Weyco Group posted a net loss of $8.9 million in the second quarter, compared to net earnings of $1.5 million in last year’s corresponding quarter, on revenues that dropped by 72 percent to $16.7 million, hampered by store closures and lockdowns.
During the past few months, the group adjusted its advertising spending, which reduced second quarter selling expenses by $1.1 million. The balance sheet and associated liquidity remain highlights in the company’s current financial position, with nearly $26 million in cash and short-term marketable securities, and $60 million available on its line of credit.
The management highlighted solid increases in Bogs’ online business and believes that as the brand’s busy season approaches, there will be new opportunities to grow and potentially increase market share.
At Florsheim and Stacy Adams, the dress and dress casual footwear market has seen significantly lower demand, due to many people having not yet returned to offices and also due to weddings and other dress-up type events being canceled due to Covid-19. Nunn Bush performed better due to its more casual product offering. The management said that casual footwear and apparel were growing in popularity prior to the pandemic, and lockdowns greatly accelerated this trend. It noted that many of the new shoes and boots that Weyco is delivering this fall are more casual, and so is the majority of the spring 2021 line.
During the quarter, revenues from the North American wholesale segment, which includes wholesale and licensing revenues, dropped by 79.8 percent to $9.3 million. Sales were down across all of the company’s brands. Licensing revenues declined to $141,000, down from $636,000 in the year-ago quarter, in line with reductions in licensees’ sales of branded products. The gross margin in the segment declined by 0.4 percentage points to 34.7 percent, while operating losses reached $10.2 million, hampered by the write-off of $3.3 million in receivables as a result of the J.C. Penney bankruptcy filing in May 2020.
In the North American retail segment, which includes sales at the company’s Florsheim retail stores and internet business in the U.S., e-commerce sales were $3.6 million in the quarter, down from $5.4 million in last year’s second quarter. Same-store sales decreased by 31 percent due to retail store closures, which were partially offset by higher sales on the company’s websites. The retail segment had operating losses totaling $856,000, down from earnings of $400,000 last year due to larger operating losses at brick-and-mortar stores.
Other net sales, which include the wholesale and retail revenues of Florsheim Australia and Florsheim Europe, stood at $3.7 million, compared with $9.0 million last year, weighed down by weak performance from Florsheim Australia and Florsheim Europe. Collectively, Florsheim Australia and Florsheim Europe had operating losses totaling $2.0 million, compared to operating losses of $749,000 in the second quarter of 2019, mainly due to the write-down of obsolete inventory at Florsheim Asia.
The company expects the shutdowns and global economic slowdown caused by the pandemic to continue to adversely impact its businesses during 2020. It warned that the backlog is down for fall, as it received many cancellations for both spring ’20 and fall ’20 orders from retailers.