Weyco Group taking measured approach to diversifying supply chain away from China

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Long term, Thomas Florsheim Jr. plans for Glendale-based Weyco Group Inc. to around 50% or less of its shoes from China, but he is in no rush to reach that target.

โ€œWe believe that itโ€™s in our best interest to move production very slowly,โ€ he told analysts on the companyโ€™s earnings call Wednesday.

Weyco Group designs and markets footwear under the Florsheim, Nunn Bush, Stacy Adams, BGS and Rafters brands. Last year, the company sourced around 70% of its shoes from China, although that number was pushed higher as Weyco sought to bring product in before new tariffs were in place on Sept. 1. The company had $81.3 million in inventories on Sept. 30, up from $60.1 million at the same time in 2018.

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In addition to receiving product earlier, the company also negotiated price increases with its wholesale customers and discounts with its suppliers to help offset the tariffs.

Despite the problems a reliance on Chinese suppliers caused last year, Florsheim said the company isnโ€™t looking to rapidly change its sourcing. He said the percentage of shoes from China would likely drop to the lower 60s this year and reach into the 50s next year.

โ€œWeโ€™re seeing competitors honestly move production very quickly, like overnight saying โ€˜we really donโ€™t want to be in China anymoreโ€™ and picking up their product and just moving it very quickly to other countries,โ€ he said. โ€œThat is a recipe, in our opinion, for disaster.โ€

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Weyco is increasing its sourcing from India, Vietnam, Cambodia and the Dominican Republic, Florsheim said, but he added that the company has long-term relationships with suppliers in China.

โ€œSome of our best shoes are made there,โ€ he said, adding that having quality issues would be bad for the long-term health of the companyโ€™s brands.

While Weyco is moving production to other countries, it is unlikely production would return to the U.S.

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โ€œThere arenโ€™t any component makers, you canโ€™t buy shoe boxes in the U.S.,โ€ Florsheim said when asked about the possibility during an earnings call last year. โ€œThat we donโ€™t see happening. I mean you have a few people that continue to make shoes here, that are the very high end shoes, but I donโ€™t think this country really wants to make shoes.โ€

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