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WG

WEYCO GROUP INC (WEYS)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 revenue was $80.5M (flat YoY), diluted EPS rose 16% to $1.04 on lower tax and higher interest income; gross margin compressed to 47.9% from 50.3% YoY as mix and segment margins weighed .
  • Wholesale strength in Florsheim (+22%) and Nunn Bush (+4%) offset BOGS (-17%) and Stacy Adams (-8%); retail sales were +1% but retail operating income fell 28% on higher web advertising and freight .
  • Management flagged newly imposed U.S. tariffs (raising total leather footwear duties from 26% to 36%) and indicated price increases are likely; negotiations with Chinese suppliers to share costs are underway .
  • Balance sheet remained robust with $71.0M cash at year-end and no revolver borrowings; a regular $0.26 dividend was declared (following a Jan 2 special $2.00 dividend) .
  • Wall Street consensus estimates from S&P Global were unavailable at time of review; beat/miss vs estimates cannot be assessed; expect estimate revisions around tariffs/pricing and brand mix [GetEstimates error, S&P Global data unavailable].

What Went Well and What Went Wrong

What Went Well

  • Florsheim momentum: Wholesale sales +22% YoY in Q4, driven by dress and hybrid footwear; “double-digit sales growth in our Florsheim business offset declines of our other brands” (CEO) .
  • Cost discipline: Wholesale SG&A down to $16.7M (28% of sales) from $18.9M (32%) YoY, supporting +14% wholesale operating income despite mixed brand performance .
  • Strong cash and returns: Year-end cash and equivalents $70.963M; regular $0.26 dividend declared after paying a $2.00 special dividend on Jan 2, 2025, highlighting capital return capacity .

What Went Wrong

  • Margin pressure: Consolidated gross margin fell to 47.9% from 50.3% YoY; wholesale margin fell to 42.4% from 44.9% as mix/weather hurt BOGS and dress category demand remained soft .
  • BOGS/weather headwinds: Q4 BOGS sales -17% due to warm, dry weather dampening at-once demand; retail BOGS softness also noted in prior quarters .
  • Retail profitability: Retail operating income declined 28% YoY to $2.5M on higher web advertising and freight; retail gross margin ticked down to 65.0% from 65.8% .

Financial Results

Consolidated (sequential trajectory)

MetricQ2 2024Q3 2024Q4 2024
Revenue ($USD Millions)$63.9 $74.3 $80.5
Gross Earnings ($USD Millions)$28.1 $32.9 $38.5
Gross Margin (%)43.9% 44.3% 47.9%
Operating Income ($USD Millions)$6.7 $10.2 $11.5
Net Income ($USD Millions)$5.6 $8.1 $10.0
Diluted EPS ($)$0.59 $0.84 $1.04
Selling & Admin ($USD Millions)$21.4 $22.7 $27.0
Interest Income ($USD Millions)$1.0 $0.9 $0.9

Q4 2024 vs Q4 2023

MetricQ4 2023Q4 2024
Revenue ($USD Millions)$80.6 $80.5
Gross Margin (%)50.3% 47.9%
Operating Income ($USD Millions)$11.5 $11.5
Net Income ($USD Millions)$8.5 $10.0
Diluted EPS ($)$0.90 $1.04

Segment Breakdown (Q4)

Segment MetricQ4 2023Q4 2024
Wholesale Net Sales ($USD Millions)$59.6 $60.4
Wholesale Gross Margin (%)44.9% 42.4%
Wholesale Operating Income ($USD Millions)$7.9 $8.9
Retail Net Sales ($USD Millions)$13.9 $14.1
Retail Gross Margin (%)65.8% 65.0%
Retail Operating Income ($USD Millions)$3.5 $2.5
Florsheim Australia Net Sales ($USD Millions)$7.2 $6.0
Florsheim Australia Gross Margin (%)65.4% 62.5%
Florsheim Australia Operating Income ($USD Millions)$0.2 $0.1
Brand Performance (Wholesale)Florsheim +22% Nunn Bush +4%
Brand Performance (Wholesale)Stacy Adams -8% BOGS -17%

KPIs / Balance Sheet Indicators

KPIQ2 2024Q3 2024Q4 2024
Cash & Equivalents ($USD Millions)$78.407 $75.455 $70.963
Inventories ($USD Millions)$67.944 $72.187 $74.012
Accounts Receivable ($USD Millions)$37.338 $46.804 $37.464
Interest Income ($USD Millions)$1.0 $0.9 $0.9
Australia Same-Store Sales (%)N/A+1% +11%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Capital Expenditures ($USD)FY 2025N/A$1–$3MNew range
Regular Dividend ($/share)Q1 2025$0.26 (Q3/Q4 2024) $0.26 payable Mar 31, 2025Maintained
Special Dividend ($/share)Paid Jan 2, 2025Announced $2.00 on Nov 5, 2024$2.00 paid Jan 2, 2025Executed
Pricing (Wholesale)Fall 2025N/AReviewing wholesale pricing; likely price increasesNew action due to tariffs
Tariff Impact202526% leather footwear tariff (end-2024)36% total after additional +10%+10%Higher costs; mitigation via supplier concessions and pricing

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024)Previous Mentions (Q3 2024)Current Period (Q4 2024)Trend
BOGS/weather sensitivity-33% sales; outdoor oversaturation; focus on workwear and seamless construction -18% sales; mild fall; e-commerce -31%; push farm/ag channel -17% sales; warm/dry weather; sell-through improved Jan/Feb; rebuilding for Fall Stabilizing with inventory normalization; weather still a risk
Legacy brands mixNunn Bush +8% (timing shift), Florsheim +3%; Stacy Adams -10% Florsheim +1%; Stacy Adams -17%; Nunn Bush -20% (timing) Florsheim +22%; Nunn Bush +4%; Stacy Adams -8% Florsheim strengthening; Stacy Adams transitioning to hybrids
Gross margin/costsGross margin 43.9%; freight normalizing; wholesale margins improved Gross margin 44.3%; comfortable margin range Gross margin 47.9%; wholesale margin down YoY; retail margin -80bps Mixed: consolidated improved QoQ, YoY down vs Q4
E-commerce & web adsRetail OI down on web ad/freight; reallocations from wholesale Retail sales -5%; promo environment; retail OI ~flat Retail sales +1%; retail OI -28% on web ads/freight Investment continues; profitability pressure persists
Tariffs & sourcingN/AN/AMechanics, sourcing mix (~75% China), tariff steps to 36%, mitigation via supplier pricing and own pricing New cost headwind; management proactive on mitigation
Australia operationsWinding down Asia Pacific; AU net sales -23% AU net sales -15%; SSS +1%; OI ~0 AU net sales -15%; SSS +11%; OI $0.1M Retail comps improving; wholesale growth targeted in 2025

Management Commentary

  • “The benefits of a diversified, multi-brand portfolio were evident in the fourth quarter, as double-digit sales growth in our Florsheim business offset declines of our other brands, enabling us to uphold profitability for the period. All brands’ fourth-quarter performance improved relative to earlier quarters this year” — Thomas W. Florsheim, Jr., Chairman & CEO .
  • “We are happy with our margins… have been negotiating with our suppliers in China to mitigate the effects of tariffs and will likely need to raise our prices in the near future” — Thomas W. Florsheim, Jr. .
  • “Interest income totaled $0.9M… provision for income taxes decreased $0.7M… due to a lower effective tax rate” — Judy Anderson, CFO .

Q&A Highlights

  • Tariff mechanics and sourcing mix: Management detailed customs payment flows (bonding, declaration-based payments) and estimated ~75% 2025 sourcing from China, with India ~15% and smaller shares in Cambodia, Vietnam, Dominican Republic; leather footwear duty escalated to ~36% total, driving likely price increases .
  • Supplier concessions: Longstanding Chinese factory relationships are receptive to sharing some tariff burden, though margins are thin; overall industry likely to raise prices .
  • Balance sheet and dividends: No revolver borrowings; regular $0.26 dividend declared; special $2.00 paid Jan 2, 2025 .
  • Q3 context: Retail environment cautious into holidays; revolver renewed with Associated Bank on same terms (SOFR + ~125 bps), 364-day maturity .

Estimates Context

  • S&P Global Wall Street consensus estimates for Q4 2024 revenue and EPS were unavailable due to data access limitations; therefore, a beat/miss assessment vs consensus is not possible at this time [GetEstimates error – S&P Global data unavailable].
  • Given tariff-driven cost increases and planned pricing actions, expect analysts to reassess gross margin trajectories, retail profitability (web advertising mix), and brand-level growth assumptions, particularly for Florsheim (strength) and BOGS (weather/workwear transition) .

Key Takeaways for Investors

  • Mix drove resilient EPS: Despite flat sales and lower gross margin, Q4 diluted EPS rose to $1.04 on lower tax and higher interest income; wholesale SG&A efficiencies aided operating income stability .
  • Florsheim is the growth engine: +22% wholesale sales in Q4 with share gains in refined dress and hybrid styles; supports near-term topline resilience amid dress-category softness .
  • Tariffs are a near-term margin headwind, but mitigation is underway: Total leather footwear duties moved to ~36%; management plans supplier price negotiations and wholesale price increases, which should partially offset COGS inflation .
  • Weather normalization improving BOGS sell-through: Retailers selling through inventory in Jan/Feb positions the brand better for Fall 2025; medium-term strategy pivots to workwear and three-season products .
  • Retail profitability trade-off: Continued investment in DTC and web advertising supports brand equity but pressured retail operating income; monitor ROI on ad spend and promotion intensity .
  • Balance sheet optionality: $71M cash, no debt, and demonstrated capacity to return capital (special $2 dividend) underpin flexibility to fund growth and absorb tariff impacts .
  • Watch estimate revisions: With S&P Global consensus unavailable, expect sell-side updates focusing on pricing actions, margin path, and brand mix; stock reaction likely tied to clarity on tariff pass-through and BOGS momentum into Fall .