Rocky Brands, Inc. saw fourth-quarter net sales decrease 9.3 percent to $126.0 million, compared with $138.9 million in the fourth quarter of 2022.

  • Wholesale segment sales for the fourth quarter of 2023 decreased 13.3 percent to $85.8 million compared to $98.9 million for the corresponding period in 2022.
  • Retail segment sales for the fourth quarter of 2023 increased 1.5 percent to $37.8 million compared to $37.3 million for the 2022 fourth quarter.
  • Contract Manufacturing segment sales, which include contract military sales and private label programs, decreased 14.9 percent to $2.3 million for the fourth quarter of 2023 compared to $2.7 million in the fourth quarter of 2022. The decrease in Contract Manufacturing sales was reportedly due to the expiration of certain contracts with the U.S. Military.

“While it was a challenging year from a sell-in perspective as many of our wholesale accounts worked to rebalance their overall inventory levels, retail sell-through and the performance of our own e-commerce websites underscores that consumer demand for our brands remains solid,” offered Jason Brooks, chairman, president and CEO of Rocky Brands, Inc. “Equally important, we made great progress strengthening our balance sheet throughout 2023 highlighted by a $66.2 million reduction in inventories and an $83.8 million decline in our debt levels compared with the end of 2022. This work has put us in a great position to invest in our business to drive profitable growth and increased shareholder value over the near and long term.”

Gross margin in the fourth quarter was 40.3 percent of net sales, compared to 40.8 percent of net sales, for the 2022 fourth quarter. The 50-basis-point decrease in gross margin was said to be attributable to a tariff refund with a net impact of approximately $2.4 million received in the fourth quarter of 2022, partially offset by a higher mix of Retail segment sales in the fourth quarter of 2023, which carry higher gross margins than the Wholesale and Contract Manufacturing segments.

Operating expenses were $36.0 million, or 28.6 percent of net sales, for the fourth quarter of 2023, compared to $43.1 million, or 31.0 percent of net sales, for the 2022 fourth quarter.

  • Excluding $0.7 million of acquisition-related amortization expense and $0.1 million of expenses related to the closure of a manufacturing facility in the fourth quarter of 2023 and $1.7 million in acquisition-related amortization and restructuring costs in the fourth quarter of 2022, adjusted operating expenses were $35.2 million for the fourth quarter of 2023 and $41.4 million for the 2022 fourth quarter.
  • The decrease in operating expenses was said to be largely attributable to cost-saving reviews and operational efficiencies achieved through strategic restructuring initiatives implemented over the past year.
  • As a percentage of net sales, adjusted operating expenses were 27.9 percent in the fourth quarter of 2023 compared with 29.8 percent in the year-ago period.

Income from operations for the fourth quarter was $14.7 million, or 11.7 percent of net sales, compared to $13.6 million, or 9.8 percent of net sales, for the 2022 fourth quarter.

  • Adjusted operating income for the fourth quarter of 2023 was $15.5 million, or 12.3 percent of net sales, compared to adjusted operating income of $15.3 million, or 11.0 percent of net sales, for the 2022 fourth quarter.

Interest expense for Q4 2023 was $5.3 million compared with $5.9 million in Q4 2022. The decrease was driven by lower debt levels in the fourth quarter of 2023 compared with the fourth quarter of 2022.

The effective tax rate for the fourth quarter of 2023 increased to 29.0 percent compared to 16.1 percent in Q4 2022. The year-over-year increase, which was higher than initially projected, was driven primarily by a return to provision adjustment resulting from foreign tax credits recognized in the fourth quarter of 2023.

RCKY reported a fourth-quarter 2023 net income of $6.7 million, or 91 cents per diluted share, compared to net income of $6.5 million, or 89 cents per diluted share, in the fourth quarter of 2022.

  • Adjusted net income for the fourth quarter of 2023 was $7.3 million, or 98 cents per diluted share, compared to adjusted net income of $7.9 million, or $1.08 per diluted share, in the fourth quarter of 2022.

“We are encouraged with our fourth quarter performance as we navigated top-line headwinds and delivered operating income that was ahead of our expectations,” added Brooks. “Despite market softness towards the end of December, the late arrival of certain materials that pushed back our manufacturing and shipment schedules, and the transition to a distributor model in Canada in early November, net sales improved from the third quarter with year-over-year declines moderating to their lowest levels in 2023.”

Full Year 2023 Overview

  • Net sales decreased 25.0 percent to $461.8 million.
    • Wholesale segment sales decreased 30.5 percent.
    • Retail segment sales increased 1.4 percent.
  • Operating income decreased 19.7 percent to $35.4 million.
  • Net income decreased 49.1 percent to $10.4 million, or $1.41 per diluted share.
  • Adjusted net income decreased 40.8 percent to $14.3 million, or $1.93 per diluted share.

Balance Sheet Review
Cash and cash equivalents were $4.5 million at year-end compared to $5.7 million at the prior year-end.

Inventory at year-end was $169.2 million compared to $235.4 million at the prior year-end. Compared with December 31, 2022 and September 30, 2023, inventories at December 31, 2023 were down 28.1 percent and 13.1 percent, respectively.

Total debt at December 31, 2023 was $175.0 million, consisting of $77.9 million senior term loan and $97.1 million of borrowings under the company’s senior secured asset-backed credit facility. Compared with December 31, 2022 and September 30, 2023, total debt at December 31, 2023 was down 32.6 percent and 19.1 percent, respectively.

Image courtesy Rocky Brands