Weyco Group, Inc. ( NASDAQ: WEYS) Q1 2023 Profits Teleconference May 3, 2023 11:00 AM ET
Judy Anderson – Chief Financial Officer
Thomas Florsheim – Chairman & & Ceo
David Wright – Henry Financial Investment Trust
Great day and thank you for waiting. Invite to the Weyco Group First Quarter 2023 Profits Launch Teleconference. [Operator Instructions] Please be encouraged that today’s conference is being taped.
I would now like to hand the conference over to your speaker today, Chief Financial Officer, Judy Anderson. Please proceed.
Thank you. Great early morning, everybody and welcome to Weyco Group’s teleconference to go over very first quarter 2023 outcomes. On this call with me today are Tom Florsheim, Jr., Chairman and CEO; and John Florsheim, President and COO.
Prior to we start to go over the outcomes for the quarter, I will check out a short cautionary declaration. Throughout this call, we might make forecasts or other positive declarations concerning our existing expectations worrying future occasions and the future monetary efficiency of the business. We want to warn you that these declarations are simply forecasts which real occasions or outcomes might vary materially. We refer you to the area entitled Danger Consider our newest yearly report on Kind 10-K and to our other filings with the Securities and Exchange Commission for a conversation of essential aspects and dangers that might trigger our outcomes to vary materially from our forecasts, consisting of the unsure effect of inflation on our expense and customer need for our items, increased rate of interest and other macroeconomic aspects that might trigger a downturn or contraction in the U.S. or Australian economies.
In general, net sales for the very first quarter were a very first quarter record of $86.3 million, up 6% compared to our previous record of $81.4 million in 2022. Consolidated gross incomes increased to 43.1% of net sales compared to 35.8% of net sales in the in 2015’s very first quarter due generally to greater gross margins in our North American wholesale sector.
Operating incomes were a record– were a very first quarter record of $10.4 million, up more than 90% over in 2015’s very first quarter operating incomes of $5.4 million. Net incomes were a very first quarter record of $7.4 million or $0.78 per diluted share, up 84% compared to $4.1 million or $0.42 per diluted share in 2022.
Net sales in the North American wholesale sector reached a very first quarter record of $69.9 million, up 4% compared to $67.1 million in 2022. Wholesale sales increased due to greater system offering costs, while sets delivered reduced 5%. Florsheim published 15% development for the quarter, driven by greater sales of gown and gown casual shoes and attained record quarterly sales on top of record sales for the brand name in 2015. Net sales of our other significant brand names, Nunn Bush, Stacy Adams and BOGS stayed fairly consistent with in 2015’s robust very first quarter outcomes.
Wholesale gross incomes were 38.2% of net sales compared to 30% of net sales in the very first quarter of 2022. Gross margins enhanced due generally to offering rate boosts executed in 2022 to attend to greater expenses. In 2015’s very first quarter’s gross margins were adversely affected by greater incoming freight expenses as an outcome of the worldwide supply chain concerns continuous at that time which has actually considering that relieved. Wholesale selling and administrative costs were $17.9 million or 26% of net sales for the quarter compared to $15.3 million or 23% of net sales in in 2015’s very first quarter. This year’s costs consisted of greater staff member expenses. Wholesale operating incomes reached a very first quarter record of $8.8 million, up 82% compared to $4.8 million in 2022, driven by greater sales and gross margins this year.
Net sales of our North American retail sector were a very first quarter record of $8.9 million compared to our previous record of $7.9 million in 2022. The boost was mainly due to greater sales on the Florsheim and Stacy Adams sites. Brick-and-mortar sales likewise increased for the quarter.
Retail gross incomes as a percent of net sales were 66.3% and 65.9% in the very first quarters of 2023 and 2022, respectively. Offering and administrative costs for the retail sector were $4.6 million compared to $4.4 million in 2015. As a percent of net sales, retail selling and administrative costs were 52% in 2023 and 55% in 2022. This decline was mainly due to lower e-commerce costs relative to net sales, mainly outgoing freight and marketing expenses. We understood expense savings throughout the very first quarter as an outcome of procedures taken control of the previous year to manage expenses.
Retail operating incomes were a very first quarter record of $1.3 million, up 55% compared to $828,000 in 2015. This boost was mainly due to greater sales and enhanced success in our e-commerce companies. Brick-and-mortar operating incomes were likewise up for the quarter.
Our other operations include our wholesale and retail companies in Australia, South Africa and Asia Pacific jointly described as Florsheim Australia. Other net sales for the very first quarter of 2023 amounted to $7.5 million, up 17% compared to $6.4 million in 2022. In regional currency, Florsheim Australia’s net sales were up 24%, with sales up in both its wholesale and retail companies. In 2015’s sales volumes in Asia were adversely affected by lockdowns enforced in Hong Kong throughout the quarter.
Other gross incomes were 60.5% of net sales compared to 59.6% of net sales in in 2015’s very first quarter. Other operating incomes recuperated to $275,000 in 2023, up from running losses of $243,000 in 2015.
At March 31, 2023, our money, short-term financial investments and valuable securities amounted to $30.7 million and we had $20.6 million impressive on our $50 million revolving credit line. Throughout the very first 3 months of 2023, we produced $23 countless money from operations. We utilized funds to pay for $10.5 million on our credit line to pay $4.6 countless dividends and to redeem $1.5 countless our typical stock. We likewise had $660,000 of capital investment. We approximate that 2023 yearly capital investment will be in between $2 million and $4 million.
On May 2, 2023, our Board of Directors stated a money dividend of $0.25 per share to all investors of record on May 26, 2023, payable June 30, 2023. This represents a boost of 4% above the previous quarterly dividend rate of $0.24.
I would like– I would now like to turn the call over to Tom Florsheim, Jr., Chairman and CEO.
Thanks, Judy and excellent early morning, everybody. We are incredibly pleased with our arise from the very first quarter, both from a sales and incomes point of view. In a challenging retail environment, we had the ability to accomplish boosts throughout numerous sectors of our organization while keeping our costs in check leading to a record bottom line.
While the outlook for 2023 stays unsure, we are off to a strong start and we feel excellent about our organization design along with our capability to handle through the existing macroeconomic difficulties. Our general North American wholesale organization was up 4%, led by our tradition organization. Florsheim had another record quarter with a 15% boost as the brand name continues to get market share in the improved shoes classification. Within the market, Florsheim has actually viewed as the go-to brand name for on-trend gown shoes and we continue to concentrate on broadening the brand name into the hybrid and daily casual market.
Our Nunn Bush organization was up somewhat for the quarter with 1% sales boost. We enjoy with the development that Nunn Bush has actually made within the Convenience Casual sector with over half of its sales originating from the casual classification. Stacy Adams was down 3% for the quarter. Stacy Adams continues to be the leading brand name for available style shoes and we are well placed from a stock and design point of view for the essential approaching senior prom and wedding event seasons.
Our tradition brand names all knowledgeable resurgent sales in 2022 as we gained from traditionally high sell-throughs based upon robust need for refined shoes. Lower-than-normal stock levels at retail likewise led to extra deliveries through pipeline fill. Since spring 2023, retail stock levels have actually been reset and sell-through rates for our brand names have actually stabilized at somewhat above pre-pandemic levels.
While accounts are now taking a careful technique to the marketplace as they evaluate near-term customer costs, we stay positive about our long-lasting potential customers provided the strength of our brand name and our capability to positively contend within the nonathletic shoes classification.
BOGS very first quarter sales were down 2%. After a record 2022, we have actually seen BOGS wholesale sales slow in 2023 as sellers stay careful about contributing to their outside shoes stock provided the moderate winter season in numerous parts of the nation. We expect the sales pattern to continue into fall as accounts rightsized their stock. We see this as a short-lived problem for the BOGS brand name. BOGS experienced strong need throughout the pandemic and has actually taken pleasure in remarkable direct-to-consumer development.
While we are much heavier than typical in regards to our BOGS stock levels, our company believe it is a workable circumstance as we took care to buy evergreen designs. In general, the BOGS brand name is healthy and keeps a management position within the weather condition boot classification along with in broadening casual way of life organization. We predict to go back to more stabilized stock levels in the 4th quarter of this year and rebound in sales development in 2024.
In our retail sector, sales were up 14% for the quarter. The majority of the boost was driven by Web sales. Brick-and-mortar sales likewise increased for the quarter. As pleased as we are with our retail sales boost, we were even better with the dive in retail operating incomes. Our e-commerce group has actually been concentrated on lowering costs as a percent of sales. The outcomes this quarter suggest the development that has actually been made in managing costs.
Market data revealed reductions in online sales year-over-year for shoes. We are presently bucking that pattern. Nevertheless, the difficult shoes and retail market makes us conscious of the requirement to handle our costs and to preserve a healthy earnings margin.
Florsheim Australia’s net sales were up 17% for the quarter. In regional currency, they were up 24%. While we were up versus a simple similar due to in 2015’s very first Omicron partial shutdown in Australia and other abroad markets, our efficiency shows a strong post-pandemic organization design for the area. As in the U.S., our organization overseas is trending well however deals with unpredictability associated to financial pressures as the world browses greater rate of interest and careful customer need. We have an outstanding management group in Florsheim Australia and are positive that we can continue to preserve a strong, lucrative organization as we progress.
Our general stock since March 31, 2023, was $107 million, below $128 million at December 31, 2022. As anticipated, our stock levels have actually boiled down now that the supply chain is stabilized and we can prepare our invoices closer to when we require to deliver our shoes to clients.
This concludes our official remarks. Thank you for your interest in Weyco Group and I would now like to open the call to your concerns.
[Operator Instructions] Our very first concern originates from the line of David Wright of Henry Financial Investment Trust.
Thanks for raising the dividend. I understand I brought that up just recently. And although it’s a modest boost, I’m grateful to take anything that the business is going to state. So thank you. Wished to ask a number of concerns about money and money management. Can you inform us how the business’s money is invested and what it’s making?
Well, we do– our excess money is bought valuable securities which is a low-risk financial investment. As time has actually gone on just recently, like presently, we do have a financial obligation balance due to our stock purchases in 2015. So we have actually remained in a pattern of simply letting our community securities as they develop, we have actually not been reinvesting. They do not actually appear like– presently, that market is not extremely strong. So we’re not reinvesting however we believe we’re much better off settling our financial obligation.
Yes. I was simply taking a look at your interest earnings versus your money balance is up, treasury expenses near 5% for the last couple of months and most likely going to remain there for a while. I do not understand if that belongs to your portfolio however I did see the interest earnings. And after that with rate of interest having actually gone up, naturally, short-term loaning expense also and I simply questioned how you think of your capital management with, on the one hand, having money earning interest at a lower rate than the interest you’re paying on the financial obligation you’re obtaining and curious for your commentary on that.
Yes. Well, our focus has actually been on settling the financial obligation. The financial obligation is a revolving credit line. So as the money appears, it earns money off in the United States. Due to the fact that of foreign exchange rates in Canada, we do have a money balance– a quite healthy money balance up in Canada today and we are presently working to invest that in simply the short-term cost savings account however they are type of offering us some beneficial rate of interest up there. So that’s type of an existing operate in procedure.
So simply from a basic sense, you’re more comfy having simply round numbers $20 million in money and $20 million in financial obligation and having $10 million in money and $10 million in financial obligation?
No. Like I stated, it’s simply a matter of at this minute in time where the money is. So in the U.S., we are settling the financial obligation at the– to the level that we can. We do have a bit of a money balance up in Canada even if of the FX rates and we’re aiming to make some more interest on that cash up there. However this is simply a time thing. It resembles something that we’re presently dealing with.
Yes. And simply to contribute to what Judy stated, our intent is to pay for and settle the line of credit where– we have actually remained in a position where we have actually been developing stocks. Now that we’re beginning to bring stocks down since of the supply chain being typical, we are going to begin creating a lot more money. And the money ups and downs a bit with seasonality since as we spend for fall items being available in, it can– we can utilize money however in basic, you’re visiting our money grow this year due to the stocks boiling down and we anticipate that we will settle the line of credit.
Great. And after that last concern simply on type of capital allowance. How does the Board normally think of, fine, traditionally, the business has a great deal of money which’s great, that’s excellent really. However how do you– like what’s the approach to state, fine, we’re putting– we’re paying this much in dividends and we’re putting this much in stock buyback. Is it like– what’s the formula, if you will?
Yes. Well, we take a look at the dividend payment ratio much like everyone and we wish to keep that at an affordable weather condition– level since we do wish to have totally free capital to construct money since our objective long term is still to make some more acquisitions. Therefore that is something. As far as our stock buybacks go, we remain in the marketplace redeeming stock when we feel that the rate of it is useful. The levels that our stock has actually been over the in 2015, we felt that it was a bargain. So we type of display that and do it essentially on what level the stock is trading at, whether we believe it makes good sense. However long term, we like to produce and construct money since our objective long term is to try to find acquisitions.
[Operator Instructions] At this time, I wish to turn it back to Judy Anderson, Chief Financial Officer, for any additional remarks.
No even more remarks. Thank you, everyone, for attending our call today and we hope you have a fantastic day.
Thank you for your involvement in today’s conference. This does conclude the program. You might now detach.