Rocky Brands Inc. reported third-quarter sales increased 15.8 percent to $77.8 million compared to $67.2 million in the third quarter of 2019.
The company reported third-quarter net income of $7.6 million, or $1.04 per diluted share, compared to net income of $5.6 million, or 75 cents, in the third quarter of 2019, representing a gain of 35.7 percent.
Net sales for the first nine months of 2020 were $189.7 million compared with $195.1 million for the first nine months of 2019. The company reported net income of $11.2 million, or $1.53 per diluted share, and net income of $12.4 million, or $1.66 per diluted share for the nine months ended September 30, 2020 and 2019, respectively.
Adjusted net income for the first nine months of 2020, which excludes expenses related to the temporary closure of the company’s manufacturing facilities due to COVID-19, was $12.8 million, or $1.74 per diluted share. Adjusted net income for the first nine months of 2019, which excludes hurricane expense related reimbursement, was $11.8 million, or $1.59 per diluted share.
Jason Brooks, president and chief executive officer, commented, “We delivered outstanding results fueled by the resurgence of our wholesale business combined with continued strength in our direct to consumer channels. The third quarter was highlighted by strong demand for our product lines which drove increased full-priced selling in stores and online. These top-line dynamics contributed to meaningful gains in gross margins and operating expense leverage, resulting in a strong increase in Q3 profitability. Our recent performance amidst ongoing challenges created by COVID-19 underscores the strong consumer appeal of our current footwear offering, the importance of our brands to our retail partners, and the work we’ve done creating a more efficient organization. While there are uncertainties around the near and long-term impact that COVID-19 will have on our industry and the overall economy, we are currently on track for a solid finish to the year and I’m confident that we’ll emerge from this pandemic well-positioned financially to continue investing in future growth.”
Third Quarter Review
Net sales for the third quarter increased 15.8 percent to $77.8 million compared to $67.2 million a year ago. Wholesale sales for the third quarter increased 19.3 percent to $56.3 million compared to $47.2 million for the same period in 2019. Retail sales for the third quarter increased 11.4 percent to $16.1 million compared to $14.5 million for the same period last year. Military segment sales for the third quarter were $5.3 million compared to $5.4 million in the third quarter of 2019.
Gross margin in the third quarter of 2020 was $29.8 million, or 38.4 percent of sales, compared to $25.0 million, or 37.2 percent of sales, for the same period last year. The 120 basis point increase was primarily attributable to higher wholesale margins driven by increased full-priced selling along with higher retail margins, partially offset by lower military margins compared to 2019.
Operating expenses were $20.2 million, or 25.9 percent of net sales, for the third quarter of 2020 compared to $18.0 million, or 26.8 percent of net sales, a year ago. The increase in operating expenses was driven primarily by higher variable expenses associated with the increase in sales.
Income from operations for the third quarter of 2020 was $9.7 million, or 12.4 percent of net sales compared to $7.0 million for the same period a year ago, or 10.4 percent of net sales.
Balance Sheet Review
Cash and cash equivalents increased $13.5 million, or 209.7 percent, to $19.9 million at September 30, 2020 compared to $6.4 million on the same date a year ago. As of September 30, 2020, the company had zero debt and $71 million in available borrowings on its credit facility.
Inventory at September 30, 2020 decreased 2.7 percent to $80.7 million compared to $82.9 million on the same date a year ago.
The company repurchased approximately 41,000 shares of common stock during the quarter ended September 30, 2020.
Photo courtesy Rocky Brands