Q1 2025 Weyco Group Inc Earnings Call
Gail: Thank you for standing by. My name is Gayle and I will be your operator for today. At this time, I would like to welcome each and every one of you to the WEYCO Group Inc. 1st quarter to minute 25 earnings release conference calls.
Gail: All lines have been placed on mute to prevent any background noise.
Gail: After the speakers remarks, there will be a question and answer session.
Gail: If you would like to ask a question during that time, simply press star, followed by the number one on your telephone keypad. If you would like to withdraw your question, kind of press star one again. It is now my pleasure to turn today's call over to WEYCO Group Inc's CFO , Judy Anderson. Please go ahead.
Judy Anderson: Thank you. Good morning and welcome to WEYCO Group's conference call to discuss first quarter 2025 results. I'm a call with me today are Tom Florsheim Jr. Chairman and Chief Executive Officer and John Florsheim, President and Chief Operating Officer.
Speaker Change: Before we begin to discuss the results for the quarter, 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. We wish to caution you that these statements are just predictions and that actual events are resolved to make future materials.
Speaker Change: We refer you to the section entitled Risk Factors in our most recent annual report on Form 10K, 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 here and by reference.
Speaker Change: They include, in part, the uncertain impacts of US trade and tariff policies which remain highly dynamic and unpredictable. The impacts of inflation on our costs and consumer demand for our products.
Speaker Change: Increased interest rates and other macroeconomic factors that may cause a slowdown or contraction in the U.S. or Australia economy.
Speaker Change: Overall net sales for the first quarter of 2025 were $68 million, down five percent compared to $71.6 million in the first quarter of 2024.
in the first quarter of 2024.
Speaker Change: Consolidated growth earnings were 44.6% of net sales in order compared to 44.7% of net sales in last year's first quarter.
Speaker Change: Operating earnings totaled $7 million down 15% from $8.3 million in the first quarter of 2024.
Speaker Change: Net earnings were $5.5 million, or $0.57 per diluted share for the current quarter of last year, or $6.7 million or $0.69 per diluted share in the first quarter of last year.
Speaker Change: In the North American hold sales segment, net sales were $54.3 million for the quarter, down 4% compared to $56.2 million last year. Higher sales of our Florsheim brand were more than offset by lower sales of our other major brands.
Speaker Change: Wholesale gross earnings were 39.4% of net sales compared to 39.6% of net sales in last year's first quarter. Wholesale selling an administrative expenses totaled $14.8 million for the quarter and $14.9 million last year.
Speaker Change: As a percent of net sales, wholesale selling and administrative expenses were flat at 27% in both 2025 and 2024.
Speaker Change: Full-sale operating earnings decreased 10% to $6.6 million for the quarter from $7.4 million in 2024 due to lower sales.
Speaker Change: Next sales in our North American retail segment were $8.7 million for the quarter, down 10th, 12% from record sales of $9.8 million in 2024.
Speaker Change: The decrease resulted mainly from lower sales on the BOX website, due to reduced promotional activities in 2025, compared to strong BOX website sales in the first quarter of last
Speaker Change: Retail growth earnings as a percent of net sales were 66.6 percent and 65.3 percent in the first quarters of 2025 and 2024 respectively.
Speaker Change: Retail operating earnings totaled $600,000 for the quarter, down 52% from $1.3 million last year. The decrease was primarily due to lower sales.
Our other operations historically include
Speaker Change: Our retail and wholesale businesses in Australia, South Africa, and Asia Pacific collectively referred to as Florsheim Australia.
Speaker Change: We seized operations in Asia-Pacific region in 2023 and completed the line down of that business in 2024.
Speaker Change: Accordingly, first quarter 2025 results of the other category only reflect the operations of Australia and South Africa.
Speaker Change: Florsheim, Australia's net sales were $5.1 million down 7% from $5.5 million in the first quarter of 2024. The WEYCO-Australian dollar, relative to the US dollar, contributed to [inaudible]
Speaker Change: In local currency, Florsheim, Australia's net sales were down 3% due mainly to the closing of Asia specifics partially offset by higher sales in Australia.
Speaker Change: Net sales in Australia were up 6% in local currency with higher sales in both a toll sale and retail businesses.
Speaker Change: Florsheim, Australia's gross earnings as a percent of net sales were 62.7% and 60.2% in the first quarters of 2025 and 2024 respectively.
Speaker Change: Florsheim, Australia, Gena-rated, operating losses totaling $200,000 for the quarter on $400,000 last year.
The improvement was due to higher sales in Australia.
Speaker Change: Over the last several weeks, the US government enacted a broad range of reciprocal and retaliatory tariffs.
Speaker Change: Collectively referred to as incremental tariffs on goods imported into the United States.
Speaker Change: including these incremental tariffs. The current effective total tariff rate on good source from China, which is where we source a majority of our products is 161% up from 16% in 2024.
Speaker Change: While the incremental tariffs did not impact our first quarter 2025 performance, unless withdrawn, these tariffs will significantly increase our good sold in future periods.
Speaker Change: To mitigate the impact of tariff cost increases, we have negotiated cost reductions with several of our Chinese suppliers and our planning to raise selling prices beginning in summer of 2025.
We are also accelerating our efforts to diversify our sourcing.
Speaker Change: At December 31st, 2025, our cash and marketable securities totaled $77.9 million and we had no debt outstanding on our $40 million revolving line of credit.
Speaker Change: During the first three months of 2025 we generated 4.1 million dollars of cash from operations.
Speaker Change: We used funds to pay $2.5 million in dividends and repurchase $700,000 of our comments
Speaker Change: Additionally, pre-funded dividends of $21.6 million worth of YouTube shareholders in January of 2025.
We also had $400,000 of capital expenditures during the quarter.
Speaker Change: We estimate that 2025 annual capital expenditures will be between $1 million and $2 million.
Speaker Change: On May 6, 2025, our Board of Directors declared a cash dividend of 27 cents per share to all shareholders of record on May 16, 2025, payable June 30, 2025.
Speaker Change: This represents an increase of 4 percent above the previous quarterly dividend rate of 26 cents.
Speaker Change: I would now like to turn the call over to Tom Florsheim Jr.
Chairman of the
Speaker Change: Thanks, Judy, and good morning everyone. Our overall net sales were down 5% for the quarter.
Speaker Change: We began the year facing significant geopolitical and macroeconomic uncertainties, which include evolving U.S. trade policies, recession concerns, and market volatility.
Speaker Change: These factors have affected both consumer and retailer competence, resulting in declines in our wholesale and direct-to-consumer businesses.
FOG sales declined 5% for the quarter.
Speaker Change: On a positive note, we saw more difficult winter weather in January and February with cold temperatures and precipitation across much of the country.
This helped our bogs retailers work through existing inventory.
Speaker Change: which we expect will create opportunities for a new product in the second quarter and the second half.
of the year.
Speaker Change: As mentioned in previous calls, we remain very bullish on our innovative seamless construction which is lighter and more durable than comparable, vulcanized products currently in the market.
Speaker Change: We are also excited about new spring products like the Boga Cog which has arrived at retail and is off to a solid start.
Speaker Change: Our combined legacy business was down 3% in the first quarter with Florsheim, up 7%
Stacey Adams Downs 7% and Nundwurst Downs 16%
Speaker Change: The declines in non-bush and states the animals reflect the current softness and non- athletic footwear at retail, as consumers remain cautious with their discretionary spending. In tandem with this, many of our hostile partners are maintaining conservative inventory positions, which has impacted our shuffling.
Speaker Change: In light of this challenging environment, Florsheim's performance was particularly strong.
Speaker Change: The brand continues to gain market share with robust sales across a range of categories, including hybrid, refined casual footwear which we view as a significant growth opportunity going forward.
Speaker Change: That sales in our retail segment were down 12% for the quarter.
Speaker Change: Last year, we drove significant e-commerce volume through promotions, particularly with Boggs, to elevated inventory levels. In 2025, our inventory is more aligned with demand, and we've scaled back promotional activity, which has contributed to decline in sales.
Speaker Change: That said, we continue to invest in data-driven tools to position our e-commerce business for long-term growth.
Speaker Change: Florsheim, Australia's net sales declined 7% for the quarter, or 3% in local currency. Somewhere to the U.S.
Speaker Change: Oorsheim, Australia's markets, which includes South Africa, New Zealand, and the Pacific Rim, are facing economic headwinds.
Speaker Change: A 11% increase in same-store retail sales. We remain focused on managing expenses and identifying opportunities for profitable growth.
Speaker Change: Our overall inventory as of March 31st, 2025 was 68.2 million compared to 74 million at the end of December , 2024 and 62 million
at March 31st, 2024.
or our inventory levels are down from your end.
Speaker Change: They are higher than normal for this time of year, as we were proactive in expediting a large amount of inventory before the incremental tariffs went into effect.
Speaker Change: This put us in a good inventory position such that we were able to temporarily halt our China imports during this tumultuous period as we evaluate plans to mitigate the anticipated future impact of the tear of cost increases.
Speaker Change: and 44.7% last year. Given the uncertainty around tariffs, we cannot predict your impact on our margins. We are closely monitoring the situation and are also expecting to increase our prices.
Speaker Change: Despite the tear-related uncertainties we face, we are confident in our abilities to successfully manage the situation.
Speaker Change: We are hopeful that in overcoming these challenges we will be able to pick up additional market share in the long run. This concludes our formal remarks. Thank you for your interest in WEYCO Group and I would now like to open the call to your questions.
Speaker Change: This time, I would like to remind everyone that in order to ask a question, please press store, then the number 100 telephone keypad.
Speaker Change: We will pause for just a moment to come out of the Q&A roster.
Speaker Change: Again, if you would like to ask a question, press far than the number one on your telephone keypad.
Speaker Change: Okay, so your first question comes from the line of John Deysher. Please go ahead.
John Dichter: Hi, good morning. I just have a quick question on the pausing of the imports from China.
Yeah, I think that's a good question. I think that...
We are Carverd.
John Dichter: Through part of the third quarter, but we're going to start to run into inventory issues, you know, at that point.
John Dichter: Meanwhile, what we're doing is continuing to manufacture in China, so we haven't stopped our manufacturing.
and what we're doing is we're shipping to...
John Dichter: We have a distribution center in Montreal and we're continuing to shoot from China to Montreal where we're holding them and so they're about a week away from our distribution center here in Tokyo, Scott said and so
John Dichter: As soon as things start, which we're hoping, you know, we don't know, obviously, but we're hoping it happens over the next couple of months for it to be in a position
to bring inventory.
John Dichter: into Milwaukee our main distribution center within a week and the other thing that we're doing is we have been working
John Dichter: None stop, really, since fall of last year to source our shoes in other countries. And so, you're going to see over the next...
12 months.
A Pretty Radical
John Dichter: Reorganizing of our supply chain so that we have much less exposure.
John Dichter: in China and we're going to see shoes this fall search come in.
John Dichter: from some of these other places. So we are really taking a very aggressive approach on...
John Dichter: Reorder in our supply chain and we're fortunate because we have experience in many of these other countries.
John Dichter: such as Cambodia and Vietnam and India. And so, we feel that we can move fairly quickly, mindful of not sacrificing the quality of our product. And so...
John Dichter: That's a little bit of a long answer to your question, but hopefully that gives you what you're looking for.
Speaker Change: Okay, that's a full time. So, back to Montreal, you're shipping to Montreal and holding inventory there.
and hoping that what tarves come down on...
imports right from Montreal or
Speaker Change: No, because what the way this works is when you bring the footwear into Montreal, you pay the Canadian duty.
when you when you
Speaker Change: If and when the tariffs come down between China and the U.S.
Then we take those grids, they're staged and matri-op . . .
Speaker Change: and we bring them into Milwaukee and at that time we pay the prevailing tearoff between
Speaker Change: 30%, you know, something more reasonable level. Then we get the duty back from Canada, there's
Speaker Change: A mechanism called duty drawback where you get the duty back if you ship out of the country. So we get the duty back that we've paid bringing in the goods to Canada and then we will pay.
Speaker Change: The additional 30% of the top of the normal duties when we bring the goods into...
Bring the goods into the U.S. at the curb.
Speaker Change: rate of plus 145 percent. It's just totally unmanageable. So, you know, we
Speaker Change: Well, there's a little bit of a bet there that the tears will come down in the short term, but what we've done just
Speaker Change: To be safe is we're focusing on continuing to manufacture shoes that we know are styles that won't be good for for
A year, you know, we were longer, you know, we're not, we're not continuing to
Speaker Change: seasonal type goods or in-and-out type goods, and so that if this takes longer than we hope, we're going to still be able to bring the inventory down in the U.S. or we have a fairly large business in Canada, we'll be able to sell it off in Canada.
Oh, okay, that's awful. What's the duty going into Canada?
It's 19 percent. They just have a flat 19 percent.
Speaker Change: on all footwear. There are duty structures, actually much less complicated than the U.S., where you've got a lot of different duty categories. And so, bringing shoes into the U.S., you've got leather shoes at one duty rate, one tariff rate, you've got PU upper shoes at a different one, you've got ...
Speaker Change: Certain constructions of boots and another one, so it's much more complicated in the U.S. But the main number to focus on is what the additional duty is, which is currently 145%.
So you might have to carry additional inventory in Canada for a while until the Chinese
Dude, he's come down
Exactly.
Okay, all right, good, that's a full appreciated.
All right, thank you.
Speaker Change: Once again, I would like to remind everyone that if you would like to ask a question, press star 1 on your telephone keypad.
Speaker Change: Alright, thank you everyone that concludes our Q&A session for today. I will now turn the call over back to Judy Anderson for closing your marks. Thank you so much. Please to go ahead.
Judy Anderson: Thank you everyone for joining us today. Have a great day.
Judy Anderson: Ladies and gentlemen, back on clear today's call. Thank you all for joining. You may not disconnect. Have a nice day ahead.