Rocky Brands’ Earnings Call: Retail Triumphs Amid Challenges

Rocky Brands ((RCKY)) has held its Q1 earnings call. Read on for the main highlights of the call.

Rocky Brands’ recent earnings call paints a picture of a company navigating both triumphs and challenges as it embarks on Fiscal 2025. The sentiment expressed during the call was largely positive, highlighting strong retail sales growth and record gross margins. However, the company faces hurdles, including declining wholesale sales and the impact of tariffs, which contribute to a mixed outlook. Despite these challenges, Rocky Brands is taking proactive steps in sourcing and inventory management to mitigate potential risks.

Strong Retail Performance

Rocky Brands reported a significant increase in retail sales, which rose by 20.5% to $36.6 million. This growth was fueled by robust demand across several brands, with XTRATUF and Muck standing out as top performers. The impressive retail performance underscores the company’s ability to capture consumer interest and drive sales in a competitive market.

Record Gross Margin

The company achieved its highest gross margin ever reported in the first quarter, reaching 41.2%, up from 39.1% in the previous year. This record-setting margin highlights Rocky Brands’ effective cost management strategies and its ability to enhance profitability despite external pressures.

Significant Increase in Adjusted Net Income

Rocky Brands saw a notable increase in adjusted net income for Q1 2025, which rose to $5.5 million or $0.73 per diluted share, compared to $3.1 million or $0.41 per diluted share a year ago. This growth in net income reflects the company’s successful efforts to improve its financial performance and deliver value to shareholders.

Reduced Interest Expense

Interest expenses for the company decreased significantly to $2.4 million from $4.5 million in Q1 2024. This reduction is attributed to a prior debt refinancing and lower debt levels, which have positively impacted the company’s financial health.

Diversified Sourcing Strategy

In response to changing market dynamics, Rocky Brands is accelerating its efforts to diversify its sourcing strategy. The company is reducing its reliance on Chinese production by shifting manufacturing to countries like Vietnam, Cambodia, India, and its own facilities in the Dominican Republic and Puerto Rico.

Wholesale Sales Decline

The company experienced a decline in wholesale sales, which fell by $5 million or 6.3% to $74.8 million. This decrease was primarily due to a planned reduction in commercial military sales, reflecting a strategic shift in the company’s sales approach.

Challenges with Tariffs

Higher tariffs imposed by the U.S. have created a challenging environment for Rocky Brands. In response, the company is planning immediate price increases and sourcing shifts to mitigate the impact of these tariffs on its operations.

Economic Uncertainty Affecting Orders

Economic uncertainties have led to a slowdown in orders for the Georgia Boot brand, particularly in March. This reflects broader market challenges that are affecting consumer confidence and purchasing decisions.

Inventory Management Challenges

Rocky Brands is facing inventory management challenges, with inventories increasing to $175.5 million, up 6.3% compared to the previous year. This increase is partially due to accelerated receipts aimed at mitigating the impact of tariffs.

Forward-Looking Guidance

Looking ahead, Rocky Brands maintains its guidance for low single-digit revenue growth for the year, despite economic uncertainties. The company plans to implement price increases in June to offset tariffs, particularly those impacting Chinese imports. Additionally, the XTRATUF brand is showing exceptional momentum, with bookings up 80% from last year, and the women’s business in the Muck brand is delivering double-digit growth. These strategic initiatives are expected to support the company’s growth trajectory.

In conclusion, Rocky Brands’ earnings call reflects a company that is capitalizing on strong retail sales and record gross margins while proactively addressing challenges such as declining wholesale sales and tariff impacts. The company’s diversified sourcing strategy and focus on inventory management are key components of its plan to navigate the current economic landscape. With a positive outlook for certain brands and strategic initiatives in place, Rocky Brands is positioned to continue its growth journey in Fiscal 2025.