Rocky Brands, Inc.'s Q2 sales increased 2.6% to $58.8 million from
$57.3 million. A 16.6% increase in retail revenues offset by a 2.7%
decrease in wholesale sales. It also showed a steeper loss due to
weaker-than-expected wholesale revenues, increased production costs and
a greater level of closeouts.

Gross margin eroded to 40.7% from 42% a year ago. The decline was
primarily due to a decrease in sales of its western footwear, which
carry higher gross margins, combined with higher production costs and
an increase in closeout sales versus a year ago. SG&A expenses
increased to 38.8% of sales from 37.4%, partially due to additional
selling expenses related to increased sales and higher professional fees

The net loss of $1.4 million, or 25 cents per share, compared
with  a net loss of $200,000, or 4 cents, a year ago. The latest
loss includes a one-time charge of $0.8 million, or nine cents per
share, due to the refinancing of its term loans as compared to a $0.4
million, or five cents per share, similar write off in the second
quarter of last year.

To reduce costs and improve efficiencies, Rocky Brands said that
beginning in 2008 it will distribute products in the U.S. solely from
its 196,000 square foot facility in Logan, Ohio, and no longer utilize
its leased facility in Tunkhannock, Pennsylvania. At the same time,
Rocky Brands signed a letter of intent with Kane Distribution, which
currently manages the Pennsylvania facility, to serve as a third-party
to manage and operate its combined distribution center in Ohio.

Looking ahead, Rocky Brands remains comfortable with its previously
issued guidance and continues to expect fiscal 2007 revenues to
increase approximately 5% over 2006 levels, and diluted earnings per
share to increase approximately 35% over 2006 levels.