Weyco Group, Incorporated
Weyco Group, Incorporated
Incorporated: 1892 as W.R.P. Shoe Company
Sales: $127.1 million (1998)
Stock Exchanges: NASDAQ
Ticker Symbol: WHYS
NAIC: 316213 Men’s Footwear (Except Athletic) Manufacturing; 44821 Shoe Stores; 533110 Brand Name Licensing
Weyco Group, Incorporated is a major manufacturer, purchaser, and marketer of men’s and boy’s footwear, including mid-priced leather dress shoes and lower-priced casual footwear made from synthetic materials and leather. Weyco Group sells its products to more than 8,000 shoe, clothing, and department stores. Its top brands include Nunn Bush, Brass Boot, and Stacy Adams. The company manages 151 leased departments in men’s clothing and department stores nationwide, and operates, through Nunn Bush, 47 company-owned retail stores. It licenses the Stacy Adams name—known by Swing Dancers for the two-tone Dayton Wingtip—for men’s clothing and accessories. The Florsheim family—descendants of the founder of footwear giant Florsheim Group—controls 53 percent of Weyco Group’s voting power.
Weyco was founded in 1892 by three Appleton, Wisconsin men who formed a partnership known as the W.R.P. Shoe Company, offering retail shoes regionally. By 1895 two of the partners had sold their shares of the business to two brothers. The business was moved to Chippewa Falls, a thriving lumber town in northern Wisconsin. The site was laid out with a retail store on the lower level and a handcrafted shoemaking workshop upstairs. The company catered to workers in the logging industry by providing tough, well-crafted shoes and boots made of quality materials.
Frank Weyenberg, a young man with an eighth grade education, entered the business in 1897 at the age of 15. Three years after becoming a partner, Frank Weyenberg took a trip to Milwaukee to seek help from then Mayor David Rose. The young entrepreneur was interested in building a factory to accommodate expansion. By that time (1900), shoe production had grown to 300 pairs per day. The business was soon relocated from Chippewa Falls to 122 Reed Street in Milwaukee. In Frank Weyenberg’s words, “I figured the tanneries were here (Milwaukee) and also we were close to our market.” The energetic Frank Weyenberg served as assistant superintendent of the factory, general manager, and traveling salesman.
The company gradually increased production but experienced financial difficulties when it switched to more automated technologies. During this period the two brothers in the partnership became disillusioned and sold out to Frank Weyenberg and his father, Franklin. The company was reorganized from a partnership to an incorporated entity, the Weyenberg Shoe Manufacturing Company, in 1906, with the 24-year-old Frank positioned as company president. A new plant was constructed on Brown Street in Milwaukee in 1910, and additional operations were added in Beaver Dam (1913) and Portage (1918). An office and shipping center were added across the street from the Brown Street plant. Although the company continued to struggle between the years of 1908 and 1920, the company grew from producing 600 to over 8,000 pairs of shoes per day.
Combat Boots for World War I
At the onset of World War I, Frank Weyenberg served on the War Production Board and sold liberty bonds. His company manufactured combat boots for that effort. Recognized as an ambitious man, Frank entered into a business partnership with his golfing partner and organized the Simplex Shoe Manufacturing Company to make children’s shoes, justifying the formation of the company because “we couldn’t get any money for our scraps [from shoemaking].” He also organized the United Fertilizer Company in 1919. Then when Weyenberg decided that the company was paying too much for shoe cartons, he organized the Manufacturers Box Company, and when he needed chemical supplies, he formed the Manufacturers Chemical Supply. These were profitable operations, structured as cooperatives, with various shoe companies sharing ownership and reaping the benefits from producing lower-cost supplies.
The period following the end of the war was very difficult financially, but the company survived it and the ensuing Great Depression. Weyenberg applied for a listing in the New York Curb Exchange (later named the American Stock Exchange) in 1937, listing 300,000 outstanding shares of its common stock. The Weyenberg Shoe Company had expanded to include additional operations in Milwaukee, Beaver Dam, Portage, and Hartford, Wisconsin, and Ludington, Michigan. By this time, Weyenberg had become the largest shoe manufacturing company in the city of Milwaukee, producing over 10,000 pairs of shoes per day.
World War II-Era Transition
The company made a transition from producing logging-type shoes and boots to concentrating on the production of fine men’s dress shoes. Following the transition, net sales soon climbed to over $8 million. Factories that produced other lines of shoes were closed, including the Ludington plant, which made work shoes (closed in 1942), and the Hartford Plant, which manufactured children’s shoes and women’s casual shoes (closed in 1953).
By 1964, net sales had grown to over $20 million, and Frank Weyenberg sold $750,000 worth of his stock to Thomas W. Florsheim, who had been associated with a family operated Chicago shoe manufacturing business, the Florsheim Shoe Company. Florsheim became the Weyenberg Shoe Manufacturing Company president and Frank Weyenberg acted as chairman of the board. At that time, the two men issued the following statement outlining their objectives: “We have had a change of management this year to insure continuity in our company. Along with our new, young management team, we are continuing the process of styling up our merchandise, reorganizing our sales approach, updating our facilities and streamlining our procedures. We hope all of this will mean larger profits and bigger sales in 1965.” The company was producing a broad line of men’s fashion dress shoes and a very selective line of men’s work shoes and boots. The company ranked 15th nationally, in dollar sales, among more than 1,000 domestic shoe manufacturers. Management decided to apply for a listing on the New York Stock Exchange in 1965. Frank Weyenberg lived to see his company become a major presence in the fashion shoe industry. He remained on the board of directors until his death in 1976. Shortly thereafter, the company adopted the name Weyco Group, Incorporated, to better reflect the company’s increasingly diverse family of shoes.
Foreign purchases of shoes and components became vital to Weyco as competitive pressures increased in the marketplace. The company responded to the necessity for a diversified, broadly priced line of shoes, acquiring the Nunn Bush Shoe Company to supplement its wholesale business. Weyco also assumed ownership of factories in Milwaukee and Edgerton, Wisconsin, in addition to 150 retail and leased outlets. The company opened a factory for manufacturing hand-sewn shoes in Portage, Wisconsin, and acquired Adler Shoe Shops, a retailer of men’s shoes based in New York. The Houston, Texas-based Morgan-Hayes, Incorporated, was added the following year. Factories were opened in Waterloo, Wisconsin; Dundalk, Ireland; and Vincenza, Italy. The Stacy-Adams Shoe Company, after more than a century in business, became part of Weyco in 1971. Weyco management wanted more exposure for its Stacy Adams fashion footwear line, which was developed into a major fashion line after signing licensing agreements with hosiery and tailored-clothing leaders. The company chose Lanier Clothes of Atlanta, Georgia, for its apparel licensee and Chatsworth, California-based Keepers International, for hosiery.
Changing Shoe Trends: 1990s
Beginning in the late 1980s, the Stacy Adams line of fashion footwear began adopting the whimsical “retro look” borrowed from styles popular in the 20s, 30s, and 40s. Young Swing dancing consumers, in particular, sported vintage clothing and sought spats, black-and-white wingtips, and oxfords to coordinate with their apparel. An average 200,000 pairs of the Weyco retro-styled shoes were being sold annually, substantially boosting company profits. While many fashion companies compromised these styles by using materials different from the originals, some companies produced footwear using real leather, threads, and colors copied diligently from the past. According to Barbara Schneider-Levy of Footwear News, “As men’s footwear looks backward while moving ahead … retro looks reminiscent of The Untouchables and Top Hat are showing up in modern fashion terms. However, there are some authentics in the market today, such as the cap-toe boot and oxford called the Madison, circa 1915, from the Stacy Adams line.
“The company aims to establish and maintain an Institution and a Name founded on justice and right that will live through generations and will stand as a monument, a credit to the efforts of the men [and women] who made it, to give the world a good product, to stay among the leaders of the industry, and above all to make friends of our business associates—and to gather about us men [and women] whose ambitions are high, and who are equipped in all ways to help us carry on the work we have in hand, and attain the good for which we are striving.” -Franklin L Weyenberg, Weyco president, 1906–64
Weyco was hit hard when May Department Stores, the company that leased shoe departments in its stores to Weyco, terminated the arrangement, resulting in a drop of 15 percent in profits and ten percent in earnings. Despite that, other factors in the market promised to compensate for the setback, which may have been part of the impetus for company insiders proposing to take the company private. Medium- and lower-priced shoes were selling more than the high-priced ones, just as trends were shifting from athletic footwear to casual shoes, translating into very favorable conditions for Weyco. Company insiders wanted to buy out the minority public stockholders who controlled 43 percent of the votes for $50 million, or $34 per share. The company was debt-free with cash reserves of $27 million. It had overfunded pensions and undervalued inventories. Analysts estimated that Weyco shares were actually worth closer to $43 a share, more than 25 percent over what the insiders were offering. Marcia Berss reported in Forbes that Wisconsin law required Weyco Chairman Thomas Florsheim and his group to get approval from half the minority shareholders before it could take the company private, reporting “The group vowed not to sell if its bid was rejected—turning the bid into a take-it-or-leave-it deal.”
Outraged at what they believed was Weyco management’s attempt to buy the company at an undervalued price, Alan Kahn, former president of New York City money management firm Kahn Brothers & Company, and Quest Advisory Group, another New York money manager that held Weyco stock, rallied successfully against the bid. Kahn’s daughter Amanda also filed two separate suits against the company. Alan Kahn was known for filing lawsuits against company managers and investment bankers that he perceived were not carrying out their fiduciary duty to best represent shareholders. The company responded cooperatively, and volunteered a shareholder list that the Kahns used to send a letter explaining Alan Kahn’s opposition to the proposed deal. Kahn made the point that he and others believed the proposal by Weyco managers represented an abuse of the super-voting rights shareholders had granted insiders in 1987 as an antitakeover measure. To some it appeared that managers were pulling their own hostile takeover—hostile to outside shareholders. In the end, Weyco managers announced that they were withdrawing their offer to buy the company, following indications that they were compromising shareholder support, and considering the effects of a long litigation process.
In their defense, Weyco management said that its bid was based on the analysis of two major investment banking firms: Bear, Stearns & Company, New York City, and Kemper Securities Inc., Chicago. According to Rich Kirchen of the Business Journal—Milwaukee, “Management believed its offer—which at the time represented an all-time high for Weyco stock—gave shareholders a profitable way to exit an illiquid stock.”
Repercussions of the failed buyout proposal appeared on the ballot for the following Weyco annual meeting. The Quest Advisory Corporation proposed that Weyco eliminate the super-voting Class B stock that was issued as an anti-hostile takeover measure—and reestablish a single class of common stock.
Late in 1997 Weyco began construction on a $13 million warehouse and distribution center, locating it on a 12-acre parcel near its roots and its workers. Thomas Florsheim commented that, “One of our biggest assets is our people,” adding “we have extremely low turnover, so we don’t want to lose our work force.” A larger, more modern headquarters was also intended for the site. With production climbing—from 1991 to 1996, the number of pairs of shoes shipped by the company rose from 3.4 million to five million—Weyco facilities were overflowing. The company’s only manufacturing facility remained in Beaver Dam, also the site of a large warehouse, which it planned to shut down after the new warehouse in Milwaukee became operational. The shutdown meant job losses for approximately 50 employees.
Company managers anticipated additional growth in the fashion-casual market, the fastest-growing area of the casual market. In 1999, Weyco doubled its advertising budget in order to build the SAO brand of shoes. They targeted the hip-hop culture by placing advertisements in music magazines such as Vibe, The Source, Blaze, and Rap Pages. According to Footwear News, “The full-page ads have an ‘edgy, urban feel to them,’ said Florsheim, with the ‘centerpiece’ shoes appearing in street locales. Weyco is marketing SAO as its own brand, though with subtle links to its parent, Stacy Adams, on boxes and sole plugs.” Stylish oxfords, boots, and sandals were targeting the 18- to 24-year-old urban streetwear market.
After getting its feet wet with other licensing agreements, Weyco entered into further agreements with Jimmy Sales, New York, to manufacture, market, and distribute Stacy Adams’ men’s neckwear. Through department and specialty stores, ties and handkerchiefs were marketed for the sophisticated urban consumer. The company began considering additional licensing agreements to include hats, belts, and clothing, but wanted to move carefully in choosing the right partners. In an effort to leverage the strength of the Stacy Adams brand beyond footwear, Weyco chose to enter into a licensing agreement with Dorfman Pacific of Stockton, California, to manufacture and market a collection of Stacy Adams headwear. The company also collaborated with Aquarius Ltd. of St. Louis, to manufacture and market belts and small leather goods.
Encouraged by strong sales, the company confidently approached the new millennium. By the third quarter of 1999, sales had increased seven percent over 1998 third quarter results. Weyco’s wholesale division showed a seven percent increase in sales, driven primarily by the Stacy Adams line. Looking ahead, the company intended to continue focusing on its wholesale business.
- W.R.P. Shoe Company was founded.
- Partnership is dissolved and company is incorporated a year later as Weyenberg Shoe Manufacturing Company.
- Company produces combat boots for soldiers in World War I.
- Production exceeds 8,000 pairs of shoes per day.
- IPO is completed with the New York Curb Exchange (American Stock Exchange).
- Company closes selected plants due to new types of products.
- Thomas Florsheim buys into Weyenberg Company, becoming president.
- Company is listed on the New York Stock Exchange.
- Company launches a decade of acquisitions.
- Present name is adopted.
- Proposal by management to take company private is defeated.
- Brand exposure expands via licensing agreements.
Nunn Bush Shoe Company; Stacy Adams Shoe Company.
Brown Group, Inc.; Florsheim Shoe Company; Phillips-Van Heusen Corporation.
Berss, Marcia, “If the Shoe Fits … ,” Forbes, November 7, 1994, p. 12.
——, “Waiting for the Other Shoe to Drop,” Forbes, June 20, 1994, p. 48.
Dries, Michael, “With ‘Shoes all Over the Place,’ Weyco Begins Expansion,” Business Journal—Milwaukee, December 19, 1997, p. 6.
Kirchen, Richard, “Capitalist Crusader Thwarted Weyco Manager’s Buyout Bid,” Business Journal—Milwaukee, July 30, 1994, p. 7.
——, “Weyco Shareholders Seek to Boost Stock,” Business Journal—Milwaukee, September 24, 1994, p. 9.
“News Digest,” Footwear News, May 10, 1999, p. 18.
Rieger, Nancy, “Weyco Nixes Plan to Go Private,” Footwear News, August 1, 1994, p. 41.
Schneider-Levy, Barbara, “Fine and Dandy,” Footwear News, May 8, 1995, p. 12.
——, “Thread Count: Targeting Young, Urban Men, Stacy Adams Has Extended Its Brand by Licensing Clothing and Hosiery Lines,” Footwear News, August 10, 1998, p. 64.
“Shoe Maker to Close Beaver Dam, Wisconsin, Warehouse,” Knight-Ridder/Tribune Business News, June 11, 1999, p. OKRB99162178.
“Weyco Gains 200 Percent in First Quarter,” Footwear News, May 4, 1992, p. 31.
“Weyco Group Inc. (Special Supplement—Hot Shots),” Business Journal—Milwaukee, July 30, 1990, p. X14.
“Weyco Pumps Up Volume for SAO Advertisements,” FootwearNews, February 1, 1999, p. 16.