Rocky Brands, Inc. posted a slight decline in its top-line numbers for the third quarter, but management said they were “very pleased” after the footwear manufacturer enjoyed its strongest earnings performance in 12 quarters. The dip in revenues, which came as a direct result of sliding retail sales from the company’s transition to an e-commerce platform, was the smallest sales decline of the year.
Net sales for the quarter were $66.6 million, down 8.1% compared to net sales of $72.5 million in the third quarter of 2008. Net earnings increased 17.2% to $2.8 million, or 50 cents per diluted share, versus net earnings of $2.4 million, or 43 cents per diluted share, a year ago. Last year’s third quarter includes a one-time prior year tax benefit of $600,000, or 10 cents per diluted share. Excluding this one-time benefit, third quarter 2009 diluted EPS increased 51.5% to 50 cents compared to 33 cents in the third quarter of 2008.
SG&A improved 240 basis points to 27.9% of sales for Q3 compared to 30.3% of sales in the year-ago period.
Inventory decreased 18.3%, to $68.1 million as compared with $83.3 million on the same date a year ago.
By segment, wholesales sales, which make up more than 80% of the company’s business, dipped 2.1% to $54.5 million compared to $55.6 million a year ago. Strength from the Hunting, Western and Duty categories helped offset weakness in other categories.
As noted, retail sales were down year-over-year as a result of the ongoing transition to more Internet-driven transactions along with the company’s cost-related decision to remove a portion of its Lehigh mobile stores from operation. Retail sales for the third quarter were $11.5 million compared to $15.3 million for the same period last year. Management noted that through the first quarter of Web sales, revenues from Internet transactions have increased from 6.2% of the total retail business to 13.6%. Year over year, sales through the Internet grew 208%.
By product category, RCKY continued to see softness from its Work category, which includes the Georgia Boot, Rocky, Dickies and Michelin brands. Sales declined 8.0% to $20.8 million from $22.6 million in the year-ago period. The Hunting category, which benefited from early cold, wet weather trends and strong at-once demand for fill-ins in apparel and footwear, saw sales increase 7.4% to $13 million from $12.1 million a year ago. On a conference call with analysts, management highlighted the strength from the company’s thermal underwear program at Walmart, which is expected to sell out much sooner than originally expected.
Sales in RCKY’s Western category were up 12.5% to $8.1 million from $7.2 million last year. Management said the company’s emerging Duty category has shown promising potential for growth, with sales up 10.5% to $5.2 million for the quarter from $4.7 million a year ago. COO David Sharp added that there is a “growing appetite” for special operations products built to military specification.
