ROCKY BRANDS, INC. Q3 FY2024 earnings call

Jason Brooks mentioned Durango and XTRATUF had double-digit growth in the U.S. However, Muck was impacted by a warm dry fall as its rubber neoprene product drives most sales. Georgia Boots faced headwinds like changes in order size/frequency and unfavorable weather but saw new product concepts pay off. Rocky work was flat year-over-year but had sequential improvement. Rocky Western saw strong reception to new fall 2024 lineup. Rocky Outdoor had hunting footwear inventory issues but non-hunting footwear trended positively. Commercial Military and Duty was down. Retail saw XTRATUF and Durango sites post strong double-digit revenue gains. B2B Lehigh sales were up double-digits with over 200 new accounts added in the third quarter.

Wholesale sales were down 9.7% to $84 million, Retail sales increased 11.8% to $26.8 million, and Contract Manufacturing sales were $3.6 million, up $3.4 million from last year. Gross margin by segment: Wholesale up 280 basis points to 37.5%; Retail down 440 basis points to 43.6%; Contract Manufacturing up 50 basis points to 12%.

Now anticipate full year sales to be at the low end of the initial range of $450 million to $460 million. Gross margin expected to be similar to 2023's adjusted gross margins of 38.9%. Interest expense reduced by $5 million due to debt paydown and refinancing. Look forward to combining work with sustained top-line growth in 2025.

Unfavorable weather, less promotional activity, inventory shortages on certain key styles, macroeconomic environment affecting discretionary spending, military budget delay impacting sales cadence.

Q: Janine Stichter asked about inventory delays and initiatives to get back in stock.

A: Tom Robertson said XTRATUF demand outpaced forecast and lead times for rubber-based products are longer. Jason Brooks added they missed upside in Durango and XTRATUF and were overconfident in other brands.

Q: Jonathan Komp asked about wholesale growth and brand sizes.

A: Tom Robertson said Wholesale goal is relatively flat on an adjusted basis and brands aren't vastly different in size.

Q: Bruce Geller asked about inventory and debt levels.

A: Tom Robertson said inventory will be down but in-transit up, and anticipate paying down $10 million to $12 million in debt in the fourth quarter.