Rocky Brands Inc. Beats On Q3 Revenue & Income

Rocky Brands Inc. on Tuesday reported net sales for the third quarter ended increased 1.9 percent to $65.9 million compared to $64.7 million in the third quarter of 2017, beating Wall Street estimates by $0.4 million.

The company reported third quarter net income of $5 million, or 67 cents per diluted share compared to a net income of $2.2 million, or 30 cents per diluted share in the third quarter of 2017. Adjusted net income for the third quarter of 2018 was $4.5 million, or 60 cents per diluted share—topping estimates by 11 cents—compared to adjusted net income of $2.9 million, or 39 cents per diluted share in the prior year period.

Jason Brooks, president and CEO, said, “We delivered another quarter of solid year-over-year improvements highlighted by strong gains in gross margin and operating profit. The strategic initiatives that we’ve been executing over the past 12 months continued to drive sales growth in our two highest margin channels–wholesale and retail. Our commitment to developing compelling product that serves the needs of our consumers in the work, western, outdoor and commercial military segments of the market coupled with enhanced marketing programs and improved service levels is fueling our success. With our portfolio of authentic brands, internal manufacturing capabilities and differentiated direct business-to-business model, we are confident that the company is well positioned to achieve profitable growth on an annual basis and generate increased shareholder value over the long-term.”

Net sales were $185.5 million and $186.2 million for the nine months ended September 30, 2018 and 2017, respectively. The company reported net income of $10.9 million, or $1.47 per diluted share and a net income of $5.2 million, or 70 cents per diluted share for the nine months ended September 30, 2018 and 2017, respectively. Adjusted net income for the first nine months of 2018 was $10.4 million, or $1.40 per diluted share compared to an adjusted net income of $5.8 million, or 78 cents per diluted share in the prior year period.

Wholesale sales for the third quarter increased 2.1 percent to $47 million compared to $46 million for the same period in 2017. Retail sales for the third quarter increased 7.6 percent to $11.9 million compared to $11.1 million for the same period last year. Military segment sales for the third quarter were $7 million compared to $7.6 million in the third quarter of 2017.

Gross margin in the third quarter of 2018 increased 14.8 percent to $22.4 million, or 34 percent of sales, compared to $19.5 million, or 30.2 percent of sales, for the same period last year. The 380 basis point increase was driven by higher wholesale, retail and military margins combined with a lower percentage of military sales, which carry lower gross margins than wholesale and retail sales.

Operating expenses were $16.8 million, or 25.5 percent of net sales, for the third quarter of 2018 compared to $16 million, or 24.8 percent of net sales, a year ago. The increase in operating expenses was primarily related to the increased investments in our core brands to help initiate growth, variable expenses tied to sales increases and bad debt expense. The increase was partially offset by the reduction of expenses for the Creative Recreation brand which was sold in the fourth quarter of 2017.

Income from operations for the third quarter of 2018 increased 61 percent to $5.6 million, or 8.5 percent of net sales, compared to $3.5 million for the same period a year ago, or 5.4 percent of net sales.

For the first nine-months of 2018, wholesale sales increased 4 percent to $127.2 million compared to $122.3 million for the same period in 2017. Retail sales for the first nine-months increased 8.2 percent to $36.7 million compared to $33.9 million for the same period last year. Military segment sales for the first nine-months were $21.6 million compared to $29.9 million in the first nine-months of 2017.

Gross margin in the first nine-months of 2018 increased 9.5 percent to $62.9 million, or 33.9 percent of sales, compared to $57.4 million, or 30.8 percent of sales, for the same period last year.

Operating expenses were $49.7 million, or 26.8 percent of net sales, for the first nine-months of 2018 compared to $49.3 million, or 26.5 percent of net sales, a year ago. The increase in operating expenses was primarily related to the increased investments in our core brands to help initiate growth, variable expenses tied to sales increases and bad debt expense. The increase was partially offset by the reduction of expenses for the Creative Recreation brand which was sold in the fourth quarter of 2017.

Income from operations for the first nine-months of 2018 increased 62.9 percent to $13.2 million, or 7.1 percent of net sales compared to $8.1 million for the same period a year ago, or 4.4 percent of net sales.

Cash and cash equivalents increased $2 million or 88 percent to $4.2 million at September 30, 2018 compared with the same date a year ago.

Inventory at September 30, 2018 increased 2 percent to $78.4 million compared to $76.9 million on the same date a year ago.

The company had no long-term debt at September 30, 2018 compared to $11.6 million at September 30, 2017.

Photo courtesy Rocky Brands