ROCKY BRANDS, INC. Q1 FY2025 earnings call

• Despite macroeconomic uncertainty, 2025 started well with healthy demand in the brand portfolio and distribution channels. - Retail segment had 20% top-line growth, led by strong rubber boot business (XTRATUF and Muck). - Achieved record first quarter gross margins and second-highest gross margin ever. - Adjusted debt income increased 78% year-over-year. - Moved quickly to mitigate tariff impact, plan to implement price increases in early June, and accelerate sourcing reduction from China. - Brand performances: XTRATUF continued momentum with double-digit growth, Muck had better-than-expected growth, Durango had moderated sell-in but positive online, Georgia Boot had softer March but recent introductions did well, Rocky Brand Group had mixed results by category, wholesale Commercial Military and Duty down, retail B2B Lehigh had high teens sales growth, direct-to-consumer grew faster. - Tom Robertson discussed net sales of $114.1 million, gross profit of $47 million (41.2% of sales), operating expenses, balance sheet details including cash, debt, and inventory, and reiterated full-year 2025 guidance.

During the first quarter, the retail segment saw a 20% top-line growth. The XTRATUF brand had double-digit growth in Q1, with strong sell-through online and at wholesale. The Muck brand had better-than-expected growth, especially in the women's business. The Durango brand's sell-in to wholesale moderated but had positive online and At Once business. Georgia Boot had softer March but recent introductions performed well. The Rocky Brand Group's work and outdoor categories increased, while Rocky Western was down. The wholesale Commercial Military and Duty segment was down. The retail B2B Lehigh business had high teens sales growth for the third consecutive quarter, and the direct-to-consumer business grew even faster. In terms of revenue contribution, retail had a 20% growth, and various brand segments contributed differently based on their performance.

• Reiterated full-year 2025 guidance with revenue expected to increase in the low single-digit range over 2024 levels. - Price increases in Q2 to offset lower volumes due to higher prices. - Gross margins to decline modestly year over year but gross profit dollars to be maintained through price increases. - SG&A expected to be up in dollars but similar as a percentage of revenue. - EPS still expected to be just below 2024's adjusted EPS of $2.54.

• Macroeconomic uncertainty. - Higher tariffs imposed by the U.S. on most trade partners, particularly China, which creates fluid and uncertain operating conditions. - Potential pressure on consumer demand due to price increases. - Challenges in transitioning sourcing to other regions and securing incremental capacity with third-party partners.

Q: Janie Stichter asked about elaborating on guidance, migration out of China, and wholesale partners' thoughts on consumer ability to absorb price increases.

A: Tom Robertson said they have a good inventory position to transition product out of China, anticipate total volume out of China to be just less than 20% by year-end; Jason Brooks added some shipments from China are paused or redirected. On wholesale partners, Jason Brooks noted bookings were strong going into Q1, retail partners are navigating price increases but not in panic mode.

Q: Jonathan Komp asked about guidance timing, price increase strategy, and sourcing capacity shift.

A: Tom Robertson clarified guidance details on revenue, margin, and EPS; Tom explained price increases are to preserve gross profit dollars while being defensive; Jason Brooks mentioned they are slowly shifting to third-party capacity in Vietnam, India, and Cambodia, with about 90%-92% of product being shifted, and have good relationships with factories but face challenges in securing incremental capacity quickly.