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Weyco Group Inc (WEYS 3.47%)
Q1 2019 Earnings Call
May. 8, 2019, 11:00 a.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Welcome to the First Quarter 2019 Earnings Release Conference Call. My name is Paulette and I will be your operator for today's call. At this time, all participants are in a listen-only mode. (Operator Instructions)
I will now turn the call over to John Wittkowske, Chief Financial Officer. You may begin.
John Wittkowske -- Senior Vice President and Chief Financial Officer
Thank you. Good morning, everyone. Welcome to Weyco Group's first quarter conference call to discuss our 2019 first quarter earnings. On this call, with me today are Tom Florsheim, Jr., our Chairman and CEO; and John Florsheim, our President and COO.
Before we begin, I'd like to 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 as filed with the Securities and Exchange Commission. The 10-K identifies 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 and why we use them.
Net sales for the first quarter of 2019 were $74.1 million, up 7% compared to 2018 net sales of $69.5 million. Operating earnings were $5.1 million in 2019, an increase of 44% compared to $3.6 million in 2018. Net earnings attributable to Weyco Group were $4 million this quarter, a 33% increase compared to $3 million last year. Diluted earnings per share were $0.40 per share in the first quarter versus $0.29 per share last year.
In the North American wholesale segment, net sales for the first quarter increased 11% to $59.5 million. Licensing revenues were $707,000 in the first quarter of 2019 and $793,000 last year. Wholesale gross earnings were 34.3% of net sales in the first quarter compared to 33.1% of net sales in 2018. Wholesale operating earnings increased 54% to $5.2 million, up from $3.4 million last year, mainly due to higher sales.
Net sales of our North American retail segment which include our retail stores and US e-commerce sites were $5.6 million in the first quarter, up 13% compared to $4.9 million in last year's first quarter. Same-store sales, which include our US e-commerce sales, were up 13% for the quarter, due to higher sales on the Company's websites. Driven by higher online sales, retail earnings from operations rose to $483,000 this quarter, up from $206,000 last year.
Our other operations, which include the wholesale and retail businesses of Florsheim Australia and Florsheim Europe, had net sales of $9.1 million in the first quarter, down from $10.8 million in 2018. This decrease was primarily due to the weaker Australian dollar. Florsheim Australia's net sales in local currency were down 4% for the quarter with lower sales in both its retail and wholesale businesses as the Australian market remains challenging. Collectively, Florsheim Australia and Florsheim Europe had operating losses totaling $543,000 in the first quarter compared with operating losses of $29,000 in the first quarter of 2018. The decline between years was mainly due to lower sales at Florsheim Australia.
At March 31, 2019, our cash and marketable securities totaled $38.2 million and we had $3.7 million outstanding on our $60 million revolving line of credit. During the first three months of 2019, we generated $4.5 million of cash from operations. We used funds to pay $4.6 million in dividends, paid down $2.1 million on our line of credit, and repurchased $1.8 million of our company's stock. Additionally we had $981,000 of capital expenditures. We estimate that 2019 annual capital expenditures will be between $3.5 million and $4.5 million.
On May 2, 2019, our Board of Directors declared a cash dividend of $0.24 per share to all shareholders of record on May 31, 2019, payable on June 28, 2019. This represents an increase of 4% above the previous quarterly dividend rate of $0.23.
I would now like to turn the call over to Tom Florsheim, Jr., our Chairman and CEO.
Thomas Florsheim -- Chairman and Chief Executive Officer
Thanks, John, and good morning, everyone. Our overall North American wholesale sales for the quarter were up 11%. We had a terrific first quarter from a wholesale perspective with three of our four brands posting sizable increases. Given the overall tepid reports regarding the North American retail market, we feel very good about this performance. Our Florsheim business was up 25% for the quarter. On the heels of a 20% increase last year, Florsheim is off to a great start in 2019.
The Florsheim growth continues to be driven by strong new product performance, which has enabled the brand to garner more shelf space in key retailers. Stacy Adams sales were up 8% for the quarter. The brand had strong momentum at retail and, along with Florsheim, is one of the few dress and dress casual footwear success stories in the marketplace. First quarter growth was driven by the department and family shoe chain trade channels. In addition, based on social media posts and sales of certain occasion-oriented styles, Stacy Adams seems to be picking up a nice following in the prom and wedding consumer segments, reflecting the ability of the brand to extend to a younger consumer profile.
Our BOGS business was up 23%. Sales of work-oriented footwear as well as spring product helped deliver a nice quarter for the brand. In late 2017, we relaunched the BOGS Work program focusing on slip, a chemical resistant rubber and leather footwear as well as steel and composite toe styles with a seamless lightweight construction. The BOGS Work business has made steady progress and is now realizing strong year-over-year increases. Meanwhile, a long term objective of the BOGS team has been to diversify toward having more of a year around assortment. The nature of the work business contributes toward this end, but we are also very pleased with solid sales of our lightly insulated spring product and rain boots, which are doing extremely well at retail.
Nunn Bush sales were down 6%. While we feel encouraged by certain aspects of the Nunn Bush business, it was a disappointing quarter for the brand. From a product standpoint, the brand has successfully expanded its casual offerings. This better positions Nunn Bush to compete in an increasingly casual world. The brand is also seeing good growth in its wholesale e-commerce business, reflecting a strong consumer following. Nunn Bush's overall sales, however, have been impacted by retail consolidation and competition for private label brands. Over the years, we've experienced similar challenges and are confident that over time, we can get Nunn Bush back on a growth track.
Our North American retail segment was up 13% in term terms of same-store sales. Our strategy of investing in e-commerce while maintaining a limited number of flagships is working well. We will continue on this path and believe we should have a strong 2019 in our direct to consumer business.
Our Florsheim Australia businesses were down 4% local currency for the quarter. As mentioned in our previous conference call in March, we hired an experienced retail executive, Damian Walton, to lead our Florsheim Australia subsidiary, which is now 100% owned by Weyco Group. While our results were down in the first quarter in both our retail and wholesale businesses at Florsheim Australia, we believe that that change in leadership and the steps we are taking will turnaround this business and position it for a rebound in 2020. In the short time that Damian has been on-board, we've already worked to transfer some of our knowledge and tools for our US e-commerce business to jump start the Internet sales in the Australia market.
The turnaround in our brick and mortar end of the business which encompasses about 30 stores as well as the revitalization of our wholesale business will progress over the course of this year. Our inventory levels at March 31, 2019 were $66 million compared to $51 million a year ago. We have increased our inventory to support the sales growth in our brands that we are seeing in North America. Overall, gross margins were 38.8% versus 38.3% a year ago. Factory pricing remains stable as does the US dollar against the currencies where we source.
This concludes our formal remarks. Thank you for your interest in Weyco Group and I'd now like to open the call to your questions.
Questions and Answers:
Operator
Thank you. We will now begin the question-and-answer session. (Operator Instructions) And we are showing no questions at this time.
John Wittkowske -- Senior Vice President and Chief Financial Officer
Okay. Thank you for joining us on the conference call and have a great day.
Operator
Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating and you may now disconnect.
Duration: 11 minutes
Call participants:
John Wittkowske -- Senior Vice President and Chief Financial Officer
Thomas Florsheim -- Chairman and Chief Executive Officer
