Rocky Shoes and Boots first quarter sales reached a new high this year, jumping 59.1% from $13.8 million last year to 21.9 million this year. Gross margins improved by 50 basis points, from 25.2% last year to 25.7% for Q1 2004. SG&A expenses were $5.3 million, or 24.3% of net sales, for the quarter, representing a 660 basis point improvement compared to $4.3 million, or 30.9% of net sales, the prior year.
First quarter sales by category showed the Rocky brand growing 23.3% to $16.4 million, Gates sold $500,000 of product, and Military business posted $5.0 million.
Backlog increased 27% for Rocky branded product, from $26.5 million last year to $34 million this year. Military backlog is $17 million, up from zero last year, and Gates product backlog is up to $7 million from an undisclosed amount last year, prior to the acquisition.
The increase in sales and tight controls by management brought RCKY out of the red, and into profitability. This is the first time in six years RCKY has seen a profitable Q1, mainly due to the seasonality of their business.
Net income increased to $100,000, or one penny per diluted share, for the three month period compared to a net loss of $600,000 or 14 cents per diluted share in the prior year.
The ongoing efforts to balance the business appear to be working for the company. One area that has helped offset seasonality considerably is occupational sales. These have grown from 26% of revenue in 2001 to 33% last year.
Currently the company is producing 20,000 pairs of military boots, or $1.6 million in product a month at its facility in Puerto Rico. Brooks said that the factory is not at capacity and sees more military opportunity. While RCKYs sales benefited from military contracts, the company maintains that their growth strategy does not focus on this customer.
Part of the reason Brooks is hesitant to commit fully to this could be the reduced margins the military business usually requires. To offset this impact RCKY is ramping up their sourced product sales, which come in at above average margins. Sourced product sales were relatively flat as a percentage of sales, but increased by $4 million for the quarter and Brooks sees this expanding. Now, all apparel and gloves are sourced, and eventually all branded sales will be.
RCKY management sees a tremendous upside coming out of the Gander Mountain IPO and the future Cabelas and Bass Pro IPOs. The company said that they are the number one branded footwear company at all three retailers, and also speculated that further consolidation that will occur as the three companies grow should push Rockys fortunes even higher.