Bogs did not manage to reverse its fortunes during the latest quarter, after several months of decline. The brand's revenues for the three months ended Dec. 31 fell by 10 percent from the year-ago quarter. The management said that the fourth quarter looked very promising during the early November cold snap in the U.S., but then it fell off during a warm month of December with no precipitation. In addition, the brand's parent company, Weyco Group, stressed that U.S. retailers are taking a very conservative approach toward seasonal inventory by limiting replenishment in order to end the season without significant markdowns.
Bogs' problems dragged down Weyco's total revenues from the North American wholesale segment, which decreased by 0.5 percent to $61.4 million. Sales of the Stacy Adams and Florsheim brands grew by 10 and 12 percent respectively. However, Nunn Bush's sales were down by 5 percent for the quarter, primarily due to lower sales to department stores. However, the gross margin in this segment gained 2.7 percentage points to 37.4 percent, partly due to tighter management of inventories, resulting in a lower percentage of obsolete products.
Group revenues declined by 2.2 percent from the year-ago quarter to $80.3 million. However, the company said it managed to improve the gross margin by being more conservative on seasonal items and putting more inventory behind best-selling core styles. As a result, the gross margin advanced by 1.6 percentage points to 42.2 percent. The operating margin rose by 2.1 percentage points to 12.8 percent. Net income dipped by 1.2 percent to $8.1 million, but it advanced by 8 percent when adjusted to exclude a charge in the latest period due to a tax reform, an impairment charge in the year-ago period and the year-ago benefit from a tax reversal.
For the full financial year, Weyco's sales were down by 4.4 percent to $283.7 million. The gross margin improved by 1.3 percentage points to 39.0 percent. Net income was flat at $16.5 million, while adjusted net income jumped by 54 percent. The management described 2017 as a difficult retail year in footwear and apparel, adding that part of the challenge for the company is that most of its brands are sold at the manufacturer's suggested retail price (MSRP), which it said gives the company a competitive disadvantage in an increasingly promotional internet space.
Moving forward, the management said it will keep its strategy of being more conservative on seasonal items and putting more inventory behind its best selling core styles. It will also be working to diversify the Bogs brand to be less dependent on cold temperatures and precipitation. These efforts include the relaunch and expansion of the brand's line of work boots as well as the introduction of more fashionable women's and men's styles with light to no insulation.
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