Rocky Brands, Inc. reported sales declined 8.8 percent in the third quarter ended September 30 while profits on an adjusted basis were down 27.5 percent.

Third Quarter 2024 Overview

  • Net sales decreased 8.8 to $114.6 million versus the year-ago quarter, or 2.4, excluding certain non-recurring sales from the year-ago quarter
  • Gross margin increased 110 basis points to 38.1 compared to 37.0 in the year-ago quarter
  • Operating income was $10.1 million as compared to $14.3 million in the year-ago quarter
  • Net income was $5.3 million, or $0.70 per diluted share, as compared to $6.8 million, or $0.93 per diluted share, for the year-ago quarter
  • Adjusted net income was $5.8 million, or $0.77 per diluted share, as compared to $8.0 million, or $1.09 per diluted share, for the year-ago quarter
  • Inventories at September 30, 2024 decreased 11.8 year-over-year
  • Total debt at September 30, 2024 decreased 29.7 year-over-year

“While cautious consumer spending outside of peak shopping periods and warm, dry weather acted as headwinds this quarter, the underlying strength of our business remains intact,” said Jason Brooks, chairman, president and chief executive officer. “The benefits of our multi-brand, multi-channel model were evident in the third quarter as double digit sales growth in both our Durango brand and our Lehigh CustomFit safety footwear platform partially offset Wholesale declines primarily within our work, outdoor and commercial military categories. Based on our current order book for 2025, we believe this softness is transitory and that recent brand and marketing investments, along with our improved capital structure, have the company well positioned to drive sustainable, profitable growth and long-term shareholder value.”

Third Quarter 2024 Review
Third quarter net sales decreased 8.8 to $114.6 million compared with $125.6 million in the third quarter of 2023. Excluding certain non-recurring sales relating to the manufacturing of Servus product following the divestiture of the Servus brand, the change to a distributor model in Canada in November 2023, and temporarily elevated commercial military footwear sales to a single customer throughout 2023, net sales decreased 2.4 year-over-year. Wholesale sales for the third quarter were $84.0 million, down 15.7 compared to the third quarter of 2023, or 9.7 excluding the aforementioned non-recurring sales. Retail sales for the third quarter increased 9.2, or 11.8 excluding the non-recurring sales related to the change in the Canadian distribution model, to $26.8 million compared to the third quarter of 2023. Contract Manufacturing sales were $3.8 million in the third quarter of 2024 compared to $1.4 million in the prior year period, or up $3.4 million excluding the aforementioned non-recurring sales.

Gross margin in the third quarter of 2024 was $43.6 million, or 38.1 of net sales, compared to $46.5 million, or 37.0 of net sales, for the same period last year. The 110-basis point increase in gross margin as a percentage of net sales was due to a higher mix of Retail segment sales which carry higher gross margins than the Wholesale and Contract Manufacturing segments.

Operating expenses were $33.6 million, or 29.3 of net sales, for the third quarter of 2024 compared to $32.3 million, or 25.7 of net sales, for the same period a year ago. Excluding $0.7 million of acquisition-related amortization in the third quarter of 2024 and $1.5 million of costs related to closure of a manufacturing facility, acquisition-related amortization, and restructuring costs in the third quarter of 2023, adjusted operating expenses were $32.9 million in the current year period and $30.7 million in the year-ago period. This increase was primarily attributable to incremental brand building and advertising programs to support future growth. As a percentage of net sales, adjusted operating expense were 28.7 in the third quarter 2024 compared with 24.5 in the year-ago period.

Income from operations for the third quarter of 2024 was $10.1 million, or 8.8 of net sales compared to $14.3 million or 11.4 of net sales for the same period a year ago. Adjusted operating income for the third quarter of 2024 was $10.8 million, or 9.4 of net sales compared to adjusted operating income of $15.8 million, or 12.6 of net sales a year ago.

Interest expense for the third quarter of 2024 was $3.3 million compared with $5.8 million a year ago. The decrease was driven by lower debt levels and interest rates as a result of the debt refinancing completed in April 2024.

The company reported third quarter net income of $5.3 million, or $0.70 per diluted share compared to $6.8 million, or $0.93 per diluted share in the third quarter of 2023. Adjusted net income for the third quarter of 2024 was $5.8 million, or $0.77 per diluted share, compared to $8.0 million, or $1.09 per diluted share, in the year-ago period.

Balance Sheet Review
Cash and cash equivalents were $3.7 million at September 30, 2024 compared to $4.2 million on the same date a year ago.

Inventories at September 30, 2024 were $171.8 million, down 11.8 from $194.7 million on the same date a year ago.

Total debt, net of unamortized debt issuance costs of $2.4 million, at September 30, 2024 was $150.3 million consisting of a $47.2 million senior term loan and $105.5 million of borrowings under the company’s revolving credit facility. Compared with September 30, 2023 and December 31, 2023, total debt at September 30, 2024 was down 29.7 and 13.2, respectively.

Image courtesy Rocky Brands