Good day and thank you for standing by. Welcome to the Weyco Group Third Quarter 2023 Earnings Release Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions]. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Judy Anderson, Chief Financial Officer.

Thank you. Good morning, and welcome to Weyco Group's conference call to discuss third quarter 2023 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-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 reference. They include, in part, the uncertain 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 were $84.2 million, down 13% compared to record third quarter sales of $97 million in 2022. Consolidated gross earnings increased to 43% of net sales, compared to 40.6% of net sales in last year's third quarter, due mainly to higher gross margins in our North American wholesale segment. Quarterly earnings from operations were $12.4 million, down 12% compared to record operating earnings of $14.2 million in 2022. Quarterly net earnings totaled $9.3 million or $0.98 per diluted share, compared to record net earnings of $10.8 million, or $1.12 per diluted share last year. Net sales in our North American wholesale segment were $69.5 million, down 15%, compared to record…

Thanks, Judy, and good morning, everyone. Sales in our North American wholesale business were down 15% for the quarter. While we are never pleased with the decrease, the comparison was against a record third quarter last year. Wholesale sales in 2022 reflected strong demand but also significant pipeline fill as many accounts for replenishing stock depleted due to pandemic-related supply chain delays. To provide some context, taking out 2022, this year's third quarter would have been our most profitable third quarter in wholesale operating earnings. This year, the retail environment is more challenging due to macroeconomic pressures and consumers are being cautious in terms of expenditures on footwear and apparel. With demand softening, retailers are being conservative with at once and future orders at the wholesale level. The change in retail dynamics is most apparent in the outdoor market. Given the spike in demand in 2021, and the first half of last year, retailers placed heavy orders with the expectation of strong consumer sell-throughs. Sales did not keep pace in the back half of last year and the outdoor trade channel entered 2023 with an inventory glut. The situation has been exacerbated by unseasonably warm weather in early fall. As a result, BOGS shipments declined 42% compared to record sales for the brand last year, with retailers placing fewer orders due to the current saturation of product in the market. The BOGS brand has enjoyed very strong performance over the last few years and we see the current decline as a category issue. While the majority of our BOGS inventory is in core product that remains valid from year-to-year, we are also taking steps to reduce inventory of slower moving styles. We believe the situation is manageable, but anticipate that the inventory backlog in the outdoor footwear category will not…

Thank you. [Operator Instructions]. Our first question comes from the line of John Deysher with Pinnacle. Your line is now open.

Good progress on the inventories. Glad to see the debt paid off. Just curious what the plans are for the cash going forward. I know you raised your dividend recently and I think you bought back what 2.4 million shares year-to-date. Is there anything remaining on the share repurchase at this point?

Yes. Judy, can you give that number?

What's remaining, 903,000 shares.

Is remaining.

Did you hear it?

Yes.

So we have plenty remaining.

Good. I was just going to say, what was the average on the 2.4 million buyback?

$25.43.

Yes.

$25.43 and is that number right, the $2.24, I thought it was a little higher.

Total cost of our shares purchased through October 31 is about $3,794,000.

Yes. So it's about $3.8 million, John.

3.8 million shares at $25.--

No, no, dollars, dollars.

Dollars.

$3.8 million.

$3.8 million and the average cost is $25.43.

Right. So we can give you the number of shares. How many shares was that, John?

149,000.

Yes. 149,000.

149,000, John.

Okay. Sorry, my mistake. Sorry, Tom, I cut you off. What were you going to say as to the future uses?

Well, we're going to continue to probably build some cash. I mean, a lot of that cash that we built is from we spent a lot of money building up our inventories because our inventories were depleted due to all the supply chain issues and also coming out of COVID our inventory basically evaporated. And then we had to rebuild those inventories. And because the demand was so high, we built them up to a fairly high level. And so now that we've brought them down to what we consider a good level. We're not going to see as much cash pour in as you've seen over the last nine months. And so we're going to watch it, and we're going to continue to do stock buybacks. And we had a record of increasing our dividend for years. And our plan, I think is that we're going to continue to try to increase our dividend on an annual basis.

Okay. That's helpful. Would you consider a special dividend? I don't think you've done that historically, but is that --?

I don't think we've done that either. But if our cash continues to go up, it's definitely something that we might consider.

Okay. Good. That's helpful. What's the status of Forsake? You bought that over a year ago. I'm just wondering where we are with that. And is that brand really adding value to the portfolio, and if not, what are the plans?

Yes. No, first of all, I want to state that the Forsake brand represents roughly 1% of our total annual sales. So when we bought, it was very small. It remains small. And part of the reason, a big part of the reason it remains small is because our timing definitely could have been better buying an outdoor brand when the market for that category is just totally saturated. And so what we've done, John, the last year-and-a-half is retool the brand. And so fall 2023 is really the first season that we started to get new product out there. And we have new product that's planned for spring of 2024 and fall of 2024. And John and I just came back from our sales meeting. We had a sales meeting for BOGS and for Forsake on Portland. And we actually are encouraged about the brand. I mean, not making any promises, but we feel that it has unique positioning. We have a really good guy running the brand. The product looks good. We have put together a national sales force of 800 agents, which the brand never had before. And so we want to give it a chance. And again, it's less than 1% of our business, so it's not hurting us. And we have a very talented office out in Portland that's running BOGS. And we -- so there's quite a lot of efficiency there because we have the same design people doing both brands. And so we're going to -- we want to give it a little bit of time, let the market clear up from this inventory glut, and see what happens. We're hoping that the inventory glut clears next year. And so that the back half is better and we'll see what happens. But it has not had a fair chance, and so we want to give it that.

Okay. All right. Fine. So you've got the pieces in place. You just need to execute at this point.

Exactly. Exactly.

Okay. Good. Fair enough. Congrats on a pretty good quarter.

Thanks. Thanks, John. We appreciate your questions.

Thank you, John. We're showing no further questions at this time. And I would now like to turn it back to Judy Anderson for closing remarks.

Just like to thank everybody for joining us today and wish you a great back half of your week this week. Thank you.

Yes. Thank you for your participation in today's conference. This does conclude the program. And you may now disconnect.