Weyco (WEYS) - 2025 Q1 - Quarterly Report

Part I. Financial Information Financial Statements This section presents the unaudited condensed consolidated financial statements as of March 31, 2025, showing declines in net sales and net income compared to the prior year, with total assets decreasing from $324.1 million to $299.3 million, and a declared dividend of $0.26 per share Condensed Consolidated Financial Statements Total assets decreased from $324.1 million at year-end 2024 to $299.3 million by March 31, 2025, driven by reduced current assets, while net sales fell to $68.0 million from $71.6 million, leading to a decline in net income from $6.7 million to $5.5 million and diluted EPS from $0.69 to $0.57, alongside a significant drop in operating cash flow Condensed Consolidated Balance Sheets (in thousands of USD) | Financial Metric | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets: | | | | Cash and cash equivalents | $71,546 | $70,963 | | Inventory | $68,186 | $74,012 | | Total current assets | $183,700 | $209,391 | | Total assets | $299,295 | $324,086 | | Liabilities and Equity: | | | | Total current liabilities | $19,114 | $47,263 | | Total liabilities | $50,745 | $78,501 | | Total equity | $248,550 | $245,585 | Condensed Consolidated Statements of Operations (in thousands of USD, except per share amounts) | Financial Metric | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net sales | $68,030 | $71,558 | | Gross profit | $30,375 | $32,007 | | Operating earnings | $7,031 | $8,251 | | Net income | $5,543 | $6,650 | | Diluted earnings per share | $0.57 | $0.69 | Condensed Consolidated Statements of Cash Flows (in thousands of USD) | Cash Flow Activity | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $4,129 | $14,336 | | Net cash (used in)/provided by investing activities | ($417) | $45 | | Net cash used in financing activities | ($3,214) | ($4,669) | Notes to Financial Statements The notes detail accounting policies and financial conditions, highlighting two reporting segments (North America Wholesale and Retail), $11.8 million in operating lease liabilities, a $40 million revolving credit facility with no outstanding borrowings, and a stable effective tax rate around 26.5% Segment Operating Performance (for the three months ended March 31, 2025, in thousands of USD) | Segment | Net Sales | Operating Earnings | | :--- | :--- | :--- | | North America Wholesale | $54,273 | $6,636 | | North America Retail | $8,666 | $622 | | Other | $5,091 | ($227) | | Total | $68,030 | $7,031 | - As of March 31, 2025, total operating lease liabilities amounted to $11.844 million, with a weighted-average remaining lease term of 3.2 years and a weighted-average discount rate of 4.87%[33] - The company maintains a $40 million revolving credit facility expiring on September 26, 2025, with no outstanding borrowings as of March 31, 2025[39] - The effective income tax rate for Q1 2025 was 26.5%, consistent with 26.6% in Q1 2024, primarily differing from the 21% U.S. federal rate due to state taxes[35] Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management attributes the 5% decline in Q1 2025 net sales to geopolitical and macroeconomic uncertainties impacting consumer and retailer confidence, noting weak performance in traditional brands like Nunn Bush and Stacy Adams, strong Florsheim sales, and significant challenges from increased tariffs on Chinese imports, which are being addressed through price adjustments and sourcing diversification Results of Operations Consolidated net sales for Q1 2025 decreased 5% to $68.0 million, with North America Wholesale sales down 4% due to Stacy Adams (-7%) and Nunn Bush (-16%) offset by Florsheim's 7% growth, while North America Retail sales fell 12% due to reduced promotions, and operating earnings declined 15% to $7.0 million, facing significant challenges from new US tariffs on Chinese imports - Overall net sales for Q1 2025 decreased by 5%, primarily due to geopolitical and macroeconomic uncertainties impacting consumer and retailer confidence, leading to declines in both wholesale and direct-to-consumer businesses[46] - Incremental tariffs imposed by the U.S. government have increased the current effective total tariff rate on goods sourced from China from 16% in 2024 to 161%, prompting the company to negotiate lower costs with Chinese suppliers, plan price increases starting Summer 2025, and accelerate sourcing diversification to mitigate impact[53] Wholesale Net Sales Year-over-Year Change by Brand (for the three months ended March 31) | Brand | 2025 Net Sales (in thousands of USD) | 2024 Net Sales (in thousands of USD) | Year-over-Year Change | | :--- | :--- | :--- | :--- | | Stacy Adams | $12,771 | $13,758 | -7% | | Nunn Bush | $10,611 | $12,690 | -16% | | Florsheim | $23,918 | $22,395 | +7% | | BOGS | $6,302 | $6,659 | -5% | - North America Retail segment net sales decreased by 12%, primarily due to reduced promotional activities on the BOGS website in 2025 compared to the prior year[68] Liquidity and Capital Resources As of March 31, 2025, the company maintained strong liquidity with $77.9 million in cash and marketable securities and no debt under its $40 million credit facility, despite a significant drop in net cash from operating activities to $4.1 million from $14.3 million due to proactive inventory build-up ahead of tariff increases, while paying $2.5 million in dividends and repurchasing $0.7 million in stock - As of March 31, 2025, the company held $77.9 million in cash and marketable securities, with no outstanding debt under its $40 million revolving credit facility[55] - Net cash provided by operating activities decreased from $14.3 million in the prior year to $4.1 million, primarily due to increased inventory-related cash outflows from proactive stocking in anticipation of incremental tariffs[77][78] - During Q1 2025, the company paid $2.5 million in cash dividends and repurchased $0.7 million worth of common stock[80] - The Board of Directors declared a cash dividend of $0.27 per share on May 6, 2025, representing a 4% increase from the previous quarter's $0.26 per share[82] Controls and Procedures Company management, including the CEO and CFO, assessed and concluded that disclosure controls and procedures were effective as of March 31, 2025, with no significant changes in internal control over financial reporting during the quarter that materially affected or were reasonably likely to materially affect them - The company's Chief Executive Officer and Chief Financial Officer assessed and concluded that disclosure controls and procedures were effective as of the end of the reporting period[89][91] - No significant changes in the company's internal control over financial reporting occurred during the three months ended March 31, 2025, that have materially affected or are reasonably likely to materially affect them[92] Part II. Other Information Legal Proceedings The company may be involved in legal proceedings in the ordinary course of business but is not currently party to any litigation deemed to have a material adverse effect on its business, financial condition, results of operations, or cash flows - The company is not currently facing any legal proceedings that are likely to have a material adverse effect on its business[94] Risk Factors The company identifies a new significant risk: additional US tariffs on imported products, especially from China, which could substantially increase costs, reduce profit margins, and decrease consumer demand due to higher prices, with mitigation strategies under review but uncertain overall impact - A new significant risk involves additional U.S. tariffs imposed on imported goods, particularly a substantial volume of products sourced from China[96] - Tariffs could lead to significantly increased costs, reduced profit margins, and negatively impact consumer demand and sales volume due to higher product prices[97] - The company is evaluating strategies such as adjusting sourcing countries, negotiating with suppliers, and modifying pricing to mitigate tariff impacts, though the success of these measures is not guaranteed[97] Unregistered Sales of Equity Securities and Use of Proceeds During Q1 2025, the company repurchased 24,253 shares of common stock at an average price of $30.14 per share, totaling approximately $0.7 million, with 824,663 shares remaining available for repurchase under the existing plan as of March 31, 2025 Stock Repurchase Details for Q1 2025 | Period | Total Shares Repurchased | Average Price Paid per Share | | :--- | :--- | :--- | | March 1 - March 31, 2025 | 24,253 | $30.14 | - As of March 31, 2025, 824,663 shares remain authorized for repurchase under the stock repurchase plan[100]