Rocky Brands Inc. reported earnings climbed 91.1 percent in the fourth quarter on a 16.2 percent revenue gain.
Fourth Quarter 2020 Sales And Income
Fourth quarter net sales increased 16.3 percent to $87.6 million versus net sales of $75.3 million in the fourth quarter of 2019. Fourth-quarter net income increased 91.1 percent to $9.7 million, or $1.33 per diluted share, compared to $5.1 million, or $0.68 per diluted share in the year-ago period. Adjusted net income for the fourth quarter of 2020, which excludes acquisition-related expenses, was $10.3 million, or $1.41 per diluted share.
Fiscal Year 2020 Sales And Income
For fiscal year 2020, net sales increased 2.6 percent to $277.3 million versus net sales of $270.4 million in fiscal year 2019. Net income increased 20.1 percent to $21.0 million, or $2.86 per diluted share, for fiscal year 2020, compared with a net income of $17.5 million, or $2.35 per diluted share, for fiscal 2019. Adjusted net income for fiscal 2020 was $23.1 million, or $3.14 per diluted share, compared to an adjusted net income of $16.9 million, or $2.27 per diluted share in 2019.
“We had an incredible fourth quarter with strong sales across our business leading to record revenue and profitability,” said Jason Brooks, president and chief executive officer. “The solid foundation we’ve built at Rocky Brands over the past several years allowed the company to successfully weather the initial challenges created by COVID-19 last spring, and more recently capitalize on the opportunities that emerged as the economy reopened and consumers returned to shopping at brick & mortar retail. Our performance during the second half of 2020 reflects the strong appeal of our brands and products, the advantages of our internal manufacturing, and our enhanced fulfillment capabilities. Our execution amidst the challenging operating environment has strengthened our customer and consumer relationships and provided us with great momentum to start 2021. We believe we have the right strategies in place to continue expanding our market share both organically and through our proposed acquisition of the performance and lifestyle footwear business of Honeywell that is on track to close in March. I am extremely proud of our organization’s many recent accomplishments, and I am confident that we are on course to deliver even greater value to shareholders in the years to come.”
On January 25, 2021, Rocky Brands announced that it has entered into a definitive agreement to acquire the performance and lifestyle footwear business of Honeywell International, Inc. including The Original Muck Boot Company and XtraTuf footwear brands, for a purchase price of $230 million.
Fourth Quarter and Full-Year Review
Wholesale sales for the fourth quarter increased 21.7 percent to $59.9 million compared to $49.3 million for the same period in 2019. Retail sales for the fourth quarter increased 13.1 percent to $23.5 million compared to $20.8 million for the same period last year. Military segment sales for the fourth quarter were $4.2 million compared to $5.3 million in the fourth quarter of 2019.
Gross margin in the fourth quarter of 2020 increased 27.8 percent to $36.1 million, or 41.2 percent of sales, compared to $28.3 million, or 37.5 percent of sales, for the same period last year. The 370 basis point increase was primarily attributable to higher wholesale margins driven by increased full-priced selling along with higher retail margins.
Operating expenses were $23.2 million, or 26.5 percent of net sales, for the fourth quarter of 2020 compared to $21.6 million, or 28.7 percent of net sales, a year ago.
Income from operations for the fourth quarter of 2020 increased 93.8 percent to $12.9 million, or 14.7 percent of net sales compared to $6.7 million for the same period a year ago, or 8.8 percent of net sales. Adjusted operating income for the fourth quarter of 2020 was $13.6 million, or 15.5 percent of net sales.
For 2020, wholesale sales increased 3.4 percent to $185.6 million compared to $179.5 million for 2019. Retail sales increased 12.4 percent to $72.9 million compared to $64.8 million for the same period last year. Military segment sales declined 27.6 percent to $18.9 million compared to $26.1 million in 2019.
Gross margin for 2020 increased 7.2 percent to $104.7 million, or 37.8 percent of sales, compared to $97.7 million, or 36.1 percent of sales, for the same period last year. Adjusted gross margin for 2020, which excludes approximately $2.0 million in expenses related to the temporary closure of the company’s manufacturing facilities due to COVID-19, was $106.7 million, or 38.5 percent of sales, while adjusted gross margin for 2019, which excluded hurricane-related expense reimbursement, was $97.0 million, or 35.9 percent. The 260 basis point increase was driven by a higher percentage of retail sales, which carry higher gross margins than wholesale and military sales, and higher wholesale and retail segment margins versus the same period last year.
Operating expenses were $77.6 million, or 28.0 percent of net sales, for 2020 compared to $75.6 million, or 28.0 percent of net sales, a year ago.
Income from operations for 2020 increased 23.0 percent to $27.2 million, or 9.8 percent of net sales compared to $22.1 million for the same period a year ago, or 8.2 percent of net sales. Adjusted operating income for 2020 was $29.8 million, or 10.8 percent of net sales, compared to adjusted operating income of $21.4 million, or 7.9 percent for 2019.
Balance Sheet Review
Cash and cash equivalents increased $12.8 million or 82.7 percent to $28.4 million at December 31, 2020 compared to $15.5 million on the same date a year ago.
Inventory at December 31, 2020 increased 1.1 percent to $77.6 million compared to $76.7 million on the same date a year ago.
The company’s footwear brands include Rocky, Georgia Boot, Durango, Lehigh, and the licensed brand Michelin.
Photo courtesy Original Muck Boot Company