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Weyco Group Inc (WEYS 1.96%)
Q4Â 2019 Earnings Call
Mar 11, 2020, 11:00 a.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Good morning, and welcome to the Fourth Quarter and Full Year 2019 Earnings Release Conference Call. My name is Senora, and I'll be the operator for today's call. At this time, all participants are in a listen only mode. Later we will conduct a question and answer session. [Operator Instructions]
I'll now turn the call over to Mr. John Wittkowske, CFO. John, you may begin.
John F. Wittkowske -- Senior Vice President, Chief Financial Officer and Secretary
Thank you. Good morning, everyone, and welcome to our fourth quarter conference call. On this call with me today are Tom Florsheim Jr., our Chairman and CEO; and John Florsheim, our President and COO.
Before we begin to discuss the results of the quarter and for the year, 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 from these statements. We refer you to Weyco Group's most recent Form 10-K and it's other SEC filings with the SEC, which identify important factors and risks 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, including why we use them and reconciliations to the corresponding GAAP data.
Net sales for the fourth quarter of 2019 were $86.9 million, down 3% compared to last year's fourth quarter net sales of $89.6 million. Operating earnings were $11.5 million in the fourth quarter of 2019, down 3% from $11.9 million in the fourth quarter of 2018. Net earnings attributable to Weyco group totaled $8.8 million this quarter, a decrease of 8% from $9.6 million last year. Diluted earnings per share were $0.90 per share in the fourth quarter of 2019 and $0.93 per share in 2018.
In the North American wholesale segment, net sales for the fourth quarter were $68.8 million, down 3% compared with $70.8 million last year. Licensing revenues were $1.1 million this quarter, and $734,000 last year. wholesale gross earnings were 40.4% of net sales in the fourth quarter of 2019, compared with 40% of net sales in the last year -- in last year's fourth quarter. Despite the decrease in fourth quarter sales, wholesale operating earnings increased 5% to $10.9 million this quarter from $10.4 million in 2018. This increase was largely the result of lower selling and administrative expenses.
Net sales of our North American retail segment, which include both our retail stores and U.S. e-commerce sales were $9.1 million for the quarter, up 11%, compared with the $8.2 million last year. Same store sales, which include the U.S. e-comm sales were up 9% for the quarter, due mainly to higher sales on the Company's websites. Retail operating earnings were $1.5 million this quarter and $1.9 million last year. The decrease between periods was primarily due to lower operating results at the Company's brick and mortar locations and higher advertising costs from the Company's e-commerce businesses.
Our other operations, which include the wholesale and retail businesses of Florsheim Australia and Florsheim Europe had net sales of $9 million in the quarter, down 15% compared with $10.6 million in 2018. This decrease was primarily due to a 15% decline in net sales at Florsheim Australia with sales down in both its wholesale and retail businesses, due to the challenging retail environment in Australia and Asia. The weaker Australian dollar -- excuse me, relative to the U.S. dollar also contributed to the decrease, as Florsheim Australia's net sales in local currency were only down 10% for the quarter.
Collectively, Florsheim Australia and Florsheim Europe had operating losses totaling $854,000 for the quarter, compared to operating losses of $333,000 in the same period last year. The increase in operating losses between years was primarily due to lower sales and higher operating costs in Florsheim Australia's retail business. In the fourth quarter of 2019, Florsheim Australia's operating expenses include an approximately $500,000 of costs to exit unprofitable stores.
Our overall net sales were $304 million in 2019, an increase of 2% compared with $298 million in 2018. Earnings from operations were $27 million in 2019, up 6% from $25.5 million last year. Net earnings attributable to Weyco Group rose 2% to $20.9 million in 2019, up from $20.5 million. Diluted earnings per share were $2.10 per share in 2019, up from $1.97 per share in 2018.
In the wholesale segment, net sales for the year were $242 million, up 4% from $233 million in 2018. Licensing revenues were $3 million this year and $2.5 million last year. Wholesale gross earnings as a percent of net sales were 36.6% in 2019, up from 35.6% last year. Operating earnings for the wholesale segment increased 20% to $27.8 million this year, up from $23.1 million last year, due primarily to higher sales and gross margins.
In our retail segment, net sales were $25.2 million, up 11% compared with $22.7 million in 2018. Same-store sales were up 10% for the year, due mainly to increased sales on the Company's websites. Earnings from operations for the retail segment were $2.8 million, up 2% from $2.7 million in 2018, due mainly to higher e-commerce sales.
Our other operations had net sales of $36.7 million, down 13% compared to $42.3 million. The decrease was primarily due to lower net sales at Florsheim Australia. Florsheim Australia's net sales were down 12% for the year, with lower sales in both its wholesale and retail businesses, due again to the challenging retail environment in Australia and Asia. The weaker Australian dollar relative to the U.S. dollar also contributed to the decrease as Florsheim Australia's net sales in local currency were only down 5% for the year.
Collectively, Florsheim Australia and Florsheim Europe had operating losses totaling $3.5 million in 2019, compared with operating losses of $379,000 in 2018. This decrease was primarily due to lower sales and gross margins and higher selling and administrative expenses at Florsheim Australia. In 2019, Florsheim Australia's operating expenses included $940,000 of costs to exit unprofitable stores. Additionally, those stores generated $350,000 of Florsheim Australia's operating losses in 2019.
In 2019, the U.S. government announced it would impose an additional 15% tariff on footwear sourced from China. The tariff on leather footwear, which primarily impacts the Florsheim, Stacy Adams and Nunn Bush brands took effect on September 1st and was subsequently reduced to 7.5% on February 14, 2020. The tariff on rubber and other non-leather footwear, which primarily impacts the BOGS brand was expected to take effect on December 15, but never commenced as the U.S. government suspended indefinitely.
For the fourth quarter and full-year 2019, the tariff on leather footwear did not have a material impact on the Company's results of operations, because most of the inventories sold in 2019 was received before the tariff took effect. For 2020, in an effort to mitigate the overall impact of the tariff cost increases, the Company has negotiated wholesale price increases with many of its customers and price reductions from many of its Chinese suppliers.
At December 31st, 2019, our cash and marketable securities totaled $31.5 million and we had $7 million outstanding on our $60 million revolving line of credit. During 2019, we generated $9.4 million of cash from operations and drew $1.2 million on our line of credit. We repurchased $5.6 million of our Company's stock and paid $9.4 million in dividends. We also spent $7.4 million on capital expenditures, primarily due to the expansion of office space within our corporate headquarters. This project is expected to be completed in April 2020. We expect annual capital expenditures will be between $3 million and $4 million in 2020.
On March 10th, 2020, the company's Board of Directors declared a quarterly cash dividend of $0.24 per share to all shareholders of record on March 20th, 2020 and payable on March 31st.
I would now like to turn the call over to Tom Florsheim, Jr., Our Chairman and CEO.
Thomas W. Florsheim, Jr. -- Chairman and Chief Executive Officer
Thank you, John, and good morning, everyone. Our North American wholesale business was down 3% for the quarter and up 4% for the year. Excuse me, it was a positive, but somewhat mixed fourth quarter for our wholesale business. Overall, we performed well as we picked up share in the markets where we compete. At the brand level, we had a wide range of results that in part reflected both our strengths, as well as the opportunities in our business as we enter 2020.
Our Florsheim wholesale division was up 9% in the fourth quarter and 17% for the year. We believe that this is an outstanding result especially considering that this increase is on top of the 20% sales growth the Florsheim brand registered in 2018. Moreover, as primarily addressed a dress casual brand, Florsheim achieved this growth in a category that shrink over 5% according to market statistics. The brand has performed extremely well in terms of developing new product that resonates with consumers and is recognized for the value it offers relative to some higher priced competitors. As we move forward, Florsheim is doubling down on the expansion of its casual assortment in order to take advantage of brand momentum and address the need to diversify its assortment to align with fast changing lifestyles.
BOGS sales were down 5% in the fourth quarter and up 8% for the year. We believe that warm temperatures and lower precipitation across large parts of Canada and the United States resulted in a slower finish to BOGS here. Apart from the fourth quarter sales decline, we are pleased with our strong single-digit increase in 2019 and the progress we continued to make toward becoming less weather-dependent in the future with more casual lifestyle-oriented footwear, as well as footwear in the work category. We continue to see significant upside brand based on the success we're having [Indecipherable]. Excuse me.
As our Stacy Adams business was down 11% for the quarter and 3% for the year -- oh, I'm sorry. Excuse me. Our Stacy Adams business was down 11% for the quarter and 3% for the year. Stacy Adams decrease was in large part driven by a decline in shipments to the shoe chain trade channel. The vast majority of the Stacy Adams product range falls primarily into the dress shoe segment. And while our sales performance has been very good, retailers, particularly in the chain store channel, are narrowing their assortment in dress footwear. As a result, placing fresh new footwear is challenging unless it has a casual orientation. Similar to Florsheim, Stacy Adams is increasing the number of casual styles within its mix as part of a long-term strategy to have its fashion aesthetic mirror to changes in how consumers dress. We believe the key to success is maintaining the unique Stacy Adams point of view, as we transition the brand to being more casual over time. We believe that we're making progress toward this end, but are in the early innings of this process.
Our Nunn Bush business decreased 7% for the quarter and 9% for the year. As discussed in previous conference calls, Nunn Bush's loss is the direct result of challenges faced in the mid-tier department store segment. Our belief is that the Nunn Bush business will return to growth mode in 2020. The brand is performing well at retail and he has also made great progress in the e-commerce trade channel. While there are still headwinds facing some of Nunn Bush's key retail partners, the brand has renewed momentum and we are optimistic about this year.
Same-store sales in our North American retail segment, which includes U.S. e-commerce sales were up 9% in the fourth quarter and 10% for the year. The increase was entirely driven by our e-commerce sales. We continued to invest in consumer acquisition tools and programs to build our North American Internet business, as well as e-commerce sales in other markets, such as Australia and Europe. With our solid foundation and improving capabilities, we believe we are positioned well to drive e-commerce's growth.
Net sales in our overseas business decreased 15% for the fourth quarter and 13% for the year. Florsheim [Phonetic] sales reflected an overhaul of our business in Australia, as 2019 has been a year of transition for Florsheim in that market. We have worked through a significant amount of obsolete inventory in both women's and men's footwear and have reset our stores with a more manageable level of SKUs. We have also taken steps to prune unprofitable stores, as well as look for opportunities with more favorable leases within our store network.
In February of this year, we relaunched a more concise women's line focused on comfort, which we believe better reflects the essence of the Florsheim brand. In men's, we have curated assortment to highlight global product, as well as a shift toward more casual footwear. All in all, our new leadership in Australia has made tremendous amount -- a tremendous amount of progress in a short period of time, and we anticipate improved performance in 2020. Within our International business, our sales proportion of Asia Pacific are also being impacted by a difficult retail environment.
Overall, gross margins were 40.8% in 2019 versus 40.2% last year. This increase was driven by an increase in North American wholesale margins, which were 36.6% in 2019, compared to 35.6% in 2018. We have been focused on price negotiations with our factories in China to offset some of the cost of the additional tariff. While we see -- while we will see an impact from the 15% tariff in the first two quarters of 2020, we believe that with the reduction of the tariff to 7.5%, along with working together with our suppliers and customers, margins will not be materially affected over the long term.
Our inventories at December 31st, 2019 were $87 million compared to $73 million a year ago. Our inventories are higher than last year, because we brought in as much inventory as possible on core, shoes and boots before the tariffs went into effect. Doing this helped us maintain our margins and as it turned out, with production delays that are being caused by the Corona virus, we believe that we are well positioned to sustain any short-term interruptions in our supply chain. It is unknown how long the impact of this virus will last, which makes it impossible to make predictions regarding the full year.
This concludes our formal remarks. Thank you for your interest in Weyco Group. I would now like to open the call up to your questions.
Questions and Answers:
Operator
Absolutely. Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Chris Von Hammersmark [Phonetic]. Please go ahead. Your line is open.
Chris Von Hammersmark
Yeah. How are you guys doing?
Thomas W. Florsheim, Jr. -- Chairman and Chief Executive Officer
Hi, Chris.
Chris Von Hammersmark
Yeah. So I have two questions. The first one, you mentioned the coronavirus. Is there any specific details about that, like, are there any like factories that are on Wuhan or other factories around China that have actually been shut down where the supply change has been cut-off? And then the second question is the stock buyback. You mentioned, I think, two quarters ago, how many shares you guys were going to buyback? Can you tell us like over -- what's your stock buyback program looking like over the next six months to a year? Thank you.
Thomas W. Florsheim, Jr. -- Chairman and Chief Executive Officer
Sure. This is Tom. I'm going to take the first question, and then I'm going to turn the second question over to John Wittkowske, our CFO. So regarding the factories, we don't have any factories in Hubei province. We do have factories around -- and several different provinces around China. I think it's important for everybody to know that during the Chinese New Year, [Technical Issues] So this year, Chinese New Year was January 28th, and so the factories basically shut down, no matter what regardless of any kind of virus. January 15th and then people come back around February 15th, because most of the workers at the factories in China come from other provinces and they go home for Chinese New Year. So they take a modification basically.
So this year with the coronavirus, the government in China extended the Chinese New Year vacation by one or two weeks, and so basically, to end of February. And we've been getting reports -- I've been talking to China almost every day -- communicating with China everyday, I should say, and almost every single factory that we make shoes in is open again. And the challenging part is getting all the workers back, because they have very -- they've put in restrictions, so that when people come back from their provinces, they can't just start work the next day, they put them in kind of a quarantine for a couple of weeks. But our factories have 50% of the workers back to 90% of the workers. And so we're making shoes again, we're getting shipments again. So as long as things stand or control in China, we actually got back to work sooner than I thought, and we're seeing some good progress.
And so does that answer your first question?
Chris Von Hammersmark
Yes.
Thomas W. Florsheim, Jr. -- Chairman and Chief Executive Officer
Okay. So John, do you want to answer the stock buyback?
John F. Wittkowske -- Senior Vice President, Chief Financial Officer and Secretary
Sure. Is your general question on the stock buyback, what are we doing currently? Is that what you would like to know?
Chris Von Hammersmark
I would like to know what do you have in place? Because two quarters ago, you had mentioned in the conference call, you said an amount -- a share amount, and you said a share dollar amount that you had in place. And also, has there been any changes in that?
John F. Wittkowske -- Senior Vice President, Chief Financial Officer and Secretary
Yeah, there has been no changes in that, and we are active in the market right now on our stock buyback program. Given the price of the stock, we feel it's very attractive, and we are in the market on an active share buyback program. The global amounts have not changed from the amounts disclosed and every quarter. Every quarter, there is an update in the 10-Q and the 10-K, and there will be one in the 10-K that gets filed tomorrow. There is always an update on the amount of shares that are available to be repurchased under our plan, and how many we have repurchased. So that will be in the 10-K. There has been no increase nor decrease in the global amount that we have authorized to buyback, and we are actively in the market. Now there are limitations on how much we can buy back based on our trading volume that's set by the SEC, and we are we're buying those.
Operator
Thank you. Our next question comes from John Deysher. Please go ahead. Your line is open.
John Deysher -- Pinnacle -- Analyst
Good morning, everyone.
Thomas W. Florsheim, Jr. -- Chairman and Chief Executive Officer
Good morning.
John Deysher -- Pinnacle -- Analyst
On the share buyback, just to clarify, you said you repurchased $5.6 million worth. How many shares is that?
Thomas W. Florsheim, Jr. -- Chairman and Chief Executive Officer
Let me see, if I can get.
John F. Wittkowske -- Senior Vice President, Chief Financial Officer and Secretary
Let me see, if I have that for you right off the top here. I can -- give me one second. Here is the 10-K.
Thomas W. Florsheim, Jr. -- Chairman and Chief Executive Officer
Here John. Here is the 10-K.
John F. Wittkowske -- Senior Vice President, Chief Financial Officer and Secretary
Give me one second, I'll tell you that number.
Thomas W. Florsheim, Jr. -- Chairman and Chief Executive Officer
I actually got it, but just to confirm [Technical Issues].
John F. Wittkowske -- Senior Vice President, Chief Financial Officer and Secretary
Let's see. It's right here. Okay. We bought back 223,000 shares in 2019.
John Deysher -- Pinnacle -- Analyst
And what was the average price? That was the question.
John F. Wittkowske -- Senior Vice President, Chief Financial Officer and Secretary
You have definitely estimate shares. Like do the math and get the average price. The average price is about $24.
John Deysher -- Pinnacle -- Analyst
Okay. Fine. And the status of that buyback will be disclosed in the 10-K tomorrow?
John F. Wittkowske -- Senior Vice President, Chief Financial Officer and Secretary
Yes. It will have a summary of the -- well, again 223,000 shares have been repurchased, so that's -- and kind of given you the number, you will see that and it will show that there are -- what's the additional total number of buyback shares are [Speech Overlap].
Thomas W. Florsheim, Jr. -- Chairman and Chief Executive Officer
I mean, as of March 5th, we're authorized to buyback 412,520 shares still under our buyback program, which gives us plenty of...
John F. Wittkowske -- Senior Vice President, Chief Financial Officer and Secretary
Right.
John Deysher -- Pinnacle -- Analyst
Okay. Great. That's helpful. Regarding China, last year, what percentage of wholesale shipments came from China? I think it had previously been around 70%. And what do you anticipate it to be this year? Because who knows if the tariffs could come back or not, and I was just curious how you're doing with the migration to get away from China?
Thomas W. Florsheim, Jr. -- Chairman and Chief Executive Officer
Yeah, I mean, we anticipate that that percentage will go down, although -- it's going to take a number of years for us to really move that number a lot. So you may see it go down to maybe the middle 60s, maybe low 60%. Our position on this is that, we started production in other countries. We've already had a long-term relationships with many of the factories in India and we are increasing production there. We've been in Vietnam for a while, and we're continuing there.
We opened a new facility in Cambodia. We've ramped up our production in the Dominican Republic. But some of our very best factories are in China and we have long-term relationships there. They have been very good partners through this whole situation with the tariffs, and we believe that it's in our best interest to move production very slowly, because we're seeing competitors honestly move production very quickly. Like overnight saying, we really don't want to be in China anymore and picking up their production and just moving very quickly to other countries, that is a recipe in our opinion for disaster. We have developed over the years great resourcing in China. Some of our best shoes are made there. And the last thing we feel is good for a long-term.
Health is -- in our brands is to have quality issues. And so, first and foremost, we're making sure that we are able to maintain our quality standards. With that said, our long-term strategy is to get our dependency down to China. In China, we're not sure where that number is going to land, but our guess would be 50% or maybe a little bit less, would be a lot healthier. But one of the things that you're seeing right now, and this is just kind of a -- indication of how interconnected all of these countries are, as that people that move their production to other places like Vietnam, quality manufacturers have moved their production to Bangladesh. They're having interruption now, because a lot of the components or raw materials still come from China. And so the answer to insulating yourself from things that happen in China, it's not necessarily going to be having production out of there. While we feel that it is best to diversify over the long term, we're just going to be very methodical about it.
John Deysher -- Pinnacle -- Analyst
That makes total sense. So last year was still about the same 68% to 70% that came out of China and and you see that perhaps going down to 60% over the next several years. Do I have [Speech Overlap].
Thomas W. Florsheim, Jr. -- Chairman and Chief Executive Officer
Yeah, like the lowest -- I would say the low 60s, and that 60s in 2020, yeah. And then more -- like I would -- I'm guessing here, because there is so many things in play right now with -- our production obviously has gotten a slow start after Chinese New Year. And we also brought in a lot of production from China in 2019 trying to beat the tariff. So I would guess, it will be this year 63%, 64%, and then in 2021, we're going to continue this movement into other countries. And so I would guess it would be 60% or a little bit lower. We'd start breaking into the 50% range, and the plan is over several years to get that down to around 50%.
John Deysher -- Pinnacle -- Analyst
Okay. Good. That makes sense. Talking about Australia for a second, I was a little surprised at the magnitude of the operating loss of $3.5 million. I know that includes Europe, but my guess is most of that came from Australia. And I'm just curious, are we where we want to be in Australia at this point or is 2020 going to be another transition year for us?
Thomas W. Florsheim, Jr. -- Chairman and Chief Executive Officer
John, do you want to take that?
John F. Wittkowske -- Senior Vice President, Chief Financial Officer and Secretary
Yeah. I mean I think, we're going to make good progress in 2020. It's Australia, it's also the Pacific Rim, because we had to deal with the forecast in Hong Kong [Phonetic], which had an impact on us. And also now with the coronavirus, which is affecting 2020 obviously. And -- but in Australia, we took over 100% joint -- all 100% ownership. Previously, it was a joint venture. And we ended up seeing a lot of things we didn't expect once we took that over. And part of that was a fair amount of obsolete inventory that was mentioned in the conference call script. And I think it has been mentioned in previous conference calls as well.
And we worked through that in 2019 to a significant degree. We've got still a ways to go. So there will be some residual impact in 2020. The good news is, we've hired new management. We're really happy with the new President we have in place in Florsheim Australia, Damian Walton. He has hired a new team of people. We just feel we're on the right path. So the performance not -- might not be exactly where we want to be in 2020, but it's going to be significantly better than what it was in 2019.
John Deysher -- Pinnacle -- Analyst
Okay. That's encouraging. How many stores did you end up within Australia at year-end? And how many do you think you will have at the end of 2020 in Australia?
Thomas W. Florsheim, Jr. -- Chairman and Chief Executive Officer
Do you have that excess number?
John F. Wittkowske -- Senior Vice President, Chief Financial Officer and Secretary
[Indecipherable] Yeah. And we are reviewing the store network. What we've done is we've gotten out of some of the most unprofitable stores. And then in analyzing the store network, we're seeing where we have gaps, like we didn't have enough outlet stores for instance. And from a geographic standpoint, where there's opportunity and where -- from a business model perspective, we're not entering into leases unless we feel that we can make money in store. And so I think, there's more discipline around our total approach.
One thing, we ran into, at the end of 2019, is the loss of a significant wholesale customer in Australia. So we're very focused on expand -- rekindling that relationship and also expanding our Australian wholesale business, which will help overall with the total operation.
Thomas W. Florsheim, Jr. -- Chairman and Chief Executive Officer
And one area, where we had good success in 2019 is in the commerce trade channel. We've really grown our own website significantly, and we're seeing that growth continue into 2020, and so that is going to help contribute to overall profitability down there.
John F. Wittkowske -- Senior Vice President, Chief Financial Officer and Secretary
Some of the tools that we use in the U.S., where we've had significant growth -- I think we had growth back to back years in the U.S. over 20%. We moved those down to Australia, and we feel given the Florsheim's market position in Australia, there is a lot of upside with e-commerce.
John Deysher -- Pinnacle -- Analyst
Okay. Good. And then finally -- go ahead.
Thomas W. Florsheim, Jr. -- Chairman and Chief Executive Officer
What John...
John F. Wittkowske -- Senior Vice President, Chief Financial Officer and Secretary
I was going to mention that that the 33 estimated number of stores -- we had mentioned those 33 stores in Australia, the exact number for you. And as I mentioned on the e-commerce side, we've seen significant growth in e-commerce there, 70% last year. So we are encouraged by that.
John Deysher -- Pinnacle -- Analyst
Okay. The loss on the wholesale customer, was that on price, on selection -- where did that wholesale customer go?
John F. Wittkowske -- Senior Vice President, Chief Financial Officer and Secretary
It was...
Thomas W. Florsheim, Jr. -- Chairman and Chief Executive Officer
[Speech Overlap] say, it was on the terms of the business. And so it was a business that wasn't profitable, and we basically try to negotiate terms that would be favorable to both and it did not go as we had hoped, but the conversation continued. And so, it's a account that we were one of their biggest brands for many, many years. We've performed very well there and I think that long term we're hopeful that we can, as john used the word, rekindle the relationship.
And so we'll see how that goes, but it was just -- we're basically applying the same disciplines to the business in Australia that we have applied for literally ever in the U.S. And so with our wholesale business here, which is the majority of our business, we've always been able to run profitable businesses. And so we'll applying those same standards down there, and so it's going to take us a little bit of time, but we feel that that we have a model that is profitable in the U.S. and that over time that model will be profitable in Australia.
John Deysher -- Pinnacle -- Analyst
Okay. That makes total sense. And then finally, on the U.S. retail side, how many stores did you end the year with? And will you be closing any stores in 2020?
Thomas W. Florsheim, Jr. -- Chairman and Chief Executive Officer
We ended the year with eight stores. Add in 2020. I think there is one more lease coming up, and that store will close. And then -- yeah, I mean that basically I think answers the question.
John Deysher -- Pinnacle -- Analyst
Seven is where you want to be on the retail side?
Thomas W. Florsheim, Jr. -- Chairman and Chief Executive Officer
No, I think that we're going to continue to evaluate it, just like we're doing in Australia. As these leases come up, in the past, the power in the leasing arrangement or in the lease term has been very much on the side of the mall or the person that we see in the space. And so in some cases in the U.S., just like in Australia, we entered into leases that when we look back at it are not favorable to us, and especially, given that mall traffic continues to decline. So as each lease comes up, we're having discussions with the lessor and try to negotiate better terms. If those terms allows to make money in a location, then we'll keep that location open. If those terms do not allow us to make money, then we're going to make the business decision to close.
And the power has shifted though, because in a lot of the malls, as leases come up, retailers are leaving, and in many cases retailers are leaving before that, because they're going out of business. And so the part of the shift -- there has been a shift in power. So we'll see how that goes. In the U.S., in particular, we're a very small -- probably, we have a very small retail presence, so we don't have a tremendous amount of power. But we're going to -- we believe that marketing -- there is a marketing benefit to having some Florsheim stores, but only if they can make money. So we are in -- we're going to close the stores if it doesn't look like it's going to be a profitable venture.
John Deysher -- Pinnacle -- Analyst
Great. That makes total...
Thomas W. Florsheim, Jr. -- Chairman and Chief Executive Officer
Hello.
John F. Wittkowske -- Senior Vice President, Chief Financial Officer and Secretary
Hello.
John Deysher -- Pinnacle -- Analyst
Yeah. Thanks for your comments.
John F. Wittkowske -- Senior Vice President, Chief Financial Officer and Secretary
Okay. Thank you.
Operator
Thank you. [Operator Instructions] And I'm not showing any further questions at this time. I'd like to turn the call back over to the host.
John F. Wittkowske -- Senior Vice President, Chief Financial Officer and Secretary
Thank you, everyone for your questions. And we will talk with you after the first quarter. Have a great day.
Operator
[Operator Closing Remarks]
Duration: 40 minutes
Call participants:
John F. Wittkowske -- Senior Vice President, Chief Financial Officer and Secretary
Thomas W. Florsheim, Jr. -- Chairman and Chief Executive Officer
Chris Von Hammersmark
John Deysher -- Pinnacle -- Analyst
