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

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.

“We believe that it’s in our best interest to move production very slowly,” he told analysts on the company’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.

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 isn’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.

“We’re seeing competitors honestly move production very quickly, like overnight saying ‘we really don’t want to be in China anymore’ and picking up their product and just moving it very quickly to other countries,” he said. “That is a recipe, in our opinion, for disaster.”

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.

“Some of our best shoes are made there,” he said, adding that having quality issues would be bad for the long-term health of the company’s brands.

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

“There aren’t any component makers, you can’t buy shoe boxes in the U.S.,” Florsheim said when asked about the possibility during an earnings call last year. “That we don’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 don’t think this country really wants to make shoes.”

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Arthur covers banking and finance and the economy at BizTimes while also leading special projects as an associate editor. He also spent five years covering manufacturing at BizTimes. He previously was managing editor at The Waukesha Freeman. He is a graduate of Carroll University and did graduate coursework at Marquette. A native of southeastern Wisconsin, he is also a nationally certified gymnastics judge and enjoys golf on the weekends.

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