Rocky Shoes & Boots needs to add Gloves to the company name as the addition of the Gates brand in the second quarter is already producing results for the company that has traditionally been more focused on the hunting and occupational end of the footwear market. RCKY will be using the Gates brand to build sales in both handwear and footwear in the outdoor sports and après ski markets, while it looks to more contract production to help build margins across the board.

Net income for Q3 increased 45.2% to $3.5 million, or 77 cents per diluted share, from $2.4 million, or 52 cents per diluted share, in the year-ago period. An increase in gross margins helped here — improving by 250 basis points to 31.6% — due mostly from an “increase in sourced products”, which were 73% of net sales for Q3 versus 57% for the same period last year.

Third quarter net sales increased 35.8% to $41.3 million, up from $30.5 million for the same period last year. The increase was attributed to $5.4 million of Gates branded sales, a 21.0% increase in Rocky branded footwear sales, and higher sales of Rocky Outdoor Gear, which more than doubled, compared to the same period a year ago.

Excluding the gain from Gates, sales would have still risen 17.7% for Q3.

Inventory at the end of the quarter was up 39.3% to $42.2 million due to the addition of the Gates product and to support sales of branded products.

Rocky did a “soft release” in the new Gates Footwear category at the last OR Show with a range of light hikers and expects to launch a “majority” of new products at the SIA show and Winter Market, with insulated pack boots and après ski boots featured in the line.

“We plan to focus the brand on covering the extremities”, said Brian Gerrain, VP Sales for the new Gates Footwear & Accessories unit. The company will focus on current established Gates accounts as well as strong Rocky retailers that see that brand primarily servicing their “blood sport” or occupational business.

RCKY now sees earnings of $1.23 per diluted share for the year, an increase of 18 cents over its previous guidance and almost double the 62 cents in full-year 2002. The boost is based on a 5.0% increase in its sales forecast to $105 million for the year.