Weyco Group Inc (WEYS)
Q1 2008 Earnings Call
April 30, 2008 11:00 am ET
Rob Damron - Investor Relations
John Wittkowske - SVP, CFO
Tom Florsheim- Chairman and CEO
Good day, ladies and gentlemen and welcome to the Weyco Group, first quarter 2008 Earnings Call. (Operator Instruction).
I would like to now turn the call over to your host for today, Mr. Rob Damron, Investor Relations representative. Sir, you may proceed.
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Before I turn the call over to management to discuss the results for the quarter, I will 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 events or results may differ materially. We refer you to Weyco Group's most recent Form 10-K 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.
I will now turn the conference call over to John Wittkowske, Weyco Group's Senior Vice President and CFO to discuss some of the financial highlights of the quarter.
Thanks, Rob. Good morning everyone. On behalf of Tom and John Florsheim, I would like to thank all of you for joining us here today on our conference call. Our net sales for the first quarter of 2008 were $61.3 million down 4% from $63.9 million in 2007. Net earnings were $5.1 million down 10% from $5.7 million last year.
Diluted earnings per share were $0.43 compared with $0.47 in 2007. Wholesale sales for the first quarter were 53.1 million down 4% from 55.5 million in 2007.
Looking at each brand in our wholesale divisions, sales of our Stacy Adams and Nunn Bush brands were each down approximately 1%, while Florsheim sales were down 13%. Tom will further discuss the individual brand performance in a few minutes.
Sales in our retail division decreased 2% to 7.1 million, down from 7.25 million last year. Same-store sales were down 5% for the quarter. Our retail sales this year include four new stores that were opened in the second half of 2007. Our retail division currently consists of 39 retail stores in the United States, two in Europe and an Internet business.
Licensing revenues were $1.1 million in both 2008 and 2007. Florsheim royalties increased this quarter but the impact of this was offset by a decrease in Stacy Adams royalties, reflecting the continued struggles faced by the independent clothing retailers.
Overall gross margins were 36.3% in the first quarter compared with 36.1% last year. Wholesale margins were up 10 basis points and gross margins in retail were up 40 basis points.
Selling and administrative expenses were 23.9% of sales for the first quarter of 2008 versus 22.5% in 2007. Selling and administrative costs as a percent of sales, increased in both wholesale and retail divisions in the first quarter. Wholesale selling and administrative expenses were flat in dollars but the lower sales volumes this quarter caused the increase in costs as a percent of sales. This reflects the fixed nature of many of our wholesale selling and administrative expenses.
In our retail division, selling and administrative expenses as a percent of net sales were up due to higher rent and occupancy costs at our existing stores, as well as higher expenses in relation to sales at newer stores. This resulted in operating earnings as a percent of sales decreasing to 12.4% in 2008 from 13.6% in 2007.
As of March 31, 2008, our cash and marketable securities totaled $56.9 million with only $3 million of debt, resulting in a net cash position of $53.9 million. This compares with a net cash position of $56.2 million at December 31st, 2007.
In the first quarter of 2008 we generated $2.1 million of cash from operations and used $1 million of our cash for capital expenditures, $4.3 million to repurchase company stock, $1.3 million to pay dividends and we borrowed $2.5 million under our short-term credit facility. We still anticipate capital expenditures for 2008 to be approximately $2 million.
I will now turn the call over to Tom Florsheim, Jr. our Chairman and CEO.
Tom Florsheim, Jr.
Thanks John and good morning everyone. In our wholesale business this quarter, we felt the impact of the challenging economy across all three of our brands. Decreased discretionary income related to higher gas prices and general economic uncertainty translated to a tough environment at retail. Consumers tightened their belts and retailers reacted by focusing on inventory management.
January in particular, was a tough month. For many retailers, January is the last month of their fiscal year and in challenging times some retailers significantly reduce their buying in January to keep their yearend inventories at conservative levels. We felt this across all three of our brands this January.