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Rocky Brands(RCKY) - 2024 Q2 - Earnings Call Transcript
RCKYRocky Brands(RCKY)2024-07-30 23:55
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Financial Data and Key Metrics Changes - Reported net sales for Q2 2024 were 98.3million,down1.698.3 million, down 1.6% from 99.8 million in the same period last year [27] - Adjusted net income for Q2 2024 was 1.3million,or1.3 million, or 0.17 per diluted share, compared to breakeven a year ago [21] - Gross profit was 38million,or38.738 million, or 38.7% of net sales, compared to 37.6 million, or 37.6% of sales in the same period last year [48] - Operating expenses were 33.5million,or34.133.5 million, or 34.1% of net sales, compared to 35.4 million, or 35.4% of net sales last year [28] Business Line Data and Key Metrics Changes - Wholesale sales increased 2.3% to 68.3million;Retailsalesincreased6.168.3 million; Retail sales increased 6.1% to 26.1 million; Contract Manufacturing sales were up 3.5million[19]−DurangoandXTRATUFledthewaywithdouble−digityear−over−yeargains,offsettingsoftnessinotherareas[12]−RockyOutdoorfacedchallengesduetolastyear′spoorhuntingseason,butnon−huntingfootwearshowedpositivetrends[17]MarketDataandKeyMetricsChanges−Thecompanyexperiencedstrongdemandacrossvariousoutdoorverticals,particularlyforXTRATUF,whichsawapositivereceptionfornewproducts[14]−TheWorkcategoryfacedpressureprimarilyfromsmalleraccounts,whilekeyaccountsshowedbetterperformance[36]CompanyStrategyandDevelopmentDirection−Thecompanyisfocusedonimprovingitsfinancialprofiletoreinvestingrowthanddriveshareholdervalue,evidencedbyhighergrossmarginsandloweroperatingexpenses[6]−Anewcreditandtermfacilityisprojectedtogenerateapproximately3.5 million [19] - Durango and XTRATUF led the way with double-digit year-over-year gains, offsetting softness in other areas [12] - Rocky Outdoor faced challenges due to last year's poor hunting season, but non-hunting footwear showed positive trends [17] Market Data and Key Metrics Changes - The company experienced strong demand across various outdoor verticals, particularly for XTRATUF, which saw a positive reception for new products [14] - The Work category faced pressure primarily from smaller accounts, while key accounts showed better performance [36] Company Strategy and Development Direction - The company is focused on improving its financial profile to reinvest in growth and drive shareholder value, evidenced by higher gross margins and lower operating expenses [6] - A new credit and term facility is projected to generate approximately 4.4 million in annualized interest expense savings starting in 2025 [7] - The company aims to secure new bookings for upcoming product lines while managing inventory effectively [15] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism for the second half of 2024, highlighting efforts in top-line expansion and expense management [27] - The company anticipates net sales to be toward the high end of the initial range of 450millionto450 million to 460 million [30] - Rising ocean freight rates have led to a revision in gross margin expectations for 2024, now expected to be slightly less than last year's adjusted gross margin [30] Other Important Information - The company reported a decrease in total debt by 12% since December 31 and 31.3% since June 30 of last year [50] - Cash and cash equivalents stood at 4.1million,comparedto4.1 million, compared to 4.5 million at the end of 2023 [50] Q&A Session Summary Question: Supply chain status and inventory management - Management noted that sales for Durango and XTRATUF exceeded expectations, but there were challenges with inventory due to supply chain issues [33] - Container prices saw an increase in June but softened in July, prompting cautious margin guidance [34] Question: Pressure on Work brands - The pressure is primarily from smaller accounts, while key accounts are performing better [36] Question: Wholesale growth expectations - Management targets mid-single-digit growth in Wholesale and expects better performance in retail, particularly in e-commerce [57]