With work, western and hunting all posting strong double-digit gains in the period, Rocky Brands, Inc. reported first quarter sales increased 22.5 percent to $65.8 million.
Earnings fell 18.9 percent to $723,788, or 10 cents a share. Excluding non-recurring investments in the quarter, earnings would have “easily exceeded last year with the strong increase in topline,” said James McDonald, Rocky’s CFO, on a conference call with analysts.
The investments included the seeding program with a retail partner; the funding of additional advertising for its Georgia Boot, Rocky, and Durango brands; and startup costs for Creative Recreation, the upscale sneaker brand acquired in December 2013.
Wholesale sales jumped 26.4 percent to $53.1 million, including a 16.8 percent increase in wholesale sales of the company’s legacy brands: Rocky, Durango and Georgia Boot. This topline increase was driven by improved product offerings, favorable weather conditions in several parts of the country, leaner inventory levels in the channel and to a small degree the seeding program with one of its major customers.
The 18 percent gain in work boots was primarily driven by Georgia Boots, as demand for the Homeland series outpaced expectations. Rocky’s work footwear sales were also up, aided by new product introductions and renewed interest in the brands IronClad collection.
Western was ahead 19 percent on demand for new products from Durango and Rocky along with a restructuring of the western sales operation. Durango continues to be driven by its Rebel collection in western but also had a favorable response to a new kid’s package of leather boots. The Rocky brand benefited by the hiring of a dedicated sales force to refocus the brand as a work western brand, with new Square Toe boots gaining a good response.
Rocky hunting saw the top performance among categories with cold weather fueling demand for insulated and waterproof products. McDonald said Rocky Brands had a good SHOT show in January and “also experienced a good deal of at once demand for our spring turkey hunting product line. The retail sales are up which has been exceptional.”
Creative Recreation, in its first quarter in business, continues to be integrated into the company’s organization and the company is “encouraged by conversions with major retailers about the strength of the brand,” said McDonald. The brand is providing Rocky Brands access to accounts such as Barneys, Nordstrom, Bloomingdale and Journeys for the first time.
Retail sales increased to $11.1 million compared to $10.8 million for the same period last year. Military segment sales reached $1.6 million, up from $0.9 million.
Gross margins declined to 33.2 percent of sales from 34.8 percent the prior year due primarily to costs associated with the seeding program and the increase in military segment sales. SG&A expenses were reduced to 31.2 percent of sales from 32.0 percent with the aid of sales leverage.
“The initiatives that impacted the first quarter profitability – the seeding program with the key retail partner to funding of additional advertising and the startup costs at Creative Recreation – will yield improved profitability particularly in the second half of the year and beyond and greater shareholder value over the long-term,” said David Sharp, president and CEO, on the call.
