Earnings call transcript: Weyco Group sees stock rise despite Q1 2025 earnings dip

Weyco Group Inc. (WEYS) reported a decline in its Q1 2025 earnings but saw a positive movement in its stock price, which rose 3.65% to $31.35. The company faced a 5% drop in net sales compared to the previous year, and its net earnings fell to $5.5 million, or $0.57 per diluted share. According to InvestingPro analysis, the stock appears undervalued at current levels, with a P/E ratio of 9.77x. Despite these challenges, Weyco’s move to diversify its supply chain and raise its quarterly dividend may have bolstered investor confidence, supported by the company’s impressive 55-year streak of consecutive dividend payments.

Key Takeaways

• Net sales decreased by 5% to $68 million in Q1 2025.
• Stock price increased by 3.65%, reaching $31.35.
• Weyco plans to diversify its supply chain and raise selling prices.
• The company increased its quarterly dividend by 4% to $0.27 per share.
• Florsheim brand sales rose by 7%, gaining market share.

Company Performance

Weyco Group’s performance in Q1 2025 was marked by a decline in net sales and earnings compared to the same period last year. The company reported a 5% decrease in net sales to $68 million, and net earnings fell from $6.7 million in Q1 2024 to $5.5 million. Despite these declines, Weyco’s strategic initiatives such as supply chain diversification and price adjustments are aimed at mitigating current economic headwinds. InvestingPro data shows the company maintains excellent financial health with a score of 3.3 (GREAT), supported by strong cash flows and minimal debt exposure. For deeper insights into Weyco’s financial health and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.

Financial Highlights

• Revenue: $68 million, down 5% from $71.6 million in Q1 2024
• Net earnings: $5.5 million, down from $6.7 million in Q1 2024
• Earnings per share: $0.57, down from $0.69 in Q1 2024
• Gross earnings: 44.6% of net sales
• Cash and marketable securities: $77.9 million with no outstanding debt, resulting in a robust current ratio of 4.43x and strong balance sheet metrics according to InvestingPro analysis

Outlook & Guidance

Weyco plans to increase its selling prices in summer 2025, which could potentially offset some of the current revenue declines. The company also announced an increase in its quarterly dividend to $0.27 per share, reflecting a 4% rise. These moves, along with ongoing efforts to diversify its supply chain, suggest a proactive approach to navigating current market challenges.

Executive Commentary

Tom Florsheim, Jr, Chairman and CEO, stated, "We are hopeful that in overcoming these challenges, we will be able to pick up additional market share in the long run." He also emphasized the company’s aggressive approach to reordering its supply chain and expressed confidence in managing the current situation.

Risks and Challenges

• Geopolitical and macroeconomic uncertainties continue to pose risks.
• The non-athletic footwear market remains soft.
• Potential impacts from incremental tariffs and supply chain disruptions.
• Conservative inventory positions by wholesale partners may affect sales.

Weyco Group’s strategic initiatives and financial stability, as evidenced by its cash reserves and lack of debt, position it to potentially weather these challenges and capitalize on market opportunities. The company’s attractive dividend yield of 3.44% and strong return on equity of 12% demonstrate its commitment to shareholder value creation. InvestingPro subscribers can access additional financial metrics and exclusive insights to make more informed investment decisions.

Full transcript - Weyco Group Inc (WEYS) Q1 2025:

Operator: Thank you for standing by. My name is Gail, 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. First Quarter twenty twenty five Earnings Release Conference Call. All lines have been placed on mute to prevent any background noise.

After the speakers’ remarks, there will be a question and answer session. It is now my pleasure to turn today’s call over to Weyco Group Inc. CFO, Judy Anderson. Please go ahead.

Judy Anderson, CFO, Weyco Group Inc.: Thank you. Good morning, and welcome to Wego Group’s conference call to discuss first quarter twenty twenty five results. On the call with me today are Tom Florsheim, Jr, Chairman and Chief Executive Officer and John Florsheim, President and Chief Operating Officer. Before we begin to discuss the results for the quarter, 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. We refer you to the section entitled Risk Factors in our most recent annual report on Form 10 ks, 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 reference. They include, in part, the uncertain impacts of U. S.

Trade and tariff policies, which remain highly dynamic and unpredictable the impact of inflation on our costs and consumer demand for our products increased interest rates and other macroeconomic factors that may cause a slowdown or contraction in The U. S. Or Australian economies. Overall net sales for the first quarter of twenty twenty five were $68,000,000 down 5% compared to $71,600,000 in the first quarter of twenty four in the first quarter of twenty twenty four. Consolidated gross earnings were 44.6% of net sales for the quarter compared to 44.7% of net sales in last year’s first quarter.

Operating earnings totaled $7,000,000 down 15% from $8,300,000 in the first quarter of twenty twenty four. Net earnings were $5,500,000 or $0.57 per diluted share for the current quarter versus $6,700,000 or $0.69 per diluted share in the first quarter of last year. In the North American wholesale segment, net sales were $54,300,000 for the quarter, down 4% compared to $56,200,000 last year. Higher sales of our Florsheim brand were more than offset by lower sales of our other major brands. Wholesale gross earnings were 39.4% of net sales compared to 39.6 percent of net sales in last year’s first quarter.

Wholesale selling and administrative expenses totaled $14,800,000 for the quarter and $14,900,000 last year. As a percent of net sales, wholesale selling and administrative expenses were flat at 27% in both 2025 and 2024. Wholesale operating earnings decreased 10% to $6,600,000 for the quarter from $7,400,000 in 2024 due to lower sales. Net sales in our North American Retail segment were $8,700,000 for the quarter, down 1012% from record sales of $9,800,000 in 2024. The decrease resulted mainly from lower sales on the BOGS website due to reduced promotional activities in 2025 compared to strong BOGS website sales in the first quarter of last year.

Retail gross earnings as a percent of net sales were 66.665.3% in the first quarters of twenty twenty five and 2024, respectively. Retail operating earnings totaled $600,000 for the quarter, down 52 from $1,300,000 last year. The decrease was primarily due to lower sales. Our other operations historically include our retail and wholesale businesses in Australia, South Africa, and Asia Pacific, collectively referred to as Florsheim Australia. We ceased operations in Asia Pacific region in 2023 and completed the wind down of that business in 2024.

Accordingly, first quarter twenty twenty five results of the Other category only reflect the operations of Australia and South Africa. Florsheim Australia’s net sales were $5,100,000 down 7% from $5,500,000 in the first quarter of twenty twenty four. The weaker Australian dollar relative to the U. S. Dollar contributed to this decrease.

In local currency, Florsheim Australia’s net sales were down 3% due mainly to the closing of Asia Pacific, partially offset by higher sales in Australia. Net sales in Australia were up 6% in local currency with higher sales in both its wholesale and retail businesses. Florsheim Australia’s gross earnings as a percent of net sales were 62.760.2% in the first quarters of twenty twenty five and 2024, respectively. Florsheim Australia generated operating losses totaling $200,000 for the quarter and $400,000 last year. The improvement was due to higher sales in Australia.

Over the last several weeks, the U. S. Government enacted a broad range of reciprocal and retaliatory tariffs, collectively referred to as incremental tariffs, on goods imported into The United States. Including these incremental tariffs, the current effective total tariff rate on goods sourced from China, which is where we source a majority of our products, is 161%, up from 16% in 2024. While the incremental tariffs did not impact our first quarter twenty twenty five performance, unless withdrawn, these tariffs will significantly increase our cost of goods sold in future periods.

To mitigate the impact of tariff cost increases, we have negotiated cost reductions with several of our Chinese suppliers and are planning to raise selling prices beginning in summer of twenty twenty five. We are also accelerating our efforts to diversify our sourcing. At 12/31/2025, our cash and marketable securities totaled $77,900,000 and we had no debt outstanding on our $40,000,000 revolving line of credit. During the first three months of 2025, we generated $4,100,000 of cash from operations. We used funds to pay $2,500,000 in dividends and repurchased $700,000 of our common stock during the period.

Additionally, prefunded dividends of $21,600,000 were paid to shareholders in January of twenty twenty five. We also had $400,000 of capital expenditures during the quarter. We estimate that twenty twenty five annual capital expenditures will be between 1,000,000 and $2,000,000 On 05/06/2025, our Board of Directors declared a cash dividend of $0.27 per share to all shareholders of record on 05/16/2025, payable 06/30/2025. This represents an increase of 4% above the previous quarterly dividend rate of $0.26 I would now like to turn the call over to Tom Florsheim, Jr, Chairman and CEO.

Tom Florsheim, Jr, Chairman and CEO, Weyco Group Inc.: Thanks, Judy, and good morning, everyone. Our overall net sales were down 5% for the quarter. We began the year facing significant geopolitical and macroeconomic uncertainties, which include evolving U. S. Trade policies, recession concerns and market volatility.

These factors have affected both consumer and retailer confidence, resulting in declines in our wholesale and direct to consumer businesses. BOGS sales declined 5% for the quarter. On a positive note, we saw more typical 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, which we expect will create opportunities for new product in the second quarter and the second half of the year. 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.

We are also excited about new spring products like the BOGA Clog, which has arrived at retail and is off to a solid start. Our combined legacy business was down 3% in the first quarter with Florsheim up 7%, Stacy Adams down 7% and Nunbusch down 16%. The declines in Nunn Bush and Stacy Adams reflect the current softness in non athletic footwear at retail as consumers remain cautious with their discretionary spending. In tandem with this, many of our wholesale partners are maintaining conservative inventory positions, which has impacted our shipments. In light of this challenging environment, Florsheim’s performance was particularly strong.

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. Net sales in our retail segment were down 12% for the quarter. Last year, we drove significant e commerce volume through promotions, particularly with BOGS to elevated inventory levels. In 2025, our inventory is more aligned with demand and we’ve scaled back promotional activity, which has contributed to the decline in sales. That said, we continue to invest in data driven tools position our e commerce business for long term growth.

Florsheim Australia’s net sales declined 7% for the quarter or 3% in local currency. Similar to The US, Florsheim Australia’s markets, include South Africa, New Zealand, and the Pacific Rim are facing economic headwinds. Despite the challenging environment, we are encouraged by the improvement in Florsheim Australia’s first quarter operating results, as well as a 11% increase in same store retail sales. We remain focused on managing expenses and identifying opportunities for profitable growth. Our overall inventory as of 03/31/2025 was 68,200,000.0 compared to 74,000,000 at the December 2024, and 62,000,000 at 03/31/2024.

While our inventory levels are down from year end, 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. 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 tariff cost increases. Our overall gross margins were 44.6% for the quarter and 44.7 last year. Excuse me, given the uncertainty around tariffs, we cannot predict their impact on our margins. We are closely monitoring the situation and are also expecting to increase our prices.

Despite the tariff related uncertainties we face, we are confident in our abilities to successfully manage the situation. Our history of strong operational execution, particularly in the management of our supply chain and price setting strategy, underscores our proven ability to withstand a turbulent environment. 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.

Operator: Okay. So your first question comes from the line of John Diesscher. Please go ahead.

John Diesscher, Analyst: Hi. Good morning. I just have a quick question on the pausing of the imports from China. I think China is like 75% of your imports. And I was just curious, how long can you keep that pause on before it starts to impact your inventories and ability to deliver for customers?

Tom Florsheim, Jr, Chairman and CEO, Weyco Group Inc.: Yeah, I think that’s a good question. I think that we are covered through part of the third quarter, but we’re going to start to run into inventory issues at that point. 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, we have a distribution center in Montreal and we’re continuing to ship shoes from China to Montreal where we’re holding them.

And so they’re about a week away from our distribution center here in Milwaukee, Wisconsin. And so as soon as things thaw, which we’re hoping, we don’t know obviously, but we hope it happens over the next couple of months, we’re to be in a position to bring inventory into Milwaukee, our main distribution center within a week. And the other thing that we’re doing is we have been working nonstop really since fall of last year to source our shoes in other countries. And so you’re gonna see over the next twelve months, a pretty radical reorganizing of our supply chain so that we have much less exposure in China. And we’re going to see shoes this fall start to come in from some of these other places.

So we are really taking a very aggressive approach on reordering our supply chain. And we’re fortunate because we have experience in many of these other countries, 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 that’s a little bit of a long answer to your question, but hopefully that gives you what you’re looking for.

John Diesscher, Analyst: Okay. That’s helpful, Tom. So back to Montreal. You’re shipping to Montreal and holding inventory there. Correct.

And hoping that what tariffs come down on imports from Montreal or?

Tom Florsheim, Jr, Chairman and CEO, Weyco Group Inc.: No, because the way this works is when you bring the footwear into Montreal, you pay the Canadian duty. If and when the tariffs come down between China and The US, then we take those goods, they’re staged in Montreal and we bring them into Milwaukee and at that time we pay the prevailing tariff between China and The US. So say the tariffs go down to 30%, something a more reasonable level, Then we get the duty back from Canada, there’s 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 the additional 30% on top of the normal duties when we bring goods into The US. At the current rate of plus 145 is just totally unmanageable.

So, there’s a little bit of a bet there that the tariffs will come down in the short term, but what we’ve done just to be safe is we were focusing on continuing to manufacture shoes that we know our styles that will be good for a year or longer. We’re not continuing to manufacture seasonal type goods or in and out type goods. And so that if this takes longer than we hope, we’re gonna still be able to bring the inventory either down in The US or we have a fairly large business in Canada, we’d be able to sell it off in Canada.

John Diesscher, Analyst: Okay, that’s helpful. And what’s the duty going into Canada right now?

Tom Florsheim, Jr, Chairman and CEO, Weyco Group Inc.: It’s 19%. They just have a flat 19% on all footwear. Their duty structure is actually much less complicated than The US where you’ve got a lot of different duty categories. And so bringing shoes into The US, 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 certain constructions of boots at another one. So it’s much more complicated in The US but the main number to focus on is what the additional duty is, which is currently 145%.

John Diesscher, Analyst: Right. Okay. Alright. So you might have to carry additional inventory in Canada for a while until the Chinese duties come down.

Tom Florsheim, Jr, Chairman and CEO, Weyco Group Inc.: Exactly.

John Diesscher, Analyst: Yeah. Okay. All right. Good. That’s helpful.

Appreciate that.

Tom Florsheim, Jr, Chairman and CEO, Weyco Group Inc.: All right. Thank you.

Operator: All right. Thank you, everyone. That concludes our Q and A session for today. I will now turn the call over back to Julie Anderson for closing remarks. Thank you so much.

Please go ahead.

Judy Anderson, CFO, Weyco Group Inc.: Thank you, everyone, for joining us today. Have a great day.

Operator: Ladies and gentlemen, that concludes today’s call. Thank you all for joining. You may now disconnect. Have a nice day ahead.

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