Rocky Brands saw a modest decline in its top line for the fourth quarter of fiscal 2009, but extensive cost cutting measures, leaner inventories and a cold, wet winter propelled the company to a slight profit for the period. In a conference call with analysts, company Chairman and CEO Mike Brooks said the company was very pleased with bottom line results and balance sheet improvement as Rocky significantly reduced borrowings on its credit facility during the full year and carefully managed inventory to account for slimmed-down orders from cautious retailers.
Following up on a third quarter that saw Rocky post its highest earnings results in three years, Q4 earnings were $909,000, or 16 cents per share, compared to a loss of $2.2 million, or 41 cents per share, in the prior-year period. Cost cutting initiatives, including lowering headcount, shaving expenses at the customer service center and instituting tighter fiscal control across the board, helped Rocky swing to a profit for the quarter.
Earnings included restructuring charges of 8 cents per share associated with the closing of 15 mini-warehouses that were operated under the Lehigh division along with the relocation of a customer service center. Non-GAAP diluted EPS was 24 cents, up from 13 cents per share in Q4 2008. Results from the corresponding fourth quarter of 2008 include non-cash charges of 54 cents per diluted share for the write-down of the Lehigh and Gates trademarks.
Net sales slipped 6.6% to $61.7 million in the fourth quarter from $66.0 million in Q4 2008. Retail sales – affected by the companys ongoing transition to more Internet-driven transactions and the decision to remove a portion of the Lehigh mobile stores — fell to $12.5 million from $15.4 million in Q4 2008. Wholesale sales slipped 7.3% to $45.9 million from $49.5 million in the prior-year quarter on more conservative orders.
Rocky Brands Western category, which includes the Durango and Rocky western products, slipped 8% to $7.6 million from $8.3 million and management said the company was unable to fully capitalize on the potential sales during the holiday season despite a recent fashion trend that has seen improved results from womens western boots.
Military sales, which included initial shipments of insulated boots under the $29 million blanket purchase agreement the company received from the General Services Administration (GSA) in July 2009, improved to $3.3 million from $1.2 million in the prior-year period.
The aforementioned cold, wet winter weather, along with a rare increase in hunting license sales, stimulated sales for Rockys hunting, waterproof and insulated products. Notably, management said hunting footwear improved 9% to $6.7 million in Q4 from $6.1 million in Q4 in the prior year, and added that they had seen solid sales at retail with hunting apparel and thermal underwear systems.
Sales for the Work category, which includes Georgia Boot, Rocky, Dickies and Michelin brands, fell 9% to $21.3 million from $23.5 million in Q4 2008.
Gross margins for the quarter slipped 190 basis points to 35.7% from 37.6% on an increase in sales in the military segment, which management said carries lower gross margins than the wholesale or retail segments. As mentioned, SG&A improved by 29% on a reduction in salaries and benefits, advertising expenses, Lehigh mobile store expenses and bad debt expense.
