Rocky Brands(RCKY) - 2024 Q3 - Quarterly Report

Net Sales Performance - Net sales decreased 8.8% to $114.6 million in Q3 2024 compared to$ 125.6 million in Q3 2023, driven by a decline in Wholesale net sales partially offset by increases in Retail and Contract Manufacturing net sales[78] - Retail net sales increased 9.2% to $26.8 million in Q3 2024, driven by growth in the Lehigh CustomFit platform[89] - Contract Manufacturing net sales increased 172.7% to$ 3.8 million in Q3 2024 due to a multi-year U.S. Military contract awarded in Q4 2023[90] - Wholesale net sales for the nine months ended September 30, 2024 decreased by $19.1 million (7.6%) compared to the same period in 2023, primarily due to the sale of the Servus brand and changes in the distributor model[99] - Retail net sales for the nine months ended September 30, 2024 increased by$ 4.2 million (5.3%) compared to the same period in 2023, driven by growth in the Lehigh CustomFit platform and e-commerce business[100] - Contract Manufacturing net sales for the nine months ended September 30, 2024 increased by $4.8 million (86.8%) compared to the same period in 2023, due to a multi-year contract with the U.S. Military[101] - Total net sales for the nine months ended September 30, 2024 decreased by$ 10.2 million (3.0%) compared to the same period in 2023[99] Gross Margin Performance - Gross margin increased 110 basis points to 38.1% in Q3 2024, driven by a favorable Wholesale product mix and higher Retail net sales[81] - Wholesale gross margin increased to 37.5% in Q3 2024, up from 34.7% in Q3 2023, due to lower promotional activity[92] - Contract Manufacturing gross margin increased to 12.0% in Q3 2024, up from 11.5% in Q3 2023, driven by higher-margin U.S. Military sales[94] - Wholesale gross margin for the nine months ended September 30, 2024 increased to 37.0% from 35.5% in the same period in 2023, driven by the divestiture of the Servus brand and product mix[102] - Retail gross margin for the nine months ended September 30, 2024 decreased to 46.5% from 48.5% in the same period in 2023, due to increased Lehigh sales and promotional efforts[103] - Contract Manufacturing gross margin for the nine months ended September 30, 2024 increased to 11.0% from 7.3% in the same period in 2023, driven by higher-margin sales to the U.S. Military[104] Operating Expenses and Costs - Operating expenses increased 4.1% to $33.6 million in Q3 2024, primarily due to incremental brand building and advertising programs[95] - Operating expenses for the nine months ended September 30, 2024 decreased by$ 4.0 million (3.7%) compared to the same period in 2023, due to restructuring and cost-saving initiatives[105] Debt and Interest Expenses - Total debt decreased 29.7% to $150.3 million as of September 30, 2024[80] - Interest Expense and Other - net decreased 43.7% to$ 3.2 million in Q3 2024, driven by lower debt levels and interest rates[96] - Interest Expense and Other - net for the nine months ended September 30, 2024 decreased by $2.0 million (12.4%) compared to the same period in 2023, due to debt refinancing and lower interest rates[106] Inventory and Tax Expenses - Inventory decreased 11.8% to$ 171.8 million as of September 30, 2024[80] - Income Tax Expense for the nine months ended September 30, 2024 increased by $1.0 million (105.2%) compared to the same period in 2023, driven by a shift in the mix of domestic and foreign earnings[107] Market Risk and Forward-Looking Statements - No material changes to market risk as disclosed in the Annual Report for the year ended December 31, 2023[124] - Forward-looking statements involve risks and uncertainties including sales forecasts, consumer demand changes, and economic factors[121] - The company assumes no obligation to update any forward-looking statements[122]