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Weyco Group Inc. (WEYS)
Q4 2008 Earnings Call
February 24, 2009; 11:00 am ET
Tom Florsheim, Jr. - Chairman & Chief Executive Officer
John Florsheim - President & Chief Operating Officer
John Wittkowske - Senior Vice President & Chief Financial Officer
Previous Statements by WEYS
» Weyco Group, Inc. Q3 2008 Earnings Call Transcript
» Weyco Group, Inc. Q2 2008 Earnings Call Transcript
» Weyco Group Inc Q1 2008 Earnings Call Transcript
I would now like to turn the presentation over to your host for today’s call Mr. John Wittkowske.
Thank you. Good morning everyone and welcome to Weyco Group’s conference call to discuss our fourth quarter and full year 2008 results. I’m John Wittkowske, Weyco Group’s Senior Vice President and Chief Financial Officer. Also on this call today are Tom Florsheim Jr., Chairman and CEO and John Florsheim, President and COO. On behalf of John and Tom, I’d like to thank all of you for joining us here today and before I begin I’ll read a brief disclaimer.
During the course of 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 such statements are just predictions and that actual event or results may differ materially.
We refer you to our most recent Form 10-K, as filed with the Securities and Exchange Commission. This document identifies important factors that could cause the company’s actual results to differ materially from our projections. Additionally, some comparisons may refer to non-GAAP measures. Our SEC filings may contain additional information about these non-GAAP measures and why we use them.
Net sales for the fourth quarter of 2008 were $50 million, down from $62.2 million in 2007. Net earnings were $3.5 million, compared with $7.8 million last year. Fourth quarter diluted earnings per share were $0.30 compared with $0.66 per share in 2007. For the year, net sales were $221.4 million down 5% from $232.6 million in 2007. Net earnings were $17 million, down from $22.9 million last year.
Diluted earnings per share were $1.45 down from $1.91. Wholesale, net sales for the quarter were $41.1 million, down $51.5 million in 2007. For the year, wholesale sales were $188.2 million, down 5% from $197.4 million in 2007.
Looking at each brand in our wholesale division, Stacy Adams sales decreased 17% in the quarter and 3% for the year. Nunn Bush sales were down 11% for the quarter and up 1% for the year. Florsheim sales decreased 31% for the quarter and 12% for the year.
Licensing revenues for the quarter were $1.3 million as compared with $1.4 million in 2007 and $4.3 million for the year as compared with $4.1 million last year. Licensee sales of Stacy Adams branded products were down for the quarter and for the year as the independent clothing retailers continue to face a challenging retail environment.
However, our Stacy Adams licensing revenues increased for the quarter and year, because at the beginning of 2008, we terminated our agreement with our licensing agent to whom we previously paid a portion of the royalties.
The services performed at the licensing agent are now handled in-house and the related costs are included in selling and administrative expenses and offset a portion of the licensing revenue gain. Licensing revenues from the sales of Florsheim footwear overseas and branded products were down 11% for the quarter and were flat for the year.
Net sales in our retail division were $7.6 million for the quarter, compared with $9.4 million last year. For the year, retail sales were $28.9 million, compared with $31.1 million in 2007. Same-store sales were down 19% for the quarter and 8% for the year.
During 2008, we closed two of our U.S. retail locations and in the first week of January 2009, we closed the third. Total sales generated by these three stores in 2008 were approximately $2.6 million. We currently operate 36 stores in the United States, two in Europe and in Internet business.
Operating earnings were down $6.9 million for the fourth quarter, with $5.7 million of the decrease in our wholesale division, $1.1 million in our retail division and $85,000 in licensing revenue. In the wholesale division, most of the decrease in operating earnings for the quarter was due to lower sales volume and lower gross margins. Wholesale gross margins were 29.4% for the fourth quarter of 2008 versus 35.5% in 2007.
Margins were down due to higher overall product cost and fourth quarter refinements to management’s estimates in response to current economic conditions related to sales returns and allowances along with coop advertising accruals, which resulted in more expense in the fourth quarter of 2008, compared with 2007.
Wholesale selling and administrative expenses for the quarter were down $500,000. This was primarily due to a decrease in salaries and salesmen’s commissions, offset by a $300,000 increase in bad-debt expense. Salary expense was impacted in the fourth quarter, by the reversal of bonus accruals that has been accumulated throughout the year due to the declining profitability in the fourth quarter.