Q4 2024 Weyco Group Inc Earnings Call
Operator: Thank you for standing by and welcome to the WEYCO Group fourth quarter and full year 2024 earnings conference release conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session.
Thank you for standing by and welcome to the weaker group fourth quarter and full year 2024 earnings Conference release Conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During this session you will need to press star one.
Operator: To ask a question during this session, you'll need to press star 11 on your telephone. If your question has been answered and you'd like to remove yourself from the queue, simply press star 11 again. As a reminder, today's program is being recorded.
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Judy Anderson: And now I'd like to introduce your host for today's program, Judy Anderson, Chief Financial Officer. Please go ahead. Thank you.
As a reminder, each program is being recorded.
Speaker Change: Now I'd like to introduce your host for today's program, Judy Anderson Chief Financial Officer. Please go ahead.
Judy Anderson: Good morning and welcome to WEYCO Group's conference call to discuss fourth quarter and full year 2024 results.
Speaker Change: Thank you good morning, and welcome to wake up groups conference call to discuss fourth quarter and full year 2024, our results.
Judy Anderson: On this call with me today are Tom Florsheim, Jr., Chairman and Chief Executive Officer, and John Florsheim, President and Chief Operating Officer.
Speaker Change: On this call with me today are Tom Florsheim Junior Chairman and Chief Executive Officer, and John Florsheim, President and Chief operating Officer.
Judy Anderson: Before we begin to discuss the results for the quarter and year, I will read a brief cautionary statement. During this call, we may make projections or other forward-looking statements regarding our current expectations concerning future events and the future financial performance of the company. We wish to caution you that these statements are just predictions and that actual events or results may differ materially.
Speaker Change: Before we begin to discuss the results for the quarter and year I will read a brief cautionary statement.
Speaker Change: During this call we may make projections or other forward looking statements regarding our current expectations concerning future events and the future financial performance of the company.
Speaker Change: We wish to caution you that these statements are just predictions and that actual events or results may differ materially.
Judy Anderson: We refer you to the section entitled Risk Factors in our most recent annual report on Form 10-K, which provides a discussion of important factors and risks that could cause our actual results to differ materially from our projections. These risk factors are incorporated herein by REC.
Speaker Change: We refer you to the section entitled Risk factors in our most recent annual report on Form 10-K, which provide a discussion of important factors and risks that could cause our actual results to differ materially from our projections.
Speaker Change: These risk factors are incorporated herein by reference.
Judy Anderson: Overall net sales for the fourth quarter of 2024 were $80.5 million compared with $80.6 million in the fourth quarter of 2020. Consolidated gross earnings were 47.9% of net sales for the quarter compared to 50.3% of net sales in last year's fourth quarter. Quarterly operating earnings were flat at $11.5 million in both the fourth quarters of 2024 and 2022. Net earnings were $10 million or $1.04 per diluted share for the quarter versus $8.5 million or $0.90 per diluted share in the fourth quarter of 2023.
Speaker Change: Overall net sales for the fourth quarter of 2024 were $85 million compared with $86 million in the fourth quarter of 2023.
Speaker Change: Consolidated gross earnings were 47, 9% of net sales for the quarter compared to 53% of net sales in last year's fourth quarter.
Speaker Change: Quarterly operating earnings were flat at 11 $5 million in both the fourth quarters of 2024 and 2023.
Speaker Change: Net earnings were $10 million or a dollar four per diluted share for the quarter versus $8 $5 million or <unk> 90 per diluted share in the fourth quarter of 2023.
Judy Anderson: In the North American wholesale segment, net sales for the quarter were $60.4 million, up 1% compared to $59.6 million last year. Higher sales of the Florsheim and Nunn-Busch brands were mostly offset by lower sales of Boggs and Stacey Adams. Wholesale growth earnings were 42.4% of net sales compared to 44.9% of net sales in last year's fourth quarter. Wholesale selling and administrative expenses totaled $16.7 million, or 28% of net sales for the quarter, compared to $18.9 million, or 32% of net sales last year. The decrease was mainly due to lower advertising and employee costs. Wholesale operating earnings increased 14% to $8.9 million for the quarter from $7.9 million in 2023 due to higher sales and lower Net sales in our North American retail segment were $14.1 million for the quarter, up 1% over $13.9 million in 2023.
Speaker Change: In the North American wholesale segment net sales for the quarter were $64 million up 1% compared to $59 $6 million last year.
Speaker Change: Higher sales of the Florsheim and Nunn Bush brands were mostly offset by lower sales of bikes and Stacy Adams.
Speaker Change: Wholesale gross earnings were 42, 4% of net sales compared to 44, 9% of net sales in last year's fourth quarter.
Speaker Change: Wholesale selling and administrative expenses totaled $16 $7 million or 28% of net sales for the quarter compared to $18 9 million or 32% of net sales last year.
Speaker Change: The decrease was mainly due to lower advertising and employee costs.
Speaker Change: Wholesale operating earnings increased 14% to $8 $9 million for the quarter from $7 $9 million in 2023, due to higher sales and lower expenses.
Speaker Change: Net sales in our North American retail segment were $14 $1 million for the quarter up 1% over $13 9 million in 2023.
Judy Anderson: The slight increase was due to higher direct direct-to-consumer sales of BOGS and Florsheim footwear. Retail growth earnings as a percent of net sales were 65% and 65.8% in the fourth quarters of 2024 and 2023 respectively. Retail operating earnings totaled $2.5 million for the quarter, down 28% from $3.5 million last year. The decrease was due to higher retail selling and administrative expenses.
Speaker Change: <unk> increase was due to higher direct.
Speaker Change: Direct to consumer sales.
Speaker Change: In Florsheim footwear.
Speaker Change: Retail gross earnings as a percent of net sales were 65% and 65, 8% in the fourth quarters of 2024 and 2023, respectively.
Speaker Change: Retail operating earnings totaled $2 $5 million for the quarter down 28% from $3 $5 million last year.
Speaker Change: The decrease was due to higher retail selling and administrative expenses.
Judy Anderson: Primarily Web Advertising in Phrase.
Speaker Change: Merrily web advertising and freight.
Judy Anderson: Our other operations historically included our retail and wholesale businesses in Australia, South Africa, and Asia-Pacific, collectively referred to as Florsheim Australia. We ceased operations in the Asia-Pacific region in 2023 and completed the wind-down of that business. Accordingly, fourth quarter 2024 results of the other category. only reflect the operations of Australia and South Africa. Net sales of Florsheim Australia were $6 million, down 15% from $7.2 million in the fourth quarter of 2020. The decrease was mostly due to closing our Asia operation. Sales in Australia were down 3% for the quarter due to the impact of fewer retail stores operating compared to the same period last year.
Speaker Change: Our other operations historically included our retail and wholesale businesses in Australia, South Africa, and Asia Pacific collectively referred to as Florsheim, Australia.
Speaker Change: We ceased operations in the Asia Pacific region in 2023, and completed the wind down of that business.
Accordingly fourth quarter of 2024 results of the other category.
Speaker Change: Only reflect the operations of Australia, and South Africa.
Speaker Change: Net sales at Florsheim, Australia were $6 million down 15% from $7 $2 million in the fourth quarter of 2023.
Speaker Change: The decrease was mostly due to closing our Asia operations.
Speaker Change: Sales in Australia were down 3% for the quarter due to the impact of fewer retail stores operating compared to the same period last year.
Judy Anderson: Australia's same store sales were up 11% for the Florsheim Australia's gross earnings were 62.5% of net sales for the quarter compared to 65.4% of net sales in the fourth quarter of 2020. Its quarterly operating earnings totaled $100,000 for the quarter compared to $200,000 last Interest income totaled $900,000 compared to $500,000 in last year's fourth quarter. This year included interest earned on higher cash balances in the U.S. and Canada. The provision for income taxes decreased $700,000 compared to last year's fourth quarter due to a lower effective tax rate than last year.
Speaker Change: Australia same store sales were up 11% for the quarter.
Speaker Change: Florsheim Australia's gross earnings were 62, 5% of net sales for the quarter compared to 65, 4% of net sales in the fourth quarter of 2023, its quarterly operating earnings totaled $100000 for the quarter compared to $200000 last year.
Speaker Change: Interest income totaled $900000 compared to $500000.
Speaker Change: Last year's fourth quarter. This year included interest earned on higher cash balances in the U S and Canada.
Speaker Change: The provision for income taxes decreased $700000 compared to last year's fourth quarter due to a lower effective tax rate this year.
Judy Anderson: I will now discuss the full year 2024. Consolidated net sales for the full year were $290 million, down 9% compared to sales of $318 million in 2023. Consolidated gross earnings increased to 45.3% of net sales in 2024, up from 44.9% of net sales last year, due mainly to higher gross margins in our North American wholesale segment.
Speaker Change: I will now discuss the full year 2020 for our results.
Speaker Change: <unk> net sales for the full year were $290 million down 9% compared to sales of $318 million in 2023.
Speaker Change: Validated gross earnings increased to 45, 3% of net sales in 2024 up from 44, 9% of net sales last year due mainly to higher gross margins in our North American wholesale segment.
Judy Anderson: Full year 2024 operating earnings were $36.6 million, down 11% compared to $41 million in 2022.
Speaker Change: Full year 2024, operating earnings were $36 $6 million down, 11% compared to $41 million in 2023.
Judy Anderson: Net earnings were a record $30.3 million, or $3.16 per diluted share, in 2024, compared to $30.2 million, or $3.2 billion in 2020. $3.17 per diluted share in 2020. North American wholesale net sales were $228 million in 2024, down 9% compared to $250 million in 2023. The decrease was primarily due to a 27% decline in bog sales, but also due to lower sales of the Stacey Adams and Nunn-Busch brands. Florsheim's net sales were up 2% for the year. Wholesale growth earnings at the percent of net sales were 40.2% in 2024 and 39.7% in in 2023. Growth margins improved because of lower inventory costs, primarily in-bump.
Speaker Change: Net earnings were a record $33 million or $3 16 per diluted share in 2024, compared to $30 2 million or three $3.17 per diluted share in 2023.
Speaker Change: North American wholesale net sales were 228 million in 2024 down 9% compared to $250 million in 2023.
Speaker Change: The decrease was primarily due to a 22, 7% decline in sales, but also due to lower sales of Stacy Adams Nunn Bush brands this year.
Speaker Change: Florsheim <unk> net sales were up 2% for the year.
Speaker Change: Wholesale gross earnings as a percent of net sales were 42% in 2024 and 39, 7% in 2023 gross margins improved because of lower inventory costs, primarily inbound freight.
Judy Anderson: Wholesale selling and administrative expenses totaled $60.1 million in 2024 compared to $66 million in 2021. The decrease in 2024 was primarily due to lower employee costs, mainly commission-based Also, advertising costs were down due to the reallocation of certain expenditures historically charged to our wholesale segments that primarily benefit our website. As a percent of net sales, wholesale selling and administrative expenses were flat at 26% in both 2024 and 2023.
Speaker Change: Wholesale selling and administrative expenses totaled $61 million in 2024 compared to $66 million in 2023.
Speaker Change: The decrease in 2024 was primarily due to lower employee cost.
Speaker Change: Mainly commission based compensation.
Speaker Change: Also advertising costs were down due to the reallocation of certain expenditures historically charged to our wholesale segments that primarily benefit our website.
Speaker Change: As a percent of net sales wholesale selling and administrative expenses were flat at 26% in both 2024 and 2023.
Judy Anderson: Wholesale operating earnings were $31.5 million in 2024, down 5% from record operating earnings of $33.3 million in 2020. mainly as a result of lower.
Speaker Change: Wholesale operating earnings were $31 $5 million in 2024 down 5% from record operating earnings of $33 3 million in 2023, mainly as a result of lower sales.
Judy Anderson: In our North American Retail segment, net sales were a record $38.7 million in 2024, up 2% over our previous record of $38 million in 2020. The increase was primarily due to higher direct-to-consumer sales of Florsheim and Bogdart. Retail gross earnings as a percent of net sales were flat at 65.9% in both 2024 and 2023.
Speaker Change: In our North American retail segment net sales were a record $38 $7 million in 2024 up 2% over our previous record of $38 million in 2023.
Speaker Change: The increase was primarily due to higher direct to consumer sales of florsheim and bogs footwear.
Speaker Change: Retail gross earnings as a percent of net sales were flat at 65, 9%.
Speaker Change: Both 2024 and 2023.
Judy Anderson: Retail operating earnings totaled $5.3 million in 2024, down 21% compared to $6.8 million in 2020. The decrease was due to higher retail selling and administrative expenses this year, primarily web advertising. As I discussed earlier, web advertising costs were up due to the reallocation of certain expenditures from our wholesale.
Speaker Change: Retail operating earnings totaled $5 $3 million in 2024 down 21% compared to $6 8 million in 2023.
Speaker Change: The decrease was due to higher retail selling and administrative expenses this year, primarily web advertising and freight.
Speaker Change: As I discussed earlier web advertising costs were up due to the reallocation of certain expenditures from our wholesale segment.
Judy Anderson: Net sales at Florsheim Australia totaled $23.6 million in 2024, down 20% from $29.6 million in 2020. The decrease was primarily due to closing our Asia Pacific... Sales in Australia were down 10% for the year, due mainly to the impact of fewer retail stores operating compared to last year. Australia's same store sales were up 2% for the Florsheim Australia's gross earnings were 61% of net sales in 2024 versus 62.5% of net sales in 2020.
Speaker Change: Net sales at Florsheim, Australia totaled $23 $6 million in 2024 down 20% from $29 $6 million in 2023.
Speaker Change: The decrease was primarily due to closing our Asia Pacific.
Speaker Change: Operations.
Speaker Change: Sales in Australia were down 10% for the year due mainly to the impact of fewer retail stores operating compared to last year, Australia same store sales were up 2% for the year.
Speaker Change: Florsheim Australia's gross earnings were 61% of net sales in 2024 versus <unk> 62, 5% of net sales in 2023.
Judy Anderson: Florsheim, Australia generated operating losses totaling $200,000 in 2024 compared to operating earnings of $1 million in 2021. to decrease what's due to lower sales.
Speaker Change: Florsheim, Australia generated operating losses totaling $200000 in.
Speaker Change: In 2024 compared to operating earnings of $1 million in 2023.
Speaker Change: The decrease was due to lower sales.
Judy Anderson: Interest income totaled $3.7 million in 2024 compared to $1.1 million. in 2020. As described earlier, this year included interest earned on higher cash balance. in the U.S. and Canada. The annual provision for income taxes decreased $1.2 million compared to 2023 due to a lower effective tax rate.
Speaker Change: Interest income totaled $3 $7 million in 2024 compared to $1 1 million.
Speaker Change: In 2023 as described earlier this year included interest earned on higher cash balances in the U S and Canada.
Speaker Change: The annual provision for income taxes decreased $1 $2 million compared to 2023 due to a lower effective tax rate this year.
Judy Anderson: In early 2025, the U.S. government imposed additional tariffs on goods sourced from China. These tariffs will increase our cost of goods across all our... In an effort to mitigate the impact of the tariffs, we have already begun negotiating price reductions with our Chinese suppliers and are in the process of reviewing our wholesale pricing.
Speaker Change: In early 2025, the U S government imposed additional tariffs on goods sourced from China.
Speaker Change: These tariffs will increase our cost of goods across all our brands.
Speaker Change: In an effort to mitigate the impact of the tariffs we have already begun negotiating price reductions with our Chinese suppliers and are in the process of reviewing our wholesale pricing for fall.
Judy Anderson: At December 31st, 2024, our cash and marketable securities totaled $77.3 million, and we had no debt outstanding on our $40 million revolving line of credit. During 2024, we generated $16.2 million of cash from operations. We used funds to pay $9.7 million in dividends and to repurchase $600,000 of our common stock. We also have $1.4 million of capital expenditures in 2024. We estimate that our 2025 annual capital expenditures will be between $1 and $3 million.
Speaker Change: At December 31, 2024, our cash and marketable securities totaled $77 3 million and we had no debt outstanding on our $40 million revolving line of credit.
Speaker Change: During 2024, we generated $16 $2 million of cash from operations.
Speaker Change: We used funds to pay $9 $7 million in dividends and to repurchase $600000 of our common stock.
We also had some $4 million of capital expenditures in 2024, we estimate that our 2025 annual capital expenditures will be between one and $3 million.
Judy Anderson: On January 2, 2025, we paid our regular fourth quarter dividend of $0.26 per share as well as a one-time special dividend of $2 per share for a total dividend payment of $21.6 million.
Speaker Change: In January 2025, we paid a regular fourth quarter dividend of 26 per share as well as a one time special dividend of $2 per share for a total dividend payment of $21 6 million.
Judy Anderson: On March 4, 2025, our Board of Directors declared a regular cash dividend of $0.26 per share to all shareholders of record on March 14, 2025, payable March 31, 2025.
Speaker Change: On March four 2025, our board of directors declared a regular cash dividend of 26 per share to all shareholders of record on March 14th 2025.
Speaker Change: Payable March 31 2025.
Tom Florsheim, Jr.: I would now like to turn the call over to Tom Florsheim, Jr., our Chairman and CEO. Good morning, everyone. As Judy mentioned, our overall net sales were flat for the fourth quarter and down 9% for the year. While we saw solid sequential improvement in the final quarter, 2024 proved to be a challenging year for our wholesale business. Consumers remain cautious amid ongoing economic uncertainty, limiting their discretionary spending on non-essential goods. Despite these challenges, we are navigating short-term pressures in evolving our portfolio brands to position the company for future growth. BOG sales declined 17% in the fourth quarter.
Speaker Change: I would now like to turn the call over to Tom Florsheim, Jr. Our chairman and CEO. Good morning, everyone. As Judy mentioned, our overall net sales were flat for the fourth quarter and down 9% for the year, while we saw solid sequential improvement in the final quarter of 2012.
Speaker Change: 34 proved to be a challenging year for our wholesale business.
Speaker Change: <unk> remained cautious amid ongoing economic uncertainty limiting their discretionary studied our non essential goods. Despite these challenges we are navigating short term pressures and evolving our portfolio of brands to position the company for future growth.
Speaker Change: Bogs sales declined 17% in the fourth quarter, the brand faced headwinds due to mild winter weather, which reduced consumers urgency to purchase new foods.
Tom Florsheim, Jr.: The brand faced headwinds due to mild winter weather, which reduced consumers' urgency to purchase new boots. With fewer cold and snowy days, pre-holiday demand for insulated and wire-proof footwear was softer than anticipated. However, winter weather did eventually arrive across most of the country in January and February, and retailers are now selling through their inventory. With leaner stock levels, our retail partners are in a much better position to bring in fresh assortments and we are starting to see renewed interest in the category for fall 2025. As discussed in previous calls, we believe the BOG's new seamless construction, which is lighter and more durable than traditional vulcanized product, is a key differentiator in the insulated boot segment.
Speaker Change: With fewer cold and Snowy days pre holiday demand for insulated and waterproof footwear were softer than anticipated. However, winter weather did eventually arrive or cross most of the country in January February and retailers are now selling through their inventory.
Speaker Change: With leaner stock levels, our retail partners are in a much better position to bring in fresh Assortments and we are starting to see renewed interest in the category for fall 2025.
Speaker Change: As discussed in previous calls we believe the box new seamless construction, which is lighter and more durable than traditional balkanized product is a key differentiator in the insulated boots segment. We are also excited about our new offerings in non insulated footwear, such as the bogs Borgata, which.
Tom Florsheim, Jr.: We are also excited about our new offerings in non-insulated footwear such as the BOGS, BOGA, which launches in March. The BOGA is a versatile lightweight clog featuring superior comfort and an outsole that provides better traction and durability than other outdoor clogs.
Speaker Change: <unk> in March the Burger is a versatile lightweight clog featuring superior comfort and an outside that provides better traction durability. Good other outdoor clogs the last two years.
Tom Florsheim, Jr.: The last two years... have been challenging for BOGS and we are focused on re-energizing the brand through product innovation and expanding its retail presence.
Speaker Change: Been challenging for box and we're focused on Reenergizing the brand through product innovation and expanding its retail presence in the spring summer selling season.
Tom Florsheim, Jr.: in the spring-summer sowing season. Our combined legacy business grew 8% in the fourth quarter, with Florsheim leading the way with a 22% increase, Nunn-Bush rising 4%, and Stacey Adams declining 8%. The dress footwear category continues to face challenges as retailers prioritize other segments. However, Florsheim has bucked this trend, solidifying its market position by gaining share in refined dress footwear while expanding its presence in hybrid and casual styles. Stacey Adams had a difficult quarter, reflecting broader challenges.
Speaker Change: Lisa.
Lisa: Our combined legacy business grew 8% in the fourth quarter with Florsheim, we lead the way with a 22% increase non bush rising 4% as Stacy Adams declined eight eight <unk>.
Lisa: The dress footwear category continues to face challenges as retailers prioritize other segments. However, florsheim has bucked this trend solidifying its market position by gaining share and refined dress footwear, while expanding its presence in hybrid and casual styles.
Lisa: Stacy Adams had a difficult quarter, reflecting broader challenges.
Tom Florsheim, Jr.: and the Dress Footwear Market. The brand remains a leader in contemporary dress footwear and continues to perform well in retail accounts that emphasize dress shoes.
Lisa: And the dress footwear market the brand remains a leader in contemporary dress footwear and continues to perform well at retail accounts that emphasized dress shoes, however, future group growth depends.
Tom Florsheim, Jr.: However, future growth depends. on the brand diversifying its product assortment to capture demand for hybrid and refined casual style. While this transition takes time, early successes in the hybrid category are encouraged. Dunn-Bush had a solid quarter, growing 4%. With a strong value proposition and innovative comfort technology, Nunn-Busch has evolved beyond its dress shoe roots and has experienced retail success in the casual, hybrid, and soft-toe work category. This spring, NUNBUSH is launching a collaboration with Milwaukee chef and influencer Adam Pollack. Pollack, who has appeared on culinary shows such as Hal's Kitchen and Beat Bobby Flay, worked with NUNBUSH designers to create an inspired collection of slip-resistant and water-resistant shoes designed for a variety of work environments.
Lisa: On the brand diversifying its product assortment to capture demand.
Lisa: For hybrid and refined casual styles. While this transition takes time early successes in the hybrid category are encouraging.
Nunn Bush had a solid quarter growing 4%.
With a strong value proposition innovative copper technology Nunn Bush has evolved beyond the structure routes as experienced retail success in the casual hybrid it software work categories.
Lisa: This spring <unk> launching a collaboration with Waukesha airports or Adam Pollock Pollack, who has appeared a culinary shows such as house kitchen and beat Bobby Flay.
Speaker Change: With Bush designers to create inspired collection of slip resistant and water resistant shoes designed for a variety of work environments over the last few years, Doug bushes built a meaningful presence in the workshop category and we believe that Unfortunately had a PA cooperation will help further expand sales.
Tom Florsheim, Jr.: Over the last few years, NUNBUSH has built a meaningful presence in the workshop category, and we believe the NUNBUSH and Anna Paul collaboration will help further expand sales in this important area of business. In our retail segment, sales were up 1% for the quarter and 2% for the year. We continue to invest in our direct to consumer business, viewing our online stores as billboards for our brands and our e-commerce platform as a key driver of profitable growth. Florsheim Australia's net sales declined 15% for the quarter and 20% for the year. This business includes the Australia and New Zealand markets.
Lisa: Port area.
Lisa: Business at our retail segment sales were up 1% for the quarter at 2% for the year.
Lisa: We continue to invest in our direct to consumer business.
Lisa: Our online stores as billboards for our brands at our E. Commerce platform is a key driver of our profitable growth.
Lisa: Florsheim, Australia's net sales declined 15% for the quarter and 20% for the year.
Lisa: This business includes the Australia, New Zealand markets.
Tom Florsheim, Jr.: as well as Pacific Rim countries in South Africa. The decline in 2024 was largely due to the closure of our Hong Kong office and retail stores as the division was not profitable. We are now managing our Asia wholesale customers through our Melbourne office. While 2024 was a challenging year for Florsheim, Australia, we are pleased to report an increase in same-store retail sales in Australia. Our top priority for Florsheim Australia in 2025 is growth of our wholesale business. For the year, our overall gross margins were 45.3 percent. 2024 up from 44.9% in 2023. We are happy with our margins and as Judy mentioned have been negotiating with our suppliers in China to mitigate the effects of tariffs and will likely need to raise our prices in the near future to account for tariff related costs.
Lisa: As well as Pacific rim countries in South Africa.
Lisa: The decline in 2024, it was largely due to the closure of our Harcar office and retail stores as the division was not profitable.
Lisa: We are now managing our Asia wholesale customers through our Melbourne office.
Lisa: While 2024 was a challenging year for Florsheim, Australia. We are pleased to report an increase in same store retail sales in Australia.
Lisa: Top priority for Florsheim, Australia it.
Lisa: In 2025 as growth of our wholesale business.
Lisa: For the year, our overall gross margins were 45, 3%.
Lisa: In 2020.
Lisa: Up from 44, 9% in 2023.
Lisa: We are happy with our emergence as Judy mentioned have been negotiated with our suppliers in China to mitigate the effects of tariffs and we'll likely do to raise our prices in the near future to account for tariff related cost increases.
Tom Florsheim, Jr.: That concludes our formal remarks. Thank you for your interest in WEYCO Group.
Speaker Change: That concludes our formal remarks. Thank you for your interest in Waco group and I'd now like to open the call to your questions.
Operator: And I'd now like to open the call to your questions. Certainly. Ladies and gentlemen, if you have a question at this time, please press star one one on your telephone. If your question has been answered and you'd like to remove yourself from the queue, simply press star one one again. One moment for our first question.
Speaker Change: Certainly ladies and gentlemen, if you have a question at this time. Please press star one on your telephone.
Speaker Change: My question has been answered and you'd like to remove yourself from the queue simply press star one again.
Speaker Change: One moment for our first question.
David Wright: And our first question. comes from the line of. David Wright from Henry Investment Trust. Your question, please. Yeah, well, hello. Good morning, everyone. Good morning.
And our first question.
Speaker Change: Comes from the line of.
David Wright: David Wright from Henry Investment Trust to your question. Please.
Speaker Change: Hello, Good morning, everyone.
David Wright: want to thank you very much, Tom, for the extensive commentary and Judy as well for, you know, what happened for the year and, and providing some context. And as always, I really appreciate, appreciate you having these calls and, you know, taking the time to prepare for them and conduct.
David Wright: Good morning.
Speaker Change: Wanted to thank you very much Tom for the <unk>.
Speaker Change: Extensive commentary and Judy as well for <unk>.
Speaker Change: What happened for the year end.
Speaker Change: And providing some context.
Speaker Change: And as always I really appreciate you appreciate you having these calls I'm, taking the time to prepare for their conduct them.
Tom Florsheim, Jr.: Can somebody walk me through kind of the mechanics of CARA? or WEYCO. You have an order coming your way.
Speaker Change: Can somebody walk me through kind of the mechanics.
Speaker Change: Tariffs.
Speaker Change: Or <unk>.
Speaker Change: No.
Speaker Change: <unk>.
Speaker Change: You have an order coming your way in like what happens one.
Tom Florsheim, Jr.: And like, what happens, what are the mechanics that gets the money from wherever it comes from to wherever it goes? Sure. The mechanics are basically... And you're not talking about just these additional tariffs, you're talking about tariffs in general, correct? Well, yeah, for sure. I mean, it would apply to the additional ones.
What are the mechanics that gets the money from wherever it comes from wherever it goes.
Speaker Change: Sure.
Speaker Change: The carry extra basically.
Speaker Change: And youre not talking about just these additional tariffs youre talking about tariffs and general crack.
Speaker Change: Well, yeah for sure I mean, it would occur.
Tom Florsheim, Jr.: I'm just trying to visualize the flow of the cast. Okay, yeah, essentially, we have to put up a bond that's equal to the amount of tariffs that we pay on average. in a monthly period. And so when the goods are cleared, and we have we broker the goods ourselves when we clear them, then we we pay customs for whatever tariffs have on goods per the U.S. government.
Speaker Change: Additional ones I'm, just trying to visualize the flow or the cash.
Speaker Change: Okay, Yes, essentially.
Speaker Change: We have to put up a bard that's equal to the amount of tariffs that we pay on average.
Speaker Change: At a monthly period and so.
Speaker Change: Well.
Speaker Change: Goods are cleared and we havent, we broker the goods ourselves when we clear them then we pay costumes for whatever tariffs.
Our.
Speaker Change: I'd drugs per the U S government so.
Tom Florsheim, Jr.: So. If, if the tariff is is 26%, which it has just gone from 26 to 36 in total. Then if you take a shoe that's roughly $20 first cost, when that shoe is cleared, we have to pay 36% of the $20, which is a little more than $7. And so it's a real cost to us. It's paid by us here in the US. Or in cases where we're importing goods into Australia or into Canada, then we pay their tariffs the same way, essentially.
Speaker Change: If if the tariff.
Speaker Change: As.
Speaker Change: It is 26%, which it is.
Has just gone from 26% to 36 in total.
Speaker Change: If you if you take a shoe that's roughly $20 <unk> cost.
Speaker Change: That shoe is cleared we have to pay 36% of the 28 hours.
Speaker Change: So, but no more than $7 since so.
Speaker Change: It's a real cost to us it's paid by US here in the U S or in cases, where we're importing goods into Australia, or Canada, then repay their tariffs to same way essentially.
Tom Florsheim, Jr.: So you you posted a bond, you're getting deliveries every week, let's say, and then monthly or quarterly or whenever you're writing a check to U.S. Customs. And so, does Customs have your invoices when the stuff comes in, or are you just declaring what the value of the shipment is and calculating the tariff based on your declaration?
Speaker Change: So you've posted a bond that youre getting deliveries every week, let's say and then.
Speaker Change: Monthly or quarterly or whenever you're writing a check to whom.
Speaker Change: U S U S cutoffs.
Speaker Change: And so just customs heavier invoices when the stuff comes in or are you just declaring what the value of the shipment is and calculating the tariff based on your declaration.
Tom Florsheim, Jr.: Judy, do you know the specifics of that? It's based on our Everything's done wire, you know, paperless today. And all the documents are available if customer wants to look at them. But we're CPTAP approved, we have a good relationship with customs, and it's it's done pretty seamlessly. And we do receive containers every single day. Right. So it's not like somebody is, it's not like customs is some guy sitting there with an adding machine going over your invoice of all these lots of shoes. You're just saying, hey, here's a shipment of $100,000 and we owe you $36,000.
Speaker Change: Judy.
Speaker Change: Specifics of that is based on our declaration.
Speaker Change: Everything started wire paperless today correct.
Speaker Change: All the documents are available if customer wants to look at.
Speaker Change: But we're super tap approved we have a good relationship with customs and it's gone pretty seamlessly and we do receive containers every single day here.
Speaker Change: Right. So it's not like somebody is not like customs is some guy who is sitting there with an adding machine going over year end voice. So all these lots of shoes, you're just saying, hey, here's a shipment of $100000 $36000.
Tom Florsheim, Jr.: Exactly. And then, you know, they have the right to they have the right to audit what we're declaring at any point for something like five years.
Speaker Change: Exactly and then they have the rights they have the <unk>.
Speaker Change: Right to audit, what we're declaring at any point for something like five years.
Tom Florsheim, Jr.: Well, I appreciate kind of the detail around that question. I hope you didn't think it was unusual. No.
Speaker Change: Okay very good.
Speaker Change: I appreciate kind of the detail around that question I Hope you didn't think it was unusual and no. Thank you.
Tom Florsheim, Jr.: Congratulations on another record year and thanks again for that special dividend. Well, thanks for your questions, and we look forward to hearing from you at our next call. Okie doke. Thank you.
Speaker Change: Congratulations on another record year end.
Speaker Change: Thanks again for that special dividend.
Speaker Change: Well thanks for your questions and we look forward to Harry from you on our next call.
Speaker Change: Thank you Joe.
John Deysher: Our next question comes from the line of John Deysher from Pinnacle. Your question please. Good morning, everyone. Good morning, John. Following up on David's tariff question. Can you remind us, excuse me? What?
Speaker Change: Okay.
Speaker Change: Thank you. Our next question comes from the line of John <unk> from clinical your question. Please.
Speaker Change: Good morning, everyone.
Speaker Change: Good morning, John.
Speaker Change: Following up on David.
Speaker Change: Good question.
Speaker Change: Could you remind us excuse me.
Tom Florsheim, Jr.: What percentage of your cost of goods sold came from China last year, roughly as well as other countries of origin like Vietnam, India, and whatever other countries you might have sourced from? Sure.
Speaker Change: Alright.
Speaker Change: What percentage of <unk>.
Speaker Change: Your cost of goods sold came from China last year, roughly as well as other countries of origin like Vietnam, India.
Speaker Change: And whatever other countries you might've source from.
Tom Florsheim, Jr.: I was anticipating that question, and what I'm going to give you is actually what we're looking at in the current year. Just give me one second to pull this up. I apologize, I'm having trouble pulling up the email, but John, I think the main question right now goes to probably China, and about 75% of our purchases this year will be from China. Our second biggest country is India. We've been in India for about almost 40 years, and with all of this on the horizon, we've been growing our sourcing in India. But we're also in Cambodia, which is smaller, it's just probably a little under 5%, Vietnam, which is also under 5%, and then the Dominican Republic, which is about the same.
Speaker Change: Sure.
Speaker Change: I was anticipating that question and what I'm going to give you is actually.
Speaker Change: What we're looking at.
Speaker Change: The current year, just give me one second to pull this off.
Speaker Change: Hang on one second.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: I apologize im having trouble point up the email, but Vic Thank you Todd.
Speaker Change: Our debate.
Speaker Change: The main question right now our growth surprise, China at about 75%.
Speaker Change: Of our purchases this year will be from China.
Speaker Change: Our second biggest countries, India, we've been in India for about almost 40 years add with all of this on the horizon that we've been we've been growing our sourcing in India, but were also in Cambodia, which is smaller it's just probably a little under 5%.
Speaker Change: Vietnam, which is also under 5% and the Dominican Republic, which is about the same and so.
Tom Florsheim, Jr.: And so it basically goes China 75, India probably about 15, and then the rest divided between those other three countries.
Speaker Change: Basically goes China, 75, India, probably about 15% of the rest divided between those other three countries.
Speaker Change: Okay. That's helpful.
Tom Florsheim, Jr.: What are the tariffs today on those other countries, India, Cambodia, Vietnam, and Dominican Republic at this point? Essentially, most of the product that we bring in is leather upper products. The duty, the harmonized duty code in the U.S. is fairly complex. And so you have different duties for like the Bob's Boots than you do for the leather shoes. But if you're talking about just the leather shoes, which is the biggest part of what we import, the tariff, the tariff has historically been eight and a half percent. And with What happened in 2018 with the tariffs that President Trump imposed at that time, they were originally higher, but then they were reduced to 7.5% additional.
Speaker Change: What are the tariffs today on those other countries, India, Cambodia, Vietnam in Dominican Republic at this point.
Speaker Change: Yeah, essentially most of the product that we bring in is whether upper products. The duty harmonized Judy Carter. The U S is fairly complex and so you have different duties for like the box boots than you do for the other shoes, but if youre talking about just the leather shoes, which is the.
Speaker Change: The biggest part of what we have port.
Speaker Change: The tariff the tariff has historically been eight 5%.
Speaker Change: Ed.
Speaker Change: With.
Speaker Change: What happened in 2018 with the tariffs.
Speaker Change: Tropic posed at that time, they originally higher but then they reduced were reduced to seven 5% additional and so that brought us to 16%.
Tom Florsheim, Jr.: And so that brought us to 16% on leather footwear and President Biden kept those that seven and a half in place. And so the 16% is what we were paying as of the end of 2024. And then President Trump put in The additional 10, which happened maybe two or three weeks ago, and so that brought the total number up to 26%. And now with the additional 10% that went into effect on Tuesday. that brought the number to 36. And if you look at other shoes, the base number is different. For example, on PU upper shoes, it's 6%.
Speaker Change: All other footwear.
Speaker Change: President <unk> kept those seven and a half in place and so the 16% is what we were paid as of the end of 2024.
Speaker Change: And then president Trump put in.
Speaker Change: The addition of 10, which happened maybe two or three weeks ago, and so that brought the total number up to 26% and now with the additional 10% that went into effect on Tuesday.
Speaker Change: That profit, Alberta, 36, and if you look at other shoes.
Speaker Change: The base number is different for example, our PDR pursues its 6%.
Tom Florsheim, Jr.: Some of the BOGS product, it's 12%. On other BOGS products, it's really already very high, at like 37 and 1 1⁄2%.
Some of the box product as it's 12% other box product, it's really already very high at like 37, 5% and then additional 10 plus 10, that's been put out in the last few weeks is 20% on top of those other numbers if that.
Tom Florsheim, Jr.: And then the additional 10 plus 10 that's been put on the last few weeks is 20% on top of those other numbers, If that's clear, I'd be happy to elaborate if you'd like me to.
Speaker Change: If that's clear IP.
Speaker Change: However, if you'd like me to.
Tom Florsheim, Jr.: Well, I guess, you know, in the mix of business, the type of shoe that you anticipate importing in this year from those non-Chinese countries, what's a reasonable tariff range, do you think, for 2025? Would it be 25 to 35% or 35 to 45? Or just kind of a range for the current mix of business? You know, I would say. Well, let me let me back up and just say this. We carry typically about 3 million pairs of inventory and We ship about 7 million pairs a year. When we saw this as potentially happening. We brought as much of our shipments forward as we could.
Speaker Change: I guess on the mix of business the type of shoe.
Speaker Change: That you anticipate importing.
Speaker Change: And this year from those non Chinese countries.
Speaker Change: Whats a reasonable tariff range do you think.
Speaker Change: For 2025 would it be 25% to 35% or 35% to 45 or just kind of a range for the current mix of business.
Speaker Change: Okay.
Speaker Change: Oh.
Speaker Change: I would say that.
Speaker Change: At since.
Speaker Change: Well, let me let me.
Speaker Change: Back up and just say this.
Speaker Change: We carry typically about $3 million appears of inventory adhere.
Speaker Change: Ed.
Speaker Change: We ship about 7 million pairs a year.
Speaker Change: Ed.
Speaker Change: When we saw this as potentially happening.
Speaker Change: As much of our shipments forward as we could.
Tom Florsheim, Jr.: And the way that these tariffs worked is anything that was in transit from China. at the first date that the tariffs were declared, the first 10%. Those avoided the tariff. And so we had another approximately million pairs in transit that avoided any of these extra tariffs. And so when you look at the blend, the remaining pairs that we're bringing this year, it will probably be in the, I would guess, in the low 30s. You know, you've got some product that's gonna be higher. because of bogs, but you've got some product that would be lower because it's SPU uppers, which we do carry in, for example, on the Nunn-Busch brand.
Speaker Change: The way that these tariffs worked as anything that was in transit from China.
Speaker Change: At the first date that the tariffs were declared the first 10%.
Speaker Change: Those avoided the tariff and so we have another approximately 1 million pairs in transit that avoided any of these extra chairs.
Speaker Change: So when you look at the.
Speaker Change: The blend.
Speaker Change: The remaining appears that we're bringing this year it will probably be.
Speaker Change: And our gas in the low thirties, you've got sub product that's going to be higher.
Speaker Change: Because of box, but you've got some product that would be lower because SBU offers which we do carry in for example on the Bush Brad So I would say the average.
Tom Florsheim, Jr.: And so I would say the average. would be in the Law 30. Okay, and that's for non non Chinese imports, correct? Oh, no, I'm sorry. I mean, I thought you're speaking of China, if you average everything in, Judy, do you have a calculator here? Because I think, hang on, if you just take 25% x 8.5, 75 x 30, that would probably be a pretty good guess. 25% times 8 1⁄2, then 75% times 30%. One second, John. We're doing a little math here.
Speaker Change: It would be in the low <unk>.
Okay, and that's for non non Chinese imports correct.
Speaker Change: I'm sorry.
Speaker Change: Hi.
Speaker Change: I thought you're speaking of China, If you average everything Ed attributed to your calculator here because I think.
Speaker Change: Hang out if you just take.
Speaker Change: 25% types eight to have 75 types 30 that would probably be a pretty good guess.
Speaker Change: Davidson.
Speaker Change: 25%.
Speaker Change: [noise] types, eight and a half.
Speaker Change: 75% times 31 say.
That dose.
Speaker Change: One second John will do I don't know math here.
Tom Florsheim, Jr.: You know, the thing that everybody has to realize is that on April 2nd... There are possibly going to be these reciprocal tariffs and so It makes it very uncertain as far as the best way forward from the standpoint of sourcing because You don't want to move a lot of product to say Vietnam right now because Vietnam is on the hit list and so you could end up with even higher tiers out of Vietnam And so you know our what we're doing is kind of waiting to see what happens in April.
Speaker Change: Thanks, everybody.
Speaker Change: I think that everybody has to realize is that on April <unk>.
Speaker Change: There are possibly going to be these reciprocal tariffs.
Speaker Change: So.
Speaker Change: It makes it very.
Speaker Change: Uncertain as far as the best way forward from the standpoint of sourcing because.
Speaker Change: You don't want to move a lot of progress.
Speaker Change: Product to say.
Speaker Change: Vietnam right now because Vietnam is on the hit list.
Speaker Change: So you could end up with EBIT higher tariffs out of Vietnam.
Speaker Change: What we're doing.
Speaker Change: It is kind of waiting to see what happens in April.
Tom Florsheim, Jr.: Judy, do you have that number? 25% 25% John, so average of about 25%. Okay, all right. That's very helpful. And in your commentary, you said you're working with your offshore vendors regarding pricing, are they? Are they receptive to eating part of the cost of the tariffs or kind of what's that dynamic like? The short answer is yes, they are. We have won relationships. with the factories that we do business with in China, going back. over a decade, some 20 years, and We've cultivated those relationships. We're a very good partner to do business with. And we've grown our business with people that we feel make great shoes and offer good value.
Speaker Change: Judy do you have that number 25, 25% so our average of about 25%. Okay. Alright, that's very helpful. In your commentary you said you were working with.
Speaker Change: Your offshore vendors.
Speaker Change: Regarding pricing are they.
Speaker Change: Alright, very receptive to eating part of the cost of the tariffs or kind of what's the dynamic like in <unk>.
Speaker Change: The short answer is yes they are.
Speaker Change: One relationships.
Speaker Change: With the factories that we do business with in China are going back.
Speaker Change: Over a decade, some 20 years ad.
Speaker Change: We've cultivated those relationships, where we're a very good partner.
Business with an.
Speaker Change: We've grown our business with people that we.
Speaker Change: If youll make great shoes at offer good value add.
Tom Florsheim, Jr.: And so when this happened, actually, before this happened, we checked in with them. And they are willing to help us out. I mean, there's a limit to what they can do because the margins in manufacturing are not big. But we've made a lot of great shoes in China. over the past, say, 25 years, as long as we've been in China. And it's very hard to completely replace them. We are committed to having a fairly large percentage of our production remain in China at this point. Because with the pairs that we need and with our quality standards, it's almost impossible for us to replace them.
Speaker Change: And so when this happened or actually before this happened we checked in with them.
Speaker Change: They are ROI to help us out I mean, theres a limit to what they can do it because the margins in manufacturing are not big but we've made a lot of great shoes in China.
Speaker Change: Over the past say 25 years as long as we've been in China, and it's very hard to completely replace them. We are committed to having a fairly large percentage of our production remain in China at this point because with the peers that we need and with our quality.
Speaker Change: <unk>.
Speaker Change: It's almost impossible for us to replace them add.
Tom Florsheim, Jr.: And I think it's important from a context. standpoint because of the the desire to bring more manufacturing back to the U.S., we manufactured 100% of our shoes in the U.S. until, say, the early 80s. You know, we started sourcing elsewhere after that. And the companies that remained in the U.S. had to sell shoes for much more, and several of those companies have gone out of business. And so, for our industry, It was it was necessary. for shoe manufacturing to move overseas. And so I think it's over 90% of the shoes that are sold in the US are made overseas, and that's because it takes a tremendous amount of unskilled labor.
Speaker Change: I think it's important from a context.
Speaker Change: Standpoint because of the.
Speaker Change: The desire to bring more manufacturing back to the U S.
Speaker Change: We manufactured a 100% of our shoes in the U S until say the early eighties, we started sourcing elsewhere after that and the companies that were made in the U S had to sell shoes for much more and several of those companies have gone out of business and so for our industry.
Speaker Change: It was it was necessary.
Speaker Change: For sure.
Speaker Change: <unk> manufacturing move overseas and so I think it's over 90% of the shoes that are sold in the U S are made overseas and that's because it takes a tremendous amount of unskilled labor to.
Tom Florsheim, Jr.: to make footwear and you just literally cannot do it in the U.S., the component. infrastructure is gone here.
Speaker Change: To make footwear.
Speaker Change: And you just literally cannot do it in the U S. The component.
Tom Florsheim, Jr.: There's no easy way and probably it would be impossible to bring manufacturing back to the US. All right, okay. Oh, that's good. I mean, so you're, you're pulling what levers you can to and perhaps have your vendors share part of the cost. Absolutely, and you know, as I said before, we have very good relationships. And so the factories over there are all working with us. and trying to help. So that will mitigate some of this. You're not going to mitigate it all, though. You're going to have to raise prices. Yeah, we're going to have to raise prices.
Speaker Change: Restructures gone here there is no easy way it probably it would be a pathway to bring manufacturing back to the U S.
Speaker Change: Alright, okay.
Speaker Change: So you are.
Speaker Change: Youre pulling what levers you can too.
Speaker Change: Perhaps half of your vendors share part of the cost.
Speaker Change: Yeah, absolutely and as I said before we have very good relationships.
Speaker Change: And so the factories over there are all working with us.
Speaker Change: Ed.
Speaker Change: Try to help so that will mitigate some of this you're not mitigated all of the opportunities you have to raise prices, yes, we're going to have to raise prices. Okay.
Tom Florsheim, Jr.: as well as everyone else. Right, exactly. Good. I appreciate the color. Thank you. Thanks, John. Thank you.
Speaker Change: Well everyone else.
Speaker Change: Right exactly.
Speaker Change: Okay, Great Alright.
Speaker Change: Alright, I appreciate the color. Thank you.
John: Thanks, John.
Operator: Once again, if you have a question at this time, please press star 11 on your telephone.
John: Thank you once again, if you have a question at this time. Please press star one on your telephone.
Operator: That does conclude the question and answer session of today's program.
John: And this does conclude the question and answer session of today's program I'd like to hand, the program back to Judy Anderson for any further remarks.
Judy Anderson: I'd like to hand the program back to Judy Anderson for any further remarks. Thank you everyone for tuning in today and we hope you have a great week. Thank you. Thank you ladies and gentlemen for your participation in today's conference. This does conclude the program.
Judy Anderson: Thank you everyone for tuning in today and we.
Judy Anderson: We hope you have a great week. Thank you.
Judy Anderson: Thank you, ladies and gentlemen for your participation in today's conference. This does conclude the program you may now disconnect good day.
Operator: You may now disconnect. Good day
Judy Anderson: Okay.
Judy Anderson: Okay.
Judy Anderson: Okay.
Judy Anderson: Okay.
Judy Anderson: [music].