Weyco Group's Tariff Exposure and Earnings Decline: A Stock With Barely Any Adjustment

Weyco Group's 2Q25 earnings show revenue and margin deterioration due to retailer caution. The company is exposed to tariffs in China and India, impacting its performance. Despite this, the stock has barely adjusted.

Wisconsin-based Weyco Group Inc. (NASDAQ: WEYS) released its 2Q25 earnings, revealing a challenging quarter marked by revenue and margin deterioration, primarily due to retailer caution and tariff exposure. The company's net sales declined by 9% to $58.2 million, while net earnings dropped by 60% to $2.3 million [3]. Despite these headwinds, the stock has barely adjusted, raising concerns about the company's valuation.

The quarterly report highlighted a decline in sales across all major brands, with drops ranging from 5% to 14% [3]. Gross margins were impacted by incremental tariffs, but the company maintained a strong cash position of $77.4 million. Weyco implemented strategies to mitigate tariff effects, including preemptive inventory purchases, cost reductions with suppliers, and diversifying sourcing.

Weyco's exposure to tariffs remains significant, with 60% of its footwear sourced from China [1]. The company has shifted some production to Cambodia, Vietnam, and India to reduce tariff exposure. However, the impact of tariffs is expected to be more pronounced in the second half of 2025, potentially affecting gross margins and demand [1].

The company's adjusted price-to-earnings ratio is not cheap, trading at 11.5x for a name shrinking secularly and super exposed to tariffs [1]. Despite the challenges, Weyco has maintained a strong cash position and has returned earnings to shareholders. However, the price, even at 8x earnings (adjusted), does not reflect the challenges ahead.

Weyco's CEO, Thomas Florsheim Jr., anticipates that consumer spending may slow down, and shoppers may delay purchases due to economic uncertainty. The company is keeping an eye out for potential sales changes tied to the price increases, which were implemented in July to offset tariff impacts [2].

The company's stock price has not reflected the recent earnings decline, which could indicate that investors are not fully pricing in the risks associated with tariffs and retailer caution. However, the stock's valuation is not cheap, and investors should be cautious before considering Weyco as an opportunity.

References:
[1] https://seekingalpha.com/article/4813419-weyco-is-exposed-to-tariffs-and-earnings-are-halving-but-the-stock-has-barely-adjusted
[2] https://www.jsonline.com/story/money/business/2025/08/08/weyco-group-hikes-shoe-prices-takes-other-steps-as-trump-tariffs-land/85516773007/
[3] https://www.ainvest.com/news/weyco-group-q2-2025-net-sales-9-net-earnings-drop-60-due-tariffs-2508/