Rocky Brands reported fourth-quarter earnings that were nearly double Wall Street’s targets as sales ran up 93.4 percent. For the full year, adjusted net income jumped 40.9 percent on an 85.4 percent sales gain.
“There were many highlights from 2021 led by sustained demand for our brands and products and a transformational acquisition that significantly enhanced our size and brand portfolio,” said Jason Brooks, chairman, president and CEO, on a conference call with analysts.
He said for the majority of the year, Rocky Brands was able to fully meet demand and expand share in multiple footwear categories, including western, work and outdoor.
“While we encountered fulfillment challenges starting in the third quarter that pressured margins and hindered our ability to deliver a portion of orders on time, we have since made good progress regaining efficiencies in our Ohio distribution center and bringing our new Reno, Nevada distribution center online,” said Brooks. “We also accomplished the critical step of migrating the acquired business to our ERP system. With the integration of our two organizations complete, our focus now shifts to identifying synergies and cost saving opportunities and driving operational excellence throughout our newly combined company. We move forward in a solid position to take better advantage of our enviable inventory position and leverage our North American-based manufacturing facilities to drive profitable growth and generate greater shareholder value.”
In the fourth quarter ended December 31, net earnings reached $12.5 million, or $1.69 per share, from $9.7 million, or $1.33, a year ago. On an adjusted basis, earnings rose 34 percent to $13.8 million, or $1.86, from $10.3 million, or $1.41, a year ago, and far better than analyst estimates of 95 cents.
Sales increased 93.4 percent to $169.5 million, topping Wall Street’s consensus target of $163.08 million. The latest quarter includes $79.3 million in sales from Boston Group, which includes The Original Muck Boot company, XTRATUF, Servus, NEOS and Ranger brands. The business was acquired from Honeywell International on March 15, 2021.
Wholesale sales for the quarter surged 124.9 percent to $134.8 million. Retail sales jumped 12.6 percent to $26.5 million. Contract Manufacturing segment sales, which now include contract military sales and private label programs, increased 95.5 percent to $8.1 million.
Gross margin in the quarter eroded to 37.3 percent from 41.2 percent, mainly attributable to the increase in inbound freight costs coupled with the delayed impact of price increases. Margins were also impacted by a lower mix of retail segment sales compared with the year ago period, which carry higher gross margins than the wholesale and contract manufacturing segments.
Operating expenses were $45.1 million, or 26.6 percent of net sales, compared to $23.2 million, or 26.5 percent of net sales, for the same period a year ago. Excluding $1.6 million in acquisition related amortization and integration expenses, operating expenses in the latest quarter were $43.5 million, or 25.7 percent of net sales. The increase in operating expenses was driven primarily by the expenses associated with the acquired brands.
Income from operations climbed 41.1 percent to $18.2 million, or 10.7 percent of sales, compared to $12.9 million or 14.7 percent, for the same period a year ago. Adjusted operating income was $19.8 million, or 11.7 percent of sales, compared to adjusted operating income of $13.6 million, or 15.5 percent, a year ago.
Interest expense grew to $3.2 million compared with $95,000 a year ago, reflecting interest payments on the senior term loan and credit facility used to finance the Boston Group acquisition.
For the year, sales increased 85.4 percent to $514.2 million compared with $277.3 million in 2020. Full year 2021 net sales include $179.0 million, or just over nine months, in net sales from the Boston Group.
Wholesale sales climbed 110.8 percent to $391.1 million, retail sales grew 29.9 percent to $94.7 million, and contract manufacturing segment sales gained 51.0 percent to $28.5 million.
Net income came to $20.6 million, or $2.77 per share, compared to $21.0 million, or $2.86, a year ago. Adjusted EPS was $32.5 million, or $4.39, against adjusted net income of $23.1 million, or $3.14 per diluted share in 2020.
Inventory at December 31, 2021 increased to $232.5 million compared to $77.6 million on the same date a year ago. The $154.9 million increase includes approximately $101.1 million in inventory related to the Boston Group.
