Earnings Labs

Weyco Group, Inc. (WEYS)

Q2 2024 Earnings Call· Wed, Aug 7, 2024

$34.27

-0.19%

Key Takeaways · AI generated
AI summary not yet generated for this transcript. Generation in progress for older transcripts; check back soon, or browse the full transcript below.

Same-Day

+0.62%

1 Week

+10.60%

1 Month

+5.22%

vs S&P

-0.13%

Transcript

Operator

Operator

Good day, and thank you for standing by. Welcome to the Weyco Second Quarter 2024 Earnings Conference Call. [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. Judy?

Judy Anderson

Analyst

Good morning, and welcome to Weyco Group's conference call to discuss second quarter 2024 results. On the call with me today are Tom Florsheim, Jr., Chairman and Chief Executive Officer; and John Florsheim, President 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 cost and consumer demand for our products, increased interest rates and other macroeconomic factors that may cause a slowdown or contraction in the US or Australian economies. Overall net sales for the second quarter of 2024 were $63.9 million, down 5% compared to sales of $67 million in 2023. Consolidated gross earnings increased to 43.9% of net sales compared to 43.3% of net sales in last year's second quarter, due mainly to higher gross margins in our North American wholesale segment. Earnings from operations were flat at $6.7 million in both the second quarters of 2024 and 2023. Net earnings were a second quarter record of $5.6 million or $0.59 per diluted share, up 15% over our previous record of $4.9 million or $0.50 per diluted share last year. Net sales in our North American wholesale segment were $50.2 million, down 2%…

Tom Florsheim

Analyst

Thanks Judy and good morning everyone. We are pleased with our Wholesale performance, especially given the challenging economic environment for discretionary purchases like footwear. While total brand shipments were down 2% for the quarter, we were able to deliver higher Wholesale operating earnings driven by improved gross margins, and we registered solid increases with two of our brands. As we enter the back half of the year, many retailers remain conservative in their approach to future order bookings. However, we are encouraged by the strength of our at-once business, and we believe we are well positioned with the right inventory to leverage an uptick in consumer demand. Our legacy wholesale business increased slightly in the second quarter with Florsheim and Nunn Bush up 3% and 8%, respectively, Stacy Adams down 10%. The increase for Nunn Bush was partially due to a timing shift of shipments to a large retailer from third to second quarter. Our legacy brands faced the challenge of maintaining a strong position and refined footwear, while expanding their presence in the casual segment. The traditional dress and dress casual footwear categories comprise a meaningful, but shrinking market. We have done well over the years with all three legacy brands picking up market share by offering great product value in fresh, relevant designs that resonate with consumers. While we remain committed to maximizing our leadership position in refined footwear, growth over the medium to long-term is dependent on each brand's ability to navigate the casual lifestyle aesthetic that accelerated during the pandemic. From a product perspective, we are focused on introducing more hybrid and athleisure styles that appeal to today's consumer who places a premium on versatility and comfort. Our success in these categories is most evident on our websites. Nunn Bush and Florsheim now derived more than…

Operator

Operator

Thank you. At this time, we will conduct a question-and-answer session. [Operator Instructions] Our first question comes from the line of David Wright of Henry Investment Trust. Your line is now open.

David Wright

Analyst

Tom and Judy, good morning.

Tom Florsheim

Analyst

Good morning.

Judy Anderson

Analyst

Good morning.

David Wright

Analyst

Congratulations on another great quarter. You continue to chug along and deliver results better than might be expected given what you hear about the overall economy. So congratulations.

Tom Florsheim

Analyst

Thank you. We appreciate it.

David Wright

Analyst

And also, thanks for having the call and the obvious effort that you put into drawing up the script and the information that you share, it is really appreciated.

Tom Florsheim

Analyst

We feel that it's something that we need to do for shareholders. But thanks acknowledging that.

David Wright

Analyst

I wanted to ask, it's kind of obvious on its face, but just so I'm not confused. What is At once business?

Tom Florsheim

Analyst

At once business is business that comes in without having orders ahead from retailers. So most of the large retailers will give us orders for the future. So right now, we're out booking spring 2025. So we're getting orders for next spring. And then once we get into the season retailers will give us their fill into their inventory if they haven't forecasted enough when they give us their orders and especially in an environment like right now, where retailers still have their memory, the situation that they ran into in 2023 when they had quite a bit too much inventory, which was caused by all the supply chain issues. And so because of that, they're being very conservative when it comes to giving us future bookings. And so what that does is it means there's going to be more at once business than there used to be. It's kind of a trend, actually, where the retailers are. We hope that trend doesn't go on forever, but right now, that is the trend where retailers want us to have the inventory when they need it instead of committing to in the future. So, what we mean by [indiscernible] business is just a business that comes in with an order without having orders ahead for retailers.

John Florsheim

Analyst

This is John. I just want to add to that. A great example would be BOGS where a lot of retailers kind of sit back and see what the weather is going to do. And then if there's a lot of precipitation or early winter, you get at once business. And last year, every fall, we get a fair amount of at once business with BOGS, but we're more dependent on it than previous years right now because the retail trades being so conservative based on the last 2 mild winters.

David Wright

Analyst

Okay. So it's sort of on-demand business and you're trying to gain how much might be coming in so that you can meet it just right?

Tom Florsheim

Analyst

Exactly. And we have been pretty good at forecasting the needs of these retailers that are buying at once. And what we do is it's kind of the 80-20 rule, where we do a lot of business on the 20% of best styles. And so what we do is we stock in extra inventory on those styles that we know we're going to be able to use the inventory. It's not perishable like some of the seasonal goods. And so that we're in a position to take advantage of the at-once business. And the retailers really count on us to do that today.

David Wright

Analyst

All right. And in wholesale, you called out lower inventory costs and I recall during the pandemic, freight was a big issue and putting the cost of things up and you do mention freight costs in retail, but I wonder generally, is trade really still an issue?

Judy Anderson

Analyst

Freight costs have definitely come back down from their peak that was in 2022 was when we experienced the very high freight cost. However, in 2023, we were still experiencing those higher freight costs as we worked through the inventory that kind of had those higher freight costs attached. So, we're still anniversarying right now when we look at 2024 compared to 2023, some higher freight costs last year that were kind of hangover from 2022, but freight costs normalized by late 2023. So we should be starting to we're kind of down at this more normalized level and it's been stable for some time. It's just when I kind of to our inventory.

David Wright

Analyst

So you're working off the last of that, we'll call it, higher-priced inventory?

Judy Anderson

Analyst

We worked it off last year, and now we're into the lower -- well, actually, you're correct. You're correct. We'll be anniversarying the higher cost inventory still until about October of this year.

David Wright

Analyst

It really is impressive these last few quarters, you just continue to be able to squeeze out a little bit of margin when one might be thinking that everything that's been -- could be done has been done. So I hope you can keep finding some extra places to squeeze. My last question is going to be on BOGS. And Tom, you mentioned obviously, the mild winters. But I wonder, do you look at your BOGS sales historically for geographic, has there been geographic concentration and where are making most of the sales and then you try to like correlate those geographies with what the weather was in the winter versus what the weather is in the winter, obviously, up where you are you know you're going to get winter every year but some other places like the Mid-Atlantic, they sort of stop getting winter. The Mid-Atlantic, the last few years doesn't get virtually no snow at all. So I'm curious geographically how you look at BOGS.

Tom Florsheim

Analyst

Yes. No, we definitely look at it geographically in the areas where we do the best in our high season, which is fall, are the areas that get more weather. And even last year in the Midwest, our snowfall was very light and the temperatures were warm. So it's just the reality of the situation is we need to build product that's going to sell and be less dependent on the weather. And that's why we're really focused on the farm and ag channel right now, which is a big channel and 1 that that we're not penetrated in that sells footwear like BOGS that is used by people in a more functional way than, say, in a city where people are buying boots only when it snows. And so you really want to get that business that is more functional. And what we're also trying to do is build lighter insulated footwear so that it just is more appropriate in these milder winters. We kind of have to assume that we're going to see this continue because it's really been the pattern. If you look over the last five or 10 years, we've had a lot of mild winners. And so we're trying to build a product that will be appropriate and that will sell in those milder temperatures.

David Wright

Analyst

Okay. Well, thanks so much for taking my questions and continue. Good luck.

Tom Florsheim

Analyst

Great. Thanks for all your questions.

Operator

Operator

Thank you. [Operator Instructions] I am showing no further questions at this time. I would now like to turn the call over to Judy Anderson, Chief Financial Officer, for closing remarks.

Judy Anderson

Analyst

We just wanted to say thank you, everyone, for joining us today, and we hope you have a great day.

Operator

Operator

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