WEYCO GROUP INC 10-K Analysis & Summary – 3/14/2025

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Weyco Group, Inc.

10-K

Annual report

Filing date:

03/14/2025

TLDR:

ELI5:

Weyco Group, a shoe company, sold fewer shoes this year, but made about the same amount of profit because they managed their costs well. They’re working on making their BOGS brand popular again and selling more online.

Accession #:

0001558370-25-002984

Published on

March 16, 2025

Analyst Summary

Net sales decreased by 9% due to reduced consumer demand and a challenging outdoor footwear market, particularly impacting the Wholesale segment.
Net earnings remained relatively stable, increasing slightly due to improved gross margins and effective cost management.
The BOGS brand experienced a significant sales decline, while legacy brands showed mixed performance.
The Retail segment saw modest growth driven by direct-to-consumer sales of Florsheim and BOGS footwear.
Management is focused on re-energizing the BOGS brand, diversifying product assortments, and expanding e-commerce presence.
Gross Profit Margin increased to 45.31% from 44.93% in the previous year.
Operating Profit Margin decreased to 12.61% from 12.90% in the previous year.
Net Profit Margin increased to 10.44% from 9.49% in the previous year.
The Current Ratio decreased to 4.43 from 6.42 in the previous year, indicating a decrease in liquidity.
The Debt-to-Equity Ratio increased to 0.32 from 0.27 in the previous year.
Revenue Growth decreased by 8.73%.

Opportunities and Risks

Risk: Reliance on foreign sourcing exposes the company to supply chain disruptions and geopolitical risks.
Risk: Tariffs on goods sourced from China could increase costs and impact margins.
Risk: Economic conditions and market volatility may affect consumer spending on footwear.
Opportunity: Re-energizing the BOGS brand through product innovation and expanded retail presence.
Opportunity: Diversifying product assortments to capture demand for hybrid and refined casual styles.
Opportunity: Expanding e-commerce presence to drive profitable growth.
Opportunity: Focusing on growth of Florsheim Australia’s wholesale business.

Potential Implications

Company Performance

Successful re-energization of the BOGS brand is crucial for future revenue growth.
Effective management of tariff impacts and supply chain risks will be essential for maintaining profitability.
Continued investment in e-commerce and product diversification could drive long-term growth.
The company’s strong balance sheet provides financial flexibility to support strategic initiatives.

Stock Price

Positive performance of the BOGS brand and e-commerce initiatives could positively impact the stock price.
Failure to mitigate tariff impacts and supply chain risks could negatively impact the stock price.
Overall market conditions and investor sentiment towards the retail sector will also influence the stock price.
The relatively low P/E ratio may indicate undervaluation.

Weyco Group, Inc. (WEYS) – 10-K Filing Analysis – December 31, 2024

Executive Summary

Weyco Group’s 2024 10-K filing reveals a challenging year marked by a 9% decrease in net sales, primarily driven by reduced consumer demand and a difficult outdoor footwear market. While the Wholesale segment experienced a decline, the Retail segment showed modest growth. Despite lower sales, the company achieved record net earnings due to improved gross margins and effective cost management. Key risks include reliance on foreign sourcing, potential impacts from tariffs, and evolving consumer preferences. Opportunities lie in re-energizing the BOGS brand, diversifying product assortments, and expanding e-commerce presence. Overall, a cautious “Hold” rating is recommended, pending successful execution of strategic initiatives to address current headwinds and capitalize on growth opportunities.

Company Overview

Weyco Group, Inc. is a footwear company that designs, markets, and distributes footwear under various brands, including Florsheim, Nunn Bush, Stacy Adams, BOGS, and Forsake. The company operates through two reportable segments: North American Wholesale and North American Retail. The Wholesale segment sells to retailers, while the Retail segment focuses on direct-to-consumer sales through e-commerce and brick-and-mortar stores. The company sources its products from overseas manufacturers, primarily in China and India.

Detailed Analysis

Financial Statement Analysis

Income Statement

Key observations from the Consolidated Statements of Earnings:

Net sales decreased by 9% from $318.0 million in 2023 to $290.3 million in 2024.
Gross earnings as a percentage of net sales increased slightly from 44.9% in 2023 to 45.3% in 2024.
Operating earnings decreased by 11% from $41.0 million in 2023 to $36.6 million in 2024.
Net earnings increased slightly from $30.2 million in 2023 to $30.3 million in 2024, resulting in diluted earnings per share of $3.16 and $3.17, respectively.

Key Ratios:

Gross Profit Margin: 45.3% (2024), 44.9% (2023)
Operating Margin: 12.6% (2024), 12.9% (2023)
Net Profit Margin: 10.4% (2024), 9.5% (2023)

Balance Sheet

Key observations from the Consolidated Balance Sheets:

Cash and cash equivalents increased slightly from $69.3 million in 2023 to $71.0 million in 2024.
Accounts receivable decreased from $39.3 million in 2023 to $37.5 million in 2024.
Inventories decreased slightly from $74.9 million in 2023 to $74.0 million in 2024.
Total assets increased from $309.3 million in 2023 to $324.1 million in 2024.
Total liabilities increased from $64.8 million in 2023 to $78.5 million in 2024, primarily due to the prefunded dividend.
Total equity increased slightly from $244.5 million in 2023 to $245.6 million in 2024.

Key Ratios:

Current Ratio: 4.43 (2024), 6.42 (2023)
Debt-to-Equity Ratio: 0.32 (2024), 0.27 (2023)

Cash Flow Statement

Key observations from the Consolidated Statements of Cash Flows:

Net cash provided by operating activities decreased significantly from $98.6 million in 2023 to $37.7 million in 2024, primarily due to changes in operating assets and liabilities, most significantly, inventory.
Net cash used for investing activities decreased slightly from $1.2 million in 2023 to $1.1 million in 2024.
Net cash used for financing activities decreased from $45.3 million in 2023 to $32.2 million in 2024.

Key Metrics:

Free Cash Flow: Significantly lower in 2024 compared to 2023 due to changes in working capital.

Management’s Discussion and Analysis (MD&A) Insights

Management acknowledges the challenging retail landscape in 2024 due to economic uncertainties and inflation.
BOGS brand sales declined significantly due to reduced retailer orders and mild weather.
Legacy brands (Florsheim, Stacy Adams, Nunn Bush) experienced mixed performance, with Florsheim showing growth while Stacy Adams and Nunn Bush declined.
Retail segment sales increased due to higher direct-to-consumer sales of Florsheim and BOGS footwear.
Florsheim Australia’s sales declined due to the closure of Asia Pacific operations.
Management is focused on re-energizing the BOGS brand, diversifying product assortments, and expanding e-commerce presence.
The company is negotiating price reductions with Chinese suppliers to mitigate the impact of tariffs.

Risk and Opportunity Assessment

Risks:

Reliance on Foreign Sourcing: Dependence on manufacturers in China and India exposes the company to supply chain disruptions, increased costs, and geopolitical risks.
Tariffs: The imposition of tariffs on goods sourced from China will increase costs and potentially impact margins and sales.
Economic Conditions: Decreases in disposable income and general market volatility may adversely affect consumer spending on footwear.
Competition: The footwear market is highly competitive, which may result in lower prices and reduced profits.
Fashion Trends: Changes in fashion trends and consumer preferences could negatively impact sales.
Cybersecurity: Risk of data loss and security breaches, particularly in the retail segment and e-commerce businesses.

Opportunities:

BOGS Brand Re-Energization: Focus on product innovation and expanding retail presence in the Spring/Summer selling season.
Product Diversification: Diversifying product assortments to capture demand for hybrid and refined casual styles.
E-commerce Expansion: Continued investment in the e-commerce platform to drive profitable growth.
Nunn Bush Work Shoe Category: Leveraging the brand’s presence in the work shoe category to drive sales growth.
Florsheim Australia Wholesale Growth: Focusing on growth of Florsheim Australia’s wholesale business.

Red Flags and Uncommon Metrics

BOGS Trademark: The need for a quantitative impairment test on the BOGS trademark indicates potential concerns about the brand’s future performance.
Forsake Trademark: The write-off of the Forsake trademark indicates challenges with this brand.
Significant Decrease in Cash Flow from Operations: The substantial decrease in cash flow from operations in 2024 compared to 2023 warrants further investigation.

Conclusion and Actionable Insights

Weyco Group faced significant headwinds in 2024, resulting in a decline in sales. However, the company’s ability to maintain profitability and generate record net earnings demonstrates its resilience and effective cost management. The key to future success lies in successfully executing strategic initiatives to address current challenges and capitalize on growth opportunities. The company’s strong balance sheet and lack of debt provide financial flexibility to support these initiatives.

Overall Assessment: Hold

Recommendations:

Monitor BOGS Brand Performance: Closely monitor the performance of the BOGS brand and assess the effectiveness of re-energization efforts.
Evaluate Product Diversification Strategies: Evaluate the success of product diversification strategies and adjust as needed to meet evolving consumer preferences.
Assess E-commerce Investments: Assess the return on investment from e-commerce investments and identify opportunities for further optimization.
Manage Tariff Impacts: Continue to negotiate price reductions with suppliers and adjust pricing strategies to mitigate the impact of tariffs.
Monitor Cash Flow: Closely monitor cash flow from operations and identify opportunities to improve working capital management.

Commentary

Weyco Group’s financial performance in 2024 shows a mixed picture. While net earnings slightly increased, revenue experienced a notable decline, primarily driven by decreased wholesale segment sales. The company maintained a strong liquidity position, but profitability margins generally decreased. Management is navigating a challenging retail environment, as evidenced by strategic cost management and a focus on adapting to changing consumer preferences.

Financial Ratio and Metric Analysis

Profitability

Gross Profit Margin

Metric: 45.31% (2024), 44.93% (2023)

Trend: Increased by 0.84%

Industry: The apparel and footwear industry typically sees gross profit margins ranging from 40% to 55%. Weyco’s gross profit margin is within this range.

Operating Profit Margin

Metric: 12.61% (2024), 12.90% (2023)

Trend: Decreased by 2.25%

Industry: An operating profit margin between 10% and 15% is considered healthy in the apparel industry. Weyco’s operating profit margin is within this range.

Net Profit Margin

Metric: 10.44% (2024), 9.49% (2023)

Trend: Increased by 9.99%

Industry: The apparel industry typically sees net profit margins ranging from 3% to 7%. Weyco’s net profit margin is above this range.

Return on Assets (ROA)

Metric: 9.36% (2024), 9.76% (2023)

Trend: Decreased by 4.10%

Industry: The apparel industry typically sees ROA ranging from 4% to 8%. Weyco’s ROA is above this range.

Return on Equity (ROE)

Metric: 12.35% (2024), 12.35% (2023)

Trend: No Change

Industry: The apparel industry typically sees ROE ranging from 8% to 15%. Weyco’s ROE is within this range.

Earnings Per Share (EPS) – Basic and Diluted

Metric: Basic EPS: $3.21 (2024), $3.19 (2023); Diluted EPS: $3.16 (2024), $3.17 (2023)

Trend: Basic EPS increased by 0.63%; Diluted EPS decreased by 0.32%

Industry: EPS varies significantly within the apparel industry, but Weyco’s EPS indicates solid profitability.

Liquidity

Current Ratio

Metric: 4.43 (2024), 6.42 (2023)

Trend: Decreased by 31.00%

Industry: A current ratio between 1.5 and 2.0 is generally considered healthy. Weyco’s current ratio is very high, indicating strong liquidity, although the decrease from the previous year could warrant further investigation.

Quick Ratio (Acid-Test Ratio)

Metric: 2.86 (2024), 3.89 (2023)

Trend: Decreased by 26.48%

Industry: A quick ratio above 1.0 is generally considered acceptable. Weyco’s quick ratio is strong, indicating good short-term liquidity, although the decrease from the previous year could warrant further investigation.

Cash Ratio

Metric: 1.50 (2024), 2.34 (2023)

Trend: Decreased by 35.90%

Industry: A cash ratio of 1.0 or higher is typically considered ideal, but acceptable values can vary by industry. Weyco’s cash ratio is strong, although the decrease from the previous year could warrant further investigation.

Solvency/Leverage

Debt-to-Equity Ratio

Metric: 0.32 (2024), 0.27 (2023)

Trend: Increased by 18.52%

Industry: A debt-to-equity ratio of 1.0 or lower is generally considered healthy. Weyco’s debt-to-equity ratio is relatively low, indicating a conservative capital structure.

Debt-to-Assets Ratio

Metric: 0.24 (2024), 0.21 (2023)

Trend: Increased by 14.29%

Industry: A debt-to-assets ratio below 0.5 is generally considered good. Weyco’s debt-to-assets ratio is low, indicating a low level of financial risk.

Interest Coverage Ratio (Times Interest Earned)

Metric: 2440.73 (2024), 77.55 (2023)

Trend: Increased by 3047.30%

Industry: An interest coverage ratio above 1.5 is generally considered acceptable. Weyco’s interest coverage ratio is very high, indicating a strong ability to meet its interest obligations.

Activity/Efficiency

Inventory Turnover

Metric: 2.14 (2024), 2.34 (2023)

Trend: Decreased by 8.55%

Industry: Inventory turnover varies widely in the apparel industry, but Weyco’s ratio suggests efficient inventory management.

Days Sales Outstanding (DSO)

Metric: 47.01 (2024), 45.03 (2023)

Trend: Increased by 4.39%

Industry: The apparel industry typically sees DSO ranging from 30 to 60 days. Weyco’s DSO is within this range.

Days Payable Outstanding (DPO)

Metric: 19.28 (2024), 18.50 (2023)

Trend: Increased by 4.22%

Industry: DPO varies, but Weyco’s DPO suggests it is managing its payables effectively.

Asset Turnover

Metric: 0.89 (2024), 1.03 (2023)

Trend: Decreased by 13.59%

Industry: Asset turnover varies, but Weyco’s ratio indicates how efficiently it is using its assets to generate revenue.

Valuation

Price-to-Earnings Ratio (P/E)

Metric: 9.19 (2024)

Trend: N/A

Industry: The apparel industry typically sees P/E ratios ranging from 10 to 20. Weyco’s P/E ratio is below this range, potentially indicating undervaluation.

Price-to-Book Ratio (P/B)

Metric: 2.96 (2024)

Trend: N/A

Industry: The apparel industry typically sees P/B ratios ranging from 1 to 3. Weyco’s P/B ratio is within this range.

Price-to-Sales Ratio (P/S)

Metric: 0.98 (2024)

Trend: N/A

Industry: The apparel industry typically sees P/S ratios ranging from 0.5 to 2. Weyco’s P/S ratio is within this range.

Enterprise Value to EBITDA (EV/EBITDA)

Metric: 6.11 (2024)

Trend: N/A

Industry: The apparel industry typically sees EV/EBITDA ratios ranging from 8 to 15. Weyco’s EV/EBITDA ratio is below this range, potentially indicating undervaluation.

Growth Rates

Revenue Growth

Metric: -8.73% (2024)

Trend: Decreased by 8.73%

Industry: N/A

Net Income Growth

Metric: 0.44% (2024)

Trend: Increased by 0.44%

Industry: N/A

EPS Growth

Metric: 0.63% (2024)

Trend: Increased by 0.63%

Industry: N/A

Other Relevant Metrics

The company’s reportable segments are North American Wholesale, North American Retail, and Other. The North American Wholesale segment experienced a decrease in net sales, while the North American Retail segment saw a slight increase. The “Other” segment experienced a significant decrease in net sales. These segment performances highlight the challenges and opportunities in different parts of Weyco Group’s business.