Rocky Brands Inc. reported net income slumped 41.9 percent in the third quarter on a 3.7 percent revenue decline.

Third quarter net sales were $70.0 million compared to $72.7 million in the third quarter ended Sept. 30. The company reported third quarter net income of $1.8 million, or 24 cents per diluted share, compared to net income of $3.1 million, or 42 cents, in the third quarter of 2014.

David Sharp, president and CEO, commented, “Our third quarter performance reflects softer than expected demand in our Work and Hunting categories. The combination of warm temperatures, challenging retail store traffic and weakening local economies tied to oil & gas production led to lower levels of reorders for many of our waterproof and insulated boot collections. This was partially offset by continued growth of our Durango brand and Commercial Military business combined with a significant sales increase in our lower margin, contract military segment. While we are disappointed in our overall results and are being cautious about the remainder of this year given current trends, we believe our entire brand portfolio remains healthy and that the slowdown in our top-line is temporary. We are confident that our product and distribution strategies will generate earnings growth in excess of sales growth over the long-term as our business model has recently demonstrated.”

Third Quarter Review

Net sales for the third quarter were $70.0 million compared to $72.7 million a year ago. Wholesale sales for the third quarter decreased 12.0 percent to $54.7 million compared to $62.1 million for the same period in 2014. Retail sales for the third quarter increased 8.4 percent to $10.3 million compared to $9.5 million for the same period last year. Military segment sales for the third quarter increased to $5.1 million compared to $1.1 million in the third quarter of 2014.

Gross margin in the third quarter of 2015 was $22.1 million, or 31.6 percent of sales, compared to $24.3 million, or 33.4 percent of sales, for the same period last year. The 180 basis point decrease was primarily due to the increase in military segment sales as a percentage of overall sales, which carry lower gross margins than wholesale and retail.

Selling, general and administrative (SG&A) expenses were $19.2 million, or 27.5 percent of net sales, for the third quarter of 2015 compared to $19.4 million, or 26.6 percent of net sales, a year ago.

Income from operations was $2.9 million, or 4.1 percent of net sales, compared to $4.9 million, or 6.8 percent of net sales, a year ago.

Interest expense was $188,000 for the third quarter of 2015, versus $253,000 for the same period last year.

The company’s funded debt decreased $5.7 million, or 11.2 percent, to $45.0 million at September 30, 2015 compared to $50.7 million at September 30, 2014.

Inventories decreased $2.1 million, or 2.4 percent, to $88.0 million at September 30, 2015 compared with $90.1 million on the same date a year ago.

Rocky Brands includes Rocky, Georgia Boot, Durango, Lehigh, Creative Recreation, and the licensed brand Michelin.