Weyco (WEYS) - 2025 Q2 - Quarterly Results

Second Quarter 2025 Overview WEYCO Group faced challenges in Q2 2025 with a 9% decline in net sales, a 42% drop in operating earnings, and a 60% decrease in net earnings, primarily due to slower consumer spending and rising tariff costs Consolidated Financial Highlights WEYCO Group's Q2 2025 consolidated financial performance saw significant declines in net sales, operating earnings, net earnings, and diluted EPS compared to the prior year Q2 2025 Consolidated Financial Highlights (vs Q2 2024): | Metric | Q2 2025 (Million USD) | Q2 2024 (Million USD) | YoY Change (%) | | :------------------- | :------------------- | :------------------- | :------------- | | Net Sales | 58.2 | 63.9 | -9% | | Gross Margin | 43.3% | 43.9% | -0.6 pp | | Operating Earnings | 3.9 | 6.7 | -42% | | Net Earnings | 2.3 | 5.6 | -60% | | Diluted EPS | 0.24 | 0.59 | -59.3% | CEO Commentary and Outlook The CEO noted Q2 headwinds from tariffs and reduced consumer spending, impacting sales, margins, and profitability, with revenue pressure expected to continue amid economic uncertainty - The tariff environment and reduced consumer discretionary spending adversely impacted Q2 business, leading to decreased sales, eroded margins, and lower profitability[15] - Continued revenue pressure is anticipated in the coming months due to heightened economic uncertainty and subdued consumer sentiment[15] - The company maintains a strong financial position, providing stability and flexibility to navigate short-term uncertainties and focus on long-term profitability and sustainable growth[15] Segmental Performance Analysis Analysis of WEYCO Group's business segments reveals declines across North American wholesale, North American retail, and other operations, driven by reduced sales and tariff impacts North American Wholesale Segment North American wholesale net sales decreased by 9% due to cautious retailer purchasing, with operating earnings down 30% impacted by tariffs and higher SG&A as a percentage of sales North American Wholesale Key Financial Data (Q2 2025 vs Q2 2024): | Metric | Q2 2025 (Million USD) | Q2 2024 (Million USD) | YoY Change (%) | | :------------------- | :------------------- | :------------------- | :------------- | | Net Sales | 45.6 | 50.3 | -9% | | Gross Margin | 37.6% | 38.2% | -0.6 pp | | Selling and Administrative Expenses | 13.1 | 13.4 | -2.2% | | SG&A as % of Net Sales | 29% | 27% | +2 pp | | Operating Earnings | 4.1 | 5.8 | -30% | - Sales for Nunn Bush, Stacy Adams, Florsheim, and BOGS brands decreased by 11%, 10%, 5%, and 14%, respectively[3] - The decline in operating earnings is primarily attributed to lower sales and reduced gross margin[4] North American Retail Segment North American retail net sales declined by 11%, primarily due to reduced website sales for Florsheim and Stacy Adams, reflecting decreased consumer demand for footwear North American Retail Key Financial Data (Q2 2025 vs Q2 2024): | Metric | Q2 2025 (Million USD) | Q2 2024 (Million USD) | YoY Change (%) | | :------------------- | :------------------- | :------------------- | :------------- | | Net Sales | 6.8 | 7.6 | -11% | | Gross Margin | 66.6% | 67.5% | -0.9 pp | | Operating Earnings | 0.1 | 0.7 | -85.7% | - The sales decline is mainly due to lower Florsheim and Stacy Adams website sales, reflecting a decrease in consumer demand for footwear[8] Other Operations (Florsheim Australia) Other operations, now limited to Australia and South Africa, experienced a 4% net sales decline, partly due to a weaker AUD, shifting from operating income to a loss - The scope of other operations has been adjusted for Q2 2025 to reflect only Australia and South Africa businesses, following the liquidation of Asia Pacific operations in 2024[10] Florsheim Australia Key Financial Data (Q2 2025 vs Q2 2024): | Metric | Q2 2025 (Million USD) | Q2 2024 (Million USD) | YoY Change (%) | | :------------------- | :------------------- | :------------------- | :------------- | | Net Sales | 5.8 | 6.1 | -4% | | Local Currency Sales Change | -2% | N/A | N/A | | Gross Margin | 60.9% | 62.0% | -1.1 pp | | Operating Earnings/(Loss) | (0.2) | 0.2 | N/A (Shift to Loss) | - The weakening Australian dollar against the US dollar was a contributing factor to the sales decline[12] Key Business Factors and Financial Details This section details the impact of new tariffs and mitigation strategies, alongside the significant increase in the effective tax rate due to a valuation allowance for deferred tax assets Incremental Tariffs and Mitigation Efforts The US government implemented new reciprocal and retaliatory tariffs, reaching 145% on Chinese imports before a temporary reduction to 30%, with the company implementing various mitigation strategies - The US government implemented new tariffs in early 2025, with duties on Chinese imports reaching 145% in April, then temporarily reduced to 30% on May 12 for 90 days[5] - Tariffs on imports from countries other than China were 10% in Q2 and are set to increase to 19-25% on August 7, 2025[5] - Mitigation efforts include accelerated inventory purchases, negotiating cost reductions with Chinese suppliers, shifting some footwear sourcing out of China, and increasing US selling prices effective July 1, 2025[6] - The US trade and tariff policy remains unstable and unpredictable, creating uncertainty regarding the near-term impact of tariffs on gross margins[7] Provision for Income Taxes The effective tax rate significantly increased to 51.1% in Q2 2025, primarily due to a $1.1 million valuation allowance established against deferred tax assets for Florsheim Australia Effective Tax Rate (Q2 2025 vs Q2 2024): | Metric | Q2 2025 | Q2 2024 | | :----------- | :------- | :------- | | Effective Tax Rate | 51.1% | 25.1% | - The increase in the effective tax rate is primarily due to a $1.1 million valuation allowance established against deferred tax assets for Florsheim Australia[14] Corporate Information This section provides details on the declared quarterly dividend, upcoming conference call for Q2 results, an overview of WEYCO Group's business, and a cautionary note on forward-looking statements Dividend Declaration The Board of Directors declared a regular quarterly cash dividend of $0.27 per share, payable on September 30, 2025 Dividend Declaration: | Metric | Details | | :----------- | :------------------- | | Dividend Type | Regular Quarterly Cash Dividend | | Amount Per Share | $0.27 | | Record Date | August 18, 2025 | | Payment Date | September 30, 2025 | Conference Call Information A conference call is scheduled for August 6, 2025, at 11:00 AM ET to discuss Q2 2025 financial results, with online pre-registration and replay options available - A conference call will be held on August 6, 2025, at 11:00 AM ET, to discuss Q2 financial results[17] - Participants are required to pre-register online, and a replay will be available approximately two hours after the call for one year[17][18] About WEYCO Group WEYCO Group, Inc. designs and markets high-quality footwear for men, women, and children under various brands, sold globally through multiple channels and company-operated stores - WEYCO Group designs and markets men's, women's, and children's footwear[19] - Key brands include Florsheim, Nunn Bush, Stacy Adams, BOGS, and Forsake[19] - Products are sold through leading footwear stores, department stores, specialty stores, and global e-commerce websites, with Florsheim stores operated in the US, Australia, and South Africa[19] Forward-Looking Statements This press release contains forward-looking statements subject to various factors, including tariff uncertainties, economic conditions, and market competition, which could cause actual results to differ materially - Forward-looking statements are subject to various factors that could cause actual results to differ materially from expectations[20] - Key risk factors include uncertainty in US trade and tariff policies (especially on Chinese goods), inflation, economic slowdowns in the US or Australia, market competition, seasonal weather, ability to procure products timely, consumer acceptance, and the impact of geopolitical conflicts[20] Condensed Consolidated Financial Statements This section presents the company's condensed consolidated financial statements, including the balance sheets, statements of earnings, and statements of cash flows, for the relevant periods Balance Sheets As of June 30, 2025, total assets decreased to $300,936 thousand, with a significant reduction in total liabilities and a slight increase in total equity compared to December 31, 2024 Condensed Consolidated Balance Sheet Summary (As of June 30, 2025 vs December 31, 2024): | Metric | June 30, 2025 (Thousand USD) | December 31, 2024 (Thousand USD) | | :------------------- | :------------------- | :------------------- | | Total Assets | 300,936 | 324,086 | | Total Liabilities | 52,874 | 78,501 | | Total Equity | 248,062 | 245,585 | - Cash and cash equivalents increased from $70,963 thousand to $77,430 thousand[22] - Inventory decreased from $74,012 thousand to $71,258 thousand[22] Statements of Earnings Q2 2025 saw declines in net sales, gross profit, operating earnings, and net earnings compared to the prior year, with diluted EPS falling to $0.24 Condensed Consolidated Statements of Earnings Summary (Three/Six Months Ended June 30, 2025): | Metric | Q2 2025 (Thousand USD) | Q2 2024 (Thousand USD) | H1 2025 (Thousand USD) | H1 2024 (Thousand USD) | | :------------------- | :------------------- | :------------------- | :------------------- | :------------------- | | Net Sales | 58,221 | 63,932 | 126,251 | 135,490 | | Gross Profit | 25,223 | 28,092 | 55,598 | 60,099 | | Operating Earnings | 3,893 | 6,661 | 10,924 | 14,912 | | Net Earnings | 2,256 | 5,607 | 7,799 | 12,257 | | Diluted EPS | 0.24 | 0.59 | 0.81 | 1.28 | - Q2 net sales decreased by 9%, operating earnings decreased by 42%, and net earnings decreased by 60% year-over-year[23] - H1 net sales decreased by 6.8%, operating earnings decreased by 26.7%, and net earnings decreased by 36.4% year-over-year[23] Statements of Cash Flows Net cash from operating activities decreased for the six months ended June 30, 2025, with net cash outflows from investing and financing activities, resulting in a net increase in cash Condensed Consolidated Statements of Cash Flows Summary (Six Months Ended June 30, 2025): | Cash Flow Type | H1 2025 (Thousand USD) | H1 2024 (Thousand USD) | | :------------------- | :------------------- | :------------------- | | Net Cash from Operating Activities | 14,357 | 17,668 | | Net Cash from Investing Activities | (672) | (129) | | Net Cash from Financing Activities | (8,174) | (7,676) | | Effect of Exchange Rate Changes | 956 | (768) | | Net Increase in Cash and Cash Equivalents | 6,467 | 9,095 | | Cash and Cash Equivalents, End of Period | 77,430 | 78,407 | - Net cash from operating activities decreased by 18.7% year-over-year[24] - Net cash outflow from investing activities increased, primarily due to higher purchases of property, plant, and equipment[24]