WEYCO GROUP INC

Incremental Tariffs

In February 2025, the U.S. imposed reciprocal and retaliatory tariffs on certain imported goods under the International Emergency Economic Powers Act (“IEEPA”). We paid a total of approximately $19.8 million in IEEPA tariffs in 2025 and the first quarter of 2026. The IEEPA tariffs increased the cost of our products by 19% to 50%, resulting in gross margin compression.

On February 20, 2026, the U.S. Supreme Court ruled that IEEPA does not authorize the President to impose tariffs, declaring the IEEPA tariffs invalid. In April 2026, U.S. Customs and Border Protection (“CBP”) commenced a phased process to accept claims for potential refunds of IEEPA tariffs previously paid. The refund process formally opened on April 20, 2026, and on that date, we submitted claims covering our Phase 1 entries totaling $18.6 million. The timing for submitting claims related to our Phase 2 entries, totaling $1.2 million, has not yet been established. The timing and amount of any recoveries remain uncertain and subject to execution by CBP.

Following the U.S. Supreme Court's ruling, the President announced the implementation of a new across-the-board tariff under a separate statutory authority, currently set at 10%, although the scope and rate remain subject to change. U.S. trade policies continue to evolve and remain unpredictable, creating near-term gross margin uncertainty. We have mitigation strategies in place and will continue to adjust, as appropriate, in response to future policy developments.

"Florsheim delivered another strong quarter following its record 2025 performance, while our other brands continued to face headwinds resulting from ongoing market uncertainty,"stated Thomas W. Florsheim, Jr., CEO. "Despite flat top-line results, our operating earnings improved, supported by lower costs. We are encouraged by the recent progress in the tariff refund process and believe it represents a constructive step toward recovering costs previously paid. At the same time, we remain focused on executing within a fluid trade environment. Our team is actively monitoring potential tariff developments and is prepared to respond, as appropriate, through future pricing and/or continued cost-management actions.”