By Eric Smith
Rocky Brands Inc. topped Wall Street’s earnings and revenue estimates in the third quarter, as the Nelsonville, OH-based company again rode a healthy balance across its portfolio brands and sales channels to more than double net income from the same quarter a year ago.
Rocky Brands—which owns Rocky, Georgia Boot, Durango and Lehigh and licenses Michelin Footwear—reported third quarter net income of $5 million, or 67 cents per diluted share, compared to a net income of $2.2 million, or 30 cents per diluted share, in the third quarter of 2017.
Adjusted net income for Q3 was $4.5 million, or 60 cents per diluted share, topping estimates by 11 cents, compared to adjusted net income of $2.9 million, or 39 cents per diluted share, in the prior year period.
Speaking on Tuesday afternoon’s earnings conference call with analysts, CEO Jason Brooks sounded pleased with the company’s performance, which included “strong gains in gross margin and profitability,” especially in wholesale and retail.
“The product, marketing and distribution strategies we implemented a little over a year ago, coupled with our commitment to operational excellence across the organizations, have been fueling quality sales growth in our highest margin channels, wholesale and retail,” Brooks said. “Our teams have done a good job developing compelling products with accessible price points that serve the needs of our consumers in work, western, hunting, commercial military segments of the market.
“At the same time, we strengthened our consumer connections through targeted digital marketing programs and personalized communications,” he added. “We’ve also stepped up our service levels. This includes supporting our retail partners with exciting programs, in-store promotions and new POP materials, as well as providing our B2C and B2B customers with broader product offerings and increased shipping options. Many of these initiatives started to bear fruit late last year and have continued to gain traction.”
Wholesale sales for the third quarter increased 2.1 percent to $47 million compared to $46 million for the same period in 2017. Retail sales for the third quarter increased 7.6 percent to $11.9 million compared to $11.1 million for the same period last year. Military segment sales for the third quarter were $7 million compared to $7.6 million in the third quarter of 2017.
Gross margin in the third quarter of 2018 increased 14.8 percent to $22.4 million, or 34 percent of sales, compared to $19.5 million, or 30.2 percent of sales, for the same period last year. The 380 basis point increase was driven by higher wholesale, retail and military margins combined with a lower percentage of military sales, which carry lower gross margins than wholesale and retail sales.
Regarding Rocky Brand’s direct-to-consumer business, Brooks said, “Our branded e-commerce websites collectively posted a 6 percent increase in Q3. As this channel continues to capitalize on recent investments aimed at increasing traffic and conversion, while enhancing the consumer experience, the rich content produced by each brand, including videos, images and banners, are being utilized to improve the look and feel of our websites as well as part of our social media efforts aimed at directly reaching new and existing customers and transforming our website from what we’ve had historically been information marketing tools to an e-commerce growth engine.”
The company’s military segment sales were down 7 percent, Brooks said, in line with the company’s expectations due to some “top-line headwinds in 2018 in addition to expiring contracts,” he added.
“However, we have successfully taken advantage of the excess capacity in our Puerto Rican facility afforded us by the declining contract military orders to expand our commercial military production,” Brooks said. “This has led to improved manufacturing efficiencies which have pushed military segment margins to new heights.”
Photo courtesy Rocky Brands
[author] [author_image timthumb=’on’]https://s.gravatar.com/avatar/dec6c8d990a5a173d9ae43e334e44145?s=80[/author_image] [author_info]Eric Smith is Senior Business Editor at SGB Media. Reach him at eric@sgbonline.com or 303-578-7008. Follow on Twitter or connect on LinkedIn.[/author_info] [/author]
