For the third quarter of 2024, Weyco Group, Inc. (WEYS Quick QuoteWEYS - Free Report) reported earnings per share (EPS) of 84 cents, down from 98 cents in the same quarter last year, marking a decline of approximately 14%. 

Net sales for the quarter totaled $74.3 million, reflecting a 12% decrease from the $84.2 million recorded in the third quarter of 2023. This reduction in both revenues and earnings points to challenges in Weyco’s key markets, primarily driven by reduced consumer demand and unseasonably warm weather that impacted sales for certain product lines.

Weyco faced a challenging quarter, particularly in its North American wholesale and retail segments. Management's commentary highlighted several factors impacting Weyco’s financial performance this quarter. CEO Thomas W. Florsheim, Jr. acknowledged the adverse effects of reduced consumer spending on discretionary items, which weighed heavily on sales across all North American wholesale brands. Additionally, the milder start to the fall season hindered performance for BOGS, a brand that typically benefits from colder weather. 

While sales were down across several brands, the company’s gross earnings improved slightly, which management attributed to stringent cost control measures and a reduction in employee costs.

Quarterly Operational Update

Gross earnings, as a percentage of net sales, improved slightly to 44.3% from 43% in the third quarter of 2023, highlighting some efficiency gains in the cost structure despite the drop in overall sales. 

Interest income also contributed positively to financial performance, increasing to $0.9 million from $0.3 million in the third quarter of 2023. This was primarily due to interest earned on higher cash balances in the United States and Canada, providing some cushion to Weyco’s earnings amid soft sales. 

Total selling and administrative expenses declined 4% from $23.7 million in the third quarter of 2023 to $22.7 million.

Operating earnings declined 18% to $10.2 million, down from $12.4 million in the prior-year period, due to lower sales volumes.

Key Business Metrics

North American Wholesale Segment

In the North American wholesale segment, net sales were $61.1 million, a 12% decrease compared to $69.5 million in the third quarter of 2023. This decline was attributed primarily to reduced demand for the Nunn Bush, Stacy Adams and BOGS brands:

Nunn Bush sales dropped 20%, partially due to a previously disclosed shift in shipment timing to a large retailer from the third quarter to the second quarter, coupled with an overall decrease in demand. Stacy Adams sales declined 17%, largely impacted by reduced demand for dress shoes, reflecting shifting consumer preferences. BOGS sales were down 18%, affected by the mild and dry autumn weather across the United States, which reduced “at-once” orders.

The Florsheim brand, however, showed resilience with a 1% increase in sales. Gross earnings for the wholesale segment rose to 40.1% of net sales from 38.6% in the third quarter of 2023, reflecting lower employee-related costs, primarily from commission-based compensation, as well as efforts to manage cost structures amid the revenue drop.

North American Retail Segment

The North American retail segment, driven mainly by e-commerce sales, generated $7.2 million in net sales, down 5% from $7.6 million in the previous year. The BOGS website saw lower sales due to the warm fall, which was partially offset by improved sales on the Florsheim and Stacy Adams websites.

Gross earnings in the retail segment improved to 66.9% of net sales, up from 65.4% last year, reflecting efficient cost management. Operating earnings for the retail division stood at $0.8 million, slightly down from $0.9 million in the third quarter of 2023.

Other Operations

Weyco’s other operations include its Australian and South African retail and wholesale activities, collectively branded as Florsheim Australia. Following the closure of its Asia-Pacific operations in 2023, Florsheim Australia reported third-quarter 2024 net sales of $6 million, down 15% from $7.1 million in the third quarter of 2023. 

This decrease was almost entirely due to the cessation of Asia-Pacific operations. While sales in Australia were down 1%, same-store sales increased 1% for the quarter. Florsheim Australia recorded break-even operating earnings for the quarter compared to $0.3 million in the third quarter of 2023, largely reflecting the impact of fewer operating retail stores.

Balance Sheet Update (As of Sept. 30, 2024)

Weyco Group ended the third quarter with cash and cash equivalents totaling $75.5 million, an increase from $69.3 million at the end of December 2023. 

Total assets amounted to $314.7 million, up from $309.3 million at year-end 2023.

Operating lease liabilities declined to $12.3 million from $13.5 million at the end of 2023.

Total equity reached $258.1 million, up from $244.5 million at the end of last year.

Decline in Cash Flows

Net cash provided by operating activities, however, experienced a significant decline over the first nine months of 2024, amounting to $17.3 million compared to $62.9 million in the same period of 2023.

Other Developments

Weyco’s Board of Directors announced a special one-time cash dividend of $2.00 per share, payable on Jan. 2, 2025, alongside the regular quarterly cash dividend of 26 cents per share. The special dividend underscores Weyco’s robust cash position and commitment to returning capital to shareholders amid slower organic growth.