WEYCO GROUP INC (WEYS)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

FORWARD-LOOKING STATEMENTS

This report contains certain forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995.  These statements represent our good faith judgment with respect to future events and are subject to risks and uncertainties that could cause actual results to differ materially. Such statements can be identified by the use of words such as “anticipates,” “believes,” “estimates,” “expects,” “forecasts,” “intends,” “likely,” “plans,” “predicts,” “projects,” “should,” “will,” or variations of such words, and similar expressions. Forward-looking statements, by their nature, address matters that are, to varying degrees, uncertain. Therefore, the reader is cautioned that these forward-looking statements are subject to a number of risks, uncertainties or other factors that may cause actual results to differ materially from those described in the forward-looking statements. These risks and uncertainties include, but are not limited to, the risk factors described under Item 1A, “Risk Factors,” of our Annual Report on Form 10-K for the year ended December 31, 2025, filed on March 13, 2026, which information is incorporated herein by reference. We undertake no obligation to update publicly any forward-looking statements, whether as a result of new information, future events, or otherwise.

GENERAL

We design, market, and distribute quality and innovative footwear principally for men, but also for women and children, under a portfolio of well-recognized brand names including: Florsheim, Nunn Bush, Stacy Adams, and BOGS. Inventory is purchased from third-party overseas manufacturers. Almost all of these foreign-sourced purchases are denominated in U.S. dollars.

We have two reportable segments, North American wholesale operations (“Wholesale”) and North American retail operations (“Retail”).  In the Wholesale segment, our products are sold to leading footwear, department, and specialty stores, as well as e-commerce retailers, primarily in the United States and Canada. We also have licensing agreements with third parties who sell our branded apparel, accessories, and specialty footwear in the United States, as well as our footwear in Mexico and certain markets overseas. Licensing revenues are included in our Wholesale segment. Our Retail segment consists of e-commerce businesses and four brick-and-mortar retail stores in the United States. We made the strategic decision to close our four U.S brick and mortar retail stores at the end of their lease terms. The first store closed at the end of June, and the remaining three are planned to close over the next seven months. Retail sales are made directly to consumers on our websites, or by our employees in our stores. Our “other” operations include our retail and wholesale businesses in Australia and South Africa (collectively, “Florsheim Australia”). The majority of our operations are in the United States, and our results are primarily affected by the economic conditions and the retail environment in the United States.

Incremental Tariff Status

In early 2025, the U.S. imposed tariffs on certain imported goods under the International Emergency Economic Powers Act (“IEEPA”). During 2025 and the first quarter of 2026, we paid approximately $19.8 million in IEEPA tariffs. In February 2026, the U.S. Supreme Court invalidated IEEPA tariffs, and in April 2026, U.S. Customs and Border Protection (“CBP”) commenced a phased process for accepting refund claims. Accordingly, in April, we submitted refund claims for our Phase 1 entries totaling $18.6 million, substantially all of which were approved during the second quarter. As a result, during the quarter we recognized: $15.3 million in tariff refunds as a reduction to cost of sales ($14.3 million in the Wholesale segment and $1.0 million in the Retail segment), $3.3 million as a reduction of inventory, and $0.7 million of interest income.

Our remaining entries, totaling $1.2 million (now classified as Phase 3 entries), have not yet been assigned a claim submission timeline. No refunds related to our Phase 3 entries have been recognized, as the timing and amount of these recoveries remain uncertain and subject to execution by CBP.

Following the U.S. Supreme Court's ruling in February, the Administration imposed a 10% incremental tariff under a separate statutory authority, which remained in effect throughout the second quarter. On July 24, 2026, the Administration increased the incremental tariff on imports from China, Dominican Republic, and Vietnam to 12.5%. U.S. trade policies continue to evolve and remain unpredictable, creating near term gross margin uncertainty. We have mitigation strategies in place and will continue to adjust, as appropriate, in response to future policy developments.

​

EXECUTIVE OVERVIEW

We are pleased with the growth of our wholesale business in the second quarter. While the categories in which we compete remain under pressure, we delivered growth in three of our four major brands, resulting in a 7% increase in wholesale sales. It remains a challenging environment for discretionary consumer goods, including footwear, and we believe our company is executing well despite these market conditions.

15

​

Sales of our combined legacy business, comprised of the Florsheim, Stacy Adams, and Nunn Bush brands, increased 6% in the second quarter.

Florsheim’s sales increased 12%, driven by strong sales of traditional dress shoes and growth in both hybrid and casual footwear.

Stacy Adams sales increased 4% compared to last year’s second quarter. The Stacy Adams dress shoe business continues to generate strong retail sell-through, and our focus is on translating that success into increased demand for our casual lifestyle products.

Nunn Bush sales declined 3% for the quarter. As an opening-price brand, Nunn Bush competes in a highly competitive segment of the market against private-label offerings and lower-priced licensed brands. Our strategy is to differentiate the brand by investing in comfort technology and higher-quality materials. We believe we are well positioned with strong products currently at retail and in the pipeline that distinguishes the brand on quality.

BOGS sales increased 10% for the quarter, and the brand is well positioned for a strong second half. In a market with many rubber boot options, BOGS' Seamless construction provides a meaningful point of differentiation. It is lighter and more durable than the traditional vulcanized construction used by many competing brands. We are continuing to educate both retailers and consumers about the advantages of Seamless construction, and we are seeing solid growth across this product line. While we believe we are still in the early stages of a BOGS turnaround, we are encouraged by the brand's performance this quarter.

Our retail segment increased 4% for the quarter, driven by strong Florsheim e-commerce sales. We continue to invest in our direct-to-consumer platform and are encouraged by our growth in the U.S. market so far this year.

Florsheim Australia's net sales increased 10% for the quarter but declined 1% in local currency, reflecting the favorable impact of foreign exchange. Despite a challenging economic environment, our Florsheim Australia team continues to execute well by maximizing sales opportunities in a difficult retail market while maintaining disciplined expense control.

Second Quarter Highlights

Consolidated net sales were $62.2 million, up 7% compared to the second quarter of 2025. Consolidated gross earnings were 70.4% of net sales compared to 43.3% of net sales in last year’s second quarter, mainly impacted by tariff refunds. Earnings from operations totaled $17.0 million for the quarter, up from $3.9 million last year. Second quarter net earnings were $13.3 million, or $1.39 per diluted share, in 2026, compared to $2.3 million, or $0.24 per diluted share, in 2025.

Year-To-Date Highlights

Consolidated net sales for the first half of 2026 were $130.2 million, up 3% from $126.3 million in 2025. Consolidated gross earnings were 56.7% of net sales in the first six months of 2026 versus 44.0% of net sales in the same period one year ago, mainly impacted by tariff refunds. Year-to-date earnings from operations totaled $24.5 million, up from $10.9 million in 2025, mainly impacted by tariff refunds. Net earnings were $19.4 million, or $2.04 per diluted share, in the first six months of 2026, up from $7.8 million, or $0.81 per diluted share, last year.

​

Financial Position Highlights

At June 30, 2026, our cash and marketable securities totaled $98.1 million, and we had no debt outstanding on our $40.0 million revolving line of credit.  During the first six months of 2026, we generated $25.2 million in cash from operations and used funds to pay $26.6 million in dividends. We also had $1.5 million of capital expenditures.

CONSOLIDATED RESULTS OF OPERATIONS

​

16

[Excerpt truncated for page length; source filing is linked above.]

ITEM 7     MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

GENERAL

We design, market, and distribute quality and innovative footwear principally for men, but also for women and children, under a portfolio of well-recognized brand names including: Florsheim, Nunn Bush, Stacy Adams, and BOGS.  Inventory is purchased from third-party overseas manufacturers. Almost all of these foreign-sourced purchases are denominated in U.S. dollars. We have two reportable segments, North American wholesale operations (“Wholesale”) and North American retail operations (“Retail”). In the Wholesale segment, our products are sold to leading footwear, department, and specialty stores, as well as e-commerce retailers, primarily in the United States and Canada. We also have licensing agreements with third parties who sell our branded apparel, accessories, and specialty footwear in the United States, as well as our footwear in Mexico and certain markets overseas.  Licensing revenues are included in our Wholesale segment. Our Retail segment consists of e-commerce businesses and four brick-and-mortar retail stores in the United States. Retail sales are made directly to consumers on our websites, or by our employees in our stores.  Our “other” operations included our wholesale and retail businesses in Australia and South Africa (collectively, “Florsheim Australia”). Florsheim Australia previously included operations in the Asia-Pacific region, but we completed the wind down of that business in 2024. The majority of our operations are in the United States, and our results are primarily affected by the economic conditions and the retail environment in the United States.

This discussion summarizes the significant factors affecting the consolidated operating results, financial position, and liquidity of our Company for the two-year period ended December 31, 2025. This discussion should be read in conjunction with Item 8, “Financial Statements and Supplementary Data” below.

KNOWN TRENDS IMPACTING OUR BUSINESS

​

In early 2025, the U.S. imposed reciprocal and retaliatory (“incremental”) tariffs on imported goods. Throughout 2025, incremental tariffs increased the cost of our products, resulting in gross margin compression.

​

On February 20, 2026, the U.S. Supreme Court ruled that the International Emergency Economic Powers Act (IEEPA) does not authorize the President to impose tariffs, invalidating the statutory basis for incremental tariffs enacted since February 2025. The matter has been remanded to the Court of International Trade for further proceedings, including issues relating to implementation and potential refunds. We paid approximately $16 million of incremental tariffs in 2025. In December 2025, we filed a lawsuit seeking a refund for amounts paid in connection with the incremental tariffs imposed pursuant to IEEPA.

​

The President responded to the ruling by announcing the implementation of a 10% across-the-board tariff under a separate statutory authority. The Administration has indicated that rates could be increased, subject to statutory limits. Certain other tariffs imposed under authorities independent of IEEPA remain in effect. U.S. trade policies remain fluid and unpredictable, creating near-term gross margin uncertainty. We have mitigation strategies in place and will continue to adjust as needed in response to future policy developments.

​

EXECUTIVE OVERVIEW

2025 was a difficult year for the Company, with sales declining 5% compared to 2024. While we are never content with a decline, given the challenges we faced related to tariffs and dampened consumer sentiment, we are pleased with the work done by our production and sales teams to navigate these economic headwinds.

​

For an extended period during the second quarter, we faced incremental tariff rates that rendered trade with China, our largest sourcing country, commercially prohibitive. Because the second quarter is a primary manufacturing period for our key Fall shipping window, this created a strong likelihood of disrupted deliveries to both our wholesale partners and our direct-to-consumer business. By strategically keeping production running on key programs and holding finished goods overseas, we positioned ourselves to deliver nearly 100% of our Fall shipments on time once tariffs were reduced to commercially viable levels.

​

Throughout 2025, new tariffs increased the cost of our products, resulting in gross margin compression despite a 10% price increase that took effect in July. Over the past year, we also made progress in diversifying our manufacturing base to be less China-centric.

​

Sales of our combined legacy business declined 4% for the year. Given the uncertain economic environment, particularly in soft goods, our Wholesale customers continued to take a conservative approach to inventory management.

​

The Florsheim brand achieved record sales of $92.0 million in 2025, a 2% increase over 2024. Sell-throughs of traditional dress and refined casual footwear have been strong, and the brand continues to make progress in the hybrid and dress sneaker categories.

11

Table of Contents

​

Our Nunn Bush business declined 10% for the year. The mid-tier trade channels, which account for the majority of Nunn Bush’s volume, remained under pressure, negatively impacting sales. As an opening price-point brand with major retailers, Nunn Bush also faces increased competition from private-label programs, as stores seek to improve margins. We believe we are taking the necessary steps to return Nunn Bush to growth, including value engineering product to meet key price points while delivering attributes and benefits not typically found in private-label offerings. Retail sell-through of Nunn Bush remains solid.

​

Stacy Adams’ sales declined 9% for the year, reflecting continued challenges in the fashion dress shoe market. While the Stacy Adams brand remains a leader in this category, retailers are devoting less inventory and shelf space to dress shoes. Our focus with Stacy Adams continues to be on expanding categories beyond its core elevated dress offerings.

​

The BOGS business remains difficult, with sales down 11% for the year. While early winter cold and snowfall resulted in strong sell-through of BOGS product, Fall sell-in declined year over year as retailers maintained a conservative, chase-based inventory strategy for seasonal product. Retailers ended the season with lower inventory levels, and we are now seeing strong booking increases for Fall 2026. While we are optimistic about improvement this year, we remain mindful of the long-term impact of climate change on the weather boot category. Our priority continues to be the development of footwear designed for multi-season use.

​

During 2025, we made the strategic decision to wind down operations of the Forsake brand due to its sustained lack of growth and profitability. This decision is part of our ongoing effort to optimize our brand portfolio and focus on those brands with the greatest potential for long-term success. The closure of Forsake is not expected to have a material impact on our consolidated financial statements.

​

Net sales in our retail segment declined 8% for the year. In 2025, our e-commerce consumer was increasingly value-oriented. While our overall inventory position is cleaner than in the prior two years, which is positive, it resulted in lower conversion among customers motivated by clearance discounts. As we enter 2026, we remain disciplined in our approach to inventory management and anticipate a lower level of clearance sales.

​

Florsheim Australia’s net sales increased for the year, increasing 2% in local currency. Florsheim Australia, which includes New Zealand, South Africa, and our Asia wholesale business, remains a work in progress. While certain areas, such as Australian e-commerce, delivered solid gains, we continue to face challenges in our Australian wholesale business, where improvements are necessary to drive profitability.

​

Sales and Earnings Highlights

Consolidated net sales for 2025 were $276.2 million, down 5% compared to $290.3 million in 2024.  Consolidated gross earnings as a percent of net sales were 43.2% and 45.3% in 2025 and 2024, respectively. Operating earnings were $29.2 million, down 20% compared to $36.6 million in 2024.  Net earnings were $23.1 million, or $2.41 per diluted share, in 2025, down from $30.3 million, or $3.16 per diluted share, in 2024.

Financial Position Highlights

At December 31, 2025, our cash and marketable securities totaled $100.9 million and we had no debt outstanding on our $40.0 million revolving line of credit. During 2025, we generated $37.3 million of cash from operations. We used cash to pay $7.7 million in dividends, repurchase $5.3 million of our common stock, and we had $1.8 million of capital expenditures during the year. Additionally, during January 2026, we paid our 2025 fourth quarter and special cash dividends totaling $21.4 million to shareholders.

​

​

​

​

​

​

​

12

Table of Contents

​

CONSOLIDATED RESULTS OF OPERATIONS

​

Consolidated net sales declined 5% for the year, due mainly to lower demand in our Wholesale segment.

​

Consolidated gross earnings as a percentage of net sales were 43.2% in 2025, and 45.3% in 2024. The decrease in 2025 was primarily due to higher costs resulting from incremental tariffs enacted this year. Our cost of sales does not include distribution costs (e.g., receiving, inspection, warehousing, shipping, and handling costs) which are included in selling and administrative expenses. Consolidated distribution costs were $19.9 million and $21.5 million for the years ended December 31, 2025 and 2024, respectively.

​

Consolidated selling and administrative expenses as a percent of net sales were 33% in both 2025 and 2024.

​

Consolidated earnings from operations for 2025 were down 20% from the prior year. The decrease in 2025 mainly resulted from lower sales volumes and gross margins in our Wholesale segment.

​

Interest income decreased $0.7 million for the year, due mainly to lower interest rates in 2025. Other expense, net, primarily includes the non-service cost components of pension expense and net gains and losses on foreign currency transactions. The expense decreased in 2025, due to lower pension expense.

​

Our effective tax rates for 2025 and 2024 were 28.0% and 23.9%, respectively. See Note 13 in the Notes to Consolidated Financial Statements for additional information on income taxes.

[Excerpt truncated for page length; the complete text is on the linked full-MD&A page.]