WEYCO GROUP INC (WEYS) stock intrinsic value fair value estimate & owner earnings analysis

Weyco Group, a Milwaukee-area company founded in 1906, designs and wholesales mostly men's footwear under Florsheim, Nunn Bush, Stacy Adams and BOGS. It sells through more than 10,000 shoe, department and specialty stores, mainly in the United States and Canada, and also through its own websites, four U.S. stores and Florsheim Australia. No customer reached 10% of sales in 2024 or 2025. The shoes are bought finished from outside factories, mostly in China and India; the two largest suppliers are both in China. The company has no borrowings. Earnings level. Owner earnings are the cash the business produces after stock pay, after the capital spending needed to keep it running, and with year-to-year swings in inventory and receivables removed. Those swings are large here: cash from operations was negative $29.9M in 2022 when inventory was built up and $98.6M in 2023 when it was sold down, but once they are removed the underlying figures are steady. Owner earnings per share were $1.33 (2016), $1.80, $2.01, $1.74, $0.25 (2020, pandemic), $2.53, $3.44, $3.56, $3.48 and $2.52 (2025). For valuation we also take out the after-tax interest earned on the cash pile, because that cash is counted separately below. On that basis the business earned $2.29 a share in 2025, down 28% from 2024. Sales fell 4.9% and gross margin dropped from 45.3% to 43.2% as the 2025 import tariffs hit costs. We use the median of 2018–2025, leaving out 2020, which is about $2.48 a share (roughly $24M a year). We start in 2018 because that is when Weyco took full ownership of Florsheim Australia, and the window takes in soft years (2019, 2025), the post-pandemic boom (2022–2024) and the tariff squeeze. Long-run sales have drifted down about 1.3% a year, from $320M in 2014 to $276M in 2025, as men's dress shoes lose ground to casual footwear, while the share count fell through buybacks. We give no value to future buybacks. Recent events. In the second quarter of 2026 the company booked a $15.3M refund of tariffs that a court had struck down. At June 30, 2026 it carried a $17.4M receivable for refunds that had been approved but not yet paid. We treat this as a one-time asset worth about $12.9M after tax and leave it out of the earnings level. Without the refund, operating income in the first half of 2026 was about $9.2M, against $10.9M a year earlier, partly because of higher employee costs. On July 24, 2026 the replacement tariffs on goods from China, Vietnam and the Dominican Republic rose from 10% to 12.5%, and management says retailers are reluctant to accept price increases. For these reasons the base case does not assume a quick rebound. Balance sheet. At June 30, 2026 the company had $93.7M in cash and $4.4M in municipal bonds, and no debt. We hold back $15M as cash the business needs for its seasonal inventory build. Adding the after-tax refund receivable gives about $96M of surplus cash, or about $10.04 a share. The unfunded executive pension of about $10.4M is not deducted, because its payments already run through the cash flows above. Base case ($42.56). Owner earnings stay at the 2025 level of $2.29 in the coming year. They return to the $2.48 normal level over the following two years as the struck-down 2025 tariffs drop out of costs; that is a return to a level the business has already reached, not growth. After that they shrink 1.3% a year, matching the company's own record since 2014, and the story runs 40 years. Brands that have lasted more than a century support that length, but we credit no growth. The business is worth about $32.51 a share and owes nothing, so with $10.04 of surplus cash the shares are worth about $42.56. Bear case ($26.18). Higher tariffs and resistance from retailers push earnings back to the 2019 level of about $1.75 a share. That was the last year before the pandemic, when the first Section 301 tariffs on some Chinese footwear had just taken effect. In the third year a recession like the 2020 shutdown hits: in 2020 sales fell 36% and owner earnings dropped to $0.22 a share, so we use $0.25, followed by a two-year recovery. After that, earnings shrink 3% a year, the pace of the company's worse stretches (sales fell about 4% a year in 2014–2017 and about 8% a year in 2022–2025), and the story ends after 25 years. The business would be worth about $16.14 a share. There is no debt, so the business survives a downturn like this, and the $10.04 of surplus cash brings the total to about $26.18. Bull case ($55.01). Florsheim (wholesale sales up 12% in the second quarter of 2026) and BOGS (up 10%) keep up their momentum, and pricing holds as it did in 2022–2024. Owner earnings climb back to about $3.00 a share within three years, which is below the $3.19–$3.57 actually earned in 2022–2024. They stay flat through year ten and then shrink 0.5% a year for 40 more years. The business would be worth about $44.97 a share, giving about $55.01 with surplus cash and no debt. What could make this wrong. Our biggest uncertainties are U.S. tariff policy on Chinese sourcing, which has changed several times since 2025, and how fast the men's dress shoe category shrinks. If tariffs climbed back to 2025 levels and stayed there, with no further refunds, earnings would settle near the bear level. The refund receivable could also be collected late or come in smaller than booked. Margin-of-safety price ($23). We are moderately sure of the earnings level. Ten years of figures show a business that earns about $1.70–$3.60 a share in normal years, and the latest year sits in the lower half of that range partly because of tariff costs that have since been partly refunded. The worst plausible outcome is a severe recession on top of permanently higher tariffs and a faster decline in dress shoes. The business would survive it: it has no debt, no customer above 10% of sales, a long record of profits outside the 2020 shutdown, and inventory and receivables that turn into cash when sales fall. If we are wrong on both tariffs and the pace of decline, the shares are worth roughly the bear value of about $26. At $23, roughly $10 of the price is surplus cash, and the operating business is valued at about $13 a share for about $2.48 of normal owner earnings, an earnings yield near 19%. The regular dividend of $1.12 a share (about 4.9% at that price) is paid over the holding period, and recent special dividends of $2.00 a share have come out of surplus cash. If the business follows the base case, the base case implies 20% a year from $23 over a holding period of up to about four years. If the bear case happens instead, the bear case implies roughly the starting value. That is why the margin-of-safety price is $23 and not higher. Previous analysis. Our earlier published figures used a different method and cannot be compared with these.