Rocky Brands (RCKY) Q3 2024 earnings summary

Executive summary

• Q3 2024 net sales declined 8.8% year-over-year to $114.6 million, or 2.4% excluding non-recurring sales, with gross margin improving to 38.1% from 37.0% in Q3 2023.

• Retail and Contract Manufacturing segments grew, offsetting Wholesale declines, with new U.S. Military contracts contributing to Contract Manufacturing gains.

• Double-digit growth in Durango, XTRATUF, and Lehigh CustomFit nearly offset softness in other areas.

• Adjusted operating margins reached 9.4%, and operating income for the nine months ended September 30, 2024 increased to $22.6 million, or 6.9% of net sales.

• Inventory and total debt were reduced by 11.8% and 29.7% year-over-year, respectively, with debt at $150.3 million as of September 30, 2024.

Financial highlights

• Q3 2024 sales were $114.6 million, down 8.8% year-over-year, or 2.4% excluding non-recurring sales.

• Wholesale sales declined 15.7% to $84 million; retail sales rose 9.2% to $26.8 million; contract manufacturing sales increased to $3.8 million.

• Gross profit was $43.6 million (38.1% of sales), up 110 basis points year-over-year.

• Q3 2024 net income was $5.3 million ($0.70 per diluted share); adjusted net income was $5.8 million ($0.77 per diluted share).

• Interest expense dropped to $3.2 million from $5.6 million year-over-year due to lower debt and refinancing.

Outlook and guidance

• Full-year sales expected at the low end of the $450–$460 million range, with 2024 gross margins anticipated to be similar to 2023’s adjusted gross margin of 38.9%.

• Management expects softness in consumer spending to be transitory, citing a strong 2025 order book and growth initiatives in core brands and digital marketing.

• Retail segment expected to see mid to high single-digit growth in 2025; wholesale segment targeted for low single-digit growth.

• Inventory and capacity expansion efforts to benefit Q4 modestly, with most upside in 2025.

• Sufficient liquidity expected for at least the next twelve months, supported by the ABL Facility and cash from operations.