco Group Inc. reported sales for the second quarter of 2021 were $57.6 million compared to second quarter 2020 net sales of $16.6 million.

The company’s brands include Florsheim, Nunn Bush, Stacy Adams, Bogs, Rafters, and Forsake.

Operating earnings were $4.5 million for the quarter compared to operating losses of $13.0 million in last year’s second quarter. Net earnings rose to $3.8 million, or $0.39 per diluted share, from net losses of $8.9 million, or $0.91 per diluted share, in the second quarter of 2020.

Last year’s second-quarter results were significantly impacted by the pandemic, as most retailers, including the company’s retail stores, were closed for a majority of the quarter. As such, comparisons of 2021 financial performance to 2020 may have limited utility. Therefore, selected comparisons to 2019 were included in the release of information as appropriate.

Net sales for the three months ended June 30, 2021 rose to approximately 95 percent of second-quarter 2019 sales levels, demonstrating a strong recovery to near pre-pandemic levels. The company’s earnings also rebounded exceeding its second-quarter 2019 levels.

North American Wholesale Segment
Net sales in the company’s North American wholesale segment were $41.9 million for the quarter compared to $9.3 million in the second quarter of 2020 with sales up across all of the company’s brands. Last year’s second-quarter sales were down significantly due to COVID-19-related retail shutdowns.

Gross earnings for the wholesale segment were 32.4 percent of net sales in the second quarter of 2021 compared to 34.7 percent of net sales in last year’s second quarter. Selling and administrative expenses were $10.9 million for the quarter compared to $13.4 million in last year’s second quarter and $13.9 million in the second quarter of 2019. Second-quarter 2021 expenses were reduced by approximately $1.8 million of income from U.S. and Canadian government wage subsidies. Second-quarter 2020 expenses included the write-off of approximately $3.3 million in receivables as a result of the J.C. Penney bankruptcy filing and offset by $1.4 million of income from U.S. and Canadian government wage subsidies. Driven by higher sales volumes, wholesale operating earnings recovered to $2.7 million in the second quarter of 2021 from operating losses of $10.2 million in last year’s second quarter.

Business recovery continues in the company’s wholesale segment with wholesale sales for the three months ended June 30, 2021 rising to approximately 91 percent of second-quarter 2019 levels. Demand for dress and dress-casual footwear accelerated during the quarter as consumers returned to offices and social events resumed. Second-quarter 2021 wholesale operating earnings exceeded comparative 2019 levels due, in part, to government wage subsidies recognized during the period.

North American Retail Segment
Net sales in the company’s North American retail segment were $6.2 million in the second quarter of 2021 compared to $3.6 million in the second quarter of 2020. Same-store sales rose 73 percent for the quarter due to a 43 percent increase in e-commerce sales and higher brick and mortar same-store sales. Last year’s brick and mortar same-store sales were down significantly due to temporary store closures as a result of the pandemic. There were four fewer brick and mortar stores operating at June 30, 2021, as compared to June 30, 2020. The company currently has four active U.S. brick and mortar locations.

The retail segment had operating earnings of $1.2 million for the quarter compared to operating losses of $856,000 in last year’s second quarter. The improvement was due to the resumption of sales at the company’s active brick and mortar locations, higher operating earnings from the e-commerce businesses and the benefit of closing unprofitable stores since last year.

Retail net sales for the three months ended June 30, 2021 surpassed second quarter 2019 levels by 15 percent. While most of this increase was driven by e-commerce growth, brick and mortar sales at the company’s four remaining locations also exceeded their 2019 levels. Second-quarter 2021 retail operating earnings outpaced the second quarter of 2019 due to the shedding of unprofitable stores last year and growth in the company’s more profitable e-commerce businesses.

Other
Other net sales, which include the wholesale and retail net sales of Florsheim Australia and Florsheim Europe, were $9.5 million for the quarter, compared to $3.7 million in the second quarter of 2020. This increase was primarily at Florsheim Australia with sales up in its wholesale and retail businesses as the retail environment continues to recover. Last year’s second-quarter sales were down significantly as a result of COVID-19-related retail shutdowns.

Collectively, Florsheim Australia and Florsheim Europe had operating earnings of $718,000 for the quarter compared to operating losses of $2.0 million in the second quarter of 2020. The improvement between periods was largely due to improved performance at Florsheim Australia. Last year’s losses included the write-down of approximately $1.0 million of obsolete inventory at Florsheim Asia Pacific offset by $1.4 million of income from rent and wage subsidies.

Other net sales for the second quarter of 2021 exceeded second quarter 2019 levels by 5 percent as the business environment in Australia improved in the quarter; however, recent outbreaks of COVID-19 have resulted in additional lockdowns. Second-quarter 2021 operating earnings from the company’s other businesses also beat the comparative 2019 levels due largely to improved performance at Florsheim Australia.

Consolidated other income totaled $189,000 for the quarter compared to other expenses of $252,000 in last year’s second quarter. Last year’s other expense included approximately $360,000 in losses on foreign exchange contracts entered into by Florsheim Australia.

Acquisition
On June 7, 2021, the company acquired substantially all of the operating assets and certain liabilities of Forsake, Inc. (“Forsake”), a distributor of outdoor footwear under the brand name “Forsake.” The principal assets acquired were inventory, accounts receivable and intellectual property, including the Forsake brand name.

The aggregate purchase price was approximately $2.6 million, plus contingent payments to be paid annually over a period of five years depending on Forsake achieving certain performance measures. The company’s estimate of the discounted fair value of the contingent payments is approximately $1.4 million in total. The transaction was funded with the company’s available cash.

“We experienced a resurgence in sales during the quarter in all areas of our business following the disruption from COVID-19 last year,” said Thomas W. Florsheim, Jr., Chairman and CEO. “Not only did sales return to near pre-pandemic levels, but earnings surpassed 2019 due largely to the strategic measures taken last year to cut costs and improve profitability. While the pandemic continues to impact our business to varying degrees, we are excited by these results and our improved trajectory. With regard to Forsake, we are looking forward to integrating a new outdoor casual footwear brand into our portfolio here at Weyco and are excited about the growth potential of this brand particularly through the e-commerce channel.”

Logo courtesy Weyco Group

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