Good day and thank you for standing by. Welcome to the Weyco Group Third Quarter of 2021 Earnings 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. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, John Wittkowske, Chief Financial Officer. Please go ahead.

Thank you. Good morning, everyone and welcome to our third quarter conference call. On this call with me today is Tom Florsheim, Jr., our Chairman and CEO. Before we begin to discuss the results, I will read a brief cautionary statement. During the course of 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 Weyco Group's most recent form 10-K as well as the security and exchange commit -- excuse me, as filed with the Securities And Exchange Commission, as well as its other filings with the SEC. The Form 10-K identifies important factors and risks that could cause the company's actual results to differ materially from our projections. With respect to this ongoing COVID-19 pandemic, numerous factors will determine the extent and length of the impact on the company, including the extent and duration of the pandemic and its impact on the global economy. The extent and duration of the negative impacts on our supply chain, actions taken by governments, such as stay at home or similar orders that among other effects require retail store closures or limit foot traffic, the financial health of the company's customers and business partners, including the effects of any bankruptcy proceedings by such parties and the health and welfare of the company's employees. Net sales for the third quarter of 2021 were $61.8 billion up from third quarter of 2020 net sales of $53.2 million. Operating earnings totaled $6.7 million for the quarter compared with operating losses of $3.8 million last year. Net earnings rose to $5.1 million or $0.52 per diluted share…

Thanks, John and good morning everyone. We are excited about the trajectory of our business and we are seeing record demand across all brands. While wholesale sales were down versus 2019 due to the bottlenecks throughout the supply chain, the fundamentals of our business are quite strong. We anticipate improved inventory flow through the fourth quarter and should be well-positioned to end 2021 with good momentum. Our BOGS wholesale business was down 8% for the quarter. The decrease entirely reflected production and shipping delays from our factory base in Asia. Sales across all BOGS category segments are robust as we enter the principal selling season for BOGS at retail. While deliveries are later than originally planned, our retail partners are working with us and we expect to be in a much better inventory situation as we had towards the holidays. The outdoor boot category has been a bright spot throughout the pandemic. And BOGS has benefited from increased consumer interest in the brand. While our BOGS classic weather boot sales remained the foundation of the business, we are enthused about the significant progress we have made toward developing a successful casual lifestyle business, which will offer additional growth opportunities moving forward. Regarding her legacy brands, Florsheim Nunn Bush and Stacy Adams all experienced strong performance at the retail level. Early in the pandemic, there was a spike in demand for athletic, rugged casual and comfort casual footwear, but substantially reduced demand for dress and dress casual shoes. With the rollout of vaccines in March and subsequent loosening of social and other restrictions, we began to see a shift back toward more refined footwear categories as consumers evaluated their closets for a return to the office and more formal social occasions. Retailers and brands were unprepared for the subsequent surge in…

Thank you. [Operator Instructions] Our first question comes from Lewis [indiscernible]. Your line is open.

I was just wondering it's a good report. And you seem to be fairly optimistic about next year. A lot of people don't realize you're paying over 4%, which I assume will continue. You've got $5 in cash and a book value of about $20, which makes the company very financially strong. You mentioned -- and I haven't been a shareholder up until recently. You mentioned buybacks, are buybacks still in progress under consideration, or where do you stand in that manner?

They're still under consideration. We bought back stock earlier in 2021. In the most recent quarter we did not buyback stock. Our position on that is when we feel that the stock is under priced, we buyback. And I mean, clearly, we believe in the third quarter it was under priced. And we're looking at that again right now as far as what are our buybacks are going to be in the fourth quarter. So, we're going to continue to buyback stock. We have authorization to buy something like 250,000 shares of stock back. And so, we will be in the market buying from time to time.

In terms of the retail stores, how many retail stores do you have left in terms of brick-and-mortar?

Well, in the U.S., we only have four. The biggest presence that we have for brick-and-mortar stores is in Australia where we have over 30 stores. And then we have store -- shopping shops in Asia, mostly in Hong Kong and one brick-and-mortar store in South Africa, one in Auckland, and that's pretty much it. So the total number of brick-and-mortar stores is less than 50 today. And while we had a big presence of brick-and-mortar in the U.S. Going back, over the last decade, and we've slowly been closing them as leases have come up. We actually feel very good about where we stand today with the number of total brick-and-mortar stores, where -- it's really a struggle to be profitable in the U.S. we've reduced that number, all four stores we have right now are profitable. And our focus is on web -- on our website consumer direct. We're -- the financial model is different than in Australia, and we're still able to make money in brick-and-mortar. And the business that we have in Australia is very retail driven. So, we're going to continue to grow that business and possibly open additional stores. So, does that answer your question?

Basically, because I had the thought that perhaps you're going to eventually discontinue your Australia stores. And apparently what you're saying now is that's not going to be the case.

That is not going to be the case. The Florsheim brand is very dominant in Australia. We feel that the work that we did over the past year during the pandemic where we got out of stores that were unprofitable, renegotiated leases has put us in a much better position going forward. And we're still looking at opportunities to open additional stores there.

And in Australia, it's a very different market from the standpoint of wholesale versus retail for us. I mean, there's limited number of wholesale accounts there. There's a couple of large department store type accounts, but people still go to our stores to buy our product. That's really one of the main places. So, we're focusing on that and supplementing that with our website down there, which is starting to take off a little bit as well. So, we really think that in Australia retail is the -- is really the way the distribution is going to be in the long-term down there for us.

How do you feel about your online sales? I know you're increasing them. How do you go about making them more dynamic?

When you say making them more dynamic, what do you …?

In other words, if you're increasing 20% a year, how do you get to 50% online? I mean, how do you get your exposure?

Yeah. I mean, we have been investing a lot in our website. And the way that you get more customers is through different tools and we're investing in those tools. And the growth that we've had on the web over the past few years is actually been that strong. And we think that it's harder as you grow the base to have the big percentages -- big percentage increases, but we did grow at 33% versus last year 54% versus 2019. And we continue to hire people in analytics and front end and backend web development. And that really is where we're investing a lot of our resources right now, because we see the consumer direct model through the web in the U.S. is being very critical to our future. And we are pleased to see that our profitability in retail has grown. And though we had operating earnings of $1.4 million in retail in the U.S. this past quarter, which is a record for us. It is kind of amazing when you think about it, because that comparison goes back to when we had 39 stores in the U.S. and a website. So the website is really grown. It's very profitable, and we've reduced the brick-and-mortar count to four stores. And because the brick-and-mortar was less profitable, that's really helped our overall profitability. So to answer your question, we're going to just continue to invest in it, and we're committed to trying to continue to drive that growth. We think that there's still a lot of room for growth.

In terms of subjected growth, you've got $5 in cash at least, that's what I can see online. Is there any thought to any additional activity in an acquisition area?

John, do you want anything to add?

Sure. Yeah. A couple of things on the cash balance. Just -- I mean, it's maybe a little bit of a roundabout way to answer your question. In a nutshell, yes, we're always looking for acquisitions and we think that as a result of, call it, the pandemic and everything that's happened there, some of those might -- some things might come available the next year or two. We don't know. We believe -- as you pointed out earlier, we're in very strong financial shape on the balance sheet. So, we've, number one, been able to withstand the last year and a half and come out of it, we think stronger. So, we're always looking. We're not going to frivolously go purchase something that will hurt us, but we are always in the market for that. We think that that type of growth is there. And as far as the cash balance, it's a little misleading in a sense that if you look at our inventories, you can see that we've had some decline in inventory because of the way the pandemic. Now we're building our inventory back up. And so that cash balance is fluctuating a little bit, and we're certainly over the next six to nine months going to be probably increasing our inventories, because there's a lot of demand. As Tom mentioned, it's been hard to get product in. So, a lot of our product is coming in and sold right away. So, we want to build those inventories up. But in a nutshell, we are always in the market for acquisitions, because we do think that we have a very good platform here and a lot of leverage that if we get the right acquisitions, we can make a lot of money.

Your activity, you said in your work -- in your -- in the information you've given us so far indicates that your boot business is doing very, very well. Now, is your main concentration going to be on in that area? Or it just happens to be an anomaly that because of the pandemic, maybe more people are outside.

Are you asking about future acquisitions or what we -- well, we were saying in the call is the BOGS business, which is really our only outdoor business, really held up well during the pandemic, because people were getting out and doing more active outdoor activities. That business has remained strong as people have come out of hibernation. And so, we do have interest in expanding our outdoor portfolio, which was driven -- which partly driven -- drove us to buy the Forsake brand, which is in that same category. That's a brand that we purchased earlier this year. That's a much smaller brand, but we're going to continue to look at acquisitions in the outdoor space, because that is a growing area of the business.

The years I've invested in companies such as yours, which a very low cap companies, many of them actually happen -- sometimes there's no trading at all in the stocks. However, what I have noticed is that every company that is in that type of position, once they start to really move along in terms of increasing their earnings and sales, has been discovered. And if I look at your company, you're trading maybe 10,000 shares of volume a day, and I wonder if there's any possibility that you can increase your interest in your company by trying to find additional or some analysts that will help out in terms of giving you more exposure to the financial community.

Yeah. We're open to suggestions in that area. In the past what we've found is that the stock just doesn't trade enough to really get much attention from analysts, because it just doesn't have -- they're going to cover companies that have the big trading volume a daily basis. And so, it's just hard to get their attention basically, but we're open to suggestions there.

Okay. Because that would certainly help. Somebody who's covering the company in terms of -- there was some analysts, that was projecting sales, but not earnings. If you look at the Yahoo bought -- that's where I saw that. And hopefully you'll be able to move. Do you do any type of investor relations in terms of conferences that you attend or, other opportunities in your industry to get exposure through that method?

There are some of those opportunities that have been out there. We have decided, or we decided not to do those as being not really valuable. We did do that. We did do that after we purchased Florsheim, which was a significant acquisition for us, a while ago. I think if the opportunity arose where we had something to really talk about, and I'll say a large acquisition or something that really materially changed our company, I think that there would be an opportunity to do that. We're not sure on the -- on an ongoing basis, if it makes sense to do that. But the next time those things arise. We will take a look at that, but it might be a way to get a little bit of exposure to some other people. But right now with our float being so low percentage wise and volume wise, as Tom mentioned, we haven't really found that much interest in covering our company.

Okay. Thanks very much. I appreciate the answers.

Thank you for your questions.

Sure.

Thank you. [Operator Instructions] And I'm currently showing no further questions at this time. I'd like to turn the call back over to John Wittkowske for closing remarks.

Thank you very much for your interest in Weyco Group. And we will talk with you after the end of the year. Have a great day.

This concludes today's conference call. Thank you for participating. You may now disconnect.