Rocky Brands Inc. reported second-quarter earnings fell 25.0 percent on a 9.4 percent slide in sales.

Second-quarter net sales were $56.2 million compared to $62.0 million in the second quarter of 2019. The company reported second-quarter net income of $2.4 million, or 33 cents per diluted share, compared to net income of $3.2 million, or 42 cents, in the second quarter of 2019. Adjusted net income for the second quarter of 2020, which excludes expenses related to the temporary closure of the company’s manufacturing facilities due to COVID-19, was $3.2 million, or 44 cents per diluted share.

Net sales for the first six months of 2020 were $111.9 million compared with $127.9 million for the first six months of 2019. The company reported net income of $3.6 million, or 49 cents per diluted share, and net income of $6.8 million, or 91 cents per diluted share for the six months ended June 30, 2020 and 2019, respectively. Adjusted net income for the first six months of 2020, which excludes expenses related to the temporary closure of the company’s manufacturing facilities due to COVID-19, was $5.2 million, or 71 cents per diluted share.

Jason Brooks, President and Chief Executive Officer, commented, “Our business exhibited increasing strength as the quarter progressed despite the ongoing challenges created by COVID-19. The work we’ve done over the past several years strengthening our brands and product lines, enhancing our marketing programs and building out our digital capabilities has allowed us to capitalize on the accelerated shift in consumer spending online brought on by the pandemic. Between our branded websites and online marketplaces, total digital sales increased triple digits on a percentage basis in the second quarter driven by existing customers and a dramatic increase in new customer acquisition. Meanwhile, the strong relationships we have forged with our key wholesale accounts helped us weather the slowdown at brick and mortar retail from reduced traffic and store closures. As lockdown restrictions began to ease in many areas of the country midway through the second quarter, we experienced a significant pick up in weekly sell-through at retail. Given the circumstances, we are pleased with our recent performance and encouraged as this momentum has carried into July. While there is still uncertainty about the ultimate impact that COVID-19 will have on our industry and the overall economy, I am confident that our business model and balance sheet, which featured over $25 million in cash and cash equivalents and no debt at the end of the second quarter, have Rocky Brands well positioned to navigate the current headwinds and emerge from the pandemic poised for long-term success.”

Second Quarter Review
Net sales for the second quarter declined 9.3 percent to $56.2 million compared to $62.0 million a year ago. Wholesale sales for the second quarter declined 15.6 percent to $34.3 million compared to $40.6 million for the same period in 2019. Retail sales for the second quarter increased 15.8 percent to $16.3 million compared to $14.1 million for the same period last year. Military segment sales for the second quarter were $5.6 million compared to $7.2 million in the second quarter of 2019.

Gross margin in the second quarter of 2020 was $19.5 million, or 34.6 percent of sales, compared to $21.4 million, or 34.6 percent of sales, for the same period last year. Adjusted gross margin for the second quarter of 2020, which excludes approximately $1.0 million in expenses related to the temporary closure of the company’s manufacturing facilities due to COVID-19, was $20.4 million, or 36.4 percent of sales. The 180 basis point increase was driven primarily by a higher percentage of retail sales, which carry higher gross margins than wholesale and military sales, and higher retail margins year over year, partially offset by lower wholesale and military margins compared to 2019.

Operating expenses were $16.4 million, or 29.1 percent of net sales, for the second quarter of 2020 compared to $17.5 million, or 28.2 percent of net sales, a year ago. The decrease in operating expenses was driven primarily by lower variable expenses associated with a decrease in sales.

Income from operations for the second quarter of 2020 was $3.1 million, or 5.5 percent of net sales compared to $3.9 million for the same period a year ago, or 6.4 percent of net sales. Adjusted operating income for the second quarter of 2020 was $4.1 million, or 7.3 percent of net sales.

Balance Sheet Review
Cash and cash equivalents increased $10.1 million, or 64.4 percent, to $25.8 million at June 30, 2020 compared to $15.7 million on the same date a year ago. During the second quarter of 2020, the company repaid the $20 million it drew down on its credit facility in March 2020 as a precautionary measure in response to COVID-19. As of June 30, 2020, the company had zero debt and $60 million in available borrowings on its credit facility.

Inventory at June 30, 2020 decreased 3.8 percent to $74.5 million compared to $77.5 million on the same date a year ago.

Rocky Brands makes hunt and outdoor footwear under its Rocky, Georgia Boot, Durango, and Lehigh labels, as well as the licensed brand Michelin.

Photo courtesy Rocky