Weyco Group, Inc.

Thank you for standing by and welcome to the Waco Group fourth quarter and full year 2024 earnings conference release conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you'll need to press star 1-1 on your telephone. If your question has been answered and you'd like to remove yourself, you simply press star 1-1 again.

As a reminder, today's program is being recorded, and now I'd like to introduce your host for today's program, Judy Anderson, Chief Financial Officer. Please go ahead.

Thank you. Good morning, and welcome to Waco Group's conference call to discuss fourth quarter and full year 2024 results. On this call with me today are Tom Florsheim, Jr., Chairman and Chief Executive Officer, and John Florsheim, President and Chief Operating Officer. Before we begin to discuss the results for the quarter and year, I will read a brief cautionary statement. During this call, we may make projections or other forward-looking statements regarding our current expectations concerning future events and the future financial performance of the company. We wish to caution you that these statements are just predictions and that actual events or results may differ materially. We refer you to the section entitled Risk Factors in our most recent annual report on Form 10-K, which provides a discussion of important factors and risks that could cause our actual results to differ materially from our projections. These risk factors are incorporated herein by reference. Overall net sales for the fourth quarter of 2024 were $80.5 million compared with $80.6 million in the fourth quarter of 2023. Consolidated gross earnings were 47.9% of net sales for the quarter compared to 50.3% of net sales in last year's fourth quarter. Quarterly operating earnings were flat at $11.5 million in both the fourth quarters of 2024 and 2023. Net earnings were $10 million or $1.04 per diluted share for the quarter versus $8.5 million or $0.90 per diluted share in the fourth quarter of 2023. In the North American wholesale segment, net sales for the quarter were $60.4 million, up 1% compared to $59.6 million last year. Higher sales of the Florsheim and Nunn-Busch brands were mostly offset by lower sales of Boggs and Stacey Adams. Wholesale gross earnings were 42.4% of net sales compared to 44.9% of net sales in last year's fourth quarter. Wholesale selling and administrative expenses totaled $16.7 million or 28% of net sales for the quarter compared to $18.9 million or 32% of net sales last year. The decrease was mainly due to lower advertising and employee costs. Wholesale operating earnings increased 14% to $8.9 million for the quarter from $7.9 million in 2023 due to higher sales and lower expenses. Net sales in our North American retail segment were $14.1 million for the quarter, up 1% over $13.9 million in 2023. The slight increase was due to higher direct-to-consumer sales of Boggs and Floorshine footwear. Retail growth earnings as a percent of net sales were 65% and 65.8% in the fourth quarters of 2024 and 2023, respectively. Retail operating earnings totaled $2.5 million for the quarter, down 28% from $3.5 million last year. The decrease was due to higher retail selling and administrative expenses, primarily web advertising and freight. Our other operations historically included our retail and wholesale businesses in Australia, South Africa, and Asia Pacific, collectively referred to as Florsheim Australia. We ceased operations in the Asia Pacific region in 2023 and completed the wind down of that business. Accordingly, fourth quarter 2024 results of the other category only reflect the operations of Australia and South Africa. Net sales of Florsheim Australia were $6 million, down 15% from $7.2 million in the fourth quarter of 2023. The decrease was mostly due to closing our Asia operations. Sales in Australia were down 3% for the quarter due to the impact of fewer retail stores operating compared to the same period last year. Australia's same-store sales were up 11% for the quarter. Florsheim Australia's gross earnings were 62.5% of net sales for the quarter compared to 65.4% of net sales in the fourth quarter of 2023. Its quarterly operating earnings totaled $100,000 for the quarter compared to $200,000 last year. Interest income totaled $900,000 compared to $500,000 in last year's fourth quarter. This year included interest earned on higher cash balances in the U.S. and Canada. The provision for income taxes decreased $700,000 compared to last year's fourth quarter due to a lower effective tax rate this year. I will now discuss the full year 2024 results. Consolidated net sales for the full year were $290 million, down 9% compared to sales of $318 million in 2023. Consolidated gross earnings increased to 45.3% of net sales in 2024, up from 44.9% of net sales last year, due mainly to higher gross margins in our North American wholesale segments. Full year 2024 operating earnings were $36.6 million down 11% compared to $41 million in 2023. Net earnings were a record $30.3 million or $3.16 per diluted share in 2024 compared to $30.2 million or $3.17 per diluted share in 2023. North American wholesale net sales were 228 million in 2024, down 9% compared to 250 million in 2023. The decrease was primarily due to a 27% decline in bog sales, but also due to lower sales of the Stacey Adams and Nunn-Bush brands this year. Floreshine net sales were up 2% for the year. Wholesale gross earnings at the percent of net sales were 40.2% in 2024 and 39.7% in 2023. Gross margins improved because of lower inventory costs, primarily inbound freight. Wholesale selling and administrative expenses totaled $60.1 million in 2024 compared to $66 million in 2023. The decrease in 2024 was primarily due to lower employee costs, mainly commission-based compensation. Also, advertising costs were down due to the reallocation of certain expenditures historically charged to our wholesale segments that primarily benefit our websites. As a percent of net sales, wholesale selling and administrative expenses were flat at 26%, in both 2024 and 2023. Wholesale operating earnings were $31.5 million in 2024, down 5% from record operating earnings of $33.3 million in 2023, mainly as a result of lower sales. In our North American retail segment, net sales were a record $38.7 million in 2024, up 2% over our previous record of $38 million in 2023. The increase was primarily due to higher direct-to-consumer sales of Florsheim and Boggs footwear. Retail gross earnings as a percent of net sales were flat at 65.9% in both 2024 and 2023. Retail operating earnings totaled $5.3 million in 2024 down 21% compared to $6.8 million in 2023. The decrease was due to higher retail selling and administrative expenses this year, primarily web advertising and freight. As I discussed earlier, web advertising costs were up due to the reallocation of certain expenditures from our wholesale segments. Net sales at Florsheim Australia totaled $23.6 million in 2024, down 20% from $29.6 million in 2023. The decrease was primarily due to closing our Asia Pacific operations. Sales in Australia were down 10% for the year, due mainly to the impact of fewer retail stores operating compared to last year. Australia's same-store sales were up 2% for the year. Florsheim Australia's gross earnings were 61% of net sales in 2024 versus 62.5% of net sales in 2023. Florsheim Australia generated operating losses totaling $200,000 in 2024 compared to operating earnings of $1 million in 2023. The decrease was due to lower sales. Interest income totaled $3.7 million in 2024 compared to $1.1 million in 2023. As described earlier, this year included interest earned on higher cash balances in the US and Canada. The annual provision for income taxes decreased $1.2 million compared to 2023 due to a lower effective tax rate this year. In early 2025, the US government imposed additional tariffs on goods sourced from China. These tariffs will increase our cost of goods across all our brands. In an effort to mitigate the impact of the tariffs, we have already begun negotiating price reductions with our Chinese suppliers and are in the process of reviewing our wholesale pricing for fall. At December 31st, 2024, our cash and marketable securities totaled $77.3 million, and we had no debt outstanding on our $40 million revolving line of credit. During 2024, we generated $16.2 million of cash from operations. We used funds to pay $9.7 million in dividends and to repurchase $600,000 of our common stock. We also had $1.4 million of capital expenditures in 2024. We estimate that our 2025 annual capital expenditures will be between $1 and $3 million. On January 2nd, 2025, we paid our regular fourth quarter dividend of 26 cents per share as well as a one-time special dividend of $2 per share for a total dividend payment of $21.6 million. On March 4th, 2025, our Board of Directors declared a regular cash dividend of 26 cents per share to all shareholders of record on March 14th, 2025, payable March 31st, 2025. I would now like to turn the call over to Tom Floreshine, Jr., our Chairman and CEO.