Rocky Brands, Inc. reduced its loss in the second quarter ended June 30 due to higher gross margins and lower expenses. Sales were down 1.6 percent in the period but grew 6.1 percent, adjusted for the divestiture of the Servus brand.

Second Quarter 2024 Overview

  • Net sales decreased 1.6 percent to $98.3 million from the year-ago quarter, or increased 6.1 percent, excluding certain non-recurring sales from the year-ago quarter.
  • Operating income increased 104.7 percent to $4.5 million from the year-ago quarter.
  • Net loss was $1.2 million, or $0.17 per diluted share, compared to a net loss of $2.7 million, or $0.37 per diluted share, for the year-ago quarter.
  • Adjusted net income was $1.3 million, or $0.17 per diluted share, as compared to $0.0 million or $0.00 per diluted share for the year-ago quarter.
  • Inventories at June 30, 2024, decreased 20.0 percent year-over-year.
  • Total debt at June 30, 2024, decreased 31.3 percent year-over-year.

Rocky Brands Chairman, President, and CEO Jason Brooks commented, “We continue to effectively navigate an unpredictable consumer environment thanks to our diversified brand portfolio and recently deployed cost-saving initiatives. Strong double-digit gains in sales for our Durango and XTRATUF brands in both our wholesale and e-commerce channels helped offset softness in other areas of our business and generated low-single-digit year-over-year recurring sales growth. The second quarter was also highlighted by the refinancing of our debt and simplification of our capital structure which is expected to generate approximately $4.4 million in annualized savings beginning in 2025. Over the past several years, we have taken actions to improve the company’s financial profile in order to reinvest in growth and drive increased shareholder value. We are encouraged with our recent results and look forward to delivering further growth over the near and long term.”

Second Quarter 2024 Review

  • Second quarter net sales decreased 1.6 percent to $98.3 million compared with $99.8 million in the second quarter of 2023. Excluding certain non-recurring sales related to the manufacturing of Servus products following the divestiture of the Servus brand, the change to a distributor model in Canada in November 2023, and temporarily elevated commercial military footwear sales to a single customer throughout 2023, net sales increased by 6.1 percent in the second quarter of 2024 compared to the year-ago period. Wholesale sales for the second quarter were $68.3 million, down 4.5 percent, compared to the second quarter of 2023, or up 2.3 percent, excluding non-recurring sales. Retail sales for the second quarter increased by 4.1 percent, or 6.1 percent, excluding the non-recurring sales related to the change in the Canada distribution model, to $26.1 million compared to the second quarter of 2023. Contract Manufacturing sales, including contract military sales and private label programs, were $3.9 million in the second quarter of 2024 compared to $3.3 million in the prior year, or up $2.6 million excluding the aforementioned non-recurring sales.
  • Gross margin in the second quarter of 2024 was $38.0 million, or 38.7 percent of net sales, compared to $37.6 million, or 37.6 percent of net sales, for the same period last year. The 110-basis point increase in gross margin as a percentage of net sales was due to an increase of 200-basis points in Wholesale gross margins and a higher percentage of Retail net sales, which carry higher gross margins than the company’s Wholesale and Contract Manufacturing segments.
  • Operating expenses were $33.5 million, or 34.1 percent of net sales, for the second quarter of 2024 compared to $35.4 million, or 35.4 percent of net sales, for the same period a year ago. Excluding $0.7 million of acquisition-related amortization in the second quarter of 2024 and $1.7 million of acquisition-related amortization and restructuring costs in the second quarter of 2023, adjusted operating expenses were $32.8 million, or 33.4 percent, in the current year period and $33.6 million, or 33.2 percent, in the year-ago period.
  • Income from operations for the second quarter of 2024 was $4.5 million, or 4.6 percent of net sales, compared to $2.2 million, or 2.2 percent of net sales, for the same period a year ago. Adjusted operating income for the second quarter of 2024 was $5.2 million, or 5.3 percent of net sales, compared to adjusted operating income of $5.7 million, or 5.6 percent of net sales, a year ago.
  • Interest expense for the second quarter of 2024 was $6.1 million, including a $2.6 million one-time term loan extinguishment charge, compared with $5.6 million a year ago. Excluding the one-time term loan extinguishment charge, interest expense for the second quarter was $3.5 million. The $2.1 million decrease was driven by lower debt levels and lower interest rates as a result of the debt refinancing completed in April 2024.
  • The company reported a second-quarter net loss of $1.2 million, or $0.17 per diluted share, compared to a net loss of $2.7 million, or $0.37 per diluted share, in the second quarter of 2023. Adjusted net income for the second quarter of 2024 was $1.3 million, or $0.17 per diluted share, compared to $0.0 million, or $0.00 per diluted share, in the year-ago period.

Balance Sheet Review

  • Cash and cash equivalents were $4.1 million at June 30, 2024, compared to $3.1 million on the same date a year ago.
  • Inventories at June 30, 2024 were $175.0 million, down 20.0 percent compared to $218.3 million on the same date a year ago.
  • Total debt, net of unamortized debt issuance costs, at June 30, 2024, was $152.4 million, consisting of a $49.3 million senior term loan and $105.7 million of borrowings under the company’s $175.0 million revolving credit facility with Bank of America, N.A. Compared with June 30, 2023 and December 31, 2023, total debt at June 30, 2024 was down 31.3 percent and 12.0 percent, respectively.

Image courtesy Rocky Brands / Xtratuf