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Weyco: net sales up by 5%

Nov 6, 2019 United States
Weyco: net sales up by 5%
Net sales for the third quarter of 2019 were 82.5 million US dollars, an increase of 5% compared to third quarter 2018 net sales of 78.4 million US dollars
Earnings from operations increased by 5% to 8.5 million US dollars in the third quarter of 2019, up from 8.0 million US dollars in the third quarter of 2018. Net earnings attributable to the company rose by 5% to 6.6 million US dollars in the third quarter of 2019, up from 6.3 million US dollars in last year’s third quarter. Diluted earnings per share were 0.66 per share in the third quarter of 2019 and 0.60 per share in the third quarter of 2018. 

Net sales in the North American wholesale segment, which include North American wholesale sales and licensing revenues, were 67.8 million US dollars in the third quarter of 2019, up by 7% compared to 63.2 million US dollars in the third quarter of 2018. Within the wholesale segment, Florsheim and BOGS third quarter net sales rose by 22% and 12%, respectively, due to sales increases across most major distribution channels. These sales increases were offset by lower sales of the Stacy Adams and Nunn Bush brands. Stacy Adams sales were down by 5%, due mainly to a decrease with off-price retailers, partially offset by higher sales to e-commerce retailers. Sales of the Nunn Bush brand were down by 2%, primarily due to lower sales to department stores. Licensing revenues totalled 630 000 US dollars in the third quarter of 2019, up from 531 000 US dollars in the third quarter of 2018. 

Net sales in the North American retail segment, which includes sales from the company’s Florsheim retail stores and its e-commerce businesses in the United States, were 5.2 million US dollars in the third quarter of 2019, up by 4% compared to 4.9 million US dollars in the third quarter of 2018. Same store sales (which includes US e-commerce sales) were up by 3% for the quarter due to increased sales on the Company’s websites. Retail earnings from operations were 365 000 US dollars in the third quarter of 2019 and 428 000 US dollars in the third quarter of 2018.  While operating earnings from the company’s e-commerce businesses increased, this increase was more than offset by lower operating results at the company’s brick-and-mortar locations.  

Other net sales, which include the wholesale and retail net sales of Florsheim Australia and Florsheim Europe, reached 9.5 million US dollars in the third quarter of 2019, down by 7% compared to 10.3 million US dollars in the third quarter of 2018. The decrease was primarily due to a 9% reduction in net sales at Florsheim Australia, which was caused mainly by the translation of the weaker Australian currency into US dollars. Florsheim Australian’s net sales in local currency were down by 3% for the quarter, due to lower sales in its wholesale businesses. Collectively, Florsheim Australia and Florsheim Europe had operating losses totaling 1.4 million US dollars in the third quarter of 2019, compared to operating earnings of 7 500 US dollars in last year’s third quarter. The decline between years was due to lower sales, lower overall gross margins, and higher retail expenses. Expenses included approximately 350 000 of one-time costs to exit an underperforming retail store in Australia. 

Trade War Impact

In August 2019, the US government announced it would impose an additional 15% tariff on footwear sourced from China. The tariff on leather footwear, which primarily impacts the company’s Florsheim, Stacy Adams, and Nunn Bush brands, took effect on the 1st of September 2019. The tariff on rubber and other non-leather footwear, which primarily impacts the BOGS brand, is expected to take effect on the 15th of December 2019. In an effort to mitigate the overall impact of the tariff cost increases, the Company negotiated wholesale price increases with many of its customers and price reductions from many of its Chinese suppliers. While the tariff had a minimal impact on the Company’s third quarter 2019 financial results, the ultimate future impact of the tariff on the Company’s gross margins, results of operations, and overall financial statements is still unknown by Weyco.

“Strong sales of the Florsheim and BOGS brands continue to drive earnings growth in our North American wholesale segment. We are pleased with this performance and look forward to building on this momentum as we move into the winter selling season. Overseas our businesses continue to struggle in a sluggish retail environment. We are working hard to cut costs and improve gross margins in order to generate profits in this region”, stated Thomas W. Florsheim, Jr., the Company’s Chairman and CEO.

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