Yahoo Finance

Thomas Florsheim

Good morning, everyone. As Judy, mentioned, our overall net sales were flat for the fourth quarter and down 9% for the year. While we saw solid sequential improvement in the final quarter, 2024 proved to be a challenging year for our wholesale business. Consumers remain cautious amid ongoing economic uncertainty, limiting their discretionary spending on non-essential goods.
Despite these challenges, we are navigating short-term pressures and evolving our portfolio brands to position the company for future growth. BOGS sales declined 17% in the fourth quarter. The brand faced headwinds due to mild winter weather, which reduced consumers' urgency to purchase new boots. With fewer cold and snowy days, pre-holiday demand for insulated and waterproof footwear was softer than anticipated.
However, winter weather did eventually arrive across most of the country in January and February, and retailers are now selling through their inventory. With leaner stock levels, our retail partners are in a much better position to bring in fresh assortments, and we are starting to see renewed interest in the category for fall 2025.
As discussed in previous calls, we believe the BOGS new seamless construction, which is lighter and more durable than traditional Balkanized product, is a key differentiator in the insulated boot segment. We are also excited about our new offerings in non-insulated footwear such as the BOGS, BOGA which launches in March.
The BOGA is a versatile lightweight clog featuring superior comfort and an outsole that provides better traction and durability than other outdoor clogs. The last two years. Have been challenging for BOGS, and we are focused on re-energizing the brand through product innovation and expanding its retail presence in the spring summer selling season.
Our combined legacy business grew 8% in the fourth quarter with Forsake leading the way with a 22% increase, Nunn Bush rising 4%, and Stacy Adams declining 8%. The dress footwear category continues to face challenges as retailers prioritize other segments. However, Forsha has bucked this trend, solidifying its market position by gaining share in refined dress footwear while expanding its presence in hybrid and casual styles. Stacey Adams had a difficult quarter reflecting broader challenges in the dress footwear market.
The brand remains a leader in contemporary dress footwear and continues to perform well in retail accounts that emphasize dress shoes. However, future growth depends on the brand diversifying its product assortment to capture demand for hybrid and refined casual styles. While this transition takes time, early successes in the hybrid category are encouraging.
Nunn Bush had a solid quarter growing 4% with a strong value proposition and innovative comfort technology, Nunn Bush has evolved beyond its dress shoe roots and has experienced retail success in the casual, hybrid, and soft to work categories. This spring, Nunn Bush is launching a collaboration with Milwaukee chef and influencer Adam Pollack.
Pollock, who has appeared on culinary shows such as Hell's Kitchen and Beat Bobby Flay, worked with Nunn Bush designers to create an inspired collection of slip resistant. And water-resistant shoes designed for a variety of work environments. Over the last few years, Nunn Bush has built a meaningful presence in the work shoe category, and we believe the Nunn Bush and Adam Pollack collaboration will help further expand sales in this important area of business.
In our retail segment, sales were up 1% for the quarter and 2% for the year. We continue to invest in our direct-to-consumer business, viewing our online stores as billboards for our brands and our e-commerce platform as a key driver of profitable growth. Florsheim Australia's net sales declined 15% for the quarter and 20% for the year. This business includes the Australia and New Zealand markets, as well as Pacific Rim countries in South Africa.
The decline in 2024 was largely due to the closure of our Hong Kong office and retail stores, as the division was not profitable. We are now managing our Asia wholesale customers through our Melbourne office. While 2024 was a challenging year for Fosheim Australia, we are pleased to report an increase in same store retail sales in Australia. Our top priority for Fosheim Australia in 2025 is growth of our wholesale business.
For the year, our overall gross margins were 45.3% in 2024, up from 44.9% in 2023. We are happy with our margins and as Judy mentioned, 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 to account for tariff related cost increases. That concludes our formal remarks.
Thank you for your interest in WEYCO Group, and I'd now like to open the call to your questions.

Question and Answer Session

Operator

(Operator Instructions) David Wright, Henry Investment Trust

David Wright

Hello, good morning, everyone. I want to thank you very much, Tom, for the extensive commentary and Judy as well for, what happened for the year and providing some context. And as always, I really appreciate you having these calls and, taking the time to prepare for them and conduct them. Can somebody walk me through kind of the mechanics of tariffs or WEYCO?
You have an order coming your way and like what happens? What are the mechanics that gets the money from wherever it comes from to wherever it goes.

Thomas Florsheim

Sure. The mechanics are basically and you're not talking about just these additional tariffs, you're talking about tariffs in general, correct?

David Wright

Well. For sure I mean it would apply to the additional ones I'm just trying to visualize the flow of the cash.

Thomas Florsheim

Okay, yeah, essentially, we have to put up a bond that's equal to the amount of tariffs that we pay on average in a monthly period. And so when the goods are cleared and we have, we broker the goods ourselves and we clear them, then we pay customs for whatever tariffs are on goods for the US government. So If the tariff is It is 26%, which it is, has just gone from 26% to 36% in total.
Then if you take a shoe that's roughly $20 for its cost, when that shoe is cleared, we have to pay 36% of the $20 which is a little more than $7. And so it's a real cost to us. It's paid by us here in the US or in cases where we're importing goods into Australia or into Canada, then we pay their tariffs the same way essentially.

David Wright

So you posted a bond, you're getting deliveries every week, let's say. And then monthly or quarterly or whenever you're writing a check to whom?

Thomas Florsheim

US customs.

David Wright

So does customs have your invoices when the stuff comes in, or are you just declaring what the value of the shipment is and calculating the tariff based on your declaration?

Thomas Florsheim

Judy, do you know the specifics of that?

Judy Anderson

It's based on our declaration.

Thomas Florsheim

yes, everything's done wire, paperless today. And all the documents are available if custom wants to look at them, but we're CAA approved. We have a good relationship with customs, and it's done pretty seamlessly, and we do receive containers every single day here.

David Wright

Right. So it's not like somebody is, it's not like customs is some guy is sitting there with an adding machine going over your invoice, so all these lots of shoes, you're just saying, hey, here's a shipment of $100,000 and we owe you $36,000.

Thomas Florsheim

Exactly, and then they have the right to have the right to audit what we're declaring at any point for something like five years.

David Wright

Very good. Well, I appreciate kind of the detail around that question. I hope you didn't think it was unusual, and congratulations on another record year and thanks again for that special dividend.

Thomas Florsheim

Well, thanks for your questions. And we look forward to hearing from you on our next call.

David Wright

Okay done.

Operator

John Deysher, Pinnacle

John Deysher

Good morning, everyone. Following up on David's, tariff question. Can you remind us, excuse me, what percentage of your cost of goods sold came from China last year, roughly, as well as other countries of origin like Vietnam, India, and whatever other countries you might have sourced from.

Thomas Florsheim

Sure, I was anticipating that question. And what I'm going to give you is actually, what we're looking at in the current year just give me second to pull this up, hang on second. I apologize. I'm having trouble pulling up the email, but John, I think the main question right now goes to probably China and about 75% of our purchases this year will be from China. Our second biggest country is India.
We've been in India for about almost 40 years, and with all of this on the horizon, we've been growing our sourcing in India, but we're also in Cambodia, which is smaller. It's just probably a little under 5%, Vietnam, which is also under 5%, and then the Dominican Republic, which is about the same. And so it basically goes China 75%, India probably about 15%, and then the rest divided between those other three countries.

John Deysher

Okay, that's helpful. And what are the tariffs today on those other countries, India, Cambodia, Vietnam, and Dominican Republic at this point?

Thomas Florsheim

Essentially, most of the product that we bring in is leather upper products. The harmonized duty code in the US is fairly complex, and so you have different duties for like the bobs boots than you do for the leather shoes. But if you're talking about just the leather shoes, which is the biggest part of what we import, the tariff has historically been 8.5%.
And with It happened in 2018 with the tariffs that President Trump imposed at that time. They were originally higher but then they were reduced to 7.5% additional and so that brought us to 16% a leather footwear. And President Biden, kept those that 7.5% in place and so the 16% is what we were paying as of the end of 2024.
And then President Trump put in the additional 10, which happened maybe two or three weeks ago, and so that brought the total number up to 26% and now with the additional 10% that went into effect on Tuesday. That brought the number to 36. And if you look at other shoes, the base number is different. For example, on APU upper shoes it's 6%, and some of the box products it's 12%, on other box products it's really already very high at like 37.5%.
And then the additional 10bplus 10, that's been put out in the last few weeks is 20% on top of those other numbers. If that If that's clear, I'd be happy to elaborate if you'd like me to.

John Deysher

Well, I guess, in the mix of business, the type of shoe that you anticipate importing in this year from those non-Chinese countries, what's a reasonable tariff range do you think? For 2025, would it be 25% to 35% or 35% to 45% or just kind of a range for the current mix of business?

Thomas Florsheim

I would say that since, well, let me, back up and just say this, we carry typically about three million pairs of inventory in here. And we ship about seven million pairs a year. And when we saw this as potentially happening, we brought as much of our shipments forward as we could. And the way that these tariffs worked is anything that was in transit from China.
On the first date that the terrorists were declared, the first 10% those avoided the tariff. So we had another approximately a million pairs in transit that avoided any of these extra tariffs. And so when you look at the blend, the remaining pairs that we're bringing this year, it will probably be in the, I would guess in the low 30s, you've got some product that's going to be higher.
Because of bogs, but you've got some product that would be lower because it's SPU ops which we do carry in, for example, on the Nunn Bush brand. And so I would say the average. Would be in the low 30s.

John Deysher

Okay, and that and that's for non Chinese imports, correct?

Thomas Florsheim

No, I'm sorry, I mean, I thought you were speaking of China. If you average everything in, Judy, you talk you later here because I think hang on if you just take 25% 8.5%, 75% times 30%, that would probably be a pretty good guess. Say it again. 25%. 8.5%, 75% times 31%, say, and then they had those.
One Second, John we're doing a world map here. So the thing that the thing that everybody has, so the thing that everybody has to realize is that on April 2nd, there are possibly going to be these reciprocal tariffs. And so it makes it very uncertain as far as the best way forward from the standpoint of sourcing because You don't want to move a lot of product to say Vietnam right now.
Because Vietnam is on the hit list and so you could end up with even higher tariffs out of Vietnam. And so, what we're doing I kind of waiting to see what happens in April. Judy, do you have that number?

Judy Anderson

25%

Thomas Florsheim

So an average of about 25%.

John Deysher

Okay, all right, that's very helpful. And in your commentary, you said you're working with your offshore vendors regarding pricing. Are they receptive to eating part of the cost of the tariffs or kind of what's that dynamic like in terms of?

Thomas Florsheim

The short answer is yes, they are. We have long relationships with the factories that we do business within China going back over a decade, some 20 years. We've cultivated those relationships. We're good, we're a very good partner to do business with and we've grown our business with people that we you make great shoes and offer good value.
And so when this happened actually before this happened, we checked in with them and they are willing to help us out. I mean, there's a limit to what they can do because the margins in manufacturing are not big, but we've made a lot of great shoes in China over the past, say 25 years, as long as we've been in China, and it's very hard to completely replace them.
We are committed to having a fairly large percentage of our production remain in China at this point because with the pairs that we need and with our quality standards, it's almost impossible for us to replace them. I think it's important from a context standpoint because of the desire to bring more manufacturing back to the US.
We manufactured 100% of our shoes in the US until say the early 80s. We started sourcing elsewhere after that. And the companies that remained in the US had to sell shoes for much more, and several of those companies have gone out of business. And so for our industry it was necessary for shoe manufacturing to move overseas.
And so I think it's over 90% of the shoes that are sold in the US are made overseas and that's because it takes a tremendous amount of unskilled labor to make footwear and you just literally cannot do it in the US, the component infrastructure is gone here. There's no easy way and probably it would be impossible to bring manufacturing back to the US.

John Deysher

All right, okay. Well, that's good. I mean, so you're pulling what levers you can to perhaps have your vendors share part of the cost.

Thomas Florsheim

Absolutely and as I said before, we have very good relationships. And so the factories over there are all working with us and trying to help. So that we'll mitigate some of this you're not going to mitigate at all though you're going to have to raise prices. Yes, we're going to have to raise prices.

John Deysher

As will everyone else.

Thomas Florsheim

Right, exactly.

John Deysher

Okay, good. I appreciate the color. Thank you.

Thomas Florsheim

Thanks.

Operator

(Operator Instructions) And this does include the question-and-answer session of today's program. I'd like to hand the program back to Judy Anderson for any further remarks.

Judy Anderson

Thank you everyone for tuning in today and we hope you have a great week. Thank you.

Operator

Thank you, ladies and gentlemen, for your participation at today's conference. This does conclude the program. You may now disconnect. Good day.