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Rocky Brands(RCKY) - 2024 Q3 - Earnings Call Transcript
RCKYRocky Brands(RCKY)2024-10-30 23:21
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Financial Data and Key Metrics Changes - The company reported third-quarter sales of 114.5million,down2.4114.5 million, down 2.4% year-over-year, with wholesale sales down 9.7% to 84 million, retail sales up 11.8% to 26.8million,andcontractmanufacturingsalesat26.8 million, and contract manufacturing sales at 3.6 million, up from 0.2millionlastyear[28]−Grossprofitwas0.2 million last year [28] - Gross profit was 43.6 million or 38.1% of sales, compared to 46.5millionor3746.5 million or 37% of sales in the same period last year, reflecting a 110 basis point increase in gross margin [29] - Net income for the third quarter was 5.3 million or 0.70perdilutedshare,downfrom0.70 per diluted share, down from 6.8 million or 0.93perdilutedshareinthethirdquarterof2023[34]BusinessLineDataandKeyMetricsChanges−Durangosawdouble−digitgrowth,withstrongbookingsacrosskeyaccountsandfarmandranchpartners,settingupforastrongfinishtotheyear[10]−XTRATUFmaintainedstrongmomentum,drivenbynewproductintroductionsandcollaborations,withsignificantsell−throughratesfornewcollections[12][13]−Muckexperiencedheadwindsduetounfavorableweather,butat−onceorderstrendedhighercomparedtoayearago,indicatingbrandresilience[15]−GeorgiaBootsfacedchallengesfromchangesinordersizeandfrequency,butrecentproductadjustmentshavebeguntodriveincreasedretailvolumes[17]−Rockyworkfootwearwasflatyear−over−year,withimprovedresultsfromindependentretailersandbrandedwebsites[19]MarketDataandKeyMetricsChanges−Retailsalesshowednotablestrength,particularlyforXTRATUFandDurango,withdouble−digitrevenuegains[23]−TheB2BLehighbusinesssawdouble−digitsalesgrowth,attributedtoarealignmentofthesalesorganizationandtheadditionofover200newaccounts[24]CompanyStrategyandDevelopmentDirection−Thecompanyisfocusedonaddingmanufacturingandsourcingcapacitytomeetfuturedemand,withexpectationsforastrongspringseasonin2025[9]−StrategicinvestmentsarebeingmadeinDurangoandXTRATUFtocapitalizeontheirmomentum,whilealsoleaningintovaluepropositionsforotherbrandstodrivehighervolumes[25]−Thecompanyaimstoimproveoveralltop−lineperformancethroughout2025,withafocusonsustainableandprofitablegrowth[37]Management′sCommentsonOperatingEnvironmentandFutureOutlook−Managementexpressedcautionregardingthenear−termmacroeconomicenvironmentbutremainsoptimisticaboutgrowthprospectsheadinginto2025[8]−Thecompanyanticipatesfull−yearsalestobeatthelowendoftheinitialrangeof0.93 per diluted share in the third quarter of 2023 [34] Business Line Data and Key Metrics Changes - Durango saw double-digit growth, with strong bookings across key accounts and farm and ranch partners, setting up for a strong finish to the year [10] - XTRATUF maintained strong momentum, driven by new product introductions and collaborations, with significant sell-through rates for new collections [12][13] - Muck experienced headwinds due to unfavorable weather, but at-once orders trended higher compared to a year ago, indicating brand resilience [15] - Georgia Boots faced challenges from changes in order size and frequency, but recent product adjustments have begun to drive increased retail volumes [17] - Rocky work footwear was flat year-over-year, with improved results from independent retailers and branded websites [19] Market Data and Key Metrics Changes - Retail sales showed notable strength, particularly for XTRATUF and Durango, with double-digit revenue gains [23] - The B2B Lehigh business saw double-digit sales growth, attributed to a realignment of the sales organization and the addition of over 200 new accounts [24] Company Strategy and Development Direction - The company is focused on adding manufacturing and sourcing capacity to meet future demand, with expectations for a strong spring season in 2025 [9] - Strategic investments are being made in Durango and XTRATUF to capitalize on their momentum, while also leaning into value propositions for other brands to drive higher volumes [25] - The company aims to improve overall top-line performance throughout 2025, with a focus on sustainable and profitable growth [37] Management's Comments on Operating Environment and Future Outlook - Management expressed caution regarding the near-term macroeconomic environment but remains optimistic about growth prospects heading into 2025 [8] - The company anticipates full-year sales to be at the low end of the initial range of 450 million to 460million,withgrossmarginsexpectedtobesimilarto2023[36][37]OtherImportantInformation−Thecompanyreportedadecreaseintotaldebtby13.2460 million, with gross margins expected to be similar to 2023 [36][37] Other Important Information - The company reported a decrease in total debt by 13.2% from December 31, and a decrease of 29.7% since September 30 last year [35] - Cash and cash equivalents stood at 3.7 million at the end of the third quarter, down from 4.5 million at the end of 2023 [35] Q&A Session Summary Question: Can you elaborate on the delays and inventory shortages? - Management indicated that demand for XTRATUF outpaced forecasts, leading to inventory shortages, and they are working to increase capacity to meet demand [41][42] Question: How does the company view its promotional strategy in light of cautious consumer spending? - Management noted that they were less promotional this year compared to last year, as inventory levels improved and they did not feel the need to drive promotions [43][44][46] Question: What are the updated thoughts on Wholesale growth for the second half? - Management expects retail sales to grow slightly more than initially anticipated, while wholesale business is targeted to be relatively flat [50][53] Question: What is the current visibility for brands trending well and correcting issues for underperforming brands? - Management expressed good visibility for Q1, particularly for XTRATUF and Durango, and plans to continue investing in underperforming brands [55][56] Question: What are the expectations for inventory and debt levels by year-end? - Management anticipates inventory will be down seven figures but not as much as initially expected due to increased demand, and they expect to pay down an additional 10 million to $12 million in debt [61][62]