Good day, and thank you for standing by. Welcome to the Weyco Group third quarter 2022 earnings release conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question, you will need to press star one one on your telephone, and you will then hear an automated message advising your hand is raised. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Judy Anderson, Weyco Group's Chief Financial Officer. Judy, please go ahead.
Thank you, Kyle. Good morning, everyone, and welcome to Weyco Group's conference call to discuss third quarter 2022 earnings. On this call with me today is Tom Florsheim Jr., our Chairman and CEO, and John Florsheim, our President and COO. Before we begin to discuss the results of the quarter, I will read a brief cautionary statement. During the course of this call, we may make projections or other forward-looking statements regarding our current expectations concerning future events and the future financial performance of the company. We wish to caution you that these statements are just predictions and that actual events or results may differ materially.
We refer you to the section entitled Risk Factors in our most recent annual report on Form 10-K and to our other filings with the Securities and Exchange Commission for a discussion of important factors and risks that could cause our results to differ materially from our projections, including the uncertain impact of inflation on our costs and consumer demand for our products, and the continuing direct and indirect effects of the COVID-19 pandemic. Excuse me. Overall net sales for the third quarter were a third-quarter record of $97 million, up 57% compared to $61.8 million in 2021. Consolidated gross earnings increased to 40.6% of net sales compared to 40% of net sales in last year's third quarter, due mainly to higher gross margins in our North American wholesale segment.
Quarterly operating earnings were a record $14.2 million, more than double last year's third-quarter operating earnings of $6.7 million. Quarterly net earnings were a record $10.8 million or $1.12 per diluted share, up more than 100% from $5.1 million or 52 cents per diluted share last year. Net sales in our North American wholesale segment reached a record $81.6 million, up 63% compared to $50.2 million in the third quarter of 2021. While part of this increase was due to strong consumer demand and higher selling prices, last year's third-quarter sales were abnormally low due to supply chain delays, which caused some third-quarter orders to ship in the fourth quarter. This quarter, our wholesale business experienced peak demand, and our inventory levels supported record shipments.
Looking forward to the fourth quarter, we anticipate that our sales will fall short of 2021 due to last year's shift in third-quarter sales to the fourth quarter. However, overall, the second half of 2022 is expected to outpace the same period of 2021. Wholesale gross margins were 36.3% of net sales in the third quarter of 2022 compared to 34.6% of net sales last year. Gross margins improved as a result of higher selling prices and lower inbound freight costs as freight rates on containers coming from China declined during the quarter. Wholesale selling and administrative expenses were $16.7 million or 21% of net sales for the quarter, compared to $11.3 million or 23% of net sales last year.
The increase was largely due to higher employee costs associated with our increased sales volumes. Additionally, last year's third-quarter expenses were reduced by $1.9 million in government wage subsidies. Wholesale operating earnings rose to $12.9 million in the third quarter of 2022, up 114% from $6 million last year due to higher sales and gross margins. Net sales of the North American retail segment were a third-quarter record of $7.1 million, up 13% from $6.3 million in the third quarter of 2021. The increase was primarily due to higher sales volumes across our major brands' websites. Sales were also up for the quarter at our four domestic brick-and-mortar stores.
Retail gross earnings as a percent of net sales were 66.3% and 68.4% in the third quarters of 2022 and 2021 respectively. Selling and administrative expenses for the retail segment totaled $3.9 million for the quarter compared to $2.9 million last year. The increase was mainly due to higher e-commerce expenses, primarily outbound freight and advertising. Retail operating earnings were $825,000 for the quarter versus $1.4 million last year. The decrease was primarily due to lower earnings from our e-commerce businesses as higher sales were offset by higher selling and administrative expenses. Our other operations have historically included the wholesale and retail businesses of Florsheim Australia and Florsheim Europe. However, as previously disclosed, the company closed Florsheim Europe.
As a result, the 2022 operating results of the other category reflect only that of Florsheim Australia. Other net sales for the third quarter totaled $8.2 million, up 54% compared to $5.3 million in the third quarter of 2021 due to higher sales at Florsheim Australia. In local currency, Florsheim Australia's net sales were up 71% for the quarter due to higher sales in both its retail and wholesale businesses. Last year's third quarter sales were negatively impacted by COVID-19 related lockdowns, which resulted in a large number of Florsheim Australia stores being closed for a majority of the quarter. Other operating earnings recovered to $476,000 for the quarter from operating losses of $682,000 last year.
The increase was due to improved performance of our retail and online businesses in Australia. At September 30, 2022, our cash, short-term investments, and marketable securities totaled $18.7 million, and we had $34.7 million outstanding on our $50 million revolving line of credit. During the first 9 months of 2022, we drew $34.7 million on our line of credit and liquidated $8.1 million of investment securities. We used funds to pay $6.9 million in dividends and to repurchase $3.3 million of our company stock. In addition, our operations resulted in a net $42.1 million use of cash, mainly to fund inventory purchases. We also had approximately $1.5 million of capital expenditures.
We expect that 2022 annual capital expenditures will be between $2 million and $2.5 million. On November 1, 2022, our board of directors declared a cash dividend of $0.24 per share to all shareholders of record on November 28, 2022, payable January 3, 2023. I would now like to turn the call over to Tom Florsheim, Jr., our Chairman and CEO.
Thanks, Judy, and good morning, everyone. We are very excited about the overall strength of our wholesale business, which resulted in a fourth straight quarter of record sales. As Judy mentioned, our wholesale business was up nearly 63% versus last year's third quarter. The large increase reflects, in part, our strong inventory position relative to the third quarter of 2021, when our shipments were constrained due to supply chain issues. However, our performance was also a byproduct of strong demand at both the retailer and consumer levels for our footwear. In comparison to a very good pre-pandemic third quarter of 2019, our wholesale shipments were up nearly 20%, and as a company, we achieved record profitability for the quarter. We are proud of this accomplishment, particularly in this period of heightened economic insecurity.
We are experiencing a very positive trend with our legacy brands, with Florsheim, Stacy Adams, and Nunn Bush registering gains of 82%, 68%, and 50% respectively. Both Florsheim and Nunn Bush had significant increases over 2019, and Florsheim also had its largest third quarter on record. The market continues to cycle away from the in-home casual lifestyle that prevailed during the pandemic and toward more of a dress-up aesthetic. The changeover has boosted demand for work-oriented and occasion-oriented footwear, resulting in strong sales across all of our traditional legacy brands. We have benefited from less competition in dress and dress casual footwear as certain brands pulled back from the space during the pandemic.
Over the last few years, we have also expanded our casual range and experimented in different categories of footwear, which has given us a better understanding as to what works and doesn't work for our brands. The push toward casual during the pandemic has provided good learning for future product development. While we believe the market for refined footwear will remain a growth opportunity for us in the near to midterm, we remain focused long-term on strengthening our casual assortment for all brands. In terms of our outdoor product group, Bogs was up 52% versus last year, and it was a record quarter for Bogs shipments. As discussed in previous conference calls, the outdoor business took off during the height of the pandemic, and we spent much of 2020 and 2021 navigating supply chain issues to try to meet heightened consumer demand.
In 2022, we are in a much better inventory position, allowing us to deliver on our strong backlog of orders. In addition, we have expanded our Bogs sales beyond our classic styles and have picked up market share with more casual and lifestyle products, in particular in the women's category. As we head into the fourth quarter, it has become clear that the outdoor market is oversaturated with product and consumer demand has softened somewhat relative to last year. We believe we're in a good position to navigate these changes as the majority of our Bogs inventories and styles that we believe will have validity well into the future. As we mentioned in our second quarter conference call, the onboarding of Forsake has been slower than anticipated due to supply chain challenges.
We are in the process of introducing a number of new styles for fall 2023 and believe the brand will be well positioned for a relaunch in the back half of next year. Our retail sales were up 13% for the quarter, mainly driven by strong e-commerce sales. We are pleased by the solid growth as industry statistics indicate that footwear e-commerce sales have largely flatlined year-over-year. However, our e-commerce profitability is down significantly due to higher SG&A costs, primarily related to shipping and advertising. Shipping expense increases track the surcharge and fuel costs, while the digital advertising space has become more competitive and in some respects, less efficient with new privacy settings limiting the advertiser's ability to target consumers effectively in comparison to prior years.
As we move forward, we are focused on getting our costs in line while maintaining our sales growth trend. Sales in Florsheim Australia were up 71% versus 2021 in local currency, with higher sales both in our wholesale and retail businesses. Last year, the Florsheim Australian markets were significantly impacted by COVID shutdowns. During third quarter, our Australian management team successfully navigated the transition to a new warehouse. With the opening up of the Australian markets, both our Florsheim and Bogs business are exhibiting strong momentum. We expect that Bogs will have its third straight year of record sales, and it has become an important part of our business model in this market. We are pleased by the turnaround in Australia and the bounce back to profitability for the region.
Our overall inventory was $112 million as of September 30, 2022, up from $52.9 million at the end of September last year. As discussed in previous calls, we've been building our inventories to meet the demand for our product. As explained earlier in this call, our higher inventories help drive our record third quarter results. The supply chain continues to improve, and delivery times have become shorter and more consistent. For fall this year and for spring of 2023, we planned our receipt of inventory to be earlier than normal to ensure on-time delivery to our customers. As we plan for fall 2023, our lead times with manufacturing have returned closer to historical norms, which allow us to bring a product closer to season. Our overall gross margin was 40.6% compared to 40% last year.
Gross margins improved due to price increases and lower inbound freight costs. While freight remains above pre-pandemic levels, we are continuing to see freight costs move downward, which help to drive increased margins. This concludes our formal remarks. Thank you for your interest in Weyco Group, and I would now like to open the call to your questions.
As a reminder, to ask a question, you will need to press star one one on your telephone. Once again, that is star one one on your telephone keypad. Please stand by while we compile the Q&A roster. Your first question comes from the line of David Wright from Henry Investment Trust, LP. David, your line is now open.
Good morning, David.
Hey, I've 2 questions. First, did you have any share repurchase in the latest quarter?
We did. We just 28,000 shares for the quarter at a total cost of $736,000.
That works out to 26-28 a share. 28,000 shares at $736,000?
That's correct.
Okay, thanks.
Yes, an average of. Mm-hmm.
Then the second question is with this great profitability, and of course, the company always, you know, has a super conservative balance sheet. I noticed the dividend hasn't been increased, and it's been about three and a half years. I just wondered with the great pickup in earnings, what the board's thinking was on that. I don't know if it ties in with you know, with your stock buyback and overall capital allocation, but I'd appreciate your thoughts.
Sure. The thinking behind maintaining our dividend at the same amount is just the uncertainty that we're facing, you know, in the upcoming year. It's not—I'm not talking about uncertainty just for Weyco Group. I think that everyone would agree that, you know, there's a lot of clouds on the horizon and just a lot of macroeconomic uncertainty globally. As you pointed out, our balance sheet is conservative, and I guess the way our viewpoint to our dividend increases are the same. I mean, we're, you know, the plan would be to eventually start increasing our dividend again, but we're gonna wait until times are more predictable.
Right. Well, that's a fair position. I would just point out that a penny a share, a quarter increase is only about $100,000 of real money. You know, appreciate your comments on my question. Thanks very much and good luck going forward.
Thank you.
Your next question comes from the line of John Deysher from Pinnacle Value Fund. John, your line is now open.
Good morning, Tom. Good morning, Judy.
Hi, John.
Good morning.
Good morning. A couple questions. How much is left on the share repurchase plan?
1.1 million shares. A little less than 1.1 million.
1.1 million shares. Okay. Got it. The inventory ended the quarter at $112 million. Obviously that helped drive sales, but how much do you expect inventory to come down by year-end, would you say?
We actually expect it to go up slightly higher, just probably a few million. It's a little hard to predict exactly, but we're pretty much at peak, John. You know, but it's possible that it'll go up a little bit as we end the year, and then it'll come down as we move through first quarter and into second quarter.
Why is it going up at year end?
You know, what we did was we brought in our spring inventory early because when we were purchasing the spring inventory, the supply chain was still a pretty big mess. What we have experienced the last few quarters is difficulty in getting the inventory in here on time to ship all of our customer orders on time. We actually faced a bit of that challenge still this fall. We're trying to, you know, we've been moving our timelines up for purchasing because of the supply chain and the longer lead times from our factories. That's the reason that we brought our fall inventory and spring inventory for 2023 in early. Now, what we're seeing is the supply chain normalizing and lead times getting back to almost pre-pandemic levels.
We still have issues where containers will get held up sometimes, and it's always the ones you need, unfortunately. We, you know, we are buying again much closer to season. As we contemplate what we're bringing in for fall 2023, we'll be able to bring that in much closer to our need, you know, and so that's gonna help us bring down inventories.
You think inventory will start to come down when?
Second quarter next year.
Okay. Second quarter 2023. Okay, good. Let's talk about e-commerce for a second. I know the headwinds there are, you know, probably stronger than they were 18 months or 2 years ago. What exactly are you doing to get that business profitable? I mean, advertising, freight, it's just, it's very competitive, as you know. You know, frankly, one of our portfolio companies, they ultimately decided to close their e-com because it just wasn't making money and it, they didn't see a turnaround coming. I'm just curious what specific steps you're taking to get that business profitable.
Hey, John, this is John Florsheim. John, our e-commerce business is actually very profitable. It's less profitable in this third quarter than it was last year. That's because some of the SG&A costs got away from us. You know, Tom detailed that in terms of higher spending on freight, you know, which has to do with fuel costs, and also higher expenditures on advertising having to do with more competition out there and less ability to target based on privacy settings that we didn't have a year ago. It's actually a very nice profitable area of our business. Our main focus right now is getting our costs more in line.
We sort of see what's happened from an advertising perspective. As we go into the fourth quarter, which is a very competitive time period for e-commerce, we're making sure that we stay on budget. From a freight standpoint, we're doing some things around freight to try to renegotiate deals with our shipping carriers to try to get the freight costs more in line. We're really happy with our e-commerce business and our ability to grow this year. We're not so happy with some of the pressure that we've had from an SG&A standpoint.
The other thing that we're doing, too, just in terms of, you know, in terms of targeting customers, we have a number of new tools that we're using in terms of attributing advertising and conversions. It'll allow us to better, you know, pick where we wanna advertise and do that more efficiently. It's something new that we've just added this year. We're in our beta phase, but we have hopes that this will allow us to more efficiently reach out to consumers and prospective consumers.
Okay. Lots of positive steps there. When do you anticipate seeing the impact of those changes?
Well, I think right now, you know, in the fourth quarter, we're going against some huge numbers in e-commerce. I would anticipate our e-commerce growth being under pressure in the fourth quarter. As far as SG&A, that's gonna happen immediately, where we're gonna get our costs more in line. We didn't have a great fourth quarter last year from a profitability standpoint. We had, we were very profitable, but we didn't have the growth that we should have had given the growth in sales. What I anticipate this fourth quarter is there's gonna be, there's more pressure in terms from a top-line standpoint, but we should be able to get things more in line in terms of our expenses.
In the fourth quarter?
In the fourth quarter.
Okay. All right, good. That's a good call. Thanks very much, and good luck.
Thanks, John.
Once again, if you'd like to ask a question, please press star one one on your telephone keypad. Once again, that is star one one on your telephone keypad. There are no further questions at the moment. I would now like to turn the conference back to Judy Anderson for closing remarks.
I just wanna say thank you to everybody for participating in our call today, and I hope you have a really great day.
This concludes today's conference call. Thank you for participating. You may now disconnect.