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Good day, and thank you for standing by. Welcome to the Weyco Group First Quarter 2024 Earnings Release Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.
I would now like to hand the conference over to your first speaker for today, Judy Anderson, Chief Financial Officer. Please go ahead.
Thank you. Good morning, and welcome to Weyco Group's conference call to discuss first quarter 2024 results. On this call with me today are Tom Florsheim, Jr. Chairman and Chief Executive Officer; and John Florsheim, President and Chief Operating Officer.
Before we begin to discuss the results for the quarter, I will read a brief cautionary statement. During 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 these statements are just predictions and that actual events or results may differ materially. We refer you to the section entitled Risk Factors in our most recent annual report on Form 10-K, which provides a discussion of important factors and risks that could cause our actual results to differ materially from our projections.
These risk factors are incorporated herein by reference. They include, in part, the uncertain impact of inflation on our costs and consumer demand for our products, increased interest rates and other macroeconomic factors that may cause a slowdown or contraction in the U.S. or Australian economies.
Overall net sales were $71.6 million, down 17% compared to record first quarter sales of $86.3 million in 2023. Consolidated gross earnings increased 44.7% of net sales compared to 43.1% of net sales in last year's first quarter due to higher gross margins in our North American Wholesale segment.
Earnings from operations were $8.3 million, down 21% from record first quarter operating earnings of $10.4 million in 2023. Net earnings were $6.7 million or $0.69 per diluted share compared to record first quarter net earnings of $7.4 million or $0.78 per diluted share last year.
Net sales in our North American wholesale segment were $56.2 million, down 20% compared to record sales of $69.9 million in the first quarter of 2023. The decrease was largely due to a 48% decline in BOGS sales, but also due to decreased sales across our legacy brands due to reduced demand following record sales growth early last year.
Wholesale gross earnings were 39.6% of net sales compared to 38.2% of net sales in the first quarter of 2023. Gross margins improved as a result of lower inventory costs primarily inbound freight. Wholesale selling and administrative expenses totaled $14.9 million for the quarter, compared to $17.9 million last year. The decrease was primarily due to lower employee costs, including commission-based compensation.
As a percent of net sales, wholesale selling and administrative expenses were 27% in 2024 and 26% in 2023. Wholesale operating earnings totaled $7.4 million for the quarter, down 16% from $8.8 million in 2023, primarily due to lower sales. Net sales of our North American retail segment were a first quarter record of $9.8 million, up 10% over our previous record of $8.9 million in the first quarter of 2023.
Retail growth as a percent of net sales were 65.3% and 66.3% in the first quarters of 2024 and 2023, respectively. Retail operating earnings were flat at $1.3 million in both 2024 and 2023. Higher retail sales were offset by increased selling and administrative expenses this year, primarily web freight.
Our other operations historically included our retail and wholesale businesses in Australia, South Africa and Asia Pacific, collectively referred to as Florsheim Australia. We ceased operations in Asia in 2023 and are in the final stages of winding down that business. As a result, the 2024 operating results of our other category primarily reflect that of Australia and South Africa.
Net sales of Florsheim Australia were $5.5 million, down 26% from $7.5 million in the first quarter of 2023. In local currency, its net sales were down 24% due mainly to lower sales in Asia as a result of the closing of our Asia operations in the midyear 2023 lots of a sizable wholesale account in Australia. Retail sales in Australia were also down for the quarter due to the challenging retail environment.
Florsheim Australia's gross earnings were 60.2% of net sales compared to 60.5% of net sales last year. Florsheim Australia generated operating losses of $400,000 for the period, down compared to operating earnings of $300,000 in last year's first quarter. The decrease was primarily due to lower sales.
Interest income totaled $900,000 in the first quarter of 2024 compared to $100,000 in last year's first quarter. Interest expense was 0 for the quarter compared to $400,000 last year. This year included interest earned on cash in the U.S. and Canada, while prior year included interest expense incurred on outstanding debt balances during the period.
At March 31, 2024, our cash and marketable securities totaled $84.7 million and we had no debt outstanding on our $40 million line of credit. During the first 3 months of 2024, we generated $14.3 million of cash from operations and used funds to pay $4.7 million in dividends. We also had $200,000 of capital expenditures. We estimate that 2024 annual capital expenditures will be between $2 million and $4 million.
On May 7, 2024, our Board of Directors declared a cash dividend of $0.26 per share to all shareholders of record, on May 17, 2024, payable June 28, 2024. This represents an increase of 4% above the previous quarterly dividend rate of $0.25.
I would now like to turn the call over to Tom Florsheim, Jr., Chairman and CEO.
Thanks, Judy, and good morning, everyone. It was a challenging quarter as our North American wholesale business was down 20% versus first quarter -- record first quarter sales in 2023. Our performance reflected industry headwinds as retailers are taking a conservative approach to inventory management given the soft sales trend in footwear and apparel categories, and their focus on mainly lowering -- on maintaining lower inventory levels.
While our shipments were down significantly, we remain encouraged by solid retail sell-throughs, especially in our legacy men's brands. Our overall legacy business was down 13%, with Stacy Adams, Nunn Bush and Florsheim brands down 16%, 13% and 11%, respectively. After working through high inventories for much of 2023, retailers are reducing their upfront buys and are placing more orders on an ad-needed basis.
We did see a nice uptick in our at-once business, but it was not enough to make up for the deficit. We anticipate this conservative trend among retailers will continue through the second quarter but are optimistic that demand will improve in the back half of the year.
From a competitive perspective, we believe we are outperforming our peers in traditional dress and refined casuals. We remain focused on evolving our brand to fit a more relaxed lifestyle and continue to expand our offerings in true casual and hybrid footwear.
This spring, across all 3 brands, we introduced new product that has been well received by consumers. While there is uncertainty in the current retail environment due to a variety of factors, we feel confident about the long-term trajectory of our legacy brands.
In our Outdoor division, BOGS sales were down 48% as the weather boot market remains under pressure. As discussed during our fourth quarter conference call, we believe that outdoor market will be challenging in 2024. Additionally, in this first quarter, BOGS decline in sales was driven by a tough comparison to last year's shipments.
In early 2023, BOGS shipped a large work boot program to a key account, which the brand did not anniversary in 2024. The loss of this program made up the majority of BOGS sales decline for the quarter. After multiple seasons of solid growth, the BOGS business lost momentum in the back half of 2023 due to the oversaturation of boots at retail in combination with very mild fall and winter weather. We believe the market is slowly normalizing as retailers work down their inventories.
The hallmark of the BOGS brand is product innovation. And in the current environment, we are more committed than ever to introducing new product that separates BOGS from its competition. We are rolling out a wide range of boots that utilize BOGS seamless construction, which is 30% lighter and over twice as durable than the standard vulcanized rubber boot. We believe the expansion of our seamless collection will be a difference maker as the outdoor boot market resets with cleaner inventories this fall.
Our retail segment was a bright spot in our first quarter with record sales and a 10% increase over last year. The increase was driven primarily by higher web sales for both Florsheim and BOGS. The growth in our direct-to-consumer business reflects the strength of our brand portfolio as well as the investment we have made in our e-commerce platform.
Our overseas business, which consists of Australia, New Zealand, Asia Pacific and South Africa, collectively known as Florsheim Australia had a sales decrease of 26% for the quarter. Sales were lower in part due to the closure of our Florsheim Asia retail locations at the end of last year and the loss of an important wholesale count in Australia. In addition, overall retail and wholesale sales have been lackluster throughout much of the region, reflecting general macroeconomic pressures. For the back half of the year, we are focused on expense management, while we identify opportunities to get our overseas business back on a growth track.
Changing subjects, our overall inventory as of March 31, 2024, was $62 million, down from $74.8 million at December 31, 2023. Our inventory is at a seasonal low point and will build up to approximately $75 million by the end of the second quarter. Our objective is to have inventory to support at-once business on our core styles.
Our overall gross margins were 44.7% for the quarter, up from 43.1% last year. As Judy mentioned, our wholesale margins benefited from lower inbound freight costs. Freight costs normalized in the first half of 2022, but because of the large buildup of inventories in 2022, it was not until late 2023, that we sold through inventory with higher freight costs and we're able to begin realizing the full benefit of these lower freight costs.
This concludes our formal remarks. Thank you for your interest in Weyco Group. And I would now like to open the call to your questions.
[Operator Instructions] Our first question comes from the line of David Wright of Henry Partners.
Thanks again for having the conference call, Tom. Not every company does, and it's great that you do. So thank you, and thanks also for the dividend increase. Appreciate it. A couple of questions that I have are -- on stock buyback, you bought back around $4 million the last couple of years each year. And I noticed here in the first quarter that the stock buyback was de minimis, and I wondered if there was a reason for that.
The reason is really just that we haven't -- we've been out there buying stock, I think, for the majority of the year. And we set a limit on the price, but the limit actually, which I'm not at liberty to say is fairly high. And -- but even given that, there's been enough buyers of our stock that we just haven't been able to get more.
I guess that's a happy problem to have.
I agree. It is a happy problem.
You commented, you've done a great job working the inventory down from very high levels coming out of COVID. And you talked about having to build it back up, $15 million or so by the end of the quarter. What kind of free cash flow are you projecting for the full year?
Judy, do you have idea of that? We don't have an exact number. I don't think it's going to affect our cash much. In fact, when you look at when -- the reason that our inventory is a little bit lower right now is we still make a lot of product in China. And when they're closed for Chinese New Year, we have a dry period and now shoes for far started to come in. So we'll build up the inventories, but we have lower payables than we did a year ago and higher receivables. So I mean, I don't see this as being a big dent in our cash at all.
It's kind of a normal seasonal variation.
Sure, sure. But like, I mean, I just wondered because of the inventory drawdown, your cash flow -- your cash from operations last year was $98 million. It was a huge number. And that's great. The whole business model is just so impressive. And the way that it gets run is actually kind of old school. And it's successful, it's really nice to see. So don't change anything.
Thank you for saying that.
Yes. Well, I mean, you can see it. I know the company goes back a long ways, but you're paying a fair dividend, you're buying stock back, you're running a conservative balance sheet. The business is very profitable. You managed so well through COVID, and coming out of it, by the -- you've been work shows the revenues were down quite a lot in the first quarter, but the margins maintained, which shows a lot of efficiency. So I can't say enough good things.
All right. Well, thank you very much. It's nice to start out the investor call with having some nice comments like that. So thank you.
And then just to close, Tom, a real quick question. The consumer dynamics, sometimes I ask about them. I wonder when you talk about the higher sales from the website, like shoes are sort of like your feet. And I just wondered, like what's sort of the return rates from what I'm going to call mail order shoes because obviously, the people can't try them on in the store.
Yes. My brother John, who runs that area of the business is here, and he's going to answer that question.
Yes. It varies a little bit by brand. But overall, we averaged 12% to 13%. We get a lot of repeat customers buying footwear from our different brands. And that 12% to 13% is very low from an industry standard perspective.
Yes. That surprises me. That is really great. So more good news.
At this time, I am showing no additional questions in the queue. I would now like to turn the call back over to Judy Anderson, Chief Financial Officer, for some closing remarks.
We just wanted to say thank you for listening to our call today, and we hope you all have a great day.
Thank you. This does conclude today's call. You may now disconnect.