Weyco Group, Inc. Q2 FY2025 earnings call

• Tariff Impact: Incremental tariffs on China (temporarily reduced then set to change) and other countries (tariffs increased for some). Mitigation measures include inventory prepurchasing, factory cost reductions, sourcing diversification, and price increases.
• Supply Chain: Actively diversifying sourcing away from China, moving some production to Vietnam, Cambodia, India; some product dual sourced.
• Retail Segment: Sales down due to tepid consumer environment; e-commerce traffic up but conversion rates down; focus on pricing integrity and consumer engagement tools.
• International Business: Florsheim Australia net sales down, focus on wholesale business and SG&A efficiencies; South Africa mostly wholesale with a profitable retail store.
• Inventory: Inventories back to normal levels ($70-75M), but tariff adds uncertainty to inventory value.

North American Wholesale Segment

• Net sales: $45.6 million for the quarter, down 9% from $50.3 million in 2024. Wholesale gross earnings as a percent of net sales were 37.6% in 2025 vs. 38.2% in 2024. Wholesale operating earnings totaled $4.1 million, down 30% from $5.8 million in 2024.

North American Retail Segment

• Net sales: $6.8 million for the quarter, down 11% from $7.6 million in 2024. Retail operating earnings totaled $100,000, down from $700,000 in 2024.

Other Operations (Florsheim Australia)

• Net sales: $5.8 million for the quarter, down 4% from $6.1 million in 2024. Gross earnings as a percent of net sales were 60.9% in 2025 vs. 62% in 2024. Generated operating losses of $200,000 vs. operating earnings of $200,000 in 2024.

• Challenging market environment expected to persist in the second half of 2025.
• BOGS expanding product line and manufacturing diversification.
• Inventory levels expected to remain in the $70-75 million range.
• Uncertainty around tariff impact on inventory value and gross margins.

• Uncertainty in U.S. trade and tariff policy.
• Inflation impact on costs and consumer demand.
• Interest rates and macroeconomic factors affecting economies.
• Evolving tariff rates affecting gross margins.

Q: Can you at all quantify the change in inventory as a result of the prepurchasing that you did? We see where it is, where would it have been and maybe add a little more on what your inventory purchase plans are for the immediate future?

A: Inventories brought in from prepurchasing have been worked through; inventories are getting back to normal levels (expected $70-75M). The big unknown is the impact of a 30% tariff on China-sourced goods increasing inventory value.

Q: You mentioned the diversification away from China when tariffs started on China. And if I'm not mistaken, you went to India. And if I'm not mistaken, that's kind of a tough place to be in right now?

A: Diversified to Vietnam, Cambodia, India; India tariffs increased to between 19%-25%; some product is dual sourced. We've decreased reliance on China, with open orders now 60% China, 14% India, 10% Vietnam, 5% Cambodia.

Q: You mentioned the wholesale customers are reticent about ordering too much inventory. I was just curious about the quality of the wholesale customers, the creditworthiness of them. Are you seeing anything at this point in terms of distress or anything like that for any of your wholesale customers?

A: In general, no major distress seen among major customers, but monitoring due to shaky retail environment. Approach depends on situation, aiming to work with retailers while being realistic.

Q: What's the strategic importance of Florsheim Australia at this point? My understanding is it's a handful of retail stores, it's mostly retail oriented, it's not wholesale oriented. Why is that important to the business going forward?

A: Florsheim has been in Australia over 50 years, dominates the market with 30+ stores; focus on growing wholesale and moderate retail growth; strong brand name and market share.