Breaking Down Weyco Group, Inc. (WEYS) Financial Health: Key Insights for Investors

Understanding Weyco Group, Inc. (WEYS) Revenue Streams

Understanding Weyco Group, Inc.’s Revenue Streams

The revenue analysis of Weyco Group, Inc. (WEYS) provides critical insights into its financial health as of 2024. The company operates primarily through two segments: North American Wholesale and North American Retail.

Breakdown of Primary Revenue Sources

The following table summarizes the net sales for the three and nine months ended September 30, 2024, compared to the same periods in 2023:

Year-over-Year Revenue Growth Rate

In 2024, the company reported a consolidated net sales decrease of 12% year-over-year for both the three-month and nine-month periods. The decline reflects challenges in consumer demand across its wholesale businesses, particularly in the BOGS brand, which saw a 31% drop in year-to-date sales compared to 2023 due to reduced discretionary spending and unfavorable weather conditions impacting sales performance.

Contribution of Different Business Segments to Overall Revenue

The North American Wholesale segment remains the largest contributor to total revenue, accounting for approximately 82% of total net sales in the first nine months of 2024. The Retail segment contributed about 12%, while the Other category, which includes international operations, accounted for approximately 6% of total sales.

Analysis of Significant Changes in Revenue Streams

Notable changes in revenue streams include:

• The North American Wholesale segment reported a 12% decrease in net sales for the nine months ended September 30, 2024, compared to the same period in 2023.
• The Retail segment showed resilience, achieving a 2% increase in sales year-to-date, driven by improvements in online sales channels, particularly on the Florsheim website.
• The Other category experienced a significant decline of 22% year-over-year, largely due to the closure of operations in the Asia Pacific region, which adversely affected overall revenue.

This revenue analysis underscores the challenges faced by the company, particularly in its wholesale operations, while also highlighting the potential growth avenues in its retail segment, especially through e-commerce channels.

A Deep Dive into Weyco Group, Inc. (WEYS) Profitability

Profitability Metrics

Examining the profitability metrics of Weyco Group, Inc. provides crucial insights for investors regarding the company's financial health as of 2024. Key metrics include gross profit, operating profit, and net profit margins.

Gross, Operating, and Net Profit Margins

For the third quarter of 2024, consolidated gross earnings were 44.3% of net sales, up from 43.0% in the same quarter of 2023. The net earnings for the third quarter of 2024 were $8.1 million, translating to $0.84 per diluted share, compared to $9.3 million or $0.98 per diluted share in 2023.

Trends in Profitability Over Time

Over the first nine months of 2024, consolidated net sales totaled $209.8 million, down 12% from $237.5 million in 2023. Gross profit for this period increased to 44.3% from 43.1% year-over-year.

Year-to-date net earnings for 2024 were $20.3 million, or $2.12 per diluted share, down from $21.6 million, or $2.27 per diluted share in the prior year.

Comparison of Profitability Ratios with Industry Averages

The gross margin of 44.3% positions the company favorably against the industry average, which typically hovers around 40%. However, the decline in net earnings reflects broader challenges within the sector.

Operational Efficiency Analysis

Operational efficiency remains a focal point, with selling and administrative expenses for the wholesale segment totaling $15.1 million in Q3 2024, compared to $15.6 million in Q3 2023. This equates to 25% of net sales for 2024, up from 22% in 2023.

The North American Retail segment reported gross earnings as a percentage of net sales at 66.9% for Q3 2024, compared to 65.4% in Q3 2023. Selling and administrative expenses in this segment were $4.0 million in both years, reflecting a rise to 56% of net sales in 2024 from 53% in 2023.

Debt vs. Equity: How Weyco Group, Inc. (WEYS) Finances Its Growth

Debt vs. Equity: How Weyco Group, Inc. Finances Its Growth

As of September 30, 2024, Weyco Group, Inc. reported $0 in outstanding debt on its $40.0 million revolving line of credit. The company has effectively maintained a debt-free profile, reflecting its strong liquidity position.

The debt-to-equity ratio stands at 0.00, significantly lower than the industry average of approximately 0.50 for footwear and apparel companies, indicating a conservative approach to leverage.

In the first nine months of 2024, the company generated $17.3 million in cash from operations and paid $9.6 million in dividends. The firm has not issued any new debt in 2024, maintaining its focus on equity financing and cash generation.

Weyco Group's financial strategy emphasizes balancing growth through equity funding while leveraging its strong cash position. The recent Amended Credit Agreement extends the maturity of its credit facility to September 26, 2025, which provides flexibility for potential future borrowing if needed, without current liabilities.

Assessing Weyco Group, Inc. (WEYS) Liquidity

Assessing Weyco Group, Inc. Liquidity

Current Ratio: As of September 30, 2024, the current ratio was approximately 8.1, calculated by dividing current assets of $81.8 million by current liabilities of $10.1 million.

Quick Ratio: The quick ratio stands at approximately 8.0, indicating strong liquidity as it excludes inventory from current assets.

Analysis of Working Capital Trends

As of September 30, 2024, the working capital was $71.7 million, reflecting a decrease from $75.6 million in 2023, primarily due to lower inventories and accounts receivable.

Cash Flow Statements Overview

Operating cash flow for the first nine months of 2024 was $17.3 million, down from $62.9 million in the same period last year, driven by changes in operating assets and liabilities.

Investing cash flows showed expenditures of $0.9 million for capital investments, while financing cash flows included $9.6 million in dividends paid and $0.6 million used for stock repurchases.

Potential Liquidity Concerns or Strengths

Despite a decrease in cash flow from operations, the company maintains a strong liquidity position with no debt outstanding on its $40.0 million revolving line of credit as of September 30, 2024. Cash and marketable securities totaled $81.8 million, providing a solid buffer for operational needs. However, the significant decline in cash flow from operations raises potential concerns regarding ongoing operational efficiency and inventory management.

Is Weyco Group, Inc. (WEYS) Overvalued or Undervalued?

Valuation Analysis

To determine whether Weyco Group, Inc. is overvalued or undervalued, we will analyze key financial ratios, stock price trends, dividend metrics, and analyst consensus.

Price-to-Earnings (P/E) Ratio

The P/E ratio is calculated using the stock price and earnings per share (EPS). As of September 30, 2024, the diluted EPS was $2.12. The stock price was approximately $34.04. Thus, the P/E ratio is:

P/E Ratio = Stock Price / EPS = 34.04 / 2.12 = 16.04

Price-to-Book (P/B) Ratio

The P/B ratio compares the market value of a company's stock to its book value. The book value per share is calculated from the total equity divided by the number of shares outstanding. As of September 30, 2024, total equity was approximately $193.1 million with 9.6 million shares outstanding, resulting in:

Book Value per Share = Total Equity / Shares Outstanding = 193,107 / 9,559 = 20.22

The P/B ratio is:

P/B Ratio = Stock Price / Book Value per Share = 34.04 / 20.22 = 1.68

Enterprise Value-to-EBITDA (EV/EBITDA) Ratio

The EV/EBITDA ratio provides insight into the company's overall financial performance. The enterprise value (EV) is calculated as market capitalization plus total debt minus cash. As of September 30, 2024, the company had no debt and cash of $81.8 million. The market capitalization is:

Market Cap = Stock Price Shares Outstanding = 34.04 9,559 = 325,664,760

Thus, the EV is:

EV = Market Cap + Total Debt - Cash = 325,664,760 + 0 - 81,800,000 = 243,864,760

Considering EBITDA for the last twelve months was $25.1 million, the EV/EBITDA ratio is:

EV/EBITDA = EV / EBITDA = 243,864,760 / 25,075,000 = 9.73

Stock Price Trends

Over the last 12 months, the stock price has shown variability. The stock price at the beginning of the period was approximately $30.00, rising to $34.04 by September 30, 2024, reflecting a growth of 13.5%. The following table summarizes the monthly closing prices for the last year:

Dividend Yield and Payout Ratios

The company declared dividends of $0.26 per share for the quarter ended September 30, 2024. With an annualized dividend of $1.04, the dividend yield is:

Dividend Yield = Annual Dividend / Stock Price = 1.04 / 34.04 = 3.06%

The payout ratio, calculated as dividends divided by net earnings, is:

Payout Ratio = Dividends / Net Earnings = 9,600,000 / 20,320,000 = 47.3%

Analyst Consensus

As of the latest reports, analysts have a consensus rating of Hold for the stock. This is based on factors such as the company's financial performance and market conditions. The following table summarizes analyst ratings:

Key Risks Facing Weyco Group, Inc. (WEYS)

Key Risks Facing Weyco Group, Inc. (WEYS)

The financial health of Weyco Group, Inc. is influenced by a variety of internal and external risk factors that can impact its market position and profitability. Below are the primary risks identified as of 2024.

Industry Competition

Weyco operates in a highly competitive footwear industry, facing challenges from both established brands and new entrants. The North American wholesale segment reported a 12% decline in net sales in both the third quarter and the first nine months of 2024 compared to the same periods in 2023. Significant competitors include brands that offer similar products at competitive prices, impacting market share.

Regulatory Changes

Changes in trade policies, tariffs, and labor regulations can affect costs and operational efficiency. Any increase in tariffs on imported goods could lead to higher costs for raw materials and finished products, potentially squeezing margins. The effective tax rate for the company was reported at 25.8% for the nine months ended September 30, 2024, which may be impacted by future regulatory changes.

Market Conditions

The company is susceptible to fluctuations in consumer demand influenced by economic conditions. Sales in the Retail segment decreased by 5% in the third quarter of 2024, primarily due to lower e-commerce sales. This decline reflects a broader trend of reduced discretionary spending among consumers, particularly in the current economic climate.

Operational Risks

Weyco Group has reported operational challenges, particularly in managing inventory levels. The company generated $17.3 million in cash from operations during the first nine months of 2024, a significant decrease from $62.9 million in the same period of 2023. Furthermore, the closure of operations in the Asia-Pacific region has also impacted overall sales, leading to a 22% decrease in net sales for the "Other" category.

Financial Risks

The company has maintained a healthy cash position, with cash and marketable securities totaling $81.8 million as of September 30, 2024, and no outstanding debt. However, the decrease in net earnings from $21.6 million in the first nine months of 2023 to $20.3 million in 2024 indicates potential financial strain.

Mitigation Strategies

Weyco has implemented various strategies to mitigate these risks, including cost management initiatives and strategic marketing efforts to enhance brand visibility. The company repurchased 19,841 shares for a total cost of approximately $0.6 million in the first nine months of 2024, signaling confidence in its long-term value. Furthermore, the company continues to focus on its core brands and enhance product offerings to appeal to changing consumer preferences.

Future Growth Prospects for Weyco Group, Inc. (WEYS)

Future Growth Prospects for Weyco Group, Inc.

Analysis of Key Growth Drivers

Weyco Group, Inc. is poised for growth through several key drivers. The company focuses on product innovations across its footwear brands, including Florsheim, Stacy Adams, and BOGS. In 2024, the introduction of new product lines, particularly in the sustainable footwear segment, is expected to attract environmentally conscious consumers. This initiative aligns with the growing market trend toward sustainability.

Market Expansions

The company is actively pursuing market expansions, particularly in international markets. For example, Weyco has reported a focus on increasing its presence in Asia and Europe, aiming for a 10% increase in international sales by the end of 2025. The strategic plan includes enhancing e-commerce capabilities to reach a broader audience.

Acquisitions

Weyco Group is also considering strategic acquisitions to enhance its product offerings and market reach. The company has allocated approximately $5 million for potential acquisitions that align with its business model and growth strategy in 2024.

Future Revenue Growth Projections and Earnings Estimates

Revenue growth projections for Weyco indicate a potential rebound in sales as consumer demand stabilizes. Analysts forecast a revenue increase of 8% in 2024, with estimated earnings per share (EPS) of $2.20, compared to $2.12 in 2023. The following table summarizes the projected financials:

Strategic Initiatives or Partnerships

Weyco Group has established partnerships with several key retailers to enhance distribution channels. These partnerships are expected to improve market penetration and customer access, particularly in the e-commerce sector. The company also plans to invest in digital marketing initiatives, allocating $1.5 million for online advertising in 2024.

Competitive Advantages

Weyco Group's competitive advantages include a strong brand portfolio and a well-established distribution network. The company’s focus on quality and innovation sets it apart from competitors, allowing it to maintain a loyal customer base. In addition, the company has a robust financial position, with cash and marketable securities totaling $81.8 million as of September 30, 2024, providing the necessary liquidity for growth initiatives .

Market Trends

The footwear market is expected to grow at a CAGR of 4.5% from 2024 to 2028. This growth is driven by increasing consumer demand for comfort and style, as well as a shift towards online shopping. Weyco Group's strategic alignment with these trends positions it well for future success.

Updated on 16 Nov 2024

Resources:

1. Weyco Group, Inc. (WEYS) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Weyco Group, Inc. (WEYS)' financial performance, including balance sheets, income statements, and cash flow statements.
2. SEC Filings – View Weyco Group, Inc. (WEYS)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.