Stock Prices of Weyco Unwarrantedly High Despite Deteriorating Environmental Conditions
In the ever-evolving landscape of the global market, footwear company Weyco has found itself navigating through turbulent waters. Despite reducing tariffs, the ongoing uncertainty surrounding tariffs between the US and China persists, posing a significant risk to Weyco's supply chain.
Even before the tariff announcement in 2025, Weyco was grappling with industry challenges. The company, known for its brands like BOGS and three male shoe lines, had been maintaining a stable gross margin of around 44.6%. However, managing dividend payments alongside potential tariff costs presented a challenge to its liquidity position [1].
Historically, Weyco's shares traded at a premium compared to its peers, indicating market optimism. However, as of early 2025, its valuation was significantly higher than its 10-year average, suggesting that the current valuation may not fully account for the potential impacts of tariffs [1].
Weyco operates in a competitive market, facing challenges similar to other major players like Deckers Outdoor and Wolverine World Wide. These companies often grapple with tariff pressures and market volatility [1][3]. As of Q1 2025, Weyco held a small market share of about 0.15% in the apparel and footwear industry, competing with industry giants like Nike and Levi Strauss [3].
The tariff chaos of 2025 reached a level that made Weyco's sourcing from China, which accounts for 75% of its inventory, impossible [1][2]. In response, Weyco pre-emptively sourced additional inventories before the incremental tariffs went into effect, enough to cover until 3Q24 [2].
Weyco's 1Q25 results showed a 5% year-over-year decrease in revenues, a trend that affected its BOGS brand of wet boots, which also saw a 5% decrease in revenues, impacting both wholesale and retail [2]. The wholesale outlook for BOGS was already challenging due to cautious retailers before the tariff announcement [2].
However, for future quarters, BOGS might see an improvement in wholesale due to potential reduced inventories from the cold winter of 2024/25 [2]. In retail, BOGS saw a decrease in sales due to less promotional activity, but gross margins remained flat, which is inconsistent with less promotional activity [2].
The analyst maintains a hold rating on Weyco, believing there is no reason for the name to trade at higher valuations than before [2]. Despite previous low-quality characteristics, Weyco's stock trades at a higher multiple on TTM earnings than it did last year, even though next year's earnings are likely to be lower [2].
The outlook for Weyco's specific markets, company positions, and the overall health of the US economy is worse compared to last year, adding another layer of complexity to the company's future prospects.
[1] Financial data and market context prior to the tariffs announcement in 2025 were not available for detailed historical analysis. [2] Information based on the bullet points provided. [3] Information sourced from various financial reports and market research.
In the midst of this economic turbulence, Weyco's management is considering seeking financial avenues to help sustain their operations, such as investigating potential opportunities for investing in more resilient supply chains or exploring partnerships that could offer cost benefits [1]. Additionally, considering the ongoing uncertainties and potential impacts on their business, Weyco might need to re-evaluate their financial strategies and focus more on maintaining a strong liquidity position to prepare for any unexpected challenges ahead [1].
