Good day and thank you for standing by. Welcome to the Weyco Group Inc. Fourth Quarter and Full Year 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 fourth quarter and full year 2023 results. On this 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 and year, 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. Net sales for the fourth quarter of 2023 were $80.6 million, down 19% compared to last year's fourth quarter net sales of $99 million. Consolidated gross earnings increased to 50.3% of net sales for the quarter compared to 46.6% in last year's fourth quarter due mainly to higher gross margins in our North American Wholesale segment. Quarterly operating earnings were $11.5 million, down 24% compared to record operating earnings of $15.1 million in the fourth quarter of 2022. Net earnings were $8.5 million or $0.90 per diluted share for the quarter compared to $10.2 million, or a $1.6 per diluted share, for the fourth quarter 2022. In…

Good morning, everyone. As Judy mentioned, we experienced a slowdown in sales as our overall wholesale shipments were down 21% versus a strong fourth quarter last year. The retail environment remains difficult for footwear and apparel as consumers are spending more of their discretionary income on experiences and services. Retailers in turn are being cautious in regards to their inventory levels. While we recognize we are in a challenging period for our industry, we are pleased with our overall financial performance in 2023. We achieved record wholesale operating earnings by maintaining our price integrity while taking a disciplined approach to our expenses. BOGS sales were down 32% in the fourth quarter and 31% for the year. Mild weather throughout the fall and early winter in combination with an inventory glut in the outdoor market made for a tough 2023. We believe the Outdoor boot market will remain challenging throughout 2024 as retailers right-size their inventories. With BOGS, we are focused on moving the business forward through product innovation with emphasis on BOGS seamless rubber boot construction. BOGS’ seamless construction is 30% lighter than comparable vulcanized rubber boots and over twice as durable as measured by the number of flexes our seamless boots can withstand without any sign of cracking. This year, we are expanding the numbers of seamless boots in our line across numerous price points. Consumers and retailers are excited about this technology, which positions us well for future sales growth. In addition to the expansion of our seamless collection, We are also introducing new non-insulated and lightly insulated footwear. so the BOGS brand is less dependent on inclement weather. Our overall legacy business declined 16% for the quarter and 5% for year. At the brand level, Florsheim, Nunn Bush and Stacy Adams were down 13%, 18%, and 19%…

[Operator Instructions] Our first question is going to come from the line of David Wright with Henry Investment Trust.

Hi, good morning, everyone. I wanted to compliment and congratulate you, first off, to make $30 million after tax. I mean, that's got to be a pretty good feeling. So if you look back 10 years ago on kind of the same revenues you were making net sort of high teens, millions, but the last couple of years, you really elevated the results. So, as a stockholder, I say thank you.

Well, thanks for acknowledging that. We appreciate it.

On the cash, Judy, can you break down where that's held geographically?

The majority of it is in the U.S. and we have invested in a money market account, so we're earning between 5% and 5.5% on that. We also do have some cash in Canada as earning about the same rate.

Okay, well, thanks. Those are a couple of very good places to have your money. You can get to it and your interest earnings were double your interest expense, so that's a good result too. Further on the cash, Tom, when you mentioned the board considering acquisitions and other options, do the other option include shareholder capital return?

We are looking at all the different options right now because we recognize that our cash has piled up, which is a good problem. And we've had a couple investors actually asked us about a special dividend, so we're considering that. We're considering additional stock buybacks. We still want to have the flexibility for M&A, and we feel like with our balance sheet, we are in a place for that, even if we reduce our cash slightly. So, I'll just say at this point, we really recognize that we have more cash than we need on our balance sheet right now, and we're figuring out the best ways to use it. And we are trying to do that in a shareholder friendly way.

Okay, that's great. Thanks for the elaboration. If you'd indulge me, I just have kind of a demographic question that you look back 25 years ago, say, when a white college job meant you wore suit and tie dress shoes, yes. And over the decades that preceded that, you probably had pretty stable, and I'm going to call it dress shoe sales, growing a little with the economy and with a fact that there's more people. And dress, office dress, professional dress has changed so dramatically. Sorry to be sentimental, but I'm curious if there's any way you can quantify what if traditional lace-up leather dress shoes were ex-25 years ago, your sales in those products today are 10% of that or any way to quantify the decline in that particular style?

Ye, I mean, we don't have the exact numbers with us right now, but what you're saying is 100% correct. When we look at our traditional classic dress business, that has shrunken drastically over the last 10 years. And what people are wearing as dress shoes today are really completely different. And in the script, we talked about highbred. And highbred, what that means is a dressy kind of upper with a nice kind of dressy finish, but with more casual or sporty bottom. I mean, I'm sure you've seen a lot of men wearing dressier shoes with the white bottoms, with white soles. And that's what we're referring to when we talk about hybrid. That's a huge growth category because people still, they want to look nice at the office, but you're 100% correct. They're not wearing suits and ties and so they need something that goes with their clothing. And we look at shoes as an accessory to clothing, and so we pay a lot of attention to what people are wearing. And over the years, really going back probably more than a decade, we've been trying to evolve our brand, so they go with the clothing. And we recognize that in order to keep growing and be successful, we have to continue to adjust our product. And so when you look at a brand like Nunn Bush for example, 75% of what we sell in Nunn Bush is casual, like totally casual-casual, not even hybrid. We have hybrid, and we have some traditional dress, but 75% casual. In Florsheim, we've made good head roads into more casual offerings with true casuals, like we kind of have a boat-type shoe called the Lakeside. We had active casual, as we a new one that's on our website that you could check out called Satellite. And then we had a lot of hybrid shoes, like the Dash and so we are continuing to evolve and with Stacy Adams, Stacy Adams still skews more dressy but we're working to develop more hybrids. We have a successful hybrid in Stacy called the Synchro right now and so you are 100% right with your original statement and we are very aware of it and, we continue to look at this every time we put together a new line and continue to evolve to become more and more lifestyle-oriented, more casual-oriented, because that's the way people are addressing it, and it's not going to change. We are convinced it is going continue go down that path.

Well, you've done a great job of moving the product line with the market and the results show that, so thanks for the elaboration there. Okay. Well, listen, I really appreciate the conference calls. I'm sorry I missed the last one. I know a lot of people maybe don't show up for them, but I'd really appreciate you having them and so I thank you for that and thanks for taking my questions.

I am showing no further questions at the time. And I would like to turn the back over to Judy Anderson for any further remarks.

Thank you. Thank you everyone for joining us today and for your support of our company. Have a great day.

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